Tax Administration:

IRS Can Improve Its Process for Recognizing Tax-Exempt Organizations

GGD-90-55: Published: Jun 8, 1990. Publicly Released: Jun 8, 1990.

Additional Materials:

Contact:

Jennie S. Stathis
(202) 512-5407
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO assessed several administrative steps the Internal Revenue Service (IRS) could take to better use its resources and improve its efficiency in recognizing tax-exempt status.

GAO found that: (1) IRS initiated the expedited determination process to make the tax-exempt determination process more efficient; (2) IRS may not be realizing the maximum benefit from the process, since districts varied in their process usage, and IRS had not evaluated districts' process usage; (3) during fiscal year 1989, all district offices used the expedited process to some extent, ranging from 17 percent of determination requests in one district to 2 percent in another; (4) IRS did not provide guidance to districts using the process; (5) IRS did not effectively use its determination resources when doing advance ruling followups and could not assess the effectiveness of the followups, since it did not review expenditure data; and (6) IRS procedures to close cases due to a lack of information created inefficiencies because districts had to reopen cases after applicant organizations subsequently provided IRS the requested information.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: IRS issued program guidelines in IRM 7662.8, published September 17, 1990.

    Recommendation: Given the lack of clear guidance and the inconsistency in application across the districts, IRS may not be benefitting as much as it could from the expedited determination process. Accordingly, the Commissioner of Internal Revenue should direct the Assistant Commissioner, Employee Plans and Exempt Organizations (EP/EO), to evaluate the current use of the expedited determination process, as a basis for developing a national program that will include clear guidance on when the process is to be used.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  2. Status: Closed - Implemented

    Comments: IRS has incorporated a continuing evaluation of the expedited determination process into all its general and special purpose case evaluation visits.

    Recommendation: Given the lack of clear guidance and the inconsistency in application across the districts, IRS may not be benefitting as much as it could from the expedited determination process. Accordingly, the Commissioner of Internal Revenue should direct the Assistant Commissioner, EP/EO, to assess the possibility of redirecting resources between determinations and examinations as increased use of the expedited determination process results in more efficient use of determination resources.

    Agency Affected: Department of the Treasury: Internal Revenue Service

  3. Status: Closed - Implemented

    Comments: IRS sent out 100 questionnaires in 2 districts, conducted examinations, and analyzed the results. IRS concluded that costs outweighed benefits.

    Recommendation: IRS presently considers only revenue data in following up on its advance rulings for tax-exempt status. To better ensure compliance with tax-exempt status requirements, the Commissioner of Internal Revenue should direct the Assistant Commissioner EP/EO to obtain and analyze both expenditure and revenue data during the advance ruling follow-up process.

    Agency Affected: Department of the Treasury: Internal Revenue Service

 

Explore the full database of GAO's Open Recommendations »

Sep 13, 2016

Sep 6, 2016

Jul 29, 2016

Jul 7, 2016

Jun 27, 2016

Jun 23, 2016

Apr 19, 2016

Apr 13, 2016

Apr 7, 2016

Mar 28, 2016

Looking for more? Browse all our products here