“Taxes for the Masses” Podcast About IRS and Charities

Hello all!  First time blogger here at NLPB. Because I’m me, I can’t just make a recommendation for something I like without criticizing it. There’s a tax podcast that I like called Taxes for the Masses. A recent episode provided a brief introduction to section 501(c)(3), and then criticized the IRS for not policing the charitable sector better. The hosts point out that you would be a fool at this point to rely on an IRS approval of 501(c)(3) status for pretty much anything. The 1023-EZ asks for laughably little information, and it appears that the IRS is not systematically checking even that minimal information against any third-party source. So far, so good.

Here’s the criticism: I’m not at all persuaded that the IRS ought to do the kind of investigative work the hosts propose. It might be better for it to get out of the approval/denial game altogether (or keep doing it in this admittedly pathetic way) and let charities themselves figure out how to build confidence in the sector. The IRS could focus its resources on finding fraudulent or non-compliant charities and shutting them down … or collecting punitive excise taxes from them.  For example, the hosts complain that the IRS failed to catch the fact that a charity founder had previously pled guilty to fraud and money laundering (as reported by the NY Times last summer). They also complain that the IRS didn’t notice that a charity that had “of Michigan” in its name even though it had a mailing address in Staten Island. But I’m not sure how suspicious that is. I know law professors who are officers of several small charities that don’t have their own corporate offices. These very same law professors sometimes use their own home addresses as the mailing addresses of those small charities, even when the charities conduct their activities in other states. It might annoy their wife, but it’s just not that suspicious. That being said, the hosts are probably right that the IRS should have done a better job revoking or refusing to grant charitable status to multiple charities with “American Cancer Council” in their name once the actual American Cancer Council complained that these organizations were not affiliated with it. 

Benjamin Leff