Tax-exempt-status Scandal, The IRS Fix

We are all aware of the IRS scandal and how they categorically scrutinized Code Sec. 501(c)(4) applications for Tea Party and other conservative groups.  After IRS Commissioner Steven Miller resigned, President Obama appointed Daniel Werfel.  The new commissioner’s first priority was to do a 30-day review of IRS and it’s involvement in the scandal.

Well, the 30-days are up and a new report, titled “Charting a Path Forward at the IRS: Initial Assessment and Plan of Action” is out.  Among many other things, the report provides ways that the IRS can take immediate steps to improve the process for approving tax-exempt applications.

For our clients, the most important of the improvements is a new process whereby certain taxpayers whose applications for 501(c)(4) tax exempt status has been identified for potentially inappropriate campaign intervention and have been backlogged for more than 120 days have the option of obtaining an approval if they self-certify that no more than 40% of their expenditures and voluntary person-hours will go toward political campaign intervention activities and that at least 60% of their expenditures and voluntary person-hours will go toward promoting social welfare.

There is no way to know for sure if the IRS’s new procedures will prevent inappropriate delays for tax-exempt-status exemptions, but at the very least they have admitted to the issues are have put a plan in place to fix them.

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