Books

  • Jeff Michael: Repair Your Credit and Knock Out Your Debt

    Jeff Michael: Repair Your Credit and Knock Out Your Debt
    I highly recommend this book because I wrote it.

  • Edie Milligan: Tips from the Top: Targeted Advice from America's Top Money Minds

    Edie Milligan: Tips from the Top: Targeted Advice from America's Top Money Minds
    I have about a dozen entries in this book.


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Comments

Non-profit CCCs can be unscrupulous as well.

To wit:

In what is the most significant news, perhaps ever, for the credit counseling industry the IRS has denied tax exemption for several credit counseling agencies.

The IRS noted the standard business practices of credit counseling having little to do with charitable purposes and more to do with the functions and operations of any for-profit company. One statement even went so far as to note that the credit counseling industry is simply a collection agency for the creditors.

The IRS just recently produced (redacted, of course) determination letters denying 501(c)(3) tax-exempt status to two credit counseling agencies that had applied to the IRS seeking recognition of such status. One letter was issued to the CCA on April 28, 2004 and the other letter was issued to the other CCA on May 14, 2004, but they were only this week available for public consumption in redacted form. While the IRS has issued a number of such determination letters in recent months to credit counseling agencies seeking 501(c)(3) status, these are the first of which we are aware to be publicly released by the IRS. The IRS only recently began publicly disclosing such exemption denial letters, following protracted litigation that it lost. The denials of exemption here were made on numerous grounds (which is the IRS' common practice); following is a key paragraph from each letter, summarizing the basis for the IRS' decision to deny 501(c)(3) status:

From the 4/28/04 Determination Letter: Based on the following analysis of the information provided in your Form 1023 and supporting documentation, we conclude that while you are organized for charitable purposes you are not properly operated under section 501(c)(3) of the Code. You fail the operational test for a number of reasons. You have not established that you are or will be operated for either a charitable or educational purpose. In fact, your application demonstrates that you operate for the substantial non-exempt purpose of operating a business that is prohibited under the CROA. In fact, you appear to have been established as a section 501(c)(3) organization primarily to avoid regulation under the CROA. In addition, you have not shown that your income does not inure to any private individual. The information you submitted leads to the conclusion that you operate for the private benefit of the company that processes your DMPs, its shareholders or managers or others with whom you conduct business. Finally, your operations also substantially benefit the credit card companies to whom your clients owe money because you function as a collection agent for those companies.

From the 5/14/04 Determination Letter: "Based on our analysis of the information provided in your Application and supporting documentation, we have concluded that while you are organized for charitable purposes you are not property operated under section 501(c)(3) of the Code. You fail the operational test for a number of reasons. You have failed to establish that you are or will be operated for either a charitable or educational purpose. In fact, your file demonstrates that you operate for the substantial non-exempt purpose of operating a business. Another non-exempt purpose appears to be your operation to avoid regulation under the CROA. In addition, you have not shown that your income does not inure to any private individual. In addition, you have not shown that your operations will be exclusively charitable and educational rather than for the substantial private benefit of the company that processes your DMPs * * * or similar back-end service provider), its shareholders or managers or others with whom you conduct business. Finally, you also substantially benefit the credit card companies to whom your clients owe money because you function as a collection agent for those companies."

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