In response to a request by Sen. Charles Grassley, the IRS outline its efforts to deal with the changed landscape of charities (and charity abuses) in the United States.
In the AP story about the $1 billion in payroll taxes unpaid by charities (picked up by Time/CNN, among others), there was mention of a letter from acting Internal Revenue Service Commissioner Kevin M. Brown listing charity abuses that the IRS was following. A fan (that's how she or he identified him or herself) asked if I could track down the letter.
Here it is (the pdf file is 6Mb because the pages are scanned images rather than the text of the letter). There are a few surprises, like the claim that there has been a rise in very large exempt organizations. So far as I know, there have been very large exempt organizations since the creation of the income tax (e.g. the American Red Cross, universities, hospitals, and, of course, church denominations). What is really new (in the last two decades) is the emergence of charities as personal tax instruments for the middle class and as tax-exempt hobbies.
Another surprising entry is the emergence of Indian tribes as an area of interest for the exempt organization division. There are 562 tribes recognized by the Federal government in the US, and 225 of them operate 442 casinos, taking in $25 billion annually, with tribal gaming the fastest growing segment of the gaming industry, growing at double-digit rates. Now tribes are moving into convention centers and banking, not always on tribal lands, and are using tax-exempt bonds to finance their activities.
There's a new tax device called a Charitable Family Limited Partnership, or CharFLP, which has the effect of providing a large up-front charity deduction and sheltering of appreciation in a tax-exempt entity, with a buy-back arrangement that discounts the value of the assets on the back end.
There's lots more in the letter about executive compensation, blurred lines between charity and for-profit work, ambiguity about what constitutes unrelated business incomes, and even issues with record retention on long-term tax exempt bonds.
Glad to pass it along—it's a great beach read.