Form 990 Assists IRS in Avoiding Nonprofit Audits

At yesterday’s conference entitled “Top Issues in Nonprofit Governance” sponsored by the Independent Sector, the Internal Revenue Service and Georgetown University Law Center, Sarah Hall Ingram, TE/GE Commissioner, stated that the IRS will be using the Form 990 to “figure out who needs our attention and who doesn’t.”  As a consequence, exempt organizations will be reviewed more often and contacted about particular issues arising from their annual reports, ultimately resulting in fewer in-person audits.  As reported in the BNA Daily Tax Report, Ms. Ingram did state that any audits will not include issues pertaining to a nonprofit’s governance policies.  However, the IRS will inquire into a particular organization’s failure to answer the new questions and schedules pertaining to governance in the revised Form 990.  Although some disagreement exists as to the IRS’s proper purview with respect to nonprofit governance, Ms. Hall stated that the IRS is confident of the relationship between competent governance and compliance with the tax exemption laws.  She further stated that early reports reveal that the new Form 990 questions both encourage and yield better governance of nonprofits.

Other participants at the conference, namely the chief of the New York state Charities Bureau, seem to support Ms. Ingram’s observations on good governance, recounting that most of the New York Bureau’s current investigations involve lack of proper governance.  The New York chief propounded that deficient governance results in increased waste, misuse of assets, and charitable inefficiency.

NAM