US Senate Tax Chief Calls For Tougher Enforcement For Tax-Exempt Entities

by Leroy Baker, Tax-News.com, New York

07 June 2006

Sen. Chuck Grassley, chairman of the Committee on Finance, has urged the US Internal Revenue Service (IRS) to step up enforcement in the tax-exempt arena, arguing that many non-profit entities are exploiting the vagueness of current rules to "enrich themselves" rather than serve the public.

Specifically, Grassley wants the IRS to police more proactively non-profit hospitals, non-profits that may be used for political purposes such as those tied to ex-lobbyist Jack Abramoff, generous non-profit board member compensation and trustee fees, and non-profits that appear to function like for-profit businesses and undercut their business competitors.

“I’m seeing dozens of separate problems united by a theme,” Grassley stated.

“The theme is some individuals are exploiting vagueness or silence in or a lack of enforcement of the laws governing tax-exempt groups to enrich themselves rather than serve the public. It’s unseemly for tax-exempt groups to function this way," he added.

In a letter to Donald L. Korb, IRS Chief Counsel, Grassley urged the agency to apply the broad authority granted to it under existing regulations to retroactively punish the worst offenders.

"I encourage you to use this tool more frequently and expeditiously, particularly with respect to tax-exempt organizations and in those situations when it is an IRS regulation that may be frustrating congressional intent by permitting an abuse to continue," he wrote.

Grassley has also developed a package of charitable giving incentives and improvements to nonprofit practices to help protect charities from individuals who abuse them for personal gain. He is working to get the package enacted as soon as possible, with the strong support of charities nationwide.

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