IRS TE/GE FY 2017 Accomplishments and IRS FY 2017 Data Book

In connection with the release of the IRS Tax Exempt and Government Entities FY 2018 Work Plan (which we wrote about here), the IRS promised to release the complete FY 2017 (Oct. 1, 2016, to Sept. 30, 2017) accomplishments when final results became available. The Tax Exempt and Government Entities FY 2017 Accomplishments was released on March 19, 2018. The IRS Data Book 2017 was released shortly after on March 29, 2018.

Highlights from FY 2017 Accomplishments

Examinations – 6,101 closed

  • 38% – filing, organizational, operational (primary issue involves verifying the exempt activities of the organization or its filing requirements (e.g., delinquent returns).
  • 31% – employment tax issues (including unreported compensation, payroll tax withholding issues)
  • 10% – unrelated business income (including gaming, nonmember income, expense allocation issues, NOL adjustments, rental activity, advertising, debt financed property rentals and investment income)
  • 4% – revocation/termination/foundation status change
  • 2% – inurement/private benefit
  • 2% – political, legislative, governance
  • 14% – other (including miscellaneous excise tax on gaming returns, taxes on self-dealing and failure to distribute income, healthcare issues, Chapter 41 and 42 taxes, and other abatements and penalties)

Revocations – 63 organizations had their tax-exempt status revoked (about 1% of those examined)

  • 57% – not operating consistent with an exempt purpose
  • 5% – inurement/private benefit
  • 5% – non-member use of facilities – inconsistent with 501(c)(7)
  • 33% – other (including discontinued operations, failure to provide records and/or record requests, and operating as a different subsection (self- declarer))

501(c)(3) Exemption Applications

  • Form 1023-EZ – 65%
  • Form 1023 – 35%

Exemption Applications

  • Received – 95.177
  • Exemption Granted – 91,975*
  • Exemption Denied – 68 (or less than 1/10th of 1 percent of applications received in the same year)

* This does not appear consistent with the data reported in the IRS Data Book as shown below. This number appears to be the the number of exemption applications closed whether exemption was granted or not.

Post-Determination Compliance

  • Filers of Form 1023 or Form 1024 – 1,400
    • Closed with no changes required – 57%
    • Closed with changes or actions required (e.g., amendments to organizational documents, filing past due returns) – 43%
    • Revoked or terminated – 1%
  • Filers of Form 1023-EZ – 1,182
    • Examined – 565
      • Closed with no changes required – 49%
      • Closed with changes or actions required – 51%
      • Revoked or terminated – < 1%

Annual Information Return Case Section for Audit Potential

  • Closed – 1,505
  • Change Rate (requiring the filer to change its position on a matter disclosed on the return) – 83%

Form 8976, Notice of Intent to Operate Under Section 501(c)(4) (implemented in July 2016)

  • Received – 2,182
    • Approved – 82%
    • Rejected – 17%

Highlights from FY 2017 Data Book

General

  • Number of tax-exempt organizations recognized by the IRS – 1,799,401
    • 501(c)(3) – 1,286,181
    • 501(c)(4) – 81,935
    • 501(c)(6) – 63,621
    • 501(c)(7) – 49,175
    • 527 – 34,748
  • Number of applications for tax-exempt status closed – 91,975
  • Number of closed applications resulting in an approval of recognition of tax-exempt status – 85,669*
    • 501(c)(3) – 79,699
    • 501(c)(4) – 1,379
    • 501(c)(6) – 1,324
    • 501(c)(7) – 1,046
  • Number of applications withdrawn by organizations, applications that did not include the required information, incomplete applications, IRS correction disposals, and others (not resulting in an approval or disapproval) – 6,238 (or almost 7% of all applications closed)
  • Requests for rulings – 114
  • Tax-exempt organizations unrelated business income tax (UBIT) collected – $966,468,000 (almost a 10% increase from FY 2016)

* This does not appear consistent with the data reported in the Accomplishments document as shown in the section above, but appears to be the more accurate description based on the description of the 91,975 number in the IRS Data Book as applications closed but not exemptions granted.

Number of Returns and Other Forms Filed

  • U.S. – 1,528,487 (up 1.9% from FY 2016)
  • CA – 165,352
  • FL – 127,507
  • NY – 93,659

Returns Examined

  • Forms 990, 990–EZ, and 990–N – 2,375
  • Forms 990–PF, 1041–A, 1120–POL, and 5227 – 302
  • Forms 990-T – 608
  • Forms 4720 – 393