Legislation Needed To Improve Administration of Tax Exemption Provisions for Electric Cooperatives
GGD-83-7
Published: Jan 05, 1983. Publicly Released: Jan 05, 1983.
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Highlights
GAO reviewed the changes that have occurred in some tax-exempt electric cooperatives since they were first granted tax-exempt status and the difficulty that the Internal Revenue Service (IRS) has had in attempting to apply the broad tax exemption provisions of the Internal Revenue Code to cooperatives.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should establish a tax treatment which better addresses electric cooperatives' present operating environment. |
Closed – Not Implemented
|
Congress had not yet addressed this issue and no action was pending as of October 31, 1987; therefore, this recommendation should be dropped. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Internal Revenue Service | The Commissioner of Internal Revenue should provide more complete guidance to assist electric cooperatives and other section 501(c)(12) organizations in complying with the 85-percent member income requirement of the law and to assist IRS examiners in determining compliance with this requirement. At a minimum, such guidance should address those issues that affect the computation of member and nonmember income. |
Closed – Implemented
The recommendation was contingent on the issuance of IRS regulations. IRS proposed these regulations through the Department of the Treasury, which solicited public comments. IRS adopted a position that any intended change in this computation of member and nonmember income was inappropriate. Since the GAO proposal was based on a change in this position, it will not be adopted by IRS.
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| Internal Revenue Service | The Commissioner of Internal Revenue should direct the Tax Forms Coordinating Committee to examine the need for revisions to the exempt organization return (Form 990), and the need to include a supplementary schedule to provide the format necessary for section 501(c)(12) organizations to properly account for their member and nonmember income and compute the percentage of gross income collected from members. |
Closed – Implemented
This recommendation was contingent on the issuance of IRS regulations. IRS proposed the regulations through Treasury, which solicited public comments. IRS will not issue regulations, as initially intended. Since this recommendation was based on the issuance of the regulations, the issue is moot. IRS revised its 990 Instructions and contends that both the form and instruction are adequate.
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Electric utilitiesNonprofit organizationsTax administrationTax exempt organizationsTax exempt statusTax lawInterest ratesFederal assistance programsTaxesIncome taxes