As part of the Senate Finance Committee’s investigation of tax-exempt organizations, Chairman Charles Grassley (R-Iowa) on June 1, sent letters to two top IRS officials, asking them to increase enforcement related to perceived abuses in the tax-exempt area. Acknowledging that legislation may not be the “quickest way” to correct abuses by tax-exempt organizations, Sen. Grassley told IRS officials he expects the Service to do more, in particular to police nonprofit health care organizations, and he suggested they issue guidance and update regulations to curb abuses.
The letters, sent to Donald L. Korb, IRS Chief Counsel, and Steven T. Miller, Commissioner with IRS’ Tax- Exempt and Government Entities Divisions, gave the IRS thirty days to provide information concerning the specific initiatives, reviews, and enforcement actions they have taken in overseeing the tax-exempt community they regulate.
In terms of nonprofit hospitals, Sen. Grassley, noting the rapidly changing nature of the healthcare industry, stated that regulations and guidance with respect to health care organizations need to be monitored and updated on a continuing basis. Areas that he would like the IRS to focus on include the definition of charity care, the requisite level of charity care, the definition and level of community benefit, the definition of joint ventures, joint ventures involving nonprofit hospitals, the payment of excessive compensation and the use of tax-exempt bond proceeds.
In addition, Sen. Grassley asked for information regarding the IRS’ continuing study of compensation issues related to private foundations and public charities including charitable trusts. He raised particular questions about a situation in which board members are being compensated for both board service and for their duties as an executive or an employee. He also questioned whether there is sufficient oversight of the compensation of trustees of charitable trusts, and requested general comments from the IRS regarding the issue.
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