Public Information Reporting by Tax-Exempt Private Foundations Needs More Attention by IRS

GGD-83-58: Published: Sep 26, 1983. Publicly Released: Sep 26, 1983.

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In response to a congressional request, GAO reviewed the Internal Revenue Service's (IRS) efforts to ensure that private foundations comply with the tax administration and public information reporting requirements of the Internal Revenue Code (IRC).

Private foundations are required by IRC to make extensive public disclosures on returns filed with IRS. This information is useful to grant seekers, to Congress and the public for monitoring foundation activity, and to IRS for administering the revenue laws. GAO found that information necessary for administration of the tax exemption law was well reported by the foundations; however, they did not completely respond to public information reporting items on their returns. GAO estimated that about two-thirds of the routine examinations completed by the district offices that it surveyed involved incomplete returns with respect to public information reporting requirements. GAO believes that, if IRS placed more emphasis on public information reporting during existing correspondence and routine foundation examination programs, improved voluntary compliance would result.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: To improve private foundation compliance with IRC public information reporting requirements, the Commissioner of Internal Revenue should adopt a systematic enforcement approach which combines an appropriate mix of increased service center correspondence with selective district office correspondence and examinations to secure better foundation compliance.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should adopt changes to the Internal Revenue Manual illustrating: (1) the public information reporting requirements as an examination objective; and (2) the responsibility of examiners to secure compliance with those requirements.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should develop the management information needed for monitoring the effectiveness of the overall compliance approach adopted and for determining periodically whether any changes to that approach are necessary. In accomplishing this objective, the Commissioner should consider: (1) incorporating additional reporting items in the management information system to monitor the amount and types of noncompliance, such as incomplete public information reporting found by examining agents; (2) including incomplete public information reporting as a noncompliance item in future Taxpayer Compliance Measurement Programs; and (3) using service center correspondence statistics.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commissioner of Internal Revenue should establish procedures for assessing the incomplete reporting penalty in those instances when IRS, through its overall approach, is unable to secure a foundation's voluntary compliance with tax administration or public information reporting requirements and for revoking a foundation's tax-exempt status when necessary.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

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