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Public Statements

Boustany Announces Hearing on Public Charity Organizational Issues, Unrelated Business Income Tax, and the Revised Form 990

Press Release

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Congressman Charles W. Boustany Jr., MD (R-LA), Chairman of the Subcommittee on Oversight of the Committee on Ways and Means, today announced that the Subcommittee will hold the second in its series of hearings on tax-exempt organizations, this time examining the revised Form 990, reasons for the increasing organizational complexity of public charities, including unrelated business income tax issues, and their effect on transparency and tax compliance. The hearing will take place on Wednesday, July, 25, 2012, in Room 1100 of the Longworth House Office Building, beginning at 9:30 A.M.

In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A list of invited witnesses will follow.

BACKGROUND:

Over the last two decades, public charities have grown increasingly more complex in their organizational structures and operations. Contributing to the complexity is the prevalence of profit-generating arms and investment activities within the tax-exempt organizational structure. Tax-exempt organizations are governed by a variety of rules to ensure compliance with Federal tax law and limit abuses, including rules that subject business income from for-profit activities to income tax (the unrelated business income tax, "UBIT"), unless explicitly exempted. These issues, among others, may affect how a public charity chooses to organize and operate.

To address increased complexity and to promote greater transparency and compliance within the sector generally, the Internal Revenue Service ("IRS") released a redesigned Form 990, Return of Organization Exempt from Income Tax, in 2008. The principal goal behind the redesigned Form 990 was to facilitate improved IRS compliance efforts. The Form was also intended to provide all interested parties with a clearer picture of a tax-exempt organization's activities, including those that further its exempt purpose and related party transactions. In an October 6, 2011 letter to the IRS, Chairman Boustany sought to assess whether the goals for the newly redesigned Form 990 have been achieved, the challenges the IRS faces with respect to compliance areas such as UBIT, and how the information required on the new form is being used. The hearing will, in part, follow up on this inquiry.

In addition to the importance of continuing oversight by this Subcommittee of the IRS and the tax-exempt sector, the Committee is working on comprehensive tax reform. Thus, the hearing will also provide an opportunity to discuss how current issues for public charities may inform the Committee's ongoing tax reform efforts.

In announcing this hearing, Chairman Boustany said, "Given the size and scale of the operations of public charities, which in 2008 had over $2.5 trillion in assets, it is critical that the Subcommittee continue its review of the tax-exempt sector. Indeed, over the last two decades, the organizational structures of public charities have become increasingly complex, creating compliance and transparency issues. This hearing is an excellent opportunity for the Subcommittee to hear from the IRS and experts in the tax-exempt community. Their insight will allow the Subcommittee to better understand what is driving organizational complexity, and to learn about the new compliance efforts by the IRS and the UBIT rules."

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