The Internal Revenue Service does not always control or quickly process referrals alleging that tax-exempt organizations are potentially violating federal tax law, according to a new report.
J. Russell George
The report, by the Treasury Inspector General for Tax Administration, noted that the Exempt Organizations function within the IRS’s Tax Exempt and Government Entities Division is responsible for assessing referrals from the general public, members of Congress, and federal and states agencies, as well as other parts of the IRS. These referrals allege that tax-exempt organizations are potentially violating federal tax law.
TIGTA conducted this audit to determine whether the EO function accurately accounted for referrals, acknowledged receipt to submitters, and tracked and monitored the time periods for working referrals. TIGTA found that the EO function is facing challenges in managing referrals because it cannot locate all of the referrals received, ensure that all of the referrals received are controlled, or ensure referrals are being processed on a timely basis.
TIGTA recommended that the EO function ensure that all referrals are properly controlled; guidance is developed and updated; performance goals are developed; and timeliness measures are developed and updated.
“The EO function must ensure that referrals are controlled and processed appropriately and timely,” said TIGTA Inspector General J. Russell George in a statement. “If referrals are not properly accounted for or worked timely, the EO function may not be able to identify tax-exempt organizations that are potentially in violation of Federal tax law.”
In recent years, the IRS has received an increasing number of complaints of tax-exempt organizations violating federal laws by raising funds for particular political candidates or, at religious institutions, exhorting worshippers to vote for specific nominees for public office.
In response, IRS officials agreed with TIGTA’s recommendations and plan to take appropriate corrective actions.
“Your report acknowledges the progress we have made in improving the referral process, and notes a number of areas in which we should make additional improvements,” wrote Joseph H. Grant, acting commissioner of the IRS’s Tax Exempt and Government Entities Division. “We accept your recommendations and have begun to implement them.”
4 Comments
I have worked for 3 different universities over the last 15 years, and I can tell you that (1)they do get audited, (2) when they have a business that competes with local for-profit businesses and that business is not the reason they are exempt (you can have for-profit and not-for-profit schools competing), then the not-for-profit entity must file a tax return for that business and pay the same corporate tax as the for-profit competitor, (3) the gov't changed the NFP tax returns in 2008 and they are now huge, with tons of interesting detail. They also must be "publicly available" so go look at www.guidestar.org and view the Form 990 for your NFP and see exactly what they do and whether they pay taxes (Part V, line 3). See the compensation paid to officers (Part VII), exactly how they make their money (Part VII) and spend their money (Part IX). I think NFPs (especially "religious organizations") have gotten away with poor behavior and reckless funds management for years, but those times are changing and it's important that we all USE the information that's now available and change our charitable donations accordingly. I looked at the Form 990 recently of an organization that spent 78% of its total budget on fundraising and 13% on management salaries. That means on 9% of all the funds they received went towards their charitable purpose. Needless to say, I did not give them the donation they requested.
Posted by: davenpae | July 5, 2012 12:00 PM
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Local NFP here operates (at least) 2 businesses for profit, in direct competition with a company in the local area. The IRS agent in this area sent in several requests for them to be audi ted. I know the auditor, he was told there aren't resources available. This NFP actively recruited employees from the other company. The purpose of this NFP is to employ people who are disadvantaged, yet they recruited people who aren't.
Posted by: Taxpreparer | July 4, 2012 11:14 AM
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They are probably too busy looking for phantom deficit reducing dollars from FATCA enforcement the world over.. No time for anything else, close to home :)
Posted by: Just Me | July 3, 2012 11:54 AM
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and what about all those non profit Universities and Corporations. do they ever get audited for non profit purpose and money making? Megazord
Posted by: WOLFSOHN | July 3, 2012 10:55 AM
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