IRS Official Links Good Governance and Tax Exemption

IRS is actively promoting “good governance” to an unprecedented degree.
“Somewhat controversially – at least to some – we have advanced the notion that there is a link between good governance and tax compliance,” Sarah Hall Ingram, IRS Commissioner, Tax Exempt and Government Entities, told a meeting at Georgetown University Law Center last week. Her speech is available online.

“I’m not interested in trying to usurp the business judgment of an organization’s officers or board of directors or trustees. Nor am I a micro-economist concerned with whether an organization is maximally efficient in the way it provides its charitable services to the public. I do think, however, that a tax-exempt charity should actually provide charity; it should provide some meaningful and measurable benefit or service to the public.”

Ingram said good governance includes at least three things: a clear and well-communicated mission; transparency about its governance and charitable works; and “an engaged, informed and independent” board that has “real responsibility and authority. It must, for example, be able to implement, in the life of the organization, the rules against inurement and self-dealing.” The board should also have principles regarding proper use and safeguarding of assets, supported by policies and practices that address executive compensation, protect against conflicts of interest, and support independent financial reviews, she said.

For an in-depth look at the new IRS Form 990, see the summer issue of the Great Boards newsletter, available June 29.

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