Availability of Disaster Relief Payments

• Date: 01 June 2020
• Published date: 01 June 2020
• DOI: http://doi.org/10.1002/npc.30728

Bruce R. Hopkins’ NONPROFIT COUNSEL

4 June 2020 THE LAW OF TAX-EXEMP T ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc

AVAILABILITY OF DISASTER

RELIEF PAYMENTS

President Trump, on March 13, declared the COVID-19

pandemic to be a national emergency under the Robert

T. Stafford Disaster Relief and Emergency Assistance Act.

This declaration triggered application of the federal tax

disaster relief law (IRC § 139(c)(2)), enabling employers

to provide tax-free assistance to their employees.

Qualified disaster relief payments are not subject to

income or employment taxes (IRC § 139(a)). This is the

case irrespective of the source of the payment (or reim-

bursement). A qualified disaster relief payment includes

any amount paid by an employer to or for the benefit of an

employee for “reasonable and necessary” personal, family,

living, or funeral expenses incurred as a result of a qualified

disaster (IRC § 139(b)(1)). These payments also include

repairs to or rehabilitation of a personal residence and

transportation due to injuries or death (IRC § 139(b)(2), (3)).

These payments, however, do not include payments

for expenses that are otherwise covered (e.g., by insur-

ance) or that are income-replacement payments (e.g.,

unemployment compensation) (IRC § 139(h)).

Tax-exempt organizations, including public charities

and private foundations, may be used to provide finan-

cial assistance to employees in this context. IRS Pub.

3833 provides guidance as to when employer-sponsored

charitable organizations may provide financial assistance

to employees or their family members affected by a qual-

ified disaster. [7.2(b)]

IRS INVENTORIES FY 2019 EO

ACCOMPLISHMENTS

The Exempt Organizations Division issued, on March

23, a summary of its fiscal year 2019 accomplishments

(Pub. 5329).

Overview

In their cover letter, the Tax Exempt and Government

Entities Division commissioner and deputy commis-

sioner state that they “are proud that our work in FY

2019 supported our goal of preserving the integrity of

[the components of the Division, including the Exempt

Organizations function] and met the agency’s primary

goal of protecting the integrity of a strong, fair system

of tax administration.”

The commissioners state: “Our past work and accom-

plishments laid the groundwork for success in the months

ahead. Data-driven approaches, compliance checks and

soft letters, the voluntary correction program and stream-

lining processes — these all go to improving the taxpayer

experience and strengthening our compliance efforts.”

They express thanks for “support of our mission to

provide robust and fair tax administration and congratu-

lations [to] TE/GE on another successful year.” They note

that information for the current fiscal year is to be found

in their “roadmap” in the form of TE/GE’s FY 2020 Pro-

gram Letter (summarized in the December 2019 issue).

Determinations

The Exempt Organizations function of the divi-

sion closed 101,880 applications for recognition of

tax exemption in FY 2019. This included over 92,000

approvals, approximately 86,000 of which concerned

charitable (IRC § 501(c)(3)) organizations. “Closures

have continued to keep pace with increased receipts,”

as nearly 92,000 applications were closed in both FY

2017 and FY 2018. This pace “has been made possible

through process efficiencies, including the continued

processing of the Form 1023-EZ, which can be processed

with about 82% fewer hours applied than Form 1023

applications.”

The accomplishments letter references the “growing

use” of Form 1023-EZ, stating that TE/GE “continues its

efforts to understand the impact and opportunities for

this important change in its determination program.”

Outside consulting “confirmed some of [the division’s]

current practices, such as validation that [its] sampling

rate for the pre-determination program is more than suf-

ficient to provide statistically valid results” and its efforts

to identify entities ineligible to file the Form 1023-EZ.

The division continues to study recommendations from

the consultant “for continued improvement and effec-

tiveness of the program.”

On the basis of the National Taxonomy of Exempt

Entities codes, the division observes that Form 1023-

EZ approvals in FY 2019 were “mostly organizations

categorized as human services; education; arts, culture

and humanities; religion-related; and recreation and

sports.” Organizations that were recognized after filing

Form 1023 were “largely organizations characterized as

religion-related; human services; philanthropy, volunta-

rism and grantmaking foundations; education; and arts,

culture and humanities.”

Compliance Program Overview

TE/GE’s compliance program is divided into four

“portfolios”:

• Compliance strategies — issues of noncompliance

approved by TE/GE’s Compliance Governance Board

and identified using information collected through

employee input.

• Data-driven examinations — enforcement activities

resulting from use of data and queries to select cases

based on “specified quantitative criteria.”

• Referrals, claims, and other casework — includes (1)

examinations resulting from referrals received from

internal and external sources that allege possible