By Grant Williams

In recent years, the Internal Revenue Service has become involved in reviewing — and promoting — nonprofit governance practices.

But Marc Owens, a former top IRS charity overseer, says the revenue service is straying outside its legal authority, struggling to properly use its powers to keep track of tax-exempt groups, and wrongly putting its tax agents in a position of analyzing the quality of charity management decisions.

The federal tax code does not explicitly set out governance standards for the revenue service to enforce, but the IRS is keeping an eye on what charities are doing and says it has a right to do so.

The revised version of the IRS's Form 990 informational tax return, which is now being filed by charities for the first time, includes numerous questions and inquiries about groups' governance policies and practices.

Among them:

• Enter the number of voting members of the governing body.
• Enter the number of voting members who are independent.
• Did the organization contemporaneously document the meetings held or written actions undertaken during the year by the governing body?
• Does the organization have a written conflict-of-interest policy?
• Does the organization have a written whistle-blower policy?

IRS officials have said that answers to the questions will factor into "risk models" that the agency can use to help decide which organizations should be audited.

Governance principles "find their origin in the Internal Revenue Code," Sarah Hall Ingram, commissioner of the agency's Tax Exempt and Government Entities Division, said in a recent speech. "They are not expressly laid out in the code, nor do they need to be, but the principles of governance that are of concern to the IRS should derive from the requirements for tax exemption and should aid an organization in meeting them."

Ms. Ingram added: "Some have argued that we do not need to be involved, because we can count on the states to do their job and the sector to stay on the path of self-regulation. While both state regulation and sector self-regulation are important, they do not get us off the hook. Congress gave us a job to do, and we cannot delegate to others our obligation to enforce the conditions of federal tax exemption."

Mr. Owens says he doesn't "know of anyone who doesn't think that good governance is desirable." But, he says, "if there isn't a provision of the Internal Revenue Code that gives the IRS authority to do something, they can't do it."

The absence of official guidance from the IRS on what is expected from nonprofit organizations impairs charities' efforts to comply with what the IRS is looking for, he says, and creates the risk that groups in similar situations could receive different treatment from the IRS during audits depending on the agent who happens to handle the matter.

Mr. Owens points out that a note atop the section of the Form 990 that asks governance questions says that the inquiries "request information about policies not required" by the federal tax code.

"The IRS is trying to give itself authority" through the tax form's questions, he says. "There's a disconnect between what the Internal Revenue Code says is the authority of the IRS in this area and where the IRS believes it should go in order to do its job effectively."

What's more, he says, the revenue service "is trying to evaluate governance when it's nothing it has ever studied. The IRS is presuming that revenue agents who are trained as tax investigators can somehow analyze whether management decisions by an institution have been good decisions or not."

Mr. Owens adds: "We have the agency seeing its mission as doing something it's not authorized to do. That's dangerous from a legal standpoint because if the IRS continues in that vein, there is arguably no boundary on where its authority can extend. If it can ask any question it wants on a tax return and compel the information from you, why would it stop with nonprofits?"