The Internal Revenue Service (IRS) is preparing an industry-wide review of tax-exempt organizations that are engaged in mortgage foreclosure assistance, including housing counseling agencies (the “compliance project”). In fact, the IRS has already begun scrutinizing closely any such organizations that have applied for exempt status recognition in recent months. In February 2013 alone, the IRS published three Private Letter Rulings (PLRs) denying tax-exempt status to organizations that purported to provide housing counseling and foreclosure assistance. The issues raised by the IRS in these rulings can be used by housing counseling agencies as a guide to potential areas that the IRS will focus on during its compliance project. Additionally, the legal analysis used by the IRS in these rulings provides some indication as to how it will likely view certain activities during its enforcement program.
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