Friday, May 16, 2008

Steve Miller, TE/GE Commissioner, Discusses "Jurisdictional Gaps" at the IRS

On April 24, 2008, Steve Miller, TE/GE Commissioner at the IRS, discussed something he refers to as "jurisdictional gaps" in federal tax charity law enforcement.  Sound like a great law review topic.  Is anyone writing on this topic?  Here is an excerpt from his speech:

But, back to the topic. Efficiency and effectiveness are not expressly within our jurisdiction. This is one of our jurisdictional gaps. But it is an issue of fundamental importance, and one that increasingly is attracting attention. Recently, there were Congressional hearings on veterans’ organizations. They were essentially about fundraising efficiency and compensation. It is an issue we cannot ignore if we are to faithfully administer the tax law.

I am not going to speak specifically about the veterans’ cases because that is not my point. My point is that the public and the Congress may and often do have an expectation that the Service can act when we see organizations spending 98 cents of every dollar on fundraising or compensation and 2 cents on services.

Now depending on the facts and just how egregious they are, such a situation may present issues of either private benefit or private inurement. But for the most part what we can do about efficiency and effectiveness is what we have been doing lately: pushing transparency so people can see for themselves just how efficient and effective an organization is, or is not. This means we need to give the public tools they can use to make apples-to-apples comparisons. As the public seeks a good "return" on its contribution dollar, we push for enhanced and meaningful transparency in the hope that market forces and the good sense of the public will bring about change.

We have taken a meaningful step in this direction with our work on the redesigned Form 990. One of our guiding principles was to create uniformity and transparency in reporting.

For the entire speech, see "Remarks of Steven T. Miller, Commissioner, Tax Exempt and Government Entities, Before the Georgetown Law Center Seminar on Representing and Managing Tax-Exempt Organizations, April 24, 2008," on the IRS website.

DAB

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Comments

The jurisdictional gap seems to arise from a structural gap: while inefficiencies in a for-profit will, in theory, be rooted out by pressure from the shareholders, the "shareholder" for purposes of the NFPs is the state AG (acting as proxy for the public generally). That said, I've worked with charities for 4 or 5 years and have only seen an AG take action on truly egregious violations of fiduciary duty. If action is to be taken, I'd think the IRS would have to step in to that gap.

Posted by: jpe | May 20, 2008 7:11:46 AM

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