EO Tax Journal

The following sentences appeared in an article I reprinted yesterday from the Philanthropy Journal, a publication of the Institute for Nonprofits at N.C. State University:

“Most of the sector cooperates willingly with the IRS in its efforts to ensure nonprofits are complying with federal regulations, [Lois Lerner] says, while a handful are confused about how to comply and an even smaller number have ‘bad intentions.’

“‘The nonprofit sector wants to do the right thing, and if they know what to do they will do it,’ she says. ‘The combination of greater transparency, governance and accountability are absolutely necessary.’ And with the new Form 990, and the oversight role of a handful of watchdog agencies, nonprofits have been doing a better job of ‘self-regulating,’ which could prevent further regulation by lawmakers at the federal level.”

Sparkle Plenty had this reaction to Lois’ remarks:

“It may be the case (though this is debatable) that MOST organizations cooperate willingly. However, plenty of organizations ask their lawyers and CPAs who they are consulting on EO tax mandates, ‘what do I need to do to stay below the radar screen?’, which translates to ‘how much of this crap can I ignore’? Regardless, there can be no debate that way more than a handful (or is that the hand of ‘he’s got the whole world in his hands’?) are indeed confused. With no precedential guidance on tons of things — what is UBIT-reachable, what is ‘electioneering’, what comprises ‘private benefit’?  — the c3 sector (and plenty of advisors) have no choice but to be confounded….”

I will add Gary Snyder, editor of Nonprofit Imperative (www.garysnyder.com), as another who probably suspects Lois’ rosy scenario may be too rosy. His newsletter is dedicated to “exposing the crisis in nonprofit fraud leadership … a crisis of pervasive and monumental waste, fraud, abuse, mismanagement, and malfeasance throughout the charitable sector which costs taxpayers and contributors tens of billions of dollars annually.”

My take: So who is right? Was it Don Rumsfeld who said we don’t know what we don’t know? That may be the case here. On what does Lois base her rosy scenario? Has the IRS done a project on compliance in the EO sector? How has Lois divined that “an even smaller number have ‘bad intentions’?” Perhaps we need a new question on the Form 990, “Does the organization (and its managers) have bad intentions, or is the organization just confused?”

I vaguely recall the IRS once reporting on which types of organizations they had audited in a given fiscal year, what areas of noncompliance were discovered, and the number of organizations in each category: (c)(3)s, (c)(4)s, (c)(5)s, etc. I’m not aware of the IRS releasing a report of this nature in recent years. If this is true, why not? A reader recently asked me how many private foundations had been audited in the last few years. I said I had no idea, although we both agreed zero might be a good guess. I assume Nan Downing, Director of EO Examinations, has reports on her desk telling her which types of organizations are being audited, what the issues being uncovered are, and the number of each type of organization being audited. Unless I have somehow missed these reports, why aren’t they being released to the public? No names, just data.
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Over the years I have suggested to the IRS that they keep the tax press informed of speaking engagements of their top tax officials. Since the answer has always been no-can-do, we in the tax press are forced to troll the internet. When an organization lands a big fish from the IRS to speak at one of their gatherings, they usually put it on their website, and that information then ends up on the internet.

Checking the internet this past weekend I came up with a summary of Lois Lerner’s recent remarks in North Carolina, reprinted herein. I also came up with a fun article on Lois in her alumni magazine. It’s a couple of years old, but it gives us new insights into Lois’ “meteoric rise to the top levels of the federal government.” (The author of the article may have been a little star-struck.) I’m just sorry I’m not able to reproduce all the photos of Lois — and to think she once told me she was camera shy!

1 – Lois Lerner: No More Business As Usual

2 – EO Director Has Reached ‘Rock Star Status’ with the IRS Continue…

I’ll begin the week by surveying the latest news for those of you who have been away traveling with President Obama.

1 – Not Another Cat Story

This story should give all cat lovers a warm feeling.

2 – The Chronicle of Higher Education’s Annual Salary Report

The New York Times and Washington Post — and I’m sure numerous other newspapers — weigh in on the The Chronicle of Higher Education’s latest salary report.

3 – Who Needs To Be a College President to Make Big Bucks?

The Baltimore Sun continues to do eye-opening exposes. Has anyone ever seen a Maryland state charity regulator? I haven’t, and I’ve lived in the state my entire life. The article notes that Maryland has a law that governs the composition of boards at nonprofits that receive public mental health funds, which says that no one can serve on the board of such an organization if an “immediate family member” works for that organization. I think that’s a great rule that should apply to all section 501(c)(3) public charities nationwide. Continue…

Today we have the intricacies of expenditure responsibility. Now if only the U.S. Government practiced expenditure responsibility, we wouldn’t need a national debt commission!

Expenditure Responsibility: Ten Puzzling Practical Problems

What follows are the September 24 remarks of Jerry McCoy, Law Office of Jerry J. McCoy, Washington, and Andrew C. Schulz, Council on Foundations, Arlington, Virginia, as delivered to members of the EO Committee of the ABA’s Tax Section. The moderator of the panel is Robert A. Wexler, Adler & Colvin, San Francisco. Continue…

1 – Cat Blamed for Starting Fire with Toaster Oven

2 – More on “Is More Always Better?”

3 – Just Hang Up on Charity Phone Solicitations Continue…