Enhancing Governance — The Need for Better Coordination with the States and with Other Federal Agencies
I believe that the various enforcement agencies, including the IRS, can achieve better enforcement results by partnering and coordinating our efforts. For example, we issued a joint consumer alert with the Federal Trade Commission (FTC) and the National Association of State Charity Officers (NASCO) on credit counseling abuses. Our ability to share information is governed by section 6103, and the flow of information to us in these relationships necessarily exceeds what we can offer in exchange. Nevertheless, we are taking the steps necessary to ensure that we are able to work effectively with the states and other federal agencies to the extent permitted by statute.
Coordination with States
As Messrs. Josephson and Pacella will tell us, the states play an important role in the regulation of charities and private foundations. While the IRS’s role is the administration of federal tax law, state law covers most other aspects of an exempt organization’s existence, including issues involving contracting, fundraising, use of trust corpus, and consumer protection. State enforcement often can yield important information for federal tax administration.
To give an example, a number of states are actively looking at private foundations under state nonprofit corporation and charitable trust laws. The IRS has asked to monitor information arising from those efforts. What we learn may allow us to better focus our own enforcement efforts, and help identify areas where increased information sharing with the states is appropriate.
In fact, we have been working with NASCO to improve our coordination with the states not only with respect to private foundations, but with respect to public charities as well. Although we are limited by section 6103 in what we can provide to the states, there are some exceptions. Recently, we revised and streamlined our procedures for forwarding to state attorneys general and other authorized state officials copies of denial letters we have issued to applicants for charity status, and revocation letters we have issued to existing charities.
In addition, we have told NASCO we can provide better feedback on organizations they refer to us for examination. We have offered meetings to discuss areas of mutual interest and determine what kinds of information it would be useful for the IRS and states to share. We hope to schedule an annual IRS/NASCO strategic planning meeting to allow state officials input into our annual exempt organizations work plan. Finally, we have proposed piloting project teams in key compliance areas that include NASCO members.
To facilitate continued cooperation with the states, the Treasury Department believes Congress should authorize the IRS in appropriate circumstances to share returns and return information about tax-exempt organizations with state charity officials to the extent necessary to administer state laws governing the administration of charitable assets and the solicitation of charitable contributions, or to facilitate the resolution of issues relating to the organization’s federal tax-exempt status. The Treasury Department believes any legislation that permits disclosure of additional information should be based on a balancing of the interests of state charity officials and concerns regarding taxpayer privacy and the impact on federal tax administration. In addition, such disclosure should be subject to the same confidentiality, recordkeeping, and safeguard provisions that apply to information shared by the IRS and with state tax officials. The Treasury Department believes the approach taken in the CARE Act as passed by the Senate addresses many of these concerns.
Coordination with Other Federal Agencies
We work with other federal agencies in a number of areas. For example we continue to engage in information sharing with the FTC to learn more about the credit counseling industry, including joint meetings with the FTC with representatives from industries that provide business services to credit counseling organizations. We have established an expedited process through which FTC attorneys may request approved Form 1023 application files. Similarly, the FTC has established an expedited process through which we may obtain information we need for enforcement. We expect to continue this mutually beneficial relationship and find other ways to leverage our scarce resources.