Thursday, April 4, 2013

IRS Questions Self-Declared Tax-Exempt Organizations

IRSThe IRS has announced that it is asking more than 1,000 organizations that self-declare they are tax-exempt under sections 501(c)(4), (5), or (6) to complete a questionnaire regarding their characteristics and activities.  Identified as a compliance check, the questionnaire asks for the reasons why the organization chose not to apply for tax-exempt status, when it began claiming tax-exempt status, and whether it sought outside professional advice regarding whether it qualified for exemption.  The questionnaire also asks detailed questions regarding the percentage of revenue, expenses, and time spent on various activities, as well as specifically asking for detailed information regarding the amount of money and time spent by both volunteers and paid staff on political campaign intervention.  Some questions appear redundant with the Form 990, such as questions relating to compensation, but many questions go into much greater detail than found on the Form 990. 

It is clear that the IRS is trying to get a handle on the most common types of self-declared tax-exempt organizations.  At the same time, the fact that it took this long for the IRS to even begin looking into such entities underlines the slow reaction speed that has been so frustrating for those who have called for the IRS to look into the political activities of tax-exempt organizations. Yet it is arguably unfair to expect the IRS, which is designed to audit situations well after the fact, to exhibit the level of responsiveness that politics demands (shameless self promotion - see my article regarding regulation of 527s for more on this point).

LHM

http://lawprofessors.typepad.com/nonprofit/2013/04/irs-questions-self-declared-tax-exempt-organizations-.html

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