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In a first step toward issuing new guidelines, the Internal Revenue Service has been soliciting comments from the public on how tax-exempt organizations can use the Net, and some nonprofits say they’re afraid the move could lead to excessive regulation. Though the IRS insists its request for comments is simply a way to gauge public reaction to the possibility of new rules, it’s the organization’s first foray into trying to apply existing laws to the world of Internet nonprofits. One of the issues is whether a nonprofit Web site should lose its tax-exempt status if it links to the site of a political campaign or lobbyist group. If the public comment period, which ended this week, results in new guidelines, it could potentially change the way small nonprofit organizations conduct their business via the Web. Representatives from many nonprofits argue that any intervention by the IRS in this area could have an ominous effect. “Voter and civic education is being called into question here,” says Internet strategist Steven L. Clift, who runs the nonprofit Minnesota E-Democracy project, where Web sites link viewers with voter education material, including candidates’ Web pages. “Although the IRS may be looking to keep national organizations in line, this could sound the death knell of local nonprofits on the Net.” Other nonprofit lawyers argue that a little guidance from the IRS could be a good move in light of the fact that the Internet has dramatically changed the way nonprofits conduct business. “We doubt that they will find that linking equals lobbying or electioneering,” says John Pomerance, an attorney at the Alliance for Justice lobby in Washington, D.C., adding that his organization would welcome some clarification from the IRS on another topic: the rules for e-mailed donation receipts. Currently, the IRS insists that people who make charitable donations show receipts before listing the donations for tax deduction purposes. But the IRS has never ruled on whether e-mailed receipts suffice as proof of a donation. Pomerance and others say it’s a simple decision that would smooth the path to easier gift giving. Not everyone is afraid the questions will automatically lead to excessive new rules. “We believe this is a good-faith effort on the IRS’ part,” says tax specialist Catherine E. Livingston of the Washington, D.C., law firm Caplin & Drysdale, who prepared answers to the IRS questions on behalf of 700 charities. “We think the questions were phrased to incite a certain level of fear so they would provoke strong, well-reasoned answers.” They’ve at least provoked a substantial number of answers. As of Feb. 13 — the last day of the public comment period — the IRS received about 2,600 letters and e-mail messages on the proposed issues, an IRS spokesman confirmed. For now, the nonprofits hope their responses will be enough to persuade the IRS not to create new guidelines that could inhibit their ability to function on the Internet. New laws, they say, would be too complicated for some small nonprofits to handle. “That would chill use of the Net by small outfits that can’t afford lawyers,” Pomerance says. “The IRS should recognize that the Internet is still a baby that needs to be nurtured.” Copyright � 2001 The Industry Standard

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