There has been a lot of talk lately about tax abuses by charities. You may be a watchdog, disgruntled employee, or angry contributor who wants to let the IRS know about what you believe to be wrongdoing by a charity. Here is how the IRS hears what you perceive to be the siren call emitting from your whistle....
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The IRS periodically receives information of alleged
wrongdoing from various sources outside the IRS, including the general public,
Members of Congress and other government agencies. Sometimes the IRS receives multiple referrals
of the same item from different sources. For example, the IRS may receive copies of
newspaper articles about a particular organization from concerned individuals
and, at the same time, receive copies of the same article from Members of
Congress who are also concerned about the organization or are forwarding the
concerns of constituents.
Regardless of which IRS office receives the allegations, all items are sent to a centralized office located in Dallas, Texas. Analysts conduct basic research to confirm the identity of the referred organization and enter the information into a central database so the status of the referral can be tracked throughout the process. Analysts also issue an acknowledgement letter to any non-IRS source making the referral, unless it was made anonymously.
An experienced career revenue agent then performs a thorough
technical review of the information. The agent uses a “reasonable belief”
standard to evaluate the facts of the information item and to determine whether
the IRS should take further action. The facts in the information item must
create a reasonable belief that the allegations may be true, when considered
fairly and in light of other reliable information, before the IRS will consider
further action. In cases where the
reasonable belief standard cannot be satisfied, the IRS will take no action on
the basis of the information item. The agent documents his or her decisions and
reasons in the centralized database.
At this point in the process, the agent can make one of
several determinations:
- The information does not warrant further action. In this
case, the agent inputs information, including rationale, into the centralized
database to close out the referral.
- The referral relates to activities that should be considered
at a future date. The agent provides documentation in the database and
schedules the appropriate date to re-evaluate the information.
- The referral contains characteristics that require the
information to be forwarded to committee of career EO managers and agents. Each
month, this committee evaluates referrals and decides whether to proceed with
an examination. The committee also applies the “reasonable belief” standard and
thoroughly documents its decisions in the centralized database.
- The information warrants an examination of the organization.
The agent documents his or her decision and the reasons for it in the
centralized database. The information item then becomes part of the examination
file.
Section 6103 of the Internal Revenue Code prohibits the IRS
from disclosing whether it has initiated an examination or the results of an
examination. Therefore, the IRS cannot communicate with the original source of
a referral beyond the acknowledgement letter noted earlier.
And there you have it.
If you liked this post, please visit http://www.charitygovernance.com
for a description of our Guide/Tutorial for non-profit directors and
officers entitled “Avoiding Trouble While Doing Good: A Guide for the
Non-Profit Director and Officer.” Copyright 2005, Auto Didactix LLC and Charity Governance Consulting LLC. All Rights Reserved. You may not
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anywhere or e-mailing, or otherwise reproduce this post. If you want
others to review this post, you may provide them with a link to this
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"Avoiding Trouble While Doing Good, A Guide for the Non-Profit Director
and Officer" and this web blog. For additional information call 773-325-2124
THE
FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL
ADVICE IS REQUIRED, THE NON-PROFIT OR OTHER PARTY IN QUESTION SHOULD
SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
