May 15, 2006 —The Internal Revenue Service completed audits of 41 of some of the nation's largest nonprofit consumer credit counseling agencies and decided to rescind the tax-exempt status of every one of them—mainly because they provided little if any education and operated mainly like for-profit businesses often for the benefit of officers, directors and related parties.

"They have poisoned an entire sector of the charitable community," IRS Commissioner Mark Everson said in an IRS news release. He said the agency is taking the unprecedented step of contacting every known organization in the tax-exempt credit counseling world, some 740 organizations, to determine if there are further problems. Depending on the responses received, additional audits may be undertaken.

"NeighborWorks America applauds these actions by the IRS," said Steven Tuminaro, director of policy and legislative affairs for NeighborWorks America®. "While the revocations may cause temporary problems and confusion for legitimate nonprofit credit counseling agencies, in the long run they will help consumers. This action will weed out sham nonprofit organizations and give added assurance to consumers so they can expect to receive real benefit from legitimate nonprofit organizations that are working solely on their behalf."

In addition, the IRS has tightened its review of new applications by credit counseling firms for tax-exempt status. Since 2003, about 100 applications have been reviewed, but only three have been approved.

To see which agencies have lost their tax-exempt status, view recent deletions from cumulative list and look for names that sound like credit counseling firms.

For more information, view IRS press release, May 15, 2006.