IRS' Plans

One of the IRS’s Strategic Plan objectives for 2005-2009 is “To deter abuse within tax-exempt and governmental entities and misuse of such entities by third parties for tax avoidance or other unintended purposes.” According to Everson, approximately three million entities are tax-exempt nonprofits with about $8 trillion in assets. While the commissioner said there is no “precise” way to gauge the revenue impact, the IRS is focused on insuring that the tax expenditures “achieve their intended goals.” Banks have questioned credit unions’ commitment to their mission. Everson asked the committee to support the administration’s requested 8% budget increase for 2006. The commissioner’s letter outlined a number of areas where tax-exempt entities are running into trouble, from lax governance attitudes to selling of the exemption for tax shelters. There are also excessive compensation issues and abusive retirement vehicles. One improvement has been increased transparency of nonprofit organizations due to public demand. Often, the IRS’s only recourse is to revoke an organization’s tax exemption, which may represent “a disproportionate hardship” on innocent beneficiaries, retirement plan participants or bondholders. Additionally, a recent report by the Independent Sector, which funds that National Panel on Nonprofits, recently issued a report backing mandatory electronic filings for all nonprofits. The IRS has issued temporary regulations requiring electronic 990 and 990PF filings for certain groups, Everson said. Credit unions are currently exempt from filing 990s as entities of the federal government. [email protected]