Advisory Committee on Tax Exempt and Government Entities (ACT ...

The Appropriate Role Of The Internal Revenue Service With Respect To Tax-Exempt Organization Good Governance Issuesits mission. The serious funding and staff shortages faced by regulators limit the valueof “better data” to increase enforcement. In addition, the analogy to the for-profit role ofshareholders who can vote with their feet or bring lawsuits is limited in the nonprofitsector where individual donors do not possess similar clout or have similar metrics forassessing an organization. While funders have greater leverage with an organizationwhere they control meaningful grant or other support, there are not agreed-upon criteriathat readily lend themselves to metrics (such as share price) as is the case with publiccompanies. In any event, there is little or no empirical evidence to date to show if“sufficient and comprehensible” information were made available to the public thatdonors would “use it comparatively and donate more time and money to moreaccountable nonprofits.” 94 And “among individual donors, evidence has not yetsuggested that donor choice will be a robust enforcement tool.” 95Thus efforts to increase “disclosure” as a means of engendering better compliance orimproving governance must keep these shortcomings in mind. In this vein, when theJoint <strong>Committee</strong> on Taxation in 2000 recommended greater disclosure of informationrelating to tax-exempt organizations, it balanced the competing policy objectives andlooked at a number of factors, including: 96• the public interest served by the disclosure of the information and the countervailing reasons for nondisclosure; • whether the information is relevant to determining compliance with the law;• whether disclosure of the information will increase or reduce voluntary compliance; • whether and how disclosure of the information will modify the behavior of taxexemptorganizations and those associated with such organizations, includingdonors;• privacy concerns of the organization and others;• the costs involved in complying with disclosure requirements and whether thecosts are reasonable given the benefit to be derived from disclosure of theinformation;• whether the information should be disclosed by the IRS or the organization;• whether the Federal tax laws should be used to collect the information;• whether the information will be understandable to those with an interest in theinformation; and• the extent to which the information is subject to misuse.94Id. at 603.95Id. at 603, note 176.96Joint Comm. on Tax’n, Study of Present Law Taxpayer Confidentiality and Disclosure Provisions as Required by Section 3802 ofthe Internal Revenue Service Restructuring and Reform Act of 1998 (2000), Volume II: Study of Disclosure Provisions Relating toTax-Exempt Organizations, (JCS-1-00), at 82 (hereinafter 2000 JCT Study). See also id. at 5, 62-70, 80-84.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 28