An IRS Exempt Organizations (EO) official has provided an update on EO examination focus areas for tax-exempt organizations, new online Form 990 data disclosure and common noncompliance issues found in reviews of charitable hospitals.

As reported by Tax Analysts (2016 TNT 125-7), IRS EO Director of Rulings and Agreements Jeffery Cooper spoke at an AICPA conference in National Harbor, Maryland, on June 27, 2016.

Among other topics, Cooper highlighted several areas on which the IRS is focusing in exempt organization exams:

— Tax gap issues related to employment taxes
— Terrorist funding
— Foreign bank account reporting requirements
— Private inurement
— Protection of assets
— Nonexempt charities trusts
— "Nonexempt purpose activity"

Regarding reviews of charitable hospitals, Cooper noted that EO has been conducting more than 1,000 such reviews annually. Common noncompliance issues that the IRS has found include failure to conduct a community health needs assessment, failure to adopt an implementation strategy to meet any needs identified, and the lack of a financial assistance policy.

Cooper also mentioned that the IRS is in the process of a two-year post check of Form 1023-EZ (Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code). He stated that the IRS is seeking to ensure the new short-form application for certain small tax-exempt organizations is working as intended, and added that some changes to Form 1023-EZ in the future are likely.

In addition, Cooper discussed the recent IRS announcement (IR-2016-87, June 16, 2016) that data from electronically filed copies of Form 990 are now available in a machine-readable format through Amazon Web Services. He noted that the IRS will be able to make more than one million documents available in this format. (For more information on accessing Forms 990 online, click here).

Implications

Jeffrey Cooper's comments at the AICPA conference provide exempt organizations with valuable insight into the compliance areas that are currently on the IRS's radar. Exempt organizations should analyze the potential implications that each of the areas identified by the IRS have on their operations to ensure that they comply with the law. Tax-exempt hospitals should review their financial assistance policy, community health needs assessment process and implementation strategy for identifying and meeting significant community needs to confirm that Section 501(r) requirements are being met.

Please contact your EY tax professional for further information.

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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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