The TEGE operating division of the IRS earlier this month released its Fiscal Year 2019 program letter, which outlines priorities for the division. Organizations that fall within one of the selected areas may want to spend some time in the next year making sure that they are in compliance.
The areas that TEGE will be focusing on include the following:
- Review of 501(c)(7) organizations, also known as tax-exempt social clubs, with a focus on investment income, non-member income and non-filers of 990-T. Section 501(c)(7) organizations are treated more strictly than other exempts when it comes to unrelated business income taxation, so this likely is intended to get more tax revenue in the door for the IRS.
- Review of 501(c)(3) organizations that previously operated as for-profit entities prior to their conversion. New organizations have to indicate on their Form 1023 application if they are a successor to a for-profit organization, and the IRS is likely concerned about issues like commerciality and whether obligations were assumed by the nonprofit.
- Self-dealing by private foundations, with a focus on loans between an organization and disqualified persons.
- Worker classification, essentially whether workers who should be classified as employees are improperly classified as independent contractors. This has been a hot-button issue for the IRS for a while now, in both exempt and non-exempt sectors.
TEGE notes in the letter that it is onboarding a significant amount of new hires, and is planning to cross-train existing employees to increase flexibility as needs change. In addition, the letter stresses that TEGE is committed to using data and analytics to drive decisions about identifying and addressing high-risk areas of non-compliance. Finally, issues related to the Tax Cuts and Jobs Act will remain a priority, including form updates and guidance/training.