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IRS TE/GE division’s FY 2020 program letter

IRS TE/GE division’s FY 2020 program letter

The IRS Tax Exempt and Government Entities (TE/GE) division today released a program letter—previously referred to as a "work plan" or "priority letter" in prior years—for fiscal year (FY) 2020.

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Read the FY 2020 TE/GE program letter [PDF 204 KB]

Overview

The TE/GE program letter notes that in FY 2019, the TE/GE division implemented and provided additional guidance on TE/GE-related provisions of the 2017 tax law (referred to as the “Tax Cuts and Jobs Act” or TCJA) and that it will continue in FY 2020 “…to look for ways to help taxpayers and their representatives navigate the many changes made by TCJA.”

The TE/GE division further reported that implications of the most recently enacted tax law from July 2019 (the “Taxpayer First Act”) will be assessed.

The FY 2020 TE/GE program letter outlines projects and priorities for FY 2020 regarding exempt organizations, employee plans, Indian tribal governments, and tax-exempt bonds. 

Exempt organization items in FY 2020 program letter

Highlights of the program letter for exempt organizations include the following:


Compliance strategies:
Exempt Organizations (EO) will prioritize examinations of the following:

  • Hospital organizations with unrelated business income (UBI): focus on unrelated business taxable income (UBTI) reported on Form 990-T, Exempt Organization Business Income Tax Return, when expenses materially exceed gross income
  • Section 501(c)(7) entities: focus on investment and nonmember income by tax-exempt pleasure, social and recreation clubs
  • Section 4947(a)(1) Non-Exempt Charitable Trusts (NECTs): organizations that under-report income or over-report charitable contributions
  • Previous for-profit: organizations formerly operated as for-profit entities prior to their conversion to section 501(c)(3) organizations
  • Private benefit and inurement: organizations show indicators of potential private benefit or inurement to individuals or private entities by way of private foundation loans to disqualified persons


Data-driven approaches

  • EO query sets (previously referred to as models): continue to improve compliance query sets based on information reported on Form 990, Return of Organization Exempt From Income Tax; Form 990-EZ, Short Form Return of Organization Exempt From Income Tax; Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 5227, Split Interest Trust Information Return
  • RAAS collaboration: continue to review various items and activities, including private benefit/inurement


Referrals, claims, and other casework

  • Referrals: continue to pursue referrals received from internal and external sources that allege noncompliance by an exempt organization and pursue taxpayer and interagency referrals, including information items from sources within and outside the IRS that allege noncompliance with an employment tax law by an exempt organization
  • Claims: continue to address requests for refunds or credits of overpayments of amounts already assessed and paid, including tax, penalties, interest, or an adjustment of tax paid or credit not previously reported or allowed
  • Other casework: continue to examine entities that filed and received exemption using Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Additionally, support IRS-wide compliance efforts on section 4980H with respect to certain exempt employers


Compliance contacts

TE/GE will continue to use compliance checks and “soft letters” to determine whether an entity is adhering to recordkeeping and information reporting requirements, and will continue educating taxpayers via compliance checks and soft letters while seeking to improve return filings and filing accuracy on issues of noncompliance.


Determinations

TE/GE continues to expect a large volume of determination application receipts, and will continue to look at process efficiencies, as well as expect to hire more revenue agents to address the work and offset anticipated attrition losses.


Other TE/GE groups

The FY 2020 program letter also includes objectives for other TE/GE groups, including employee plans and Indian tribal governments / tax-exempt bonds.

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

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