The Internal Revenue Service (IRS) is coming under fire from charitable organization regulators, Congress and its own independent overseer for an inability to properly identify fraudulent applications and for approving phony charities to claim tax exemption status.
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A recent fraud investigation and two new Treasury Inspector General for Tax Administration (TIGTA) reports on the IRS’s screening and operations processes are raising concerns about whether the IRS has the capability to perform its important charity “gatekeeping” task and whether it should continue to.
The two TIGTA reports, released on Sept. 29 and Oct. 3, reviewed the IRS’s enforcement program with regard to bogus charities applying for tax-exempt charity status and the agency’s competence to approve streamlined applications given its unreliable fast-track application process and a serious lack of information required by applicants.
According to the New York Times, in an effort to contend with backlogs and budget cuts, the IRS adopted a fast-track system for approving tax-exempt charitable applications. However, per agency data, the agency rejects only one application for every 2,400 submissions, or less than 1%, according to the TIGTA reports.
Particularly damning is the fact that TIGTA itself went undercover and applied for tax exemption for five…
