IRS 2012 WORK PLAN FOR EXEMPT ORGANIZATIONS

By Steve Jones, CPA - Senior Manager

The IRS recently released their 2012 work plan for exempt organizations. The work plan allows exempt organizations to have a better understanding of where the IRS plans to focus and utilize resources over the next fiscal year. A summary of the 2012 work plan follows:

I.    Legislative Implementation

1. Auto-Revocation for non-filers – Any tax exempt organization that does not file a required return or notice for three consecutive years automatically loses its tax exempt status. The IRS maintains and updates a list of those revoked organizations.
2. Requirements for tax exempt hospitals – Tax exempt hospitals are required to perform a Community Needs Health Assessment at least once every three years.
3. Section 501(c)(29) organizations- This section created a new type of exempt organization (qualified nonprofit heal insurance issuers) and the requirements for organizations described in that section.
4. Accountable Care Organizations – Notice 2011-20 was issued to address how existing guidance may apply to those tax exempt organizations that participate in the Medicare Shared Savings Program through ACOs.
5. Reporting Requirements – Form 990 changes, including Schedule H, 501(c)(29) requirements, and Form 990-T changes, will all be reviewed for compliance.

II.    Compliance – Form 990

1. 501(c)(4),(5), and (6) self-declarers – Groups with these designations are allowed to declare themselves exempt without an IRS determination letter. The IRS will be reviewing these organizations to ensure they have classified themselves appropriately and are applying with the appropriate regulations.
2. Political Activity – The IRS will focus on enforcing the rules relating to political campaigns and campaign expenditures.
3. 990-T and UBIT – The IRS focus in this area will be twofold: identifying organizations that list unrelated business activities on Form 990 but do not file Form 990-T, and those that consistently file Form 990-T with significant gross receipts yet declare no tax due.
4. Governance – The IRS plans to analyze the new Form 990s to review connections between certain government practices and tax compliance.

III.    Collaborative Efforts

1. International – Because many exempt organizations have dealings outside of the U.S. and the overall economy is moving toward greater globalization, the IRS will focus on evaluating whether assets of these organizations that are dedicated for charitable purposes internationally are being diverted for non-charitable purposes.
2. Academic Institutions Initiative – The IRS created this initiative to collaborate with educational entities to train and develop professionals who will lead and develop the nonprofit sector.
3. National Research Program – This program focuses on employment tax matters. The employment tax returns of 1,500 tax exempt entities will be examined each year over a three year period, with 500 of those being selected randomly.
4. Exempt Organizations Resource Page – A central resource page for exempt organizations will be created with a focus on providing information concerning compliance checks and examinations.

IV.    General Work

1. Colleges and Universities – A final report of the recent compliance questionnaire sent to 400 colleges and universities will highlight the IRS's findings.
2. Disaster Relief Communications – A new communication will be forthcoming to educate exempt organizations concerning the rules and responsibilities relating to disaster relief efforts.
3. Mortgage Foreclosure Assistance – More exempt organizations have become involved with foreclosure assistance activities. The IRS will be reviewing the activities of these organizations to determine whether they are fulfilling their tax exempt purpose and complying with the requirements of Section 501(q).
4. State-Sponsored Workers Compensation Organizations – Exempt organizations under Section 501(c)(27) will be contacted to determine whether they are meeting criteria for exemption, are correctly classified as exempt, and are paying any employment taxes due.
5. Private Foundations – Examinations of numerous large private foundations will be occurring to determine compliance with regulations.
6. Exempt Organizations Services and Assistance – A research project to determine how best to educate small tax exempt organizations and deliver tax related information has been ongoing. The final stage of this research project will occur in 2012 and include a cost benefit analysis of taxpayer preferences and IRS outreach efforts to measure cost effectiveness.