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Studying nonprofit compensation and political activities are among the features in the IRS 2013 workplan for exempt organizations.
The Internal Revenue Service recently released its upcoming workplan as well as a report on its 2012 activities regarding exempt organizations. For instance, the IRS continued its governance study in 2012 and completed its analysis of Governance Check Sheets from § 501(c)(3) organizations. Based on this analysis, the IRS released a list of best practices for governance of public charities, which includes having a written mission statement, using comparability data when making compensation decisions, having controls in place to ensure proper use of charitable assets, and requiring the full board to review the Form 990 before filing. The IRS will select a sample of 501(c)(3) and 501(c)(4) organizations in 2013 using a similar checksheet and focus on practices that lead to compliance and those related to noncompliance.
In 2013 the IRS will conduct examinations of a random sample of 200 organizations related to compensation transparency. In selecting these organizations, the IRS focused on those that reported amounts of compensation for all officers, directors, trustees, and other key employees that are inconsistent with the amount reported by other organizations with similar amounts of gross receipts.
The IRS identified about 300 cases in 2012 involving unlawful political campaign intervention by tax-exempt organizations. The agency plans to send these cases to a committee to determine whether there should be an examination. In addition, the IRS also receives referrals from outside sources alerting it to prohibited political activity and these referrals will be evaluated through a committee system going forward.
Also, this year the IRS plans to examine a sample of organizations that specifically reported substantial gross unrelated business income in the last three tax years and did not report any income tax due during those years. Last year, the IRS completed compliance checks of over 400 organizations reporting unrelated business income that did not file a Form 990-T, leading to over $260,000 in tax payments.
For more on the Exempt Organizations 2012 Annual Report and 2013 Workplan, click here. This article was based on an alert by attorneys in the Venable law office nonprofit practice: Matthew T. Journey, Margaret C. Rohlfing, George E. Constantine and Jeffrey S. Tenenbaum.