IRS Inventories FY 2019 EO Accomplishments

Published date01 June 2020
Date01 June 2020
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
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)]
The Exempt Organizations Division issued, on March
23, a summary of its fiscal year 2019 accomplishments
(Pub. 5329).
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).
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
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
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

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