By Joyce Underwood, CPA
The IRS Tax Exempt and Government Entities (TE/GE) division functions to help organizations and entities understand and comply with applicable tax laws and to protect the public by applying them with integrity and fairness.
The TE/GE division reports it has been busy carrying out its 2019 program activities with the added task of navigating and implementing changes resulting from the 2017 Tax Cuts and Jobs Act and recent legislation from The First Act enacted in July 2019. TE/GE reports that it has been hiring and building teams, and announced that Edward T. Killen joined Tamera Ripperda, TE/GE commissioner, as the team’s deputy commissioner.
The TE/GE released its Fiscal Year 2020 Program Letter on Oct. 8, 2019, summarizing its upcoming plans. The Program Letter outlines the projects and priorities for fiscal year 2020 for tax-exempt organizations, employee plans, Indian tribal governments, and tax-exempt bonds. This article focuses on those projects and priorities related to tax‑exempt organizations.
The TE/GE division works to carry out its plans while striving to improve efficiency and modernize processes to best utilize government resources. The current program letter focuses on six areas of its compliance program, as described below.
Compliance strategies are issues approved by TE/GE’s Compliance Governance Board to identify, prioritize and allocate resources within the TE/GE filing population. Using a web-based portal, TE/GE employees submit suggestions for consideration by the board. Once approved, these issues are considered priority work. As more issues are developed and approved, those with a higher priority may potentially replace compliance strategies currently approved to include:
Data-driven approaches use data and queries to select work based on quantitative criteria, which allows TE/GE to allocate resources that focus on issues that have the greatest impact. TE/GE is committed to integrating data into its processes and procedures and will use return data and historical information to identify the highest risk areas of noncompliance. Two examples include:
Referrals, Claims and Other Casework
Referrals allege noncompliance by a TE/GE entity and are received from internal and external sources . Claims are requests for refunds or credits of overpayments of amounts already assessed and paid; they can include tax, penalties and interest, or an adjustment of tax paid or credit not previously reported or allowed. Other casework includes examining entities that filed or received exemption using Form 1023-EZ. The focus of these three areas will be as summarized below.
Compliance units are employed to address potential noncompliance, primarily using correspondence contacts known as “compliance checks” and “soft letters.” These contacts allow TE/GE to establish a presence in the taxpayer community in a manner that reduces the cost to the IRS while limiting taxpayer burden. TE/GE will continue educating taxpayers via compliance checks and soft letters while seeking to improve return filings and filing accuracy on issues of noncompliance, including but not limited to:
Determination letters are issued to exempt organizations on exempt status, private foundation classification and other determinations relating to exempt organizations and to retirement plans that satisfy the qualification requirements of federal pension law.
TE/GE expects a continued increase in the volume of determination application receipts. The TE/GE continues to look at process efficiencies, as well as expects to hire more revenue agents to address the work and offset anticipated attrition losses.
Voluntary Compliance and Other Technical Programs
The Voluntary Correction Program applies to employee plans and tax-exempt bonds and works to ensure the quality and consistency of technical positions, provide timely assistance to employees and preserve and share TE/GE’s knowledge base.
Management of exempt organizations should be aware of the role TE/GE plays, consider the potential implications the plans outlined in the Program Letter may have on their organizations, and consult with their tax advisors as necessary.