Tuesday, January 12, 2021

The changing face of policing nonprofits

An article written by Joshua Rosenberg of Law360 last month provides interesting insight for persons not intimately familiar with the oftentimes intricate subject area of tax-exempt organization regulation. Where once the IRS led the way in prosecuting potential tax infractions by nonprofit organizations, it now seems that state governments have stepped to the fore in that arena. As illustration, Rosenberg points to events such as the recent victory by New York’s attorney general in bringing a case against the National Rifle Association which made headlines nationwide last year. Developments such as this, says the article author, “have set the tone at the state level for policing charities, even though they’re unable to directly adjudicate the tax-exempt status of those organizations.”

Balanced against this upswing in the vigilance of state governments is a certain amount of apathy by the Internal Revenue Service in policing nonprofit organizations. This is likely due in no small part to dramatic funding cuts in 2013 when the Agency faced criticism (and indeed was ultimately found liable in the matter) for subjecting to strict scrutiny a number of conservative groups applying for charitable organization status 

For Rosenberg’s succinct and informative discussion of the topic including what this means for nonprofit tax infraction enforcement moving forward, see: https://www-law360-com.ezproxy.law.uky.edu/articles/1336984/states-not-irs-lead-in-policing-tax-exempt-organizations

David Brennen, University of Kentucky College of Law


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I'm pretty sure that the "IRS was later cleared of wrongdoing" quote is inaccurate.

I wrote about 30 articles on the IRS scandal for The Nonprofit Quarterly, beginning the day after Lois Lerner's apology (yes, it was initially an apology) for the actions of IRS staff. The TIGTA's reports definitely found problems with how the IRS-named "Tea Party cases" involving 501(c)(3), 501(c)(4), and 501(c)(6) applications were handled.

The U.S. House Oversight and Government Reform committee issued a 200-page report on its work at the end of 2015 that was extensively sourced and found definite issues.

Finally, the IRS was found guilty and liable for its actions in the application process of True the Vote and had to pay "enhanced attorneys' fees" to the nonprofit. See: https://timesuniononline.com/Content/Opinion/Opinion/Article/Conservative-Group-Wins-IRS-Case/76/225/120512 for one article about the case.

Posted by: Michael L. Wyland | Jan 13, 2021 1:00:27 PM

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