Watchdog Urges Foundations to Curtail Tax Fraud

March 26, 2008

Watchdog Urges Foundations to Curtail Tax Fraud

A key figure in Congress’s recent efforts to curb abuse in the nonprofit world says foundations need to become much more aggressive in stopping tax fraud.

Otherwise, foundations could soon be in the cross hairs of federal lawmakers.

Dean A. Zerbe, a former top aide to Sen. Charles Grassley of Iowa, said in an online discussion with Chronicle readers that some members of Congress are concerned about family foundations that are paying family members for administrative or board positions.

Mr. Zerbe, who stepped down from his Senate job last month to work as national managing director for Alliant Group in Washington, also said he is concerned that private foundations are being used as a tax shelter by some wealthy donors.

“There needs to be better leadership from the foundation community in this area overall to address these problems,” Mr Zerbe said. “The private foundations should come forward with their proposals of reform and not wait for Congress.”

During the hour-long discussion, Mr. Zerbe also answered questions about issues such as the Combined Federal Campaign, endowment spending by colleges, and the tax status of religious organizations.

— Peter Panepento

Comments

When the president of The University of Texas Southwestern Medical Center in Dallas can spend donor funds on fine wine and cavir then we got a problem. The Southwestern Medical Foundation raises funds for the university, presumably to offset the lack of state funding,but when the expenses from the foundation funds are reviewed,they money was spend on luxury items for the president including first class travel to Europe every Summer claiming a foundation business meeting,but when a 990 request was sent for the foundation,there was nothing there! There was no direct benefit to the university and the president should have to re-pay those funds with interest and ,this time,not write “donation” on the memo portion of his personal check so he can take it off his income tax! The re-gifting of donor funds to other arts charities in Dallas is gutsy and is not allowed by IRS rules and the gifts he says he gives donors,well they exceed the IRS “quid pro quo” rule so those donors hould receive a 1099 for the cost of the gift over $75.The IRS could “live” at this place for a year and still not find all of the violations,but they would collect some tax dollars.How long does it take for the IRS to follow up on that form 3949??

— Brent Mar 26, 10:07 PM #

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