Tax-Exempt Sector on House Subcommittee's Agenda

The Oversight Subcommittee of the House Ways and Means Committee has launched a series of hearings on the nation's charitable sector and Internal Revenue Service oversight of tax-exempt activities in the United States.

According to the NonProfit Times, witnesses at the first hearing addressed the agency's audit of about 7,900 tax-exempt organizations, issues related to the Form 990 and Form 990-T, and concerns over the fairness of the charitable deduction. For example, Cornell University CFO Joanne DeStefano testified about a recent audit in which the IRS reviewed two years of transactions on the university's Form 990 and Form 990-T and argued that much of the information the agency requests is redundant. Roger Colinvaux, law professor at Catholic University, echoed DeStefano's comment that the IRS form offers "too much information," before adding that the "complexity of the form does reflect the complexity of the sector."

For fiscal years 2011 through 2015, the charitable sector in the U.S. will "cost" the federal government an estimated $242.6 billion in revenue. As a result, Congress in recent years has considered a number of proposals to cap the charitable deduction for the nation's top earners. But supporters of the deduction in its present form have warned that doing so would adversely affect charitable giving.

Indeed, as Independent Sector president and CEO Diana Aviv testified, charitable donations often are influenced by the tax deduction, noting that "more than 22 percent of all annual online charitable donations in the U.S. are made on December 30 and 31." For that reason, Aviv added, Congress should help the sector by renewing expired tax extenders such as the IRA charitable rollover.

The hearing comes on the heels of a letter sent by subcommittee chairman Charles W. Boustany, Jr. (R-LA) to the IRS last fall seeking information to help the committee better understand the current state of relations between the IRS and tax-exempt groups. In a release on his Web site, Boustany said, "This review allows us to examine the state of the tax-exempt sector as it currently exists today and consider this information as we continue the committee's efforts toward comprehensive tax reform. In both cases the goal is the same — to ensure that the tax-exempt sector is operating in an efficient manner and that the laws governing tax-exempt organizations are being applied fairly and evenly."

Joann M. Weiner. "House Subcommittee Targets Nonprofits." NonProfit Times 05/16/2012. "Boustany Announces Hearing on Tax Exempt Organizations." House Ways and Means Committee Press Release 05/16/2012.