Wednesday, March 3, 2021

TIGTA on Unrelated Business Income Tax Enforcement

Download (1)The Treasury Inspector General for Tax Administration recently released a new report titled Emphasis on Unrelated Business Income Tax Enforcement Should Be Enhanced. TIGTA made the following specific recommendations:

  1. Clarify the EO Examination function’s guidance to require examiners to address UBI and include evidence of its UBI identification efforts in every case file, including focused examinations.
  2. Restore UBI references to the IRM to reinforce their importance to an organization’s exempt status.
  3. Require, in appropriate cases, that examiners request any missing Forms 990-T and inform taxpayers of the potential risks if they do not comply with their filing requirements in accordance with Treasury Regulation § 1.6012-2(e).
  4. Evaluate claim thresholds sent to the field in an effort to minimize impact on limited resources and analyze specific case circumstances to prevent unnecessary case referrals to an EO Examination group.
  5. Include UBI tax issues in future compliance projects to identify issues preventing taxpayers from being compliant with their UBI reporting requirements.
  6. The Commissioner, TE/GE Division, should update the Classification and Case Assignment’s Classification Desk Guide to require experienced senior EO classifiers to review claims involving an NOL prior to accepting the claim as filed and document the review in the case file.
  7. Implement safeguards to ensure the accuracy of the Reporting Compliance Case Management System Closing Record to avoid material errors that affect information reports based on these inputs, which are relied upon by internal and external stakeholders.
  8. Replace the respective IRM sections that provide instructions on the Form 5599 with the revised Reporting Compliance Case Management System Closing Record and clarify any differences in how examiners should complete this process for appealed examinations.

The IRS agreed with the last six recommendations, but disagreed with the first two recommendations and so does not plan to follow them.

Lloyd Mayer

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