October 18, 2001 | Read Time: 1 minute
The Internal Revenue Service, which has been under fire from Congress, charity leaders, and tax lawyers for failing to do enough to regulate tax-exempt groups, plans to dramatically increase its efforts next year.
In detailed new “implementing guidelines” adopted by the tax agency’s charity regulators, the IRS says that it will conduct more and different types of audits, publish more guidelines for nonprofit organizations, and offer workshops around the country to explain the law to charities. The new types of audits will include what the IRS calls “compliance checks” — a phone call or letter to ask about a discrepancy on a charity’s information return — and limited audits that will focus on one or a few issues rather than examining every aspect of a charity’s operations.
Another item on the IRS agenda: Creating an internal committee that, by April 1, 2002, will investigate organizations that provide donor-advised funds — including those set up by commercial investment companies — and come up with strategies to ensure that such groups are following tax laws. In a donor-advised fund, donors can give cash, stock, or other assets, claim a charitable deduction on their income-tax returns, and then recommend how the money in the fund should be distributed to charities.
The guidelines will soon be available free from the IRS Web site at http://www.irs.gov/eo, under the heading “Items of Interest.”
