IRS Work Plan FY 2018 (and Draft Form 1024-A)

On September 28, 2017, the IRS released its Tax Exempt and Government Entities FY 2018 Work Plan. Below are some excerpts from the Commissioners about the IRS Work Plan for the division generally in charge of nonprofit tax compliance and some highlights from the Plan:

We enter Fiscal Year 2018 as a more cohesive and efficient division than we were even a year ago

To a degree, this is a creative response to the IRS’s and TE/GE’s declining workforce

Last year’s Program Letter stressed efficiency, effectiveness and transparency as key elements of our endeavors. Those remain our bywords going forward.

Compliance Strategies:

  • Previous for-profit entities: examine organizations that operated as for-profit entities prior to their conversion to IRC section 501(c)(3) organizations.
  • Private benefit and inurement: examine organizations which show indicators of potential private benefit or inurement to individuals or private entities.
  • Form W-2/1099 matches: examine entities where payments reported on Forms 1099 should have been treated as wages subject to Federal Insurance Contribution Act (FICA) tax and income tax withholding. [This will be accomplished using a data-driven approach, including, for example, scrutiny of returns with minimal wages compared to Form 1099 distributions).
  • Supporting organizations: examine entities that state they are supporting organizations and filed the Form 990-N.

Referrals, Claims, and Other Casework:

  • Referrals: continue to pursue referrals received from sources within and outside the IRS that allege non-compliance by an exempt organization.
  • Post-Determination Compliance: examine entities that filed and received exemption using the Form 1023-EZ. In addition, EO will examine entities that were granted exemption through the streamlined review of their Form 1023.
  • Statistical sample: examine returns filed by exempt organizations to ensure comprehensive compliance coverage of this universe.

Fiscal Year 2018 Rulings & Agreements:

  • EO [The IRS Exempt Organizations unit] expects to receive an increased number of determination applications in FY 2018. In early 2018, EO will implement revisions to the Form 1023-EZ, including a required activity description and additional questions on gross receipts, asset thresholds, and foundation classification. As a result of these changes, EO expects the average processing time for a Form 1023-EZ to increase. EO will continue pre-determination reviews of a statistical sample of Form 1023-EZ applications and will continue to analyze the data from these applications to mitigate risks and identify opportunities to improve this form and its instructions.

What About Draft Form 1024-A:

Curiously, the draft Form 1024-A (Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code) is not mentioned in the IRS Work Plan. The IRS is soliciting comments about the draft here through October 23, 2017. This would be a completely new form as organizations applying for recognition of exemption under 501(c)(4) currently file a Form 1024 that looks very different from the draft Form 1024-A.