IRS Exempt Organizations Division 2005 Accomplishments

Published on: by Gene Takagi Category:IRS & FEDERAL TAX ISSUES

The following list of accomplishments of the Exempt Organizations (EO) division of the IRS in 2005 is excerpted from the IRS Letter to colleagues, members of the press and taxpayers dated as of October 25, 2005:

1.  Disaster Relief.  EO acted swiftly after Hurricane Katrina by immediately issuing a press release urging citizens to seek out qualified charities when making donations to help the hurricane victims.  EO also provided an expedited review and approval process for new organizations seeking tax-exempt status for providing relief to victims of Hurricane Katrina.

2.  Abusive Tax Avoidance Transactions.  EO began shifting its resources to address issues related to abusive organizations.  EO identified and began examinations of potentially abusive and non-abusive donor-advised funds and of section 509(a)(3) supporting organizations that were being used by promoters in abusive tax-avoidance schemes.

3.  Anti-Terrorism.  EO began examinations of a sample of foreign grant-making organizations to ensure that grants funds are being used for their intended charitable purpose and are not diverted for terrorism or other inappropriate purposes.  EO is gathering information on the existence and effectiveness of the current controls used by these organizations to monitor their foreign grant distributions.

4.  Credit Counseling.  EO moved aggressively to address abuses in the credit counseling industry with new as well as existing organizations.  EO conducted in-depth, comprehensive reviews of all credit counseling applications, resulting in numerous organizations failing to obtain exempt status, because they either failed to meet the legal requirements for tax-exempt status, failed to provide information to establish that they meet the legal requirements, or withdrew their application.  EO revoked and proposed revocation of a number of credit counseling organizations accounting for approximately 35% of the industry’s gross receipts.

5.  Excessive Compensation.  EO conducted a significant number of examinations involving excessive compensation.  EO sent approximately 1,250 compliance check letters to a wide range of 501(c)(3) organizations and private foundations regarding their compensation practices.

6.  Guidance.  EO was involved in issuing guidance on a wide-range of technical issues including:

  • Revenue Ruling 2004-112, which provides guidance on the qualified convention and trade show activity exception to the conduct of an unrelated trade or business as it applies to internet activities conducted by a 501(c)(6) trade association.
  • Regulations (TD 9163) under IRC section 6081 regarding automatic extensions of time to file certain information returns and exempt organizations returns.
  • Regulations (TD 9173) under IRC section 6104 regarding fees the IRS may charge for providing copies of materials that must be publicly available.
  • Regulations (TD 9175) requiring certain organizations to file their Forms 990 or 990-PF electronically.
  • Regulations (TD 9206) for the filing of information returns by donees relating to qualified intellectual property contributions.
  • Regulations (70 F.R. 53599-53604) clarifying the relationship between the substantive requirements for tax exemption under 501(c)(3) and the imposition of IRC section 4958 excise taxes.
  • Notice 2005-44, which provides interim guidance on the deductibility of vehicle contributions under IRC section 170(f)(12).
  • Notice 2005-41, which provides guidance on qualified intellectual property contributions.
  • Notice 2005-13, which provides transition relief under IRC section 470 to partnerships and other pass-through entities that are treated as holding tax-exempt use property under IRC section 168(h)(6).

7.  Electronic Initiatives.  EO partnered with 26 states to develop requirements for exempt organizations to file Forms 990 and state registration forms through a single transmission (Federal/State Single Point Filing), which will be implemented in January 2006.  EO expanded Modernized e-File to include Form 990-PF.

8.  Customer Education and Outreach.  EO conducted 18 Small and Mid-size Exempt Organizations workshops and its first "phone forum" during which determination specialists discussed the newly revised Form 1023.  EO launched "EO Update," a new email subscription database (listserv) to communicate topics of importance to the EO community.