During a recent nationwide conference call between the IRS and tax practitioners, IRS representatives stressed the importance of a non-profit organization (including a private foundation) notifying the IRS of any amendment made to its articles of organization or by-laws, or any material changes in its activities from those previously disclosed to the IRS. The representatives also emphasized that it is better to disclose these changes to the IRS voluntarily, rather than having the IRS discover them independently. You may notify the IRS of any changes in one of two ways: (1) send a copy of the amended document or a letter describing new activities to the Tax-Exempt Organizations Division, or (2) notify the IRS of the changes on the non-profit's annual return (Form 990, 990PF, etc.) and attaching a copy of the amended document or a statement describing the new activities to the return.
The IRS representatives also indicated that they will be focusing on several areas of possible abuse: donations to and from groups that may support terrorist activities (especially organizations that support foreign causes or organizations (see our Tax Update of June 2003)), credit counseling agencies, acceptance of conservation easements, intellectual property donations and related party transactions involving charity officials and other conflict of interest issues. Subsequent to the conference call, the IRS announced that they have implemented a program to identify and stop abuses by non-profit organizations that pay excessive salaries and benefits to their officers and other insiders (see our Tax Update of August 2002). Because of the increased scrutiny of non-profit organizations, it is important to keep accurate, complete records and to have a conflict of interest policy in place. If your non-profit organization needs assistance with adopting a conflict of interest policy (discussed in our Tax Update of March 2003) or if you need advice on record-keeping or compensation issues, please seek the assistance of your attorneys and other tax advisors.
