The IRS Exempt Organizations (EO) Office will be revoking the tax-exemptions of a "sizable number" of small exempt organizations, EO Director Lois Lerner stated at a February 23 meeting of the D.C. Bar Taxation Section. Lerner would not provide any figures but said that the list of revoked organizations should be out in the next month. When it releases the list, EO will also issue Frequently Asked Questions about the effect of the revocation and how organizations can obtain reinstatement of their exempt status, Lerner said.
Lerner noted that EO is currently checking whether the organizations' exempt status being revoked should be revoked. She also noted that some larger organizations required to file Form 990 have attempted to meet their filing requirements by filing the electronic postcard, Form 990-N. EO is therefore checking the eligibility of filers of Form 990-N.
A governance check sheet is being used by EO agents who examine Code Sec. 501(c)(3) organizations, according to Lerner. EO will use the information to study the relationship between governance and tax compliance. Lerner said that EO will release its findings on a rolling basis. She added that EO is coordinating audits of large foundations with the IRS Large Business and International Division.
Ruth Madrigal, an attorney with the Treasury's Office of Tax Policy, said that the charitable deduction for conservation easements may need to better targeted, citing the example of a golf course in a gated community. Provisions for contribution of easements had been extended through 2011 and the Senate has passed legislation to make the deduction permanent, Madrigal noted. The president's fiscal year 2012 budget "Green Book" contains a discussion of a proposal to extend the provisions for one year, she said (TAXDAY, 2011/02/15, T.1).
Madrigal said that the IRS issued a new revenue procedure, Rev. Proc. 2011-10, I.R.B. 2011-2, 294 (TAXDAY, 2011/01/10, I.2), to address the requirements for private foundation rulings. The new revenue procedure is primarily a compilation of existing procedures found in many documents. She indicated that a private foundation needs an IRS ruling if its status changes and it wants IRS recognition.
Guidance that may be issued in the coming months includes regulations on the public support test, appraisal standards, church audits and information-sharing, Madrigal said. The Treasury and EO are also working on guidance under the 2010 health care laws, such as the new requirements under Code Sec. 501(r) for hospital organizations, she indicated. The Treasury is still accepting comments on the new hospital standards. Lerner noted that EO will start looking at hospitals and community benefit issues.
Madrigal also pointed out that the health care laws create a number of new organizations, and it is not always clear whether they are exempt organizations or how the EO provisions might apply to them. Examples include the exchange mechanism (a marketplace for people lacking insurance), an exempt organization for health insurance issuers, Medicare beneficiary organizations composed of hospitals, doctors and other providers, and applicable reinsurance entities (AREs).
By Brant Goldwyn, CCH News Staff