September 16, 2004 | Read Time: 1 minute
The Internal Revenue Service is giving its agents new advice on how to process applications from groups seeking charity status as supporting organizations.
Supporting organizations are designed to finance the work of specific charities. Many universities and other large nonprofit groups have supporting organizations that generate revenue for them by investing in stocks or by operating businesses.
In some cases, wealthy people who want to set up their own philanthropies use supporting organizations as alternatives to private foundations.
Last year, the revenue service expressed concern that some people were using supporting organizations to evade taxes. The agency is in the midst of a study of the potential for abuse by donors who set up such groups, and IRS officials have said that they will take immediate action in cases in which abuse is suspected.
The new advice for IRS agents, which does not delve specifically into the topic of abusive organizations, is a primer to help agents determine if supporting groups qualify for a tax exemption.
The advice appears as the latest article in the revenue service’s “technical instruction” handbook, which once was published as an annual book but now is released in separate chapters.
The publication is intended solely to help IRS workers, but charity officials and their lawyers find the guide useful because it shows how the agency views complicated aspects of tax law.
A free copy of the article, “Supporting Organization Reference Guide: IRC 509(a)(3) Foundation Status Classification,” may be obtained free via the IRS Web site at http://www.irc.gov.eo.
