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§ 23.2 SPECIAL EVENTS(d) Audit GuidanceIn directions disseminated to its examining agents in 1990, and revised andredisseminated in 1992, 15 concerning the Phase II examinations, the NationalOffice of the IRS cautioned that the “examinations must be thorough.” Theexaminer was entreated to “pursue the examination to the point where he/shecan conclude that all areas and data concerning fund-raising activities have beenconsidered.” 16This guidance stated that the second phase of the Program focuses on “allaspects of fund-raising and charitable solicitations.” 17 Some of the practices theIRS agents were to look for were:• Misleading statements in solicitations and literature that imply deductibilityof contributions, “where none probably exists”• Contracts with professional, for-profit fundraisers, who use “questionablefundraising methods” to solicit funds from the public• Situations in which other expenses, such as administrative and fundraisingcosts, constitute an “unusually high portion” of the solicited fundsand property• Fundraising activities that result in consequences such as taxable incomeor additional filing requirementsThese directions continued: “The scope and depth of the examination shouldbe sufficient to fully disclose the nature of abusive situations involving fundraisingactivities that mislead donors to claim the incorrect charitable contributiondeductions; misrepresent the use of the solicited funds; engage in questionablefund-raising practices, etc.” 18 There was such an insistence on thoroughnessbecause the results of these examinations “are to be used in a report that will besubmitted to Congress.” 19Thus, what started out in 1967 as concern with overdeductibility in the contextof gifts and other payments to charitable organizations evolved into anationwide examination by the IRS of all “questionable fund-raising practicesand techniques.” 20§ 23.2 SPECIAL EVENTSSpecial events (or benefit events) are social occasions that use ticket sales andunderwriting to generate revenue. These events are typically the most expensive15 The directions that were sent in 1990 are the subject of Fundraising § 6.1. This guidance is contained in ManualSupplement 7(10)G-59.16 Fundraising § 11.02.17 Id. § 11.09.18 Id. § 11.03.19 Id. § 11.02. Although this report was never formally submitted, Congress acted. See § 23.2.20 The attention given by the IRS to the matter of charitable fundraising continues unabated, albeit in differingmanifestations. For example, the contemporary focus is on charitable organizations that report considerableamounts of charitable contributions⎯and little or no fundraising cost. The IRS is in the process of monitoringa large group of these organizations; the agency sends them reminders of their fundraising cost reporting obligationsin the form of “educational letters.” 621