US Senate To Probe Charitable Tax Abuse Allegations

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

18 June 2004

Charities and other tax-exempt organizations are to come under the microscope next week when senior Senators are due to hold hearings into allegations of illegal tax sheltering.

The investigations by the Senate Finance Committee will focus on issues such as the improper use of charities for personal profit and the use of tax-exempt structures by individuals and businesses to reduce taxes. They follow recent comments by IRS Commissioner Mark Everson that suggestions of such “abuses” are of “increasing concern” to the agency.

The hearing, entitled "Charity Oversight and Reform: Keeping Bad Things from Happening to Good Charities,” is likely to focus on individuals who donate to tax-exempt funds but steer the money towards the paying of personal expenses, according to reports.

Two anonymous witnesses, with their voices electronically scrambled, are due to give evidence at the hearing, according to reports in the US media.

Senate Finance Committee Chairman Charles Grassley (R – Iowa) commented: "The salesmen have packaged their snake oil with a new tax-exempt label. But it's still snake oil.”

“Taxpayers should be careful not to jump at any tax-avoidance plan involving a charity. The IRS and the Finance Committee are looking hard at this new wave of schemes and shelters,” he warned.

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