Update: Congressional Hearing on Exempt Organizations
On May 16, 2012, the Ways and Means Subcommittee on Oversight held a hearing on the operations oversight of tax-exempt organizations. The focus was on current IRS compliance initiatives related to colleges and universities, the reporting requirements for tax-exempt hospitals, good governance standards, and the redesigned Form 990.
This was the first in a series of hearings that will be held by the subcommittee.
“Although none of the issues discussed at this hearing require urgent attention from nonprofit organizations, we are monitoring the discussions carefully to get a better sense of the challenges and opportunities facing the nonprofit sector,” said Karen Gries, a nonprofit principal.
Independent Sector President and CEO Diana Aviv testified that the redesigned Form 990 was the first opportunity for the IRS to obtain good information on exempt organizations, but she also raised the question of whether the IRS was striking the proper balance between complexity and accountability.
Joanne DeStefano, Cornell University’s vice president for finance and chief financial officer, spoke of a two-year IRS audit of the organization’s Form 990 and 990-T. Although she noted the increased reporting requirements have resulted in the adoption of policies, practices, and good governance structures, the costs of compliance ultimately become a part of the cost of education.
The difficulty of compliance was also among the key challenges for tax-exempt community hospitals. Michael Regier, senior vice president of legal and corporate affairs at VHA Inc., reported on the impact of the reporting requirements of the Accountable Care Act. Regier noted the difficulty in achieving compliance with Section 501(r) provisions when only informal guidance and no proposed or final regulations have been issued for an act which was enacted in 2010.
Additional testimony by Roger Colinvaus, associate professor of the Columbus School of Law at the Catholic University of America, raised concerns over the perceived reactionary nature of the policies based on the abuses a “few bad actors.” Though Bruce Hopkins, senior partner at Polsinnello, Shughart credited the IRS with aggressively applying laws fairly to all exempt organizations.
These hearings offer an opportunity for tax exempt organizations to participate in a constructive discussion on the balance that must be stuck between accountability and compliance. The difficulties each organization faces are as diverse as the tax-exempt organizations invited to testify. The testimony highlights the challenges on both sides of the compliance issue.
“It’s extremely difficult to write and enforce regulations for the broad spectrum of tax-exempt organizations, and similarly, it is demanding to understand and comply with them,” commented Gries.