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SPECIAL EVENTS AND CORPORATE SPONSORSHIPS§ 23.1 IRS AUDIT GUIDELINESThe IRS uses its inherent authority, in conjunction with its task of administeringthe federal tax laws, to regulate the field of fundraising for charitable purposes.In part, this is the result of mandates from Congress to the IRS to increase itsreview and regulation of the processes of charitable giving. 2 Thus, the IRS auditsthe fundraising programs of charitable organizations, either alone or in conjunctionwith a broader examination. One of the tools the agency once employed inthis regard was documentation issued in early 1990 to IRS agents in the field,including an extensive “checksheet.”(a) Regulatory HistoryPrior to a discussion of this checksheet, some background is appropriate.Today’s regulation of charitable giving by the federal government can best beappreciated in the light of its history.For years, it has seemed that wide-ranging regulation of charitable giving bythe IRS was inevitable. The IRS’s new activism in this regard is directly affectingthe administration of giving programs by charitable organizations, as well asplacing increased responsibilities and requirements on donors.The broad regulation of charitable giving that is part of contemporary lawdid not materialize as most observers expected. No great scandal involvingfraudulent “charitable” giving was uncovered by the media or IRS audit thatled the IRS to act. Nor was there development of new regulations on the subjectby the Department of the Treasury or enactment of a far-reaching statuteby Congress.Rather, regulation of charitable giving through the tax system arrived becausethe IRS decided to act with respect to a longstanding problem—some would characterizeit as an “abuse.” The problem/abuse is the casting of a payment to a charitableorganization as a deductible gift when in fact the transaction does not involvea gift at all or is only partially a gift. Legislation enacted in 1993 characterizes theselatter types of transactions as quid pro quo contributions. 3The IRS position is that a payment to a charitable organization is not a giftwhen the donor receives something of approximately equal value in return. Thisstance certainly is not new; it was made quite explicit on a number of occasions,including a pronouncement in 1967. 4 At that time and since, it has been the IRS’sview that charitable organizations have an obligation to notify their patronswhen payments to the organizations are not gifts, or are only partially gifts, particularlyin the context of a special fundraising event. 5There were, over the years, a few instances of deliberate and blatant wrongdoingin this area by “donors” and patrons. For example, there were individualswho wrote a check to a school for something acquired at the school’s annual auctionand who could not resist the temptation to treat the entire payment as a charitablegift on their federal income tax returns. The same may be said of raffles,2 See the discussion in § 22.1, text accompanied by notes 14–17.3 See § 22.2.4 Rev. Rul. 67-246, 1967-2 C.B. 104.5 See § 22.1. 618