Internal Revenue Service

The Internal Revenue Service appears to have begun to enforce a tax on gifts to the nonprofit organizations that were a key vehicle for anonymous politics in the last five years and had promised to play a large role in the presidential cycle, a move which could reshape the place of money in politics in 2012.

"It appears that the IRS Estate and Gift Tax team has also started paying attention to 501(c)(4) organizations," a Los Angeles tax lawyer who has followed the issue closely, Ofer Lion, wrote in a memo to clients.

A steep drop in financial support from foundations and individual donors is still hitting nonprofit organizations hard, but many have shown a resilience to carry on programs and keep up with rising demands brought on by the recession.

The need for charity services, which many turn to in tough economic times, have overburdened nonprofits over the last few years while, at the same time, funding for such growing needs has diminished significantly, according to consultants and local charity organizations.

The Partnership for Public Service on Monday announced 34 finalists from across the government for its annual awards honoring outstanding public service.

The federal workers, honored for their contributions to the public's health, safety and security, are contenders for eight Service to America Medals, including Federal Employee of the Year. The nonprofit organization will celebrate the finalists at a breakfast on Tuesday and will announce the winners in September at a black-tie gala in Washington.

With growing political consensus on the need to reduce the deficit, it is no longer a question of “if” the country will overhaul how it approaches taxing and spending; it is only a question of when and how we decide to put our nation’s fiscal house in order.

And that process is now raising a big question for every nonprofit in America—whether donors will be allowed the same tax benefits for charitable gifts in the future as they are today.

American donors gave a lot less to charity in the first two years of the recession than they did in 2007, dropping their donations a total of about 20 percent from 2008 through the end of 2009, new data from the Internal Revenue Service suggest.

The decline is far sharper than experts had expected—and much more substantial than in previous downturns.

The new numbers from the IRS underscore just how big a financial hole nonprofits must climb out of as the still-fragile economy recovers.

Someone has hijacked the tax identity of more than 2,300 tiny or defunct nonprofits, apparently taking advantage of a hole in a new electronic Internal Revenue Service filing system to list the same person as a charitable official at the same mail box drop in Las Vegas.

The charities, most of which seem to be religious in nature, all identify a “principal officer” as one William Alexander of Non Profit Accounting Services, with a stated location at a mail-box office address on N. Rainbow Blvd. in Las Vegas.

With about two weeks left in this year’s tax season and with fewer families able to pay to have their taxes prepared in this challenging economic climate, the Walmart Foundation, United Way, One Economy and the National Disability Institute’s Real Economic Impact Tour are urging eligible tax filers to take advantage of easy, free tax preparation and filing tools. These tools will help tax filers save money as well as claim refunds and valuable credits like the earned income tax credit (EITC).

Oregon Attorney General John Kroger went to the Legislature to press for a law that would enable the state to punish charities with paltry giving. Senate Bill 40 would strip the tax-deductible status from donations to charities that spend less than 30 percent of their annual budget on services. The charities would have to tell potential donors that their giving would not be tax-deductible — or face fines.

American Crossroads GPS, an advocacy group that reported spending about $17 million on advertising before the midterm elections, generated controversy by using its nonprofit status to shield donors' identities.

As it turns out, the Internal Revenue Service hasn't even approved the group's nonprofit status. Crossroads filed an application in September but the agency has not acted on it.

Watchdog groups say that Crossroads and other groups active in campaigns are taking advantage of lax IRS enforcement to offer political donors anonymity.

Las Vegas' nonprofit world is in a state of unease over news the Lincy Foundation, Kirk Kerkorian's charitable foundation, which gives out hundreds of millions each year, is going to give all its assets to UCLA to create the Dream Fund.

The Lincy Foundation has an estimated $200 million in assets and, pending government approval, all that will be transferred to the UCLA Foundation. While that's great news for UCLA, the ripple effect on Las Vegas charities and nonprofits may not be so cheery.