Hearing of the Oversight Subcommittee of the House Ways and Means Committee - Public Charities

Hearing

Welcome to this morning's hearing on public charities.

This hearing is the second in a series of hearings exploring tax-exempt issues and IRS compliance efforts. The focus of today's hearing is on 501(c)(3) public charities, the largest category of tax-exempt organizations.

In particular, for public charities we are focused on transparency and compliance efforts, organizational complexity, and commercial activities.

Over the last several decades, public charities have become increasingly complex organizations. While universities and hospitals are notable examples of this, complexity has not been limited to these types of organizations. A number of factors have driven this trend, including Federal tax law itself and the expansion of the types of exempt and commercial activities that public charities engage in.

About a decade ago, there was growing recognition that the Form 990, the federal return used by most tax-exempt organizations, was not collecting the kind of information needed by the IRS or the public to understand the activities of this increasingly complex sector. To ensure a greater level of transparency across the sector, the IRS substantially redesigned the Form 990 -- rearranging how information is reported and expanding the breadth of the information requested to draw out critical issues such as related party transactions, governance, and commercial activities. We will discuss how the Form 990 was changed, and whether those changes have promoted compliance and transparency.

Today we have two panels that will help the Subcommittee explore public charity compliance issues, such as the redesigned Form 990, sector transparency, organizational complexity, and commercial activities. This exercise also will provide important information to the Subcommittee as it begins to look to the future and think about changes that will help tax-exempt organizations work most effectively to meet their goals.

I want to thank all of our witnesses for joining us this morning.

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