April 3, 2008 | Read Time: 1 minute
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The misuse of nonprofit organizations to shield income or provide fake tax breaks has once again appeared on the Internal Revenue Service’s “dirty dozen,” the agency’s annual list of the top 12 tax scams in the United States. Most of the abuse stems from people giving money or property to charities but retaining too much control over the donations, or from people overestimating the value of donated property. In addition, the IRS says that an old scam — claiming private tuition payments as charitable donations — continues to grow.
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The Treasury Department has released an assessment of how thoroughly the IRS can and does investigate tax-exempt groups. Among the key findings: The IRS reviews less than 1 percent of organizations each year, so there is no guarantee that most groups still operate exclusively for charitable purposes. Also, a growing number of tax-abuse scams involving charities has probably undermined public confidence in nonprofit groups. More information is available at http://www.ustreas.gov/tigta/auditreports/2008reports/200810057fr.pdf.
- Dean A. Zerbe, who recently left his position as an aide to Sen. Charles Grassley of Iowa for a job at a tax-consulting company, said in an online discussion with Chronicle readers that changes are needed to prevent wealthy donors from using foundations as tax shelters. He also called for changes in the Combined Federal Campaign. Read the transcript of the one-hour discussion at http://staging.philanthropy.com/live.
