A special panel representing the not-for-profit sector recommended stricter federal oversight of charitable organizations and harsher penalties against individuals who self-deal, omit or misrepresent information on Form 990 filings. The Panel on the Nonprofit Sector, in its first report to the Senate Finance Committee, advised Congress to increase the excise tax for self-dealing and make it easier for enforcement agencies to impose penalties on individuals. The panel also said that individuals who violate rules in preparing Form 990 filings should be subject to the same penalties applied to those who prepare personal and corporate tax returns.
Independent Sector, which represents not-for-profits, foundations and philanthropies, convened the panel in 2004 at the encouragement of Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking minority member Max Baucus (D-Mont.). Among other recommendations, the panel said the IRS should suspend the tax-exempt status of any organization that fails to comply with filing requirements for two or more consecutive years. It also urged the IRS to require charitable organizations with more than $2 million in annual revenue to submit audited financial reports with their Form 990s. Read the panel's report. The panel will submit a second report to the committee in spring to address additional issues in governance, ethics and accountability. -- by Ralph Loos