IRS Revises 'Financial Need' Standard for September 11 Charities

IRS Revises 'Financial Need' Standard for September 11 Charities

Saying the September 11 terrorist attacks posed "unique circumstances," the Internal Revenue Service has announced that it will allow charities responding to the attacks to distribute money and benefits without first having to demonstrate clear financial distress or need on the part of the recipients, the New York Times reports.

The statement by the IRS is meant to clear up the confusion surrounding an issue that had stalled the efforts of several charities to disburse funds to victims' families, in particular the families of police officers and firefighters, many of whom have already received generous pension and death benefits.

"We don't want people who were affected by the terrorist attack [to be] distracted by tax issues," said IRS commissioner Charles O. Rossetti. "With today's notice, the IRS is sending a clear signal to charities. Groups who act in a reasonable, good-faith manner to get help to victims will not endanger their tax-exempt status."

But while some charity officials welcomed the IRS decision as a sensible response to an unprecedented national tragedy, others criticized the move as an overreaction that could potentially worsen growing inequities in the distribution of the estimated $1.3 billion raised in the wake of the September 11 attacks.

"The IRS has made a mistake," said Rochelle Korman, a lawyer in New York who represents charities. "It has a serious potential inequitable effect, because what it could mean is that the restaurant worker could get $5,000 or $20,000 but the highly compensated family could get $500,000. It puts enormous pressure on the charities to carve up the pie."

Diana Henriques. "I.R.S. Makes an Exception on Terror Aid" New York Times 11/17/2001.