The Chronicle of Philanthropy (October 12, 2006) reports that the Exempt Organizations (EO) division of the IRS has added employees and shifted its approach to focus on greater enforcement.  Among the observations from the Chronicle:

• In the past five years, the EO division has added about 100 full-time employees, bringing the total to 905 workers.
• The audit division of the EO unit has grown from 432 full-time workers in 2001 to 501 in 2006.
• About 2 percent of the roughly 650,000 nonprofit organizations and foundations that are expected to file informational tax returns in 2006 will be contacted by the IRS (and about 6,000 will be audited).
• One concern of tax lawyers is the belief that the relative inexperience of many of the new IRS employees, which is a result of the increased staffing and the replacement of 168 auditors and senior staff members since 2003, has led to tax laws being misinterpreted and misapplied.
• According to Lois G. Lerner, director of the EO division, improper political campaign activities by charities will be vigorously investigated by the IRS.
• According to an anonymous Senate Finance Committee aide, "the recent House and Senate hearings have made it clear that there is wide agreement that business-as-usual for tax-exempt hospitals has to end."
• The IRS has become much more aggressive in going after charities that fail to forward withheld taxes from employees (the IRS identified 20,000 charities that failed to forward withheld taxes in 2004).
• According to Lerner, a model of how the IRS plans to approach future enforcement is how it dealt with credit counseling agencies.  The IRS revoked the tax-exemptions of 41 of the 63 credit counseling agencies investigated and approved only three of 110 new exemption applications.

Click here for The Chronicle of Philanthropy article, IRS Takes a Tougher Stance.