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ARTICLE · 25 JANUARY 2005

Charitable Organizations Should Prepare for IRS "Soft Audit"

Miller Nash LLP
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This past summer, the Internal Revenue Service announced that it will be implementing a "Tax-Exempt Compensation Enforcement Project" to identify and halt abuses by tax-exempt charitable organizations that award excessive compensation and benefits to officers and insiders. IR 2004-106 (Aug. 10, 2004).

United StatesTax
William Manne
William Manne

This past summer, the Internal Revenue Service announced that it will be implementing a "Tax-Exempt Compensation Enforcement Project" to identify and halt abuses by tax-exempt charitable organizations that award excessive compensation and benefits to officers and insiders. IR 2004-106 (Aug. 10, 2004). The IRS expects to contact nearly 2,000 charitable organizations to request detailed information and supporting documentation on issues gleaned by the IRS from review of the organizations' Form 990 filings, primarily with respect to compensation practices and procedures. The project is also expected to scrutinize transactions with insiders, such as loans or sales, exchanges, or leases of property to or from officers or others involved with an organization.

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