Lawmakers Urge Greater Oversight of Charities

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Lawmakers Urge Greater Oversight of Charities

 

Tue Jun 22, 3:49 PM ET

By Donna Smith

 

WASHINGTON (Reuters) - Too many U.S. charities are abusing their tax exempt

status to enrich insiders at the expense of their mission and Congress needs

to tighten the rules under which they operate and give tax authorities the

resources to enforce them, lawmakers said on Tuesday.

 

 

 

"Too many well-meaning charities have fallen prey to the charlatans' pitch

about easy money," said Senate Finance Committee Chairman Charles Grassley.

 

 

"Some charities are blinded by their own mission and the need for additional

dollars.

 

 

"These charities are willing to sign onto deals that provide dollars to

promoters and insiders, but only pennies to the charity," the Iowa

Republican added.

 

 

Grassley said Tuesday's hearing will help lay the groundwork for reforms

that could include making government boards of tax-exempt organizations more

responsible for what goes on as well as greater Internal Revenue Service

(news - web sites) scrutiny.

 

 

Internal Revenue Service Commissioner Mark Everson told the panel there are

about 3 million tax exempt organizations in the United States including

charities, hospitals, universities, unions, business leagues and employee

pension plans.

 

 

He said tax-exempt abuses remain isolated but said officials should act

quickly to stem their growth.

 

 

"If these abuses are left unchecked, I believe there is the risk that

Americans not only will lose faith in and reduce support for charitable

organizations, but that the integrity of our tax system also will be

compromised," Everson said.

 

 

He told the panel the proposed $10.7 billion 2005 budget for the IRS

reflects a $490 million increase over this year's spending and that most of

the money will be used to beef up enforcement and step up audits of tax

exempt organizations.

 

 

The "risk of audits and sanctions imposed by the IRS have all but

disappeared in recent years," J.J. MacNab, an analyst with Insurance

Barometer LLC in Bethesda, said in testimony to the committee.

 

 

She outlined a number of "bad players" who use charities to pay for

vacations and engage in questionable money-making schemes including

investment pools that buy insurance policies on donors of charities.

 

 

MacNab also described companies and individuals that set up tax shelters

through charities to avoid paying taxes.

 

 

Other witnesses, including two who remained unidentified and spoke behind

screens, described scams involving car donations and a charity organized to

help first-time home buyers that was bilked by its founders.

 

 

At the same time the Senate panel was examining charities, a House Ways and

Means subcommittee took a closer look at nonprofit hospitals.

 

 

Witnesses agreed nonprofits generally provided more free care to the

uninsured than for-profit hospitals, but there was no consensus among

witnesses or lawmakers on whether the care was enough to justify their

tax-exempt status.