The Internal Revenue Service Exempt Organization Division is responsible for the oversight and regulation of approximately 1.5 million tax-exempt organizations. This sector is composed of organizations ranging in size from small, volunteer-run soup kitchens to very large and sophisticated academic medical centers.
Against an environment of limited resources, the Advisory Committee on Tax Exempt and Government Entities (ACT) outlined several recommendations in their report entitled “Exempt Organizations: Leveraging Limited IRS Resources in the Tax Administration of Small Tax-Exempt Organizations.”
The ACT report focuses on Form 990-EZ filers and organizations with annual gross receipts between $50,000 and $200,000 and total assets of less than $500,000. A summary of the ACT’s specific recommendations is as follows:
- Although some members of the ACT voted to modify the Form 990-EZ filing threshold, the recommendation was to retain the existing threshold.
- The ACT proposed that the IRS require small, tax-exempt organizations to file the following schedules with Form 990-EZ:
- Schedule F (Statement of Activities Outside of the United States)
- Schedule I (Grants and Other Assistance to Organizations, Governments, and Individuals in the United States)
- Schedule J (Compensation Information)
- Schedule L Parts III and IV (Transactions With Interested Persons)
- Schedule M (Noncash Contributions)
- Schedule R (Related Organizations and Unrelated Partnerships)
- In connection with the IRS’s study of whether certain governance practices are an indication of tax compliance, the IRS should consider adding the following questions to Form 990-EZ:
- Does the organization have a conflict-of-interest policy?
- How does the organization comply with the conflict-of-interest policy?
- How many board members are independent?
- Was there a significant diversion of funds during the year?
- Does the organization follow appropriate practices in setting compensation?
The ACT also proposed that the IRS enhance the linkage capabilities on its website to assist individuals who manage small, tax exempt organizations. Additionally, the ACT proposed that the IRS work with state charity regulators to increase information-sharing among the regulators.
Schneider Downs is prepared to assist taxpayers with their questions regarding the ACT’s proposed changes. If you have any questions or require assistance, please do not hesitate to contact Susan M. Kirsch at firstname.lastname@example.org or Debra A. Ries at email@example.com .
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.