Overview
IRS Memorandum on Referral Procedure for Political Activities
On July 21, the IRS released a memorandum describing the composition and operations of the altered Political Activities Referral Committees (PARCs). Each PARC will be composed of three IRS Exempt Organizations Division (EO) Examinations and Rulings & Agreements managers and will be charged with reviewing and recommending political activities referrals for audit in an impartial and unbiased manner.
Oversight Subcommittee Holds Hearing on EO Audit Selection Process
The House Ways and Means Subcommittee on Oversight held a hearing regarding the EO audit selection process and internal controls. Jay McTigue, director of strategic issues of the Government Accountability Office (GAO) testified concerning the GAO report released July 23, which found that “some of EO’s internal controls are adequate, and align with established selection standards; however, there were several areas where EO’s controls were not well designed or implemented.”
IRS Commissioner John Koskinen testified that the GAO’s report “found no evidence of organizations being selected in an unfair or biased manner.” Commissioner Koskinen also described the steps the IRS was taking to implement the recommendations in the report, including updating all Internal Revenue Manual sections pertaining to the EO function, expanding monitoring procedures, improving the documentation of the audit selection process, providing additional training to “classifiers” responsible for referrals, increasing tracking and maintenance of closed case files, and ensuring diversity among referral committee members by changing from a volunteer selection process to an assignment selection process.
Section 501(c)(4) Political Activity Regulations Won’t be Effective Before 2016 Election
According to news reports, Commissioner Koskinen stated to reporters, after the Ways and Means Oversight Subcommittee hearing, that he did not expect political activity regulations would become effective before January 2017, at the earliest. He also reportedly stated that proposed regulations may be released prior to the 2016 election but would not be finalized until after a notice and comment period. This is the typical procedure for issuing new regulations.