Tax-Exempt Organizations

Since the mid-1970s, the number and the size of organizations that are tax exempt have increased substantially; more than one million of these organizations existed as of 1992. Press reports and congressional hearings have recently focused on the activities of charitable groups, but other kinds of tax-exempt organizations have not received this level of scrutiny. This briefing report (1) discusses the growth in the number, the assets, the revenues, and the expenses of social welfare organizations, labor and agricultural groups, and business leagues; (2) documents the compensation that some of the largest of these tax-exempt organizations paid their executives in 1992; (3) identifies the extent to which these organizations are involved in lobbying and political activities; and (4) identifies Internal Revenue Service efforts to monitor their activities. Information on charitable organizations is presented for comparison purposes.

GAO found that: (1) while the number of business leagues and social welfare organizations increased about 45 and 14 percent, respectively, between 1975 and 1990, the number of labor and agricultural organizations decreased by about 18 percent; (2) the assets of all three types of organizations increased between 20 and 140 percent; (3) although revenue for business leagues and labor and agricultural organizations increased by nearly $18 billion and $12 billion respectively, revenue for social welfare organizations declined by 47 percent to $18 billion; (4) although the expenses for business leagues and labor and agricultural organizations increased to over $18 billion and $12.7 billion respectively, expenses for social welfare organizations declined by 48 percent to $17.7 billion; (5) these organizations are permitted to engage in lobbying and political activities if these activities related to their tax-exempt purposes; (6) of the 673 highest paid executives at these organizations, 100 received more than $200,000 in compensation and 198 executives received no compensation in 1992; (7) IRS is responsible for monitoring the activities of tax-exempt organizations through examinations of their annual tax returns; (8) although examinations of social welfare and labor and agricultural organizations and business leagues decreased about 30 percent between 1990 and 1994, the amount of taxes and penalties resulting from these examinations increased about 200 percent; and (9) between 1992 and 1994, IRS revoked the tax-exempt status of 67 of these types of organizations.