June 15, 2006 | Read Time: 2 minutes
TAX WATCH
The Internal Revenue Service isn’t doing enough to go after the charitable world’s “bad actors,” including nonprofit hospitals that don’t provide enough benefits to society to justify their tax-exempt status and charities that overpay their board members and trustees, according to a powerful senator.
Sen. Charles E. Grassley, the Iowa Republican who is chairman of the Senate Finance Committee, ordered the IRS to provide him with a detailed account of what actions it is taking to punish charities that abuse tax laws.
Mr. Grassley told the IRS that his committee found common themes when it investigated different types of organizations: “Some individuals are exploiting vagueness or silence or a lack of enforcement of the laws governing tax-exempt groups to enrich themselves rather than serve the public,” he said.
The senator asked for a report within 30 days on enforcement of laws for tax-exempt groups from Donald L. Korb, IRS chief counsel, and Steven T. Miller, commissioner of the IRS’s tax-exempt and government entities division.
Mr. Grassley asked the chief counsel how his office pursues cases where board members or trustees may receive excessive compensation, and what it does about nonprofit hospitals that may not provide enough charity care or other benefits to deserve their tax-exempt status. He also inquired about cases where charities may not be paying tax on business income that is unrelated to their missions.
The Senate Finance Committee has for the past several years been scrutinizing nonprofit organizations and has drafted legislation designed to tighten oversight of tax- exempt groups.
Mr. Grassley’s letter to Mr. Miller inquired about his efforts to investigate nonprofit hospitals, and asked Mr. Miller to report on how well charities with total assets of $100-million or more are complying with the requirement that they file their federal informational returns electronically. Mr. Grassley also praised Mr. Miller for recent IRS efforts to prosecute abuses of tax law by credit-counseling organizations and to make sure that charities are complying with the federal law that prohibits their involvement in partisan politics.
