03 October 2025 IRS and Treasury 2025-2026 Priority Guidance Plan includes various projects applicable to tax-exempt organizations - Guidance under IRC Section 4966 addressing taxable distributions by donor advised funds (DAFs) remains on the Treasury Department's 2025–2026 Priority Guidance Plan despite other guidance items on DAFs being removed.
- The 2025–2026 Priority Guidance Plan reflects Treasury and the IRS's focus on implementation of the "One, Big, Beautiful Bill Act" (OBBBA) and deregulation and burden reduction.
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The IRS and Treasury Department have issued the 2025 — 2026 Priority Guidance Plan (PGP), addressing various topics that are applicable to tax-exempt organizations. The plan includes 105 guidance projects, which the Treasury and IRS are seeking to complete by June 30, 2026. The following guidance projects are those that are specific to tax-exempt organizations. Code section | Type of guidance | Abstract | Notes | 501(c)(3) | Unspecified | Addressing application of the fundamental public policy against racial discrimination, including consideration of recent case law, in determining the eligibility of private schools for recognition of tax-exempt status under IRC Section 501(c)(3) | Revenue Procedure 75-50 requires schools exempt under IRC Section 501(c)(3) to adopt a racial nondiscrimination policy and promote the policy to the public | 501(c)(3) | Unspecified | Addressing the statutory prohibition in IRC Section 501(c)(3) against participation or intervention in political campaigns (the "Johnson Amendment") | Guidance likely will be proposed regulations addressing application of the political campaign activity prohibition to churches (see Tax Alert 2025-1569) | 4945 | Proposed regulations | Addressing expenditure responsibility requirements | The PGP does not specify what this guidance will address | 4960 | Unspecified | Addressing excess compensation paid by applicable tax-exempt organizations and the expanded definition of "covered employee" | Guidance likely will be amended regulations to address changes to IRC Section 4960 in H.R. 1 (see Tax Alert 2025-1423) | 4966 | Final regulations | Addressing taxable distributions by donor advised funds (DAFs), including excise taxes on sponsoring organizations and fund managers | Proposed regulations issued November 14, 2023 (REG-142338-07) (see Tax Alert 2023-1927) | 4968 | Unspecified | Addressing the excise tax based on investment income of certain private colleges and universities | Guidance likely will be amended regulations to address changes to 4968 in HR 1 (see Tax Alert 2025-1423) | 6104 | Proposed regulations | Addressing the place for public inspection of materials relating to tax-exempt organizations, pensions, and other plans | IRC Section 6104 requires exempt organizations to make available for public inspection their application for IRS recognition of exemption and their three most recently filed Form 990-series returns |
The following tax-exempt organization-related items that appeared in the 2024–2025 Priority Guidance Plan have been omitted from the 2025–2026 plan. It is not clear if Treasury and the IRS will continue to work on these items. Code section | Type of guidance | Abstract | Notes | 501(r) | Unspecified | Addressing application of IRC Section 501(r) regulations | Related to IRS compliance strategy for tax-exempt hospitals | 509(a)(1), 170(b)(1)(A)(vi), 509(a)(2) | Unspecified | Addressing the extent to which distributions from DAFs can be considered public support for purposes of public support computation for public charities | Guidance likely will be proposed regulations | 512 | Proposed regulations | Addressing the allocation of expenses in computing unrelated business taxable income and addressing how changes made to IRC Section 172 net operating losses by section 2303(b) of the CARES Act apply for purposes of IRC Section 512(a)(6) | | 4941 | Unspecified | Addressing a private foundation's investment in a partnership in which disqualified persons are also partners | | 4958 | Proposed regulations | Addressing excise taxes on benefits provided by DAFs to their donors and donor advisors, and excess benefits provided to disqualified persons of supporting organizations | | 4967 | Proposed regulations | Addressing prohibited benefits from DAFs, including excise taxes on donors, donor advisors, related persons, and fund management | | 6033 | Unspecified | Addressing Revenue Procedure 80-27, regarding group exemption letters | Notice 2020-36 was published on May 18, 2020 (see Tax Alert 2020-1256) | 7611 | Final regulations | Addressing designation of an appropriate high-level Treasury official under IRC Section 7611 | Proposed regulations issued on August 5, 2009 |
The annual PGP provides insight into what projects Treasury and TE/GE will prioritize for the upcoming fiscal year. The PGP includes a carry-over item regarding DAFs, specifically IRC Section 4966 guidance, for which the IRS issued proposed regulations in November 2023 (see Tax Alert 2023-1927). It is notable that three of the four guidance projects related to DAFs that appeared on the 2024–2025 PGP are not included in the 2025–2026 PGP. It is unclear if the Treasury and IRS TE/GE will continue to pursue those projects. DAFs have become increasingly popular as charitable giving vehicles, though some critics of DAFs have called for stricter regulation, including annual minimum distribution requirements. Although Treasury and the IRS have not indicated plans to impose any minimum distribution requirements on DAFs, it is possible they may still apply a more expansive interpretation of IRC Sections 4966 and 4967 to justify stricter regulation of DAFs, donor-advisors, and sponsoring organizations of DAFs. Another long-standing item that is not on the 2025–2026 PGP is guidance on the allocation of expenses when calculating unrelated business taxable income (UBTI). Exempt organizations have generally been allowed to use any reasonable method to allocate expenses between related and unrelated trade or business activities, but Treasury and the IRS have yet to specify any acceptable allocation methods. A related item not on the 2025–2026 PGP is how to determine application of the 80% annual net operating loss deduction limitation under IRC Section 172 in calculating UBTI; in particular, whether that 80% limitation is applied on an IRC Section 512(a)(6) silo-by-silo basis, or against aggregate UBTI for a given tax year. An item that was first included on the PGP for 2024–2025 — guidance illustrating application of the regulations under IRC Section 501(r) to tax-exempt hospitals — does not appear on the 2025–2026 PGP. This item reflected a compliance strategy launched by IRS TE/GE in 2024 to examine tax-exempt hospitals for compliance with IRC Section 501(r) and the community benefit standard. It is unclear whether TE/GE will continue to pursue this compliance strategy, though most of the several dozen tax-exempt hospital examinations the IRS launched in 2024 are still in process. Exempt organizations should consult with their tax advisors to better understand the tax implications of these priorities, or for help in determining whether to submit comments on proposed IRS guidance or recommendations for future IRS guidance. | * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Tax Exempt Organization Services | | Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor |
Document ID: 2025-2004 |
