Moving Forward: IRS Provides Updates on TE/GE Division Progress and 2015 Initiatives

Earlier this month, our team had the opportunity to attend the Annual Joint Meeting of the Tax Exempt and Government Entities (TE/GE) Councils in Baltimore, Maryland. This is an annual meeting where the IRS, in an effort to coordinate with the public and increase its operational transparency, provides an update on its accomplishments and plans for the year ahead. 

During the meeting, IRS TE/GE Commissioner Sunita Lough provided an in-depth overview of the IRS’ 2014 accomplishments. Above all, she noted that the biggest challenge the TE/GE Division faced was the backlog of inventory for exemption applications. Last year, in an effort to boost efficiencies, the IRS streamlined the application procedures for those seeking reinstatement and also launched the Form 1023-EZ, which allowed the agency to reduce the application inventory by 91 percent and close 117,000 applications. Currently, the application time for exemption is around six months.

Still, despite helping to boost the Division’s efficiencies, the Form 1023-EZ hasn’t come without criticism. Some in the industry believe that it introduces new risks and challenges around the IRS’ ability to ensure proper reporting. To address these concerns, the IRS has been randomly selecting applicants through a predetermination letter compliance review, in which it asks additional questions to ensure an organization is eligible to use Form 1023-EZ from the outset. Using this process, the IRS will follow up with 1023-EZ filers through a statistical sample, and then compare the information on the 1023-EZ with the 990 to identify any discrepancies and areas of concern.

With ongoing budget constraints and growing numbers of exemption applications, the IRS and its TE/GE Division now face an intensified challenge of doing more with less. To address this challenge head-on, Commissioner Lough provided several updates on planned 2015 initiatives. One of these initiatives involves a renewed focus on just-in-time training, in which IRS managers will have face time with employees and will be required to visit and review a minimum of one taxpayer during the year. Additionally, whereas previously the IRS would organize examinations by sub-segment, it will start targeting organizations based on industry issues and specific risks associated with those issues. Specifically, the agency will be looking into issues that cause revocation of exempt status, protection of assets, unrelated business income and international activity, among other issues.

As Commissioner Lough relayed, this year’s major ask from the IRS is that organizations work to make sure any personally identifiable information is not included on their Form 990s. As these are public documents, the IRS cannot guarantee that personal information sent to the IRS on the 990 will not subsequently be made public. The agency also asks that only the required information be submitted on the Form 990 and Form 1023, as it simply does not have the resources to read through information that is not required.

Overall, despite the ongoing challenges the TE/GE Division faces, Commissioner Lough expressed optimism about the group’s planned changes and the benefits they aim to bring exempt organizations in the year ahead.