Speaking at a Georgetown Law conference on April 28, IRS Exempt Organization (EO) officials described some examination focus areas and guidance plans for the coming year, as reported by Bloomberg BNA (Daily Tax Report, April 29, 2016).

EO Examinations Director Margaret Von Lienen stated that focus areas in the next year will include examination of protection of taxpayer assets through self-dealing, terrorism funding and other international issues, nonexempt charitable trusts, and tax gap issues related to under-reporting of business income. She stated that data-driven targeting will be central to EO examinations in the future. She added, however, that the IRS will also be looking at broader issues, such as whether organizations are paying unrelated business income tax and whether they are meeting the Foreign Account Tax Compliance Act (FATCA) filing requirements.

Beyond the examinations area, Von Lienen stated that the IRS is working on implementing changes instituted by the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), including creating new forms and also registration processes for Section 501(c)(4) organizations. In addition, she advertised the IRS's StayExempt website, which houses virtual tax courses to help organizations apply for and maintain their exempt status, and meet their filing requirements.

Regarding upcoming guidance, IRS Tax Exempt and Government Entities (TE/GE) Division Associate Chief Counsel Victoria Judson said the IRS is looking to issue guidance describing practices employed by aggressive tax practitioners. Judson also indicated that some practitioners are misusing private letter rulings, which are not binding, and noted that simply receiving an IRS acknowledgement of a PLR request being submitted is not equivalent to an IRS determination. Further, she said that practitioners should be identifying the legal issue when submitting PLR requests. As to other guidance projects for the year, Treasury Office of Tax Policy Attorney-Advisor Elinor Ramey noted that the IRS is accepting requests for guidance and encouraged those in the exempt organization community to submit them.

Implications

The IRS as a whole has experienced budget cuts and hiring freezes, so it has looked for ways to use technology and other means to enforce the tax law. The IRS EO Division tested certain new enforcement programs during 2013 and 2014, with positive results. Tax-exempt organizations should be cognizant that much of the IRS's future examination techniques utilize a data-driven approach to target those tax-exempt organizations that are seen as most likely to be out of compliance. This approach was first announced in March 2015 (see EY's Tax Alert 2016-612). In addition, as the EO Examinations Director pointed out, EO Examinations will take a wider look at tax issues that a tax-exempt organization can face; for example, whether tax-exempt organizations are paying unrelated business income tax and whether they are meeting the FATCA filing requirements.

Tax-exempt organizations should be on the watch for future guidance from the TE/GE division. Organizations that have suggestions for upcoming TE/GE guidance should consider submitting them to the Treasury Office of Tax Policy.

Please contact your EY professional for additional details.

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RELATED RESOURCES

— For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg.

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