IRS Tax Exempt and Government Entities Division Key Areas of Focus for FY 2016
TE/GE looks for continuous feedback to better understand taxpayers’ needs. Such understanding leads to a better allocation of resources and improvements of processes and procedures. EO has implemented many of TE/GE’s recommendations to date. For example, applications for tax-exemption are now assigned to specialists for review where necessary rather than allowing IRS employees to request new cases. In addition, if an applicant fails to respond to an additional information request, cases are closed within 35 days rather than the standard 90 days. These changes have improved the processing and benefited both the IRS and applicants.
To build on this increased efficiency and improved service to taxpayers, EO plans to implement the following long-term projects:
- Evaluation of the Form 1023-EZ process in order to determine potential improvements that can be made to the application and review processes;
- Deliverance of new outreach products that will allow users to self-train, particularly for the Affordable Care Act (“ACA”);
- Development of a program that will make Forms 990 available in modernized e-file format;
- New efficiencies in the workload selection, classification and delivery processes;
- Simplifying tax forms while enhancing their digital functionality; and
- Refining document requests to reduce the length of the examination process and foster engagement with customers.
Exempt Areas of Focus
In the upcoming fiscal year, EO plans to use a data-driven approach to identify and address existing and emerging high-risk areas of non-compliance through the use of education, compliance reviews and checks, correspondence and field examinations. In order to accomplish this goal, EO will focus its resources on the following five strategic areas:
- Exemption: non-exempt purpose activity and private inurement; enforced primarily through field examination;
- Protection of Assets: self-dealing, excess benefit transactions, and loans to disqualified persons; enforced primarily through correspondence audits and field examination;
- Tax Gap: employment tax and unrelated business income tax liability; enforced through compliance checks, correspondence audits and field examination;
- International: oversight on funds spent outside the U.S., including funds spent on potential terrorist activities, tax-exempt organizations operating as foreign conduits, and Report of Foreign Bank and Financial Accounts (FBAR) requirements; enforced through compliance reviews, compliance checks, correspondence audits and field examination;
- Emerging Issues: non-exempt charitable trusts and Internal Revenue Code (“IRC”) §501(r) requirements; enforced through compliance reviews, correspondence audits and field examination.
As the ACA continues to become an important focus for tax-exempt hospitals, EO’s compliance strategy will have a focus on oversight of compliance issues in this area. This will include conducting reviews of tax-exempt hospital facilities’ compliance with IRC §501(r). Additionally, reviews of tax-exempt organizations that were granted tax-exempt status through the streamlined determination process will continue and a post-determination compliance enforcement will begin on organizations that were granted tax-exempt status through the submission of a Form 1023-EZ.
Staffing and Education
EO plans to have 100 determination specialists review incoming applications for tax-exemption (Forms 1023 and 1024) and perform pre-determination reviews of certain Form 1023-EZ applications. In addition to these 100 specialists, 25 tax examiners will be assigned to review the Forms 1023-EZ. EO estimates a 3% increase in application receipts in FY 2016. Accordingly, this increase of dedicated staff will help to prevent a backlog and ensure timeliness of application processing.
In FY 2015, EO implemented its Knowledge Management Program in which it established knowledge networks for private foundations, hospitals and other healthcare organizations, IRC §501(c)(3) issues, and unrelated business income tax. EO employees participate in this program, gaining knowledge in these areas. EO intends on continuing to aggressively build on this program in the coming year to improve collaboration between employees and improve the technical quality and consistency of the work completed.
Conclusion
TE/GE re-evaluates its goals each year to identify which strategies are making the greatest impact and which areas, both within the industry and internally within EO, need additional focus and improvement. EO utilizes data from multiple sources, including return data, historical information, stakeholder input and public information, in order to gain perspective on their areas of focus. Many strategies including, but not limited to, those outlined above will likely require several years to implement before long-term improvements can be seen.
Ask Our Experts
Please contact a member of WS+B’s Healthcare Services Group at [email protected] for further questions or assistance.
The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.
