December 7, 2006 | Read Time: 2 minutes
The Internal Revenue Service office that oversees charities says its plans for 2007 include efforts to help nonprofit organizations comply with a new federal law. In addition, the office plans to investigate community foundations to make sure they are complying with the law and to examine so-called supporting organizations.
Lois G. Lerner, director of the IRS’s exempt-organizations office, said her employees will write guidelines and take other steps to ensure that nonprofit groups comply with the law, known as the Pension Protection Act of 2006. The law, which President Bush signed in August, contains provisions designed to stimulate charitable giving and cut down on abuses of charity tax laws by donors and nonprofit organizations.
Among other changes, the law requires the tax agency to revise the Form 990, the informational tax return charities must file with the IRS.
Charities have expressed fears about how the IRS will enforce many of the provisions in the pension law. For example, some groups have raised concerns about how to comply with a ban on donations of furniture, household goods, and clothing that are in poor condition. Organizations are also eager for the IRS to provide details on a new charitable-giving incentive that allows donors age 70 and older to give up to $100,000 a year from their individual retirement accounts to charity without paying tax on the money.
In addition to its work related to the new law, the IRS tax-exempt division said it plans to crack down on charities that raise money through bingo games or other types of gambling but fail to make tax payments on the income. The office will also investigate organizations that do not pay required employment taxes for their workers.
Other goals for the exempt-organizations office next year include making sure that community foundations continue to meet the standards for charitable exemption. Community foundations began as small trusts designed to benefit residents of a specific geographic area, but over the past decade they have grown bigger and more complex, Ms. Lerner said. “This compliance project will provide us with information on how these organizations operate,” she said.
The office will also review supporting organizations — charities that are set up by a donor to provide money to one or more nonprofit groups — and donor-advised funds, which allow people to donate money, stock, and other assets to special accounts, claim a tax deduction, and then recommend how the money in the accounts should be distributed to charities. Congress asked the IRS to review such funds, as part of the pension law, and report on possible abuses.
The IRS’s plans, “FY 2007 EO Implementing Guidelines,” are available online.
