Significant actions were taken by IRS to improve the procedure of tax – exempt applications including the political intervention, according to information released by the Treasury Inspector General for Tax Administration (TIGTA).
This particular report is just a follow-up on the May 2013 TIGTA report, which first mentioned that the IRS management which is not effective results in
1. Inappropriate use of criteria to identify and review the organization which apply for tax – exempt status, based on only the policy positions and named, instead of the required indications of intervention of political campaign.
2. Substantial delay in processing of specific application; and
3. Unnecessary requests of information issuance.
This audit was created with an objective to assess the actions of IRS in response to TIGTA’s 2013 recommendations in order to improve the identification as well as procession of applications for the tax – exempt status which also involves intervention of political campaign. Within the required timeframe, which consisted of before and during the audit, the IRS was also making additional changes to the tax – exempt application process which covered the 2013 audit report and more. The audit report focused only on the actions taken which was relevant to the recommendation in 2013.
Russell George, Treasury Inspector General for Tax Administration said earlier “The IRS has taken significant actions in response to the recommendations made in TIGTA’s 2013 report. It has eliminated the selection of potential political cases based on names and policy positions, expedited the processing of Internal Revenue Code Section 501(c) (4) social welfare organization applications, and eliminated unnecessary information requests.”
Along with this, the IRS also stopped the use of Be On the Look Out (BOLO) listings, which according to TIGTA was containing improper criteria for cases regarding political advocacy.
Additionally, TIGTA also found that the Exempt Organizations function of IRS completed the processing of 149 applications only out of the 160 applications for the tax – exempt benefit, as on December 2012, which is considered quite a lengthy period.
Moreover, the IRS has also built the questions which were preapproved, and started a quality review procedure which aims to provide better assurance and steps to ensure that only necessary request are sent to the applicants.
It was also discovered by TIGTA that IRS has also developed, as well as provided extensive training for political campaign intervention for relevant office employees in Rulings and Agreements sector, which also included all the employees of Determinations Unit. However, additional steps which should have been taken by IRS to improve the execution and timing of the training were also identified by TIGTA.
Finally, the draft guidance is being revised by Department of the Treasury to address the measurement of “primary activity” of the organizations related to social welfare. The IRS will not have a well defined test for checking if an organization’s exemption request as a social welfare organization be accepted or not, until the final guidance is passed. Thus, for the applicants, who have not chosen the expedited process (optional), the IRS will continue to use the common known subjective facts-and-circumstances process.
The IRS should take proper action for improving the execution and timing of future training as recommended by TIGTA. In addition, if the optional process of expedition for 501(c)(4) organizations become a process which is permanent, the IRS should consider (strongly) providing the option to the additional organizations with the similar political campaign limitations and intervention.
IRS management has already agreed with both these recommendations and thus plans to improve the execution and timing of the future training and also considers extending the optional process of expedition to the other types of organization.
Status of Actions Taken to Improve the Processing of Tax-Exempt Applications Involving Political Campaign Intervention
In one prior audit, TIGTA had come to the realization that ineffective management resulted in
• Inappropriate criteria being used to identify for review organizations who were applying for tax-exempt status based on names and policy positions rather than indications of political campaign intervention.
• Substantially delayed processing of certain applications.
• Unnecessary information requests being issued such as personal information and SSNs. Some recommendations from the previous audit were created to help ensure that applications for tax-exempt status would be processed in a fair, timely manner.
Why TIGTA Created the Audit
According to TIGTA, the base objective of this audit was to assess the IRS’s actions in response to TIGTA’s recommendations to improve the identification and processing of applications for tax-exempt status involving political campaign intervention.
What TIGTA Found
Significant actions were taken by IRS to eliminate the choice of potential political cases based on certain factors like expedite process of IRC, policy and names positions, applications of social welfare organization, and also to eliminate the information request which were not necessary. These, if released publicly may cause damage to the concerned parties who had a hand in making the information public.
What Did TIGTA Recommend
TIGTA had strongly advised that the IRS take immediate action to greatly improve the timing and execution of future training. Additionally, if the optional expedited self-certification process for Internal Revenue Code organizations becomes a permanent process, the Internal Revenue Service should consider possibly providing this option to additional organizations with close to similar political campaign intervention limitations to be fair.