IRS Pledges to Continue to Step Up Oversight of Charities

The Internal Revenue Service has released an updated plan for the next several years that pledges a continuation of “focused oversight of the tax-exempt sector.”

“More than $15-trillion in assets are currently controlled by tax-exempt organizations or held in tax-exempt retirement programs and financial instruments,” the IRS said in its Strategic Plan 2009-2013. “The massive size of this sector requires us to provide more careful oversight and advisory support than ever before.”

The revenue service said that tax-exempt groups “often find it difficult to navigate the complicated, specialized, and changing tax rules that apply to them.” The government said it “will provide guidance and information” to help nonprofit organizations “understand their responsibilities and comply with the law.”

The IRS said it “will also discourage those who abuse tax-exempt status by actively seeking them out and addressing wrongdoing, making it clear that violations carry a high risk of meaningful punishment.”

The revenue service noted that “certain segments of the tax-exempt sector, such as hospitals and universities, are especially large, complex, and growing.” Because of their “size and complexity, and consequent risk to the tax base,” the IRS said it “will continue to monitor compliance and enforce the rules applicable to universities, hospitals, and other major segments of the tax-exempt community.”

The IRS listed three specific approaches it plans to take:

• “Provide outreach and guidance to ensure widespread adherence to the requirements for tax-exempt status.”

• “Proactively address misuse of tax-exempt organizations and/or tax-exempt status.”

• “Maintain focus on universities, hospitals, and other major segments of the tax-exempt community.”