The IRS recently released a report entitled "Stewards of the Public Trust: Long-Range Planning for the Future of the IRS and the Exempt Community". The Report was prepared by the Advisory Committee on Tax Exempt and Government Entities (ACT), which is an advisory body of the IRS. I was one of the people interviewed for the report in September 2015 and I am glad to see the report finally come out.
Here are the high level recommendations:
1. Ensure that EO staff are equipped to carry out the responsibilities of EO.
2. Provide leadership and guidance on major issues impacting the exempt organizations sector, both current and those anticipated in the near future.
3. Give exempt organizations the tools they need to be tax compliant: a. Detailed audit data. b. Relevant, user-focused guidance, akin to former CPE text. c. An easily navigated website.
4. Assure cyber integrity through technology tools, data collection and secured cyber storage.
5. Release and share data where appropriate for public use.
a. IRS information sharing with state charities officials.
b. Electronic filing and dissemination of IRS information.
6. Foster two-way communication between the IRS Exempt Organizations division and the nonprofit sector.
a. Find ways to solicit input from a greater number of voices (including small nonprofits) and provide open channels for stakeholders to take issues to the IRS.
b. Revise the Determination Letter to educate exempt organizations on their tax obligations and responsibilities.
c. Use current technology to communicate with exempt organizations.
d. Increase the availability of strong expert resources through IRS TE/GE phone customer service.
Together, these recommendations will help TE/GE tackle the challenges and environment of the future. In addition, our final, overarching recommendation is for the EO division of TE/GE, in serving our exempt sector, to help convene and act as a focal point for its various partners in the nonprofit community
Here is the conclusion to the report:
With this report, the ACT has tried to reflect the issues that the IRS, as regulator, must tackle today to prepare for tomorrow. Some of these are depicted as challenges, many as opportunities. Above all else, we recognized, as did those we interviewed, that EO is determined to fulfill its designated functions responsibly and effectively. Our recommendations are designed to help the IRS achieve those goals.
We know that the scope of our discussions and the nature of our recommendations do not all fall neatly within the defined responsibilities of the EO division. Indeed, that is one of the chief points we would like to stress to the nonprofit sector, Congress and the federal executive branch: the EO division does not operate in a vacuum. It is part of a community of institutional partners, federal agencies, Congress and state regulators. The EO division can also draw informally on the experience, learning and models of its counterpart regulators around the globe, as well as the knowledge and understanding of the communities it regulates. This report speaks to that broad community in addition to the EO division.
We were particularly struck by comments made during our conversations with other regulators in which it was stressed that successful outcomes depend on proactive engagement and the belief that the nonprofit community is not the opposition; rather, it has an important role to play in the development and support of the process of regulation. This concept was reinforced in the majority of our conversations with professional advisers, with nonprofit leaders and with academics and government advisers. Close engagement with these key stakeholders provides stability, experience and continuity in the volatile environment that is our current and future reality.
The recommendations represent what we (and those with whom we spoke) consider to be the necessary elements of a solid platform on which a regulatory partnership can be built: an adequately resourced regulator, armed with appropriate and available data and tools for the benefit of an educated exempt community, all based on strong, two-way dialogue and shared learning. The ACT recognizes that it is not EO’s role to provide technical, precedential guidance. To regulate the sector effectively, however, EO must provide education, awareness and appropriate and timely support. Community and philanthropic engagement through the tax-exempt sector enrich and underpin our communities and society. Freedom of association encourages that engagement, but this is not without risk. Mitigating that risk through education, awareness building and appropriate and timely support are hallmarks of a successful regulator.
We believe that, with the good will of all involved, there should be a bright future ahead for the nonprofit and social sectors of the United States. Such a future can only be achieved with the full participation of all partners undertaking to deliver on their responsibilities; it is not within the power of EO to deliver on all of our recommendations in isolation. Our final, overarching recommendation for this year’s ACT report is that the EO division, in serving our exempt communities and the public at large, must serve as a convener and as a focal point for this essential community of support.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.