IRS Modernization Act Becomes Law

Published date01 September 2019
Date01 September 2019
Bruce R. Hopkins’ Nonpr ofit Counsel DOI:10.10 02/n pc
For purposes of the related party rules, the definition
of control is proposed to be essentially the same as in the
controlled subsidiary context (IRC § 512(b)(13)(D)). The
proposed regulations provide that, where an organiza-
tion is a related organization with respect to more than
one educational institution, the assets and net income of
the related organization are to be allocated between the
institutions in a reasonable manner. The same standard is
to be applied in connection with assets and income avail-
able and not available for the benefit of an institution.
These proposed regulations may be relied on for tax
years beginning before publication of final regulations.
With his signature on July 1, President Trump caused
the Taxpayer First Act, legislation to modernize and oth-
erwise improve the IRS, to become law (Pub. Law No.
Exempt Organizations Provisions
The act contains two provisions concerning changes
in the law of tax-exempt organizations.
Mandatory Electronic Filing
In general, any tax-exempt organization required to
file an annual return, including an unrelated business
income tax return (Form 990-T), will soon be required
to file the return electronically. These returns are to be
made available to the public “as soon as practicable” in
a machine-readable format. This law change will apply
with respect to tax years beginning after July 1, 2019.
Transitional relief, for up to two years, is provided for
small organizations or other entities the IRS determines
will otherwise suffer “undue burden.” For this purpose,
a small organization is an organization the gross receipts
of which for a tax year are less than $200,000 and the
aggregate gross assets of which at the end of the tax
year are less than $500,000. Similar transitional relief is
provided as to electronic filing of Forms 990-T. [28.8(d)
(in the 2019 supp.)]
Pre-Revocation Notice
If an exempt organization fails to file an annual infor-
mation return or submit a notice for two consecutive
years, the IRS will be required to notify the organization
of that fact and of the revocation that will occur under
the three-year auto-revocation rule. This notice must
include information about compliance with the filing or
submission requirements.
This law change will take effect for the two-consec-
utive-year periods beginning after December 31, 2019.
[28.5, 28.5A (in the 2019 supp.)]
Modernization of IRS Structure
By September 30, 2020, Treasury must submit to
Congress a comprehensive written plan to redesign
the organization of the IRS. This plan must (1) ensure
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