The IRS Tax Exempt and Government Entities (TE/GE) division recently issued its priorities list for 2016. Here is a list of the five strategic areas of focus for exempt organizations for the upcoming year:
- Exemption: Issues include non-exempt purpose activity and private inurement, enforced primarily through field examination;
- Protection of Assets: Issues include self-dealing, excess benefit transactions, and loans to disqualified persons, enforced primarily through correspondence audits and field examination;
- Tax Gap: Issues include employment tax and Unrelated Business Income Tax liability, enforced through compliance checks, correspondence audits, and field examination;
- A tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. See Employment Taxes for Exempt Organizations and Unrelated Business Income Tax Explained.
- International: Issues include oversight on funds spent outside the U.S., including funds spent on potential terrorist activities, 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; and
- Emerging issues: Issues include non-exempt charitable trusts and IRC 501(r), enforced through compliance reviews, correspondence audits, and field examination.
With respect to tax exemption determinations, the priorities list states that there will be 100 determination specialists reviewing Form 1023 and 1024 application and an additional 25 examiners reviewing Form 1023-EZ receipts in 2016. The IRS projects an increase in applications due to the short Form 1023-EZ, and as a result, cautions that the receipt of applications will likely outpace closures by the end of 2016.
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