IRS Exempt Organizations (EO) Division Director Tamera Ripperda has been speaking at conferences and to a few select groups over the past several weeks, providing us with a glimpse with what is currently happening within the EO Division. Ripperda commented that:
the IRS will shift its approach in examinations to focus on data-driven analysis of specific compliance issues, rather than undertaking projects to examine a specific segment of the EO sector, such as group exemptions or supporting organizations. In explaining the new approach, Ms. Ripperda commented that the IRS’s new “issue-focused strategy” would be used to identify cases for examination, and noted that such issues included protecting charitable assets, the tax gap, the unrelated business income tax, excise taxes and international activities.
The IRS, and specifically the EO Division, are also in the process of implementing a new knowledge management system, including content libraries that will initially be for internal use, but which Ripperda hopes will eventually allow for public access and contribution. This will help mitigate the loss of institutional knowledge resulting from the ongoing attrition of EO Division employees.
With respect to the backlog of exemption applications that reached as high as 74,000 applications with a median processing time of about 270 days, Ripperda claimed that the backlog has been reduced by 91 percent and the median processing time reduced to about 100 days. The approximate processing time of the controversial Form 1023-EZ is currently 3 weeks. Because about half of the applicants for exemption use the Form 1023-EZ, this seems to indicate that the processing time for the longer Form 1023 is about 120 days or 4 months.
2014-2015 Priority Guidance Plan
The Office of Tax Policy and IRS 2014-2015 Priority Guidance Plan (updated as of December 31, 2014) was released in January. Among the outstanding items related to the EO Division:
- Proposed regulations under §501(c) relating to political campaign intervention. [Ed. Ripperda informed attendees at an Independent Sector event on April 24 that the Commissioner intended to get proposed regulations out this year. See also Recent Developments and Trends for Exempt Organizations – Ropes & Gray LLP]
- Additional guidance on §509(a)(3) supporting organizations.
- Guidance under §512 [Unrelated business taxable income] regarding methods of allocating expenses relating to dual use facilities.
- Guidance under §4941 regarding a private foundation’s investment in a partnership in which disqualified persons are also partners.
- Final regulations under §§4942 and 4945 on reliance standards for making good faith determinations. Proposed regulations were published on September 24, 2012.
- Final regulations under §4944 on program-related investments and other related guidance. Proposed regulations were published on April 19, 2012.
- Guidance regarding the excise taxes on donor advised funds and fund management.