Summary: GAO discussed the issue of competition between tax-exempt organizations and taxable businesses. GAO found that: (1) competition was a major concern to both communities because they were increasingly providing similar services; (2) complete data did not exist to quantify the exact nature, extent, and impact of the competition; (3) tax-exempt groups have grown significantly in number and types of activities; (4) tax-exempt groups have become more reliant on income-producing activities and less reliant on charitable and government sources of revenue to fund their activities; and (5) these income-producing activities may result in competition with taxable businesses, but a lack of data made it difficult to measure their impact on the business sector. GAO also found that: (1) representatives of tax-exempt groups believed that income-producing activities furthered their groups' exempt purposes, but business representatives stated that such activities exceeded tax-exempt organizations' traditional roles; (2) business representatives believed that tax-exempt groups had a competitive advantage due to their tax-exempt status and other benefits; and (3) a substantial number of businesses reported experiencing competition from one or more tax-exempt groups, but the type of competitor and the extent and effects of competition varied by industry.
