Starting and Managing a Nonprofit Organization: A Legal Guide

By Bruce R. Hopkins | Go to book overview

CHAPTER TWENTY-TWO
Potpourri of Policies and
Procedures

The matter of governance has become, for a variety of reasons, the hottest topic in the realm of nonprofit organizations, primarily public charities (see Chapter 8). The forces driving this development include both congressional investigations into the operations and finances of public charities and other tax-exempt organizations and the leadership of the component of the IRS that is responsible for overseeing the nonprofit sector.

As to the latter, the technical name for this portion of the IRS is the Tax Exempt and Government Entities Division (see Chapter 24). An IRS commissioner, known as the TE/GE Commissioner, is the head of this division.


FEDERAL TAX LAW AND GOVERNANCE

The federal tax law is, of course, predicated on the Internal Revenue Code. The word governance, along with nearly all aspects of governance of nonprofit organizations, does not appear in this code. The tax regulations are likewise silent on the subject. IRS public rulings and federal tax law court opinions do not address the subject. What “law” there is (and this really is not law) is found in the annual information return (see Chapter 9) and the accompanying instructions. Indeed, this matter of governance, at least until recently, has been confined to state law, where the focus is on trustees’ and directors’ fiduciary responsibility (see Chapter 25).

Thus, this question may be posed: Is regulation of the governance of public charities and other nonprofit organizations within the ambit of the IRS’s jurisdiction? For three reasons, the answer to that question must be “no.” First, as is clear from the IRS web site, the agency’s mission is to “provide America’s taxpayers with top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all” (emphasis added). This phraseology is repeated in each issue of the IRS’s Internal Revenue Bulletin. The mission of the TE/ GE Division is, according to the IRS web site, the “uniform interpretation and application of the Federal tax laws on matters pertaining to the Division’s customer base” (emphasis added). Thus, at least on the face of things, the mission of the IRS generally and of the Division in particular does not extend to the administration of non-tax laws, including principles (meritorious as they may be), pronouncements, and examinations in the area of good governance as that subject applies (ostensibly or otherwise) to nonprofit organizations.

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