The rapid growth of the number of charitable organizations is raising some red flags for some.

• There is concern that some nonprofits are exploiting the IRS’s broad definition of what constitutes a 501(c)3 organization.
• The issue isn’t whether the charities are fraudulent as much as whether the applicants are following state and federally-mandated regulations and laws.
• The IRS stands by its streamlined process that distinguishes between small and large organizations.

Facts & Figures

• Last year the IRS approved 99% of all applications for public charity status (that’s more than one every 10 to 15 minutes!)
• In 2008, $300 billion was donated to charities which cost the federal government more than $50 billion in lost tax revenue.
• The tax code defines public charities as organizations that are “religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international amateur sports competition or prevention of cruelty to animals.”

Best Quote:

“It just seems utterly implausible that anyone can be doing due diligence in any way that constitutes a serious review of the applicant, let alone keeping an eye on them after they are approved. Why bother to have a review at all if you only reject 0.5 percent of the applicants?” – Rob Reich, Associate Professor of Political Science at Stanford