Exempt Organizations Advisory - IRS's Tax Exempt and Government Entities Division Enters Next Phase of Compensation Initiative

On May 17, David Fish, of the IRS's Tax Exempt and Government Entities Division, spoke to a telephone forum of tax-exempt practitioners about the IRS's compensation initiative, which was begun in 2004. According to Fish, the next phase of the ongoing investigation into executive compensation practices of exempt organizations will focus on loans made to key employees, directors, officers and other insiders.

The IRS's investigation of loans to insiders will include 200 compliance check letters and 50 examinations. One of the factors that will provoke a compliance check involves Schedule A, Part III of Form 990, which includes questions about sales, exchanges, loans, or leasing of property. Failure to answer this question or answering "yes" with no explanation is a compliance check trigger, said Fish.

The IRS's full report on tax-exempt organization executive compensation, which included contacts with 1,800 exempt organizations and 600 examinations, is expected to be released in August or September.
 

IRS's Advisory Committee on Tax Exempt and Government Entities (ACT) to Hold Public Meeting

On June 7, 2006, the IRS's Advisory Committee on Tax Exempt and Government Entities (ACT) will hold a public meeting in which four project teams will present recommendations to the IRS Commissioner and senior leadership of the IRS's Tax Exempt and Government Entities Division. The projects cover:

1. Policies and guidelines for Form 990 revision;
2. Document compliance program for 403(b) arrangements;
3. Public employers' toolkit for preparing payrolls; and
4. Effect of IRS audit information on tax-exempt bond market.

Suzanne Ross McDowell of Steptoe & Johnson LLP, one of members appointed by the Secretary of the Treasury to serve on the 18-member panel, will present on the topic of Form 990 revision.

The June 7th meeting will take place at 9:00 A.M. at 1111 Constitution Avenue, NW, Washington, DC. Members of the public interested in attending the meeting should call Cynthia Phillips Grady at 202-283-9954 to confirm attendance.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.