In its 2016-2017 Priority Guidance Plan, the IRS has included four new priority guidance projects for the fiscal year related to exempt organizations, in addition to a number of carryover projects from previous years' plans. Each year's IRS Priority Guidance Plan identifies priority tax issues to be addressed through regulations, revenue rulings, revenue procedures, notices and other published administrative guidance during the IRS fiscal year (July-June). This Alert highlights the anticipated guidance of interest to exempt organizations in the 2016-2017 fiscal year.

The new projects for exempt organizations listed in this year's Priority Guidance Plan include:

1. Final regulations under Sections 501(a), 501(c)(3) and 508 relating to a streamlined application process for eligible organizations to apply for recognition of tax-exempt status under Section 501(c)(3). Final and temporary regulations were published on July 02, 2014 (see Tax Alert 2014-1263).

2. An update to Revenue Ruling 67-390.

3. Regulations and other guidance on Section 506, as added by the Protecting Americans from Tax Hikes Act of 2015. Completed: Final and temporary regulations and Revenue Procedure 2016-41 were published in July 2016 (see Tax Alert 2016-1224).

4. An update to Revenue Procedure 92-94 on Sections 4942 and 4945.

The exempt organization section of the 2016-2017 Priority Guidance Plan also re-lists a number of planned projects from previous years, including:

1. Revenue procedures updating grantor and contributor reliance criteria under Sections 170 and 509.

2. Revenue procedure to update Revenue Procedure 2011-33 for EO Select Check.

3. Proposed regulations under Section 501(c) relating to political campaign intervention. Suspended, in accordance with the 2016 Department of Treasury Appropriations Act.

4. Final regulations on Section 509(a)(3) supporting organizations. Updated: Proposed regulations were published on February 19, 2016 (see Tax Alert 2016-366).

5. Guidance under Section 512 regarding methods of allocating expenses relating to dual-use facilities.

6. Final regulations under Section 529A on Qualified ABLE Programs as added by Section 102 of the ABLE Act of 2014. Proposed regulations were published on June 22, 2015.

7. Guidance under Section 4941 regarding a private foundation's investment in a partnership in which disqualified persons are also partners.

8. Guidance regarding the excise taxes on donor-advised funds and fund management.

9. Guidance under Section 6033 relating to the reporting of contributions.

10. Final regulations under Section 6104(c). Proposed regulations were published on March 15, 2011 (see Tax Alert 2011-497).

11. Final regulations under Section 7611 relating to church tax inquiries and examinations. Proposed regulations were published on August 5, 2009.

The 2016-2017 Priority Guidance Plan also includes several projects related to tax-exempt bonds:

1. Guidance on remedial actions for tax-advantaged bonds under Sections 54A, 54AA and 141.

2. Regulations on the definition of political subdivision under Section 103 for purposes of the tax-exempt, tax credit and direct-pay bond provisions. Updated: Proposed regulations were published on February 23, 2016.

3. Revenue procedure that will update Revenue Procedure 97-13 relating to the conditions under which a management contract does not result in private business use under Section 141. Updated: Revenue Procedure 2016-44 published August 2016 (See Tax Alert 2016-1469)

4. Final regulations on public approval requirements for private activity bonds under Section 147(f). Proposed regulations were published on September 9, 2008.

5. Final regulations on arbitrage investment restrictions under Section 148. Proposed regulations were published on September 26, 2007 and September 16, 2013. Completed: Regulations were issued on July 18, 2016 (see Tax Alert 2016-1261).

6. Final regulations on the definition of issue price for tax-exempt bonds under Section 148. Proposed regulations were published on June 24, 2015 (see Tax Alert 2015-1219).

7. Regulations on bond reissuance under Section 150.

Also of interest to exempt organizations, the 2016-2017 Priority Guidance Plan lists several projects related to charitable giving: (1) guidance under Section 170 on charitable contributions of appropriative water rights, (2)guidance under Section 170 on charitable contributions of conservation easements, (3) final regulations under Section 170 on charitable contributions (proposed regulations were issued in August 2008 — see Tax Alert 2008-1185), and (4) guidance under Section 170(e)(3) on charitable contributions of inventory.

Implications

The 2016-2017 Priority Guidance Plan, which takes into account suggestions submitted to the IRS from taxpayers, tax practitioners and industry groups, reports guidance projects prioritized by the Treasury and IRS. The guidance plan generally reflects issues of interest and concern to both taxpayers and tax administration.

One noteworthy new project for tax-exempt organizations is the potential update to Revenue Ruling 67-390, which offers situations in which a tax-exempt organization loses its exemption due to certain structural changes. Recent guidance suggests the IRS may eliminate the burden of re-applying for exemption in certain situations (see, e.g., PLR 201446025, Tax Alert 2014-2089).

A noteworthy item for private foundations is a potential update to Revenue Procedure 92-94 regarding Sections 4942 and 4945, suggesting an update to a private foundation's standards in making good faith determinations regarding grants to foreign organizations. The updated Revenue Procedure may incorporate the Section 4942 final regulations issued in September of 2015 (see Tax Alert 2015-1843).

Tax-exempt organizations should be on the watch for developments on these priority projects.

Please contact your Ernst & Young tax professional with any questions.

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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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