October 8, 1998 | Read Time: 2 minutes
The I.R.S. is telling its agents that they could wield a new weapon — federal law designed to fight the abuse of tax shelters — against charities that provide erroneous information to donors about the deductibility of gifts that allows contributors to take bigger write-offs than they should.
“We’re really concerned with those cases where the exempt organization is willing to work very hard to give clearly inflated values to donated properties and then turns around and sells those goods for much less than the value that was represented to the donor,” Marvin Friedlander, an official in the I.R.S.’s Exempt Organizations Division, told a recent meeting of the District of Columbia Bar.
The I.R.S. described its position in the latest version of its training handbook for agents. One provision of the law imposes a penalty on anyone — promoters, salespeople, and their assistants — involved in “organizing and selling” abusive tax shelters, which are used to reduce or defer payment of taxes. Another provision takes aim at those involved in “aiding and abetting” the preparation of false or fraudulent tax documents that would result in people’s understating their tax liability. The revenue service noted that the provisions, enacted into law in 1982, have not been applied frequently to charities in the past but could be in the future.
The I.R.S. handbook provides several examples of hypothetical cases in which the pair of penalties could apply. For instance, the provision on organizing and selling tax shelters could be applied to a charity that gave donors of used cars written acknowledgments stating that the value of the automobiles was their original purchase price (rather than their fair market value) when several years had passed since the donors bought the cars.
Proving that the charity knew or had reason to know the falsity of its acknowledgments depends on the specific facts and circumstances of the case, the I.R.S. said. One possible factor: the “sophistication and experience of the officers or persons in charge of the fund raiser.”
Said Mr. Friedlander: “We are telling our agents there are some remedies if you really come across abusive situations.”
