The IRS Exempt Organizations (EO) division’s top priority for 2005: Building a stronger enforcement presence. EO’s four critical enforcement initiatives and planned actions for FY2005 are summarized briefly as follows:
1. Anti-Terrorism.
• EO Examinations will examine a sample of returns to determine the effectiveness of controls put in place to monitor the distribution of overseas grants and other assistance.
• EO Examinations will establish a Fraud and Financial Transaction Unit (FFTU) to address complex financial fraud cases.
• EO Rulings & Agreements (R&A) will provide training in EO law and technical assistance as needed to Criminal Investigations (CI), various Treasury and inter-agency governmental task forces and other governmental personnel.
• EO R&A will monitor information provided through the determination process that would help identify organizations that are potentially involved in supporting terrorist efforts.
• EO Electronic Initiatives will develop a data acquisitions strategy for EO, determining data needs to support Anti-Terrorism, ATAT, and other compliance efforts, and facilitating acquisition of data sources.
2. Abusive Tax Avoidance Transactions.
• EO Examinations will lead cross-functional teams to examine and address perceived abuses by and of tax-exempt organizations, including IRC Section 509(a)(3) supporting organizations, IRC Section 501(c)(15) entities and Producer-Owned Reinsurance Companies (PORC), donor-advised funds and organizations involved in HUD programs.
• EO R&A will issue appropriate guidance on ATAT issues. It will also continue to use and refine its newly developed “Touch and Go” (TAG) program to identify cases early in the determination process that may involve abusive transactions, and to ensure consistent application of tax law.
3. Credit Counseling.
• EO examination activity, initiated in FY 2004 and covering over half of the gross receipts of this market segment, will continue into FY 2005 in coordination with state Attorney General offices, the Federal Trade Commission and other operating divisions.
• EO R&A will rigorously review applications from consumer credit organizations seeking exempt status and continue to provide technical expertise to EO Examinations for the Credit Counseling Compliance Project.
4. Excessive Compensation.
• The Tax Exempt Compensation Enforcement Project will continue, with approximately 2,000 compliance check letters sent, and examinations of selected returns completed, by year-end.
• Coordination with SB/SE and LMSB will ensure that related income tax return issues are dealt with appropriately.