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May 29, 2008

IRS Makes Changes Intended to Help Donors

The Internal Revenue Service is beefing up its efforts to increase the level of transparency at charities as philanthropists demand better tools to evaluate how their money is spent, reports The Wall Street Journal.

For the first time in almost 20 years, the annual tax form — known as the Form 990 — that most nonprofit groups have to fill out every year is getting a makeover. The tax agency hopes the changes it has made to the form will provide potential donors with a standardized way to glean information on charities. Organizations will begin using the new form next year.

IRS official Steven Miller says the agency is considering broadening its power to monitor nonprofit groups in the future by restoring the IRS’s use of the “commensurate test,” which examines whether nonprofit groups are spending money on charitable programs in a way that is in line with their financial holdings.

The IRS recently used the test to deny charity status to an organization, The Chronicle of Philanthropy reports.

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