The American Legion National Headquarters has received reports from some posts that they have been the subject of recent Internal Revenue Service (IRS) audits, and that the IRS was finding fault with these posts for the following reasons:
1. Unable to verify member dates of service using either DD-214, discharge paperwork, or membership applications.
2. Certain dates of service regarding Vietnam did not qualify for Legion membership.
3. Some posts were having trouble maintaining a proper ratio of war-time veterans to other categories of membership, such as Sons of The American Legion.
In response to these findings, The American Legion is in the process of gathering copies of the audit findings, and has passed the following three resolutions at its National Convention in Houston earlier this month:
1 Correction of Internal Revenue Service Audit Manual. This resolution directs the IRS to correct the authorized service dates in their audit manual that are in error, from:
Feb. 28, 1961 through May 7, 1975, in the case of a veteran who served in the Republic of Vietnam during that period; and
Aug.5, 1964, through May 7, 1975
To the dates that are set forth in the Legion’s Congressional Charter:
Feb. 28, 1961, to May 7, 1975;
Aug. 24, 1982, to July 31, 1984;
Dec. 20, 1989, to Jan. 31, 1990;
Aug. 2, 1990, to the date of cessation of hostilities;
2 In some cases, the IRS has been auditing individual posts and threatening to revoke tax- exempt status of American Legion posts, due to significant annual increases in enrollment of SAL members, or otherwise greater than the 75% stipulation.
The Legion is asking Congress to either remove the minimum percentage requirement for veterans in a post, or provide clarifying language that the minimum percentage be based upon aggregate enrollments, based on the entire national membership of the Legion, rather than on a local community-based post.
The American Legion is currently working with the IRS and Congress to settle these misunderstandings, related to the information contained in IRS Pub 3386, titled Veterans Organizations, http://www.irs.gov/pub/irs-pdf/p3386.pdf and states under chapter 9, the record-keeping section:
B. IRC 501(c)(19)
What records must be maintained to show the composition of membership?
A post must maintain a list of members and the category of membership (veteran, degree of relation or nonveteran or non-relative). If a post receives deductible contributions, it must also maintain a list of members, their dates of service….
What’s the bottom line? The American Legion believes that IRS audit manuals should reflect, and at a minimum honor the information they issue to posts in their instructional publication, reflect true and accurate dates of service eligibility in accordance with statutory law, and recognize that Sons of The American Legion membership, as with The American Legion post membership, aggregates into our national membership as long as posts are in good standing as authorized American Legion posts with their departments and National Headquarters.