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March 15, 2010; Internal Revenue Service | The IRS’s annual “dirty dozen” list of tax scams contains an obligatory item on charities. However, the item on charities doesn’t seem to be major, suggesting that the IRS appreciates that there are less problems in dealing with charities and charitable deductions than there are in the much more lucrative non-nonprofit side of tax returns.
The IRS’s basic concerns are these: “Arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property” and “schemes involving the [often highly overvalued] donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution,” often with the premise that the donor can repurchase the items later at a price set by the donor.
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We believe that the “abuse of charitable organizations and deductions” part of the dirty dozen list was longer in past years, particularly when the Senate Finance Committee in 2004 held hearings on some egregious charitable uses. But there isn’t much else. There’s no specific mention of foundations indulging themselves with overly nice offices and more, and there’s no mention of some of the shadier donor advised fund managers like National Heritage.
It either means that the Obama Administration’s Internal Revenue Service has decided to chill out over charitable giving scams, or that nonprofits have worked on improving their systems so that opportunities for tax scams are minimized.—Rick Cohen
