EO Update: e-News for Charities & Nonprofits - September 2021

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Updated Procedures Related to Direct Contact in the Determination Process

On August 17, 2021, Exempt Organizations Rulings & Agreements (EO R&A) office issued Interim Guidance (IG) memorandum (TEGE-07-0821-0016) on Updated Procedures Relating to Direct Contact (PDF) in the Determination Process. If an organization submits a valid Form 2848, Power of Attorney and Declaration of Representative, with its application for recognition of tax-exempt status or during case processing, we will contact an authorized representative listed on the Form 2848 to discuss issues or items in the application. We will contact the primary contact person listed on the application if no valid Form 2848 was submitted or if we are unable to contact the authorized representative. See the IG for additional details. The procedural changes are being made to further ensure taxpayers’ effective participation in the EO R&A determinations process, to promote consistency in determinations procedures across TE/GE, and to clarify our processes when the taxpayer authorizes a representative to assist.

Exempt Organizations Technical Guides

Technical Guides (TGs) are comprehensive, issue-specific documents that:

  • Provide in-depth technical explanations
  • Recommend specific issue identification and examination techniques
  • Explain specialized business practices and terms
  • Explore issues common to certain exempt organizations

Exempt Organizations and Government Entities has been working to combine and update the Audit Technique Guides available on irs.gov with other technical content to create the TGs, which are comprehensive, issue-specific documents. The TGs will replace the corresponding ATGs as they are completed.  You can find the first two TGs: TG 3-20 Introduction to Private Foundations and Special Rules under IRC 508 (PDF) and TG 63 Disqualified Persons as Defined in IRC 4946 (PDF), on the IRS.gov “Charities and Nonprofits” “Education Resources and Guidance“ page.

Payroll Reconciliation Webinar

You are invited to register for a free webinar on Payroll Reconciliation hosted by the Office of Federal, State and Local Government on October 14, 2021 at 2:00 PM (ET). This webinar will cover when your payroll should be reconciled and what payroll amounts to use. It will also explain reconciling gross payroll to taxable income for federal income tax and FICA.

How to Maintain Your Organization’s Tax-Exempt Status 

Leadership and volunteers of charitable organizations should be familiar with their responsibilities and the various actions that can jeopardize their organization’s tax-exempt status. The Maintaining 501(c)(3) Tax-Exempt Status course discusses what charitable volunteers and employees must do to maintain this valuable exemption and which actions can result in revocation of exempt status. The Small to Mid-Size 501(c)(3)Organization Workshop provides additional information on the benefits, limitations and expectations of tax-exempt organizations.

Revenue Procedure 2021-40

Revenue Procedure 2021-40 (PDF), released September 3, 2021, amplifies Rev. Proc. 2021-3, 2021-1 IRB 140, which sets forth areas of the Internal Revenue Code (Code) relating to issues on which the Internal Revenue Service (Service) will not issue letter rulings or determination letters. The revenue procedure announces that the Service will not issue letter rulings on whether certain transactions are self-dealing within the meaning of section 4941(d) of the Code. Specifically, the Service will not issue rulings on whether an act of self-dealing occurs when a private foundation (or other entity subject to section 4941) owns or receives an interest in a limited liability company or other entity that owns a promissory note issued by a disqualified person.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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