Government Funding

INDEPENDENT SECTOR Letter to House and Senate Appropriations Committee Members Urging Full Funding for the IRS

July 8, 2002


The Honorable C.W. Young
Chairman
Committee on Appropriations
U.S. House of Representatives
Washington, DC 20515

Dear Chairman Young: 

I am writing in conjunction with the Committee on Appropriations' consideration of the Treasury-Postal Service Appropriations bill to urge you and your colleagues to support the President's budget request for the Internal Revenue Service (IRS) of $10.4 billion dollars. The President's budget request for IRS funding would assist efforts to enhance oversight of the IRS' supervision of the charitable sector. 

INDEPENDENT SECTOR is a coalition of more than 700 national organizations and companies representing the vast diversity of the nonprofit sector and the field of philanthropy. Its members include many of the nation's most prominent nonprofit organizations, leading foundations, and Fortune 500 corporations with strong commitments to community involvement. The network represents millions of volunteers, donors, and people served in communities around the world. INDEPENDENT SECTOR members work globally and locally in human services, education, religion, the arts, research, youth development, health care, advocacy, democracy, and many other areas. No other organization represents such a broad range of charitable organizations and activities.

INDEPENDENT SECTOR's mission is to strengthen and support America's charitable sector. To that end, we have long maintained that charities' most important asset is public trust and that effective government oversight of charities is essential to maintaining that trust. Accordingly, for many years we have actively encouraged Congress to provide the IRS with sufficient resources to enable IRS oversight to keep pace with the dramatic growth in the size and complexity of the charitable sector. In keeping with this effort, recently we have advocated for funding for an electronic filing project that will greatly improve the completeness and accuracy of the Internal Revenue Service's database of tax-exempt organizations. An improved database will enable the IRS to focus its oversight resources on those organizations in most need of education or review and offer appropriate, but less intrusive, oversight of organizations operating within the requirements of the Internal Revenue Code. 

Against this background, we are deeply concerned by a recent Government Accounting Office (GAO) study entitled Tax-Exempt Organizations: Improvements Possible in Public, IRS, and State Oversight of Charities conducted at the request of Senators Max Baucus and Charles Grassley. Specifically, the study found that the IRS cannot properly oversee the nonprofit sector because the growth of the sector has outpaced the IRS' resources. This finding was not surprising, since recent trends have been in the wrong direction. Over the past decade, a strong cohort of senior IRS personnel have retired from exempt organizations work and, due to resource constraints and hiring freezes, they have not been adequately replaced. The commitment of resources to the internal work of reorganizing the IRS, while understandable and unavoidable, has compounded this problem. As a result, IRS capacity both to issue regulations and other guidance and to maintain an effective audit program has been significantly compromised. 

This poses a significant long-term threat to America's charities. The great majority of charities that are strongly committed to full compliance with the requirements for tax-exemption are not getting the timely guidance they need on how to meet their compliance obligations. Of even greater concern, the significant decline in audit coverage is an open invitation to those who would enter the charitable field for the wrong reasons. Only effective IRS oversight can deter such unscrupulous individuals from misusing charities to serve their private ends. If such individuals are not deterred, their misconduct will, over time, badly erode public confidence in charities as a whole.

At a time when leaders across the political spectrum increasingly recognize the importance of America's charities, it is vital that Congress ensure an adequate regulatory program to maintain the integrity of the charitable sector. We strongly urge you to give this matter the very serious attention that it deserves and requires, and we stand ready to assist you in any way that we can.

Best regards,

Patricia Read
Vice President, Public Affairs
INDEPENDENT SECTOR