IRS Exempt Organizations - FY 2012 annual report, FY 2013 work plan 

The report—IRS Exempt Organizations FY 2012 Annual Report & FY 2013 Workplan—provides a snapshot of exempt organization accomplishments from the past fiscal year and profiles projects and priorities for the current fiscal year.

Read the IRS report and work plan [PDF 2.32 MB]

FY 2012 annual report

Highlights of the FY 2012 annual report include:

• Organizational information – IRS Exempt Organizations (EO) increased staffing in Rulings and Agreements but reduced overall staffing as compared to prior years.
• Compliance – EO conducted fewer examinations and compliance checks than in prior years.
• Rulings and agreements – EO Technical / EO Guidance received over 300 pieces of general correspondence and almost 400 pieces of correspondence from members of Congress. EO Technical also worked with EO Guidance to revise related chapters within the Internal Revenue Manual.
• Education – EO maintained its educational activities and continued to focus on new ways to engage and educate internal and external stakeholders.
• Federal-state coordination – The IRS continues to share information with state charity regulators, and EO has seen an increase in the number of referrals from state charity regulators and tax agencies of more than 70% over the past six years.
• Affordable Care Act – The IRS and Treasury continued to implement provisions of the Affordable Care Act of 2010 that affect charitable hospitals, exempt organizations as small employers, and the tax practitioner community.
• Governance – EO completed its analysis of 1,300 governance checksheets from section 501(c)(3) organizations and published its preliminary findings.
• Plain language – EO encouraged plain writing among its employees and developed a course directed at this goal.
• Review of operations – The EO division, established to follow up on organizations after the IRS approved exemption, has grown from 14 employees to approximately 40 employees since its inception in 2005.
• Automatic revocation and reinstatement – EO continues to respond to the challenges associated with automatic revocation and the needs of tax-exempt organizations and their stakeholders, including extending the filing date for transitional relief for small automatically revoked organizations affected by Hurricane Sandy.
• Determinations – EO reviewed and closed 70% of all application cases within approximately 120 days during technical screening.

FY 2013 work plan

The FY 2013 work plan outlines the focus areas in which EO is deploying resources over and above its ongoing work. Highlights include:

• Section 512(b)(13) study – In response to changes under the Pension Protection Act of 2006, Treasury asked EO to draft a report regarding payments between controlled entities under section 512(b)(13). In response, EO developed a checksheet to be used in examinations. During the last two years, revenue agents completed approximately 3,000 checksheets, and EO has begun the analysis process.
• International activities of charities – EO will shift its exam focus in FY 2013 to organizations with high amounts of foreign grant expenditures.
• Section 501(c)(4), (5), and (6) “self declarers” – EO will send a questionnaire to organizations that “self- declared” by filing Form 990 for tax year 2010 or 2011.
• Colleges and universities – EO anticipates completing the college and university report, which will include results from examinations as well as additional analysis of the data from questionnaire responses previously received from almost 400 institutions.
• Compliance: Using the Form 990 – Expanding on work conducted in FY 2012, EO will focus on (1) charitable spending of medium to large organizations, including organizations that report substantial income from fundraising but little or no fundraising expenses; (2) examinations of organizations that may be hiding compensation through related organizations; (3) continued examinations related to impermissible political activity or failure to accurately report political expenditures on Form 1120-POL; and (4) examining organizations reporting substantial gross UBI for three consecutive years but reporting no income tax due for any of those years.