Wednesday, July 30, 2014

The National Taxpayer Advocate Isn't Happy with EO but the Form 1023 EZ Isn't the Answer

On July 16, the National Taxpayer Advocate released its mid-year report to Congress.   The IRS release is here and the report itself is here.

Given all that has occurred in the last year in EO, I suppose it is not a big surpise that the Taxpayer Advocate Service (TAS) has a lot to say about EO and not very much of it is good.   One of its areas of focus is the exempt status process, with the relevant part of the report entitled, "Despite Improvements, TAS Remains Concerned About IRS Treatement of Taxpayers Applying for Exempt Status."

Rather than focus on the Section 501(c)(4) and political activities issues, which makes up much of this section of the report, I wanted to focus on the TAS' comments on the new Form 1023-EZ.  One would have thought that the TAS, which was been extraordinarly critical of exempt status wait times (and rightfully so), would have welcomed the Form 1023-EZ.   In fact, the report notes that the TAS suggested the creation of a Form 1023-EZ as part of its 2011 report to Congress.   So you'd think that the new form (available here) would be good news.

 But not so much, apparently:

The National Taxpayer Advocate continues to be deeply concerned about the IRS' abdication of its responsibility to determine whether an organization is organized and operated for an exempt purpose and not mrerely accept an organization's statement to that effect.

Back in practice, the issue often arose whether to attach a certain document or not to the Form 1023.   My response, with which many may disagree, was usually to attach more and not less - assuming, of course, there was really no issue to be raised by the additional documentation.   I always liked the security of being able to say that we sent everything in, the IRS vetted it (or at least had the opportunity to vet it), and we could rely on having provided a complete application.   Clearly, an organization submitting the 1023-EZ can't have that limited comfort, illusory as it may have been, as it really submits almost nothing as part of the application.

The TAS' primary concern appears to be with the IRS' intention to police determinations made through the 1023-EZ process with a follow-up audit.   Given the state of the IRS' budget, I'm not really worried about those audits actually happening.   Personally, I'm more worried for donors, who often seem to use the "Section 501(c)(3)" label as a filter for fraud protection.   That probably was never truly accurate, but it's even less accurate now.

I'd love to hear thoughts....

EWW 

 

 

 

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Comments

I for one am VERY happy they have simplified the form 1023. I have been trying on my own and have someone from the local Small business center trying to help me and Ive been a year trying to work through this 1023 long form, I did the 1023 EZ in 24 hours and it is finished. I can see your concerns about abuse, and I somewhat agree, but for little guys like me who dont have legal people to help, it is a godsend. I am glad Im going to get mine filed finally.

Posted by: Stephen Karnes | Jul 31, 2014 9:12:33 AM

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