June 1, 2006 | Read Time: 1 minute
The IRS has announced that it will revoke the tax exemptions of 41 nonprofit organizations that counsel people who have amassed big credit-card debts. Together the organizations account for some $410-million of the $1-billion in revenue that credit-counseling institutions take in annually.
The move comes after the IRSconducted an audit of those groups. It said every single organization it examined did not deserve tax-exempt status, either because the groups were not providing enough financial education to their clients, or they paid too much money to their chief executives and channeled too many dollars to for-profit entities connected with the nonprofit organizations.
As a result of the widespread problems it found in its two-year investigation, the IRS said it will contact all of the 743 nonprofit credit-counseling groups that it has not investigated to make sure that each one is complying with the law.
The tax agency also released written guidelines on how nonprofit credit counselors can comply with the law and retain their tax-exempt status. The report and the other materials are available on the IRS’s Web site (http://www.irs.gov/charities/article/ 0,,id=156818,00.html).
