Charities and other nonprofits exempted from paying taxes because they serve a public purpose have come under scrutiny by the Internal Revenue Service for tax evasion and other abuses, the Washington Post reports.

According to a letter submitted to the Senate Finance Committee by IRS commissioner Mark W. Everson, the agency has found problems in virtually every type of tax-exempt organization. In particular, Everson raised concerns about nonprofit hospitals and how hard it is to distinguish them from for-profit hospitals; political activity by nonprofits; misuse of entities set up to allow religious leaders to hold property and conduct business for the benefit of a religious organization; and deals designed to allow members of a tribe to benefit from gambling revenue without paying taxes.

The IRS also has been taking a closer look at donor-advised funds and supporting organizations, charities that support other charitable or tax-exempt organizations, both of which enable donors to take a deduction without requiring the donation to be received by the ultimate beneficiary, leaving assets held by the fund or organization to accumulate tax-free. Unlike private foundations, neither is subject to minimum payout rules or prohibitions on self-dealing. Other hot-button issues being examined by the IRS are inflated valuations for non-cash assets other than publicly traded securities and the donation of easements on the facades of houses in historic areas.

"We can see that tax abuse is increasingly present in the sector," and unless the government takes effective steps to curb it, said Everson, such organizations risk "the loss of the faith and support that the public has always given to this sector."

Everson attributed the increased incidence of these problems to "weak governance practices" among nonprofits and "a culture that has become more casual about compliance and less resistant to noncompliance." While the sector has become more complex as it has grown over the years, Everson noted, tax law and regulation have failed to keep pace. "Since 1969, there has been only limited review of the rules relating to tax-exempt status," he added, "[and] our enforcement presence faded in the late 1990s."