In its Fiscal Year 2026 Program Letter, the IRS Tax Exempt & Government Entities division (TE/GE) outlines how it intends to execute its mission while supporting the IRS's enterprise-wide goals of improved taxpayer service, efficient operations and modernized enforcement.

The Program Letter emphasizes TE/GE's continued reliance on risk-based, data-driven examination techniques, increased use of modernized technology and analytics, and ongoing efforts to strengthen workforce capabilities through targeted training and leadership development.

According to the Program Letter, TE/GE will focus on:

• Enhancing taxpayer service by proactively engaging stakeholders and expanding self-service tools
• Directing enforcement and compliance resources toward areas presenting the highest risk of noncompliance, while promoting consistency and fairness in tax administration
• Advancing modernization initiatives, including enhanced analytics, artificial intelligence and system upgrades
• Improving taxpayer service and operational efficiency through updated processes, organizational review and continued TEOS modernization
• Implementing legislative changes under the "One Big Beautiful Bill Act" (OBBBA) and the SECURE 2.0 Act(see Tax Alert 2025-1423).

FY 2026 priorities

The Program Letter lists the following TE/GE priorities:

Improving taxpayer experience. TE/GE plans to:

• Proactively connect with internal and external stakeholders to better support small and underserved taxpayers
• Provide additional education and outreach around OBBBA reporting requirements
• Expand digital self-service options for TE/GE stakeholders through business tax accounts

Compliance and enforcement. TE/GE plans to:

• Maintain a risk-based, data-driven compliance strategy focused on examinations involving:
• Tax-exempt hospitals
• Name, image and likeness (NIL) collectives
• Arbitrage concerns in tax-advantaged financings
• Fraud and abusive transactions
• Implementation of OBBBA-related requirements
• Finalize updates to the Employee Plans Compliance Resolution System to incorporate SECURE 2.0 changes

Technology, privacy and data. TE/GE plans to:

• Leverage AI and network analysis tools to detect potentially inappropriate relationships or fraudulent activity and launch an IRS-approved large language model to assist with referrals within Exempt Organizations
• Deploy a modernized case management system for determinations and continue digitization efforts, including forms and correspondence
• Implement and automate redaction tools for exempt-organization applications and Forms 990 posted to the Tax-Exempt Organization Search (TEOS) system
• Deploy a modernized system for accessing historical records

Efficient and effective operations. TE/GE plans to:

• Advance TEOS modernization to improve data access and usability
• Assess potential organizational changes to strengthen operational alignment and deliver mission-critical training for employees and managers

Legislative implementation and tax gap. TE/GE plans to:

• Continue implementation efforts for OBBBA and other legislative changes
• Coordinate communications, guidance and processes for 2026 filing-season impacts, including new Form 4547, Trump Account Election(s) and Form 15714, Advance Election to Participate under Section 25F
• Develop systems and processes to support new credits for donations to scholarship-granting organizations and continue multi-year development of OBBBA-related form, instruction and system updates

Implications

The FY26 TE/GE Program Letter provides insight into TE/GE priorities for the upcoming fiscal year. It reflects TE/GE's continued emphasis on risk-based compliance and the expanded use of data analytics, artificial intelligence and modernized systems in administering the tax law. As these tools are further integrated into compliance and case-selection processes, accurate and consistent reporting will remain important for exempt organizations. Exempt organizations affected by recent legislative changes, including the OBBBA and the SECURE 2.0 Act, should monitor forthcoming guidance and reporting requirements for those changes, and consider proactive compliance reviews to support effective implementation.

Tax exempt organizations should expect continued TE/GE emphasis on early detection and voluntary compliance, increased use of data analytics in selecting returns and issues for examination, and a greater focus on complex or emerging compliance areas such as NIL-related collectives (see Tax Alerts 2023-1093 and 2025-2084) and OBBBA-related reporting (see Tax Alerts 2025-1423 and 2025-2004). Organizations should monitor these developments closely and assess potential impacts on compliance processes, governance practices and reporting obligations.