IRS Developments and Announcements for Tax-Exempt Organizations – Summer 2014

The IRS released several reports and made announcements during the summer regarding various matters of interest to tax-exempt organizations.

• Appealing an adverse determination letter. On May 19, 2014, the IRS announced that, if the Exempt Organizations Technical Unit proposes an adverse determination letter, an organization can request review from the Office of Appeals. Before this guidance was issued, an organization only had the opportunity to appeal an adverse determination letter when it was issued by the Exempt Organizations Determinations Unit.
• ACT report and recommendations on UBIT. On June 11, 2014, the Advisory Committee on Tax Exempt and Government Entities (ACT) presented its most recent annual report to the IRS. The report included a section on the IRS’s ongoing project regarding the unrelated business income tax compliance of colleges and universities. To read more about the ACT report and its recommendations for specific improvements in reporting unrelated business taxable income and administering the unrelated business income tax, click here.
• Revocation of exemption while application is pending. On June 13, 2014, the IRS posted a memo regarding the procedure an exempt organization should follow if it has filed an application for recognition of exemption and, while the application is pending, the organization’s tax-exempt status is automatically revoked for failure to file three consecutive annual returns. In these circumstances, the IRS will treat the pending application as a request for reinstatement and, if recognition of tax-exempt status would normally be granted, will treat the organization as being tax-exempt continuously from the date that it first qualified for recognition of exemption.
• Lean Six Sigma training. To help reduce the backlog of exemption applications, the IRS announced on June 16, 2014, that specialists in the Exempt Organizations Unit will be trained on the Lean Six Sigma concept. The IRS hopes this approach will reduce the time needed to provide quality services.
• Form 1023-EZ. Effective July 1, 2014, the IRS released Form 1023-EZ, which certain organizations may use to apply for recognition of tax-exempt status. To use the streamlined Form 1023-EZ, the organization must complete an eligibility checklist, have gross receipts of $50,000 or less and assets of $250,000 or less, attest to certain other qualifications under penalty of perjury, and pay a $400 application fee. The IRS also issued final and temporary regulations to allow the use of this streamlined process.
• Art Advisory Panel’s 2013 annual summary. The IRS recently released the annual summary report of the Art Advisory Panel’s closed-meeting activities for fiscal year 2013. The Art Advisory Panel assists the IRS with the review of appraisals of tangible personal property, including those for which a taxpayer takes a charitable deduction. The report is available on the IRS website.

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