The Internal Revenue Service does not always control or quickly process referrals alleging that tax-exempt organizations are potentially violating federal tax law, according to a new report.
The report, by the Treasury Inspector General for Tax Administration, noted that the Exempt Organizations function within the IRS’s Tax Exempt and Government Entities Division is responsible for assessing referrals from the general public, members of Congress, and federal and states agencies, as well as other parts of the IRS. These referrals allege that tax-exempt organizations are potentially violating federal tax law.
TIGTA conducted this audit to determine whether the EO function accurately accounted for referrals, acknowledged receipt to submitters, and tracked and monitored the time periods for working referrals. TIGTA found that the EO function is facing challenges in managing referrals because it cannot locate all of the referrals received, ensure that all of the referrals received are controlled, or ensure referrals are being processed on a timely basis.
TIGTA recommended that the EO function ensure that all referrals are properly controlled; guidance is developed and updated; performance goals are developed; and timeliness measures are developed and updated.
“The EO function must ensure that referrals are controlled and processed appropriately and timely,” said TIGTA Inspector General J. Russell George in a statement. “If referrals are not properly accounted for or worked timely, the EO function may not be able to identify tax-exempt organizations that are potentially in violation of Federal tax law.”
In recent years, the IRS has received an increasing number of complaints of tax-exempt organizations violating federal laws by raising funds for particular political candidates or, at religious institutions, exhorting worshippers to vote for specific nominees for public office.
In response, IRS officials agreed with TIGTA’s recommendations and plan to take appropriate corrective actions.
“Your report acknowledges the progress we have made in improving the referral process, and notes a number of areas in which we should make additional improvements,” wrote Joseph H. Grant, acting commissioner of the IRS’s Tax Exempt and Government Entities Division. “We accept your recommendations and have begun to implement them.”
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