I.R.S. Takes on Tax Abuse by Charity Support Groups

By STEPHANIE STROM
NYT

In the last five years, the Internal Revenue Service has revoked the tax exemption of 72 groups, known as supporting organizations, that obscure philanthropies created to support specific charities.

The revocations, made during an investigation of supporting organizations begun by the I.R.S. in 2004, were disclosed this month at a meeting in Baltimore of tax advisers to nonprofit groups. In 2005, Mark W. Everson, its commissioner from 2003 to 2007, put such entities on the agency’s Dirty Dozen list of the worst tax swindles.

Among the problems the I.R.S. found were supporting organizations that were created as tools in shady financial planning programs to let donors take a tax deduction, only to get their supposed charitable donation back through offshore investments or interest-free loans to relatives.

An additional 30 supporting groups examined by the I.R.S. agreed to end their business in audits. The agency reclassified 59 more as charities or private foundations, making them subject to more stringent reporting and granting requirements.

(More here.)