The Internal Revenue Service is reducing the number of people who serve on its Advisory Committee on Tax Exempt and Government Entities and changing the committee’s focus.
The committee, known as ACT for short, currently has 21 members, but the IRS said Tuesday it will not be filling six upcoming vacancies, decreasing the number of members to 15 beginning in June 2016.
The IRS said it would also shift some of the committee’s legal work to the Office of Chief Counsel. A shift in priorities of the IRS’s Tax Exempt and Government Entities Division is another reason for the changes to the committee.
The Advisory Committee on Tax Exempt and Government Entities, or ACT, provides an organized public forum for members of the tax-exempt and government entities communities to discuss important tax issues of the day with IRS officials. ACT members provide observations about current or proposed IRS policies, programs and procedures, and suggest improvements through a yearly final report.
Going forward, the ACT’s focus will be on tax administration issues in general encountered TE/GE-wide. ACT's prior focus was more compartmentalized with five subcommittees representing each of the five TE/GE functions (Employee Plans, Exempt Organizations, Federal, State and Local Governments, Indian Tribal Governments, and Tax Exempt Bonds).
ACT's previous charter provided two-year terms for members, with an option to extend it by one additional year. ACT’s current charter, which took effect as of May 2015, provides for a flat three-year term. All current members came in under the previous charter.
"We’d like to thank current and past ACT members for their tireless work and contributions to tax administration,” said TE/GE Commissioner Sunita Lough in a statement. “The key communities have benefitted greatly from the efforts of ACT members.”
The TE/GE Priorities for Fiscal Year 2016 was released on Oct. 1, 2015. TE/GE’s five key priorities going forward are continuous improvement, knowledge management, risk management, data-driven decision-making and employee engagement.
“It is a good time to review and revise ACT’s focus and better align it with what’s going on within the changing environment of TE/GE,” Lough said. “We will continue to consider more refinements of the ACT structure in coming months and potentially make more changes in 2017. We also remain committed to getting feedback and input from our stakeholders, both operationally within TE/GE and through the ACT.”
The IRS’s Tax-Exempt unit is still recovering from the 2013 scandal that led to the ouster of former Exempt Organizations director Lois Lerner and other top IRS officials. The Treasury Inspector General for Tax Administrations found they used inappropriate terms such as “Tea Party” and “Patriot” to screen applications for tax-exempt status from political groups applying under Section 501(c)4 of the Tax Code, which applies to social welfare organizations. In response to the scandal, the IRS announced expedited procedures allowing groups to receive determination letters within two weeks if they certify they devote 60 percent or more of both their spending and time on activities that promote social welfare as defined by Section 501(c)(4). At the same time, they must certify that political campaign intervention involves less than 40 percent of both their spending and time.
Separately on Tuesday, the IRS issued Notice 2016-09, extending the date by which social welfare organizations must notify the IRS of their intent to operate under Section 501(c)(4), as required by a new Section 506, which was added to the Tax Code by the Protecting Americans from Tax Hikes Act of 2015, the tax extenders legislation that Congress passed last month.
With respect to the separate process by which an organization may, at its option, request a determination that it qualifies for Section 501(c)(4) tax-exempt status, the Notice states that organizations seeking IRS recognition of Section 501(c)(4) status should continue using Form 1024, “Application for Recognition of Exemption Under Section 501(a),” until further guidance is issued and clarifies that the filing of Form 1024 will not relieve an organization of the requirement to submit the Section 506 notification.
Section 405(a) of the PATH Act added the new Section 506, requiring an organization to notify the IRS of its intent to operate as an organization described in Section 501(c)(4), and amended Sections 6033(f) and 6652(c), relating to required annual information returns by tax-exempt organizations and penalties for failures to file those returns. Section 506 requires a 501(c)4 organization described in section 501(c)(4), no later than 60 days after the organization is established, to notify the Treasury that it is operating as a 501(c)(4) organization. For certain existing organizations, the notification is due no later than June 15, 2016, 180 days after the date of enactment of the PATH Act.
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