The Internal Revenue Service said on Thursday it will audit more tax-exempt organizations in 2008 as well as start a new compliance program to help groups maintain their tax-exempt status.
The IRS's Exempt Organizations division said the tax agency wants to determine how many employers comply with employment tax laws and that the investigation will include tax-exempt groups and government agencies.
The division's director, Lois Lerner, told a news conference on Thursday that the agency will also audit charitable donations next year.
It plans to check deductions donors take for creating charitable trusts, ensure that those who take deductions for making contributions truly give the money, and investigate about 500 organizations that may be shells for private foundations seeking to skirt tax restrictions.
With presidential elections looming, the agency plans to step up audits of tax-exempt organizations' donations to candidates and political action committees (PACs) as well, she said.
Under the law, any tax-exempt group that fails to file required forms with the IRS for three years will lose its tax-free status. The agency will develop a compliance program in 2008 where organizations can file missing returns for the past three years and pay all taxes and interest without facing penalties.
Lerner said the government will also investigate nonprofit organizations that dismantle buildings, as well as insurance companies, community foundations and some gaming outfits.
The IRS will survey colleges and universities to make sure they correctly report their finances as well — a program similar to the hospitals project the agency conducted, Lerner said.
In 2007, the IRS investigated executive compensation at tax-exempt organizations and found alarming trends, such as loans to staff members with unclear terms, that prompted plans to audit more compensation packages in 2008.