IRS Acting Commissioner Kevin M. Brown’s letter to Sen. Charles E. Grassley dated June 28, 2007 responds to the Senator’s request for information about compliance issues within the responsibility of the Tax Exempt and Government Entities Division of the IRS. While the letter concentrates on compliance issues, Brown emphasizes at the outset that "this focus should not obscure or disparage the excellent work the tax-exempt community does every day, nor should it detract from the reality that most tax-exempt entities and governments work hard to carry out their missions and comply with the letter and the spirit of the tax law."
Here are the key exempt organization compliance issues identified in the letter:
- Sector-wide Compliance Issues
- Abusive tax transactions and the use of tax-exempts as accommodation parties
- Issues involving charitable contributions
- Charitable contribution overvaluation – in general
- Charitable contribution overvaluation – charitable family limited partnerships
- Charitable contribution overvaluation – conservation easements
- Legal non-filers, under-reporting, and the absence of transparency
- Exempt Organizations Compliance Issues
- Charities established to benefit the donor
- Abusive donor-advised fund arrangements
- Section 509(a)(3) organizations established to provide benefits to founders
- Charitable trust problems and abuses
- A blurring of the line between the tax-exempt and commercial sectors
- Commercial operators moving into the charitable sector
- Credit counseling
- Down payment assistance organizations
- Complexity and administrative difficulty of unrelated business taxable income (UBTI) determinations
- Executive compensation and inurement
- Regulation and reporting of political activities
- Political intervention (see also Rev. Rul. 2007-41)
- Political organizations and Section 527
- Charities established to benefit the donor
Read the entire letter here.