IRS to Audit Nonprofit Credit Counsellors

You may recall earlier issues of Spotlight, in which we reviewed the operations of some "nonprofit" credit counseling centers. Now, we are pleased to note an article in the Wall Street Journal reporting that the Internal Revenue Service is "auditing more than 30 nonprofit credit counseling companies, including nine of the top 15, as part of a multi-agency crackdown on the fast-growing industry." IRS Commissioner Mark Everson told a House Ways and Means Committee that at present, 40 percent of the $1 billion industry is under audit. It appears that some executives of these tax-exempt organizations are funneling business from their nonprofit agencies to for-profit firms that they control. Further, unless these "counseling" firms offer credible educational programs in return for the fees that they receive, they are not entitled to their tax-exempt status.