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 IssuesSteven T. Miller, Commissioner TE/GE, IRS, spoke on each day of the two-day 2008Georgetown Tax Conference. In his first speech 268 he addressed four issues: whygovernance matters to the IRS; what the IRS has done in the past year to encouragegood governance; where the IRS expects to go in the governance area in the future;and what attendees can do to help their clients and organizations strengthen goodgovernance. He set the backdrop as follows:Over the past year, we have said repeatedly that we care because a wellgovernedorganization is more likely to be compliant, while poorgovernance can easily lead to trouble. Good governance also allows forself-identification and resolution of problems. Some disagree with us onthis. My view is clear. Despite the absence of explicit federal statutoryprovisions setting forth clear governance standards, what I am callingjurisdictional gaps, we are not interlopers trying to regulate an area that isbeyond our sphere. Rather, the effects of good or bad nonprofitgovernance cut across virtually everything we see and do in our work. Itimpacts whether the organization is operated to further exempt purposesand public, rather than private, interests. It dictates whether theorganization’s executives are compensated fairly or excessively. Itinfluences whether the organization makes informed and fair decisionsregarding its investments or its fundraising practices, or allows others totake unfair advantage. The question is no longer whether the IRS has arole to play in this area, but rather, what that role will be.Miller described the governance questions on the redesigned Form 990 for 2008 as the“crown jewel” of their governance efforts over the last year and also touted thegovernance article that was added to the Life Cycle on-line educational tool. Heemphasized the importance of board composition, including independent members,internal financial controls that serve to safeguard charitable assets, and othergovernance procedures that ensure that large scale decisions are reviewed. Headvised that the IRS will be increasing education about governance in the determinationprocess, continue to press for transparency in connection with the Form 990, andconsider a post-exam governance checklist designed to determine if governance is afactor in compliance.In his second speech, 269 Miller spoke both about governance and about efficiency andeffectiveness. With respect to governance, his themes were similar to his earlierspeech. He emphasized the IRS belief that there is a “nexus between goodgovernance and tax compliance,” and spoke to the initiatives the IRS would be taking topromote good governance, including education, transparency, and analysis through apost-exam checklist.November 10, 2007, Speech by Steven T. Miller268See Remarks of Steven T. Miller, supra note 24.269See Remarks of Steven T. Miller, supra note 31.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 108