Regulation of “Classic” Community-Based Charitable Organizations

Abstract Tax-exempt organizations in the United States are, in general, required to file regular reports on their operations with the Internal Revenue Service (IRS). These filings represent a significant burden for the filing organizations, are a critical source of information for many observers, and are relied upon by regulators and donors as indicators of the organizations’ commitment to achieving the wide variety of purposes for which the exemptions are granted. This paper recommends that the resources of the IRS be refocused so that greater attention can be paid to complex organizations, while the burden of preparing annual filings by simpler organization is also reduced. More generally, this paper also recommends that new attention be paid to the information collected and to its publication. It argues that the needs of the public and other regulatory agencies are not well-served by the current information and that the limitations on currently available information contribute to misunderstanding of and cynicism about the role of charitable nonprofits in American life.