IRS Set to Review Nonprofits in Wake of Katrina

Marvin Friedlander of the Internal Revenue Service recently told a nonprofit tax conference that the IRS will soon be gearing up to insure that exempt organizations have not been abusing exempt status in view of the massive level of donations related to Hurricane Katrina. Friedlander cited maintainance of the public trust as a major reason for the more thorough look at exempts and specifically mentioned exempt hospitals and private foundations as targets of attention.

In a setting where large amounts are donated and with the sizable tax break (up to 35% of excess revenue over expenses) given to exempt organizations, some scrutiny of their performance is reasonable. As long as scrutiny does not become heavy-handedness, the IRS is acting appropriately.