The Tax Exempt and Governmental Entities (TEGE) Exempt Organizations Council held its annual meeting February 21 – 22, 2019, in Baltimore. This meeting brought together private practitioners, nonprofit organizations and current and former government speakers to discuss the latest statutory, regulatory and judicial developments impacting tax exempt organizations. Given the current tax environment, there was no shortage of topics!
The impact of the government shutdown was addressed during the meeting. Margaret Von Lienen, Director of Exempt Organizations (IRS), stated that only six people were retained during the 35-day shutdown. As a result, the IRS is still recovering from the loss of work days. If a nonprofit organization sent in correspondence during this time (exemption applications, letter responses, miscellaneous determinations, etc.), the IRS was accepting the mail and recording the date received, but nothing was being processed except payments. This has created a significant backlog in IRS inventory. The average processing time for correspondence inventory processed in Cincinnati is 55 days, which is up from 30 days. The average processing time for an application (Form 1023, 1024, 8940, or letter request) was 160 days prior to the shutdown, and this has increased to 180 days. Form 1023-EZs processing has increased from 23 days to 72 days as well. The IRS has hired additional people into the TEGE area, and those individuals will be cross-trained to work on determination cases as well as exams. To alleviate the inventory backlog, the IRS has shifted some of their exam agents to assist with determinations correspondence. If you have correspondence that exceeds the average processing days, you can call the toll-free Customer Account Services number at 877.829.5500 to check on the status. It was also mentioned that some of the user fees will be increasing from $1,000 to $2,000 effective July 2019. If you are submitting correspondence after June, make sure you are including the appropriate user fee to avoid processing delays.
The IRS also mentioned the rollout of the new Tax Exempt Organization Search tool on the IRS website. This site provides information on organizations that are eligible to receive tax-deductible charitable contributions (Pub 78 data), automatically revoked organizations and organizations who have filed a Form 990-N (e-Postcard). In addition, the site now provides access to approved Form 1023-EZ applications, IRS determination letters dated on or after January 1, 2014, and Form 990-series returns. In some cases, we have found the search tool provides access to more recent 990s than what is available on GuideStar. If you are looking for the most recent copy, be sure to check both search sites.
Attendees also heard from Janine Cook, Deputy Associate Chief Counsel (IRS) and Elinor Ramey, Attorney Advisor, Office of Tax policy (Treasury), who highlighted recent guidance released. Notice 2018-99—Parking Expenses for Qualified Transportation Fringes—was one key area discussed. This discussion provided an opportunity for attendees to raise concerns about the application of the guidance and stress the importance for additional guidance. For example, questions such as how to determine a reasonable allocation for expenses when you lease or when you are in a multi-tenant situation were raised. Public comments were to be submitted by February 22, 2019.
Additional topics at the meeting included the new unrelated business income “siloing” rules, partnership audit rules, tax-exempt bonds, executive compensation, healthcare updates and discussion on proposed regulations for donor-advised funds.