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IRS faces more pressure on veterans service organization audit rules

Aug. 29, 2013 - 04:58PM   |  
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The House Veterans’ Affairs Committee chairman is giving the IRS until Tuesday night to explain why veterans’ organizations are being required to prove their members are really veterans.

Rep. Jeff Miller, R-Fla., wrote the IRS on Wednesday questioning a 2011 policy requiring veterans’ organizations to provide tax auditors with proof of members’ military service by showing either discharge papers or DD 214 separation documents.

“To ask these organizations to provide materials, some of which include personally identifying information such as Social Security number and dates of birth, for, in some cases, millions of members seemingly without cause is unduly burdensome and completely unwarranted,” Miller said in the letter to Daniel Werfel, acting director of the Internal Revenue Service.

The requirement is drawing attention, Miller said, “given the recent revelations that the IRS has been illegally targeting certain political groups.” He is referring the the admission by the IRS that groups with political-sounding names, like those using the words “Tea Party,” “progressive” or “occupy,” were singled out for audits.

Miller said he wants written justification by the close of business on Tuesday for requiring veterans organization to provide the material. The answer should include why the IRS decided this was necessary and the legal authority to require the information.

Sen. Jerry Moran, R-Kan., wrote a similar letter on Tuesday but he did not set a deadline for a reply.

The requirement to prove members’ military service was included in a Jan. 27, 2011, manual about how to treat veterans’ service organizations seeking exemptions from federal taxes.

The 2011 rules require that at least 75 percent of an organization’s members be current or former service members to be tax-exempt, and set out audit guidelines that include reviewing the group’s charter, bylaws and minutes of meetings to ensure it is a non-profit organization operating for the good of veterans. Auditors also look for documentation about the members, which includes proof of military service.

Miller said he doesn’t see why this is necessary. “Congress has provided for the tax-exempt status of veterans’ organization in recognition of both the selfless service our nation’s veterans have provided and the important role veterans’ organizations play,” he said. “Allegations that they are now being unfairly targeted by the government they sought to protect and defend is nothing short of unacceptable to me.”

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