IRS Issues Report on Tax-Exempt Review Problems

A dozen tax planning triggersOn June 24th, IRS Principal Deputy Commissioner Danny Werfel issued a report outlining initial findings within the IRS’ review of problems delaying the approval of Tea Party related tax-exempt applications. The scope of the review included accountability for what went wrong, fixing the problems within the Tax Exempt Status application process, and conducting a broad review of other IRS operations. This 83 page report served as a 30 day update into their investigation stemming from mismanagement described by the Treasury Inspector General for Tax Administration (TIGTA).Comments and observations in the report worth noting:
1 All five key executive management positions in the chain of command responsible for the review and approval of tax-exempt applications have been replaced.
2 The initial IRS review shows no signs of intentional wrongdoing by IRS personnel.
3 To date, there appears to be no involvement by parties outside the IRS involved in the mismanagement or misjudgment issues.
4 There is introduction of a voluntary fast-track approval process for pending tax-exempt entity applications (section 501(c)(4)).
5 The IRS suspended the use of their “BOLO” process for tax-exempt applications. This “be-on the-lookout” process is where key terms and other items identify areas of IRS focus.

What’s happening next

The 30 day update report from the IRS stresses this is the starting point for a broad pursuit of reform at the IRS. The report discusses the need for:

Check Simplified tax code. The complexity of the code, the vast increase in code, and the lateness of law changes have challenged the operational effectiveness of the IRS.
Check Better understanding of the National Taxpayer Advocate. There is a concern that most are not aware of this taxpayer service to help solve problems.
Check Establishing an Enterprise Risk Management Program. The purpose is to try to pro-actively identify problems within the IRS and fix them on a more timely basis.
Check Increased Transparency Commitment. With new checks and balances, the service is committing to focus on better transparency of IRS operations.

More will be forthcoming as the review continues and changes are implemented within the IRS.