HERE ARE THE IRS PRIORITIES FOR 2017 FOR NONPROFIT ORGANIZATIONS
The IRS has released its priorities for 2017 examinations. Here is a summary of important issues it will be looking at:
- Exemption issues: these include non-exempt purposes and private inurement.
Private inurement is similar to excess benefit transactions. Private inurement is providing excess compensation (broadly defined to include more than salary) to insiders. Private benefit is where an organization provides a significant benefit to one or more individuals or organizations that goes beyond insiders. Insiders would include founders, officers and directors. Private inurement or excess benefit transactions can result in excise taxes.
- Protection of assets: Issues include self-dealing, excess benefit transactions and loans to disqualified persons.
- Tax Gap: IRS will review employment taxes and unrelated business income tax
The employment tax category includes unreported compensation (which includes more than salary), tips, accountable plans (expense reimbursement plans), worker reclassification (employee v independent contractor), and lack of compliance with FICA, FUTA, and backup withholding.
Unrelated business income is income generated from sources unrelated to your exempt purpose under the tax code. The IRS will look at gaming, nonmember income (especially important for 501(c)(7) organizations), expense allocation issues, net operating loss adjustments, rental activity, advertising (as compared to sponsorship payments) debt financed property rentals and investment income.
- International: IRS wants to check on oversight on funds spent outside the US, exempt organizations operating as foreign conduits, and Report on Foreign Bank and Financial Accounts (FBAR).
- Emerging Issues: IRS wants to review non-exempt charitable trusts and compliance with Internal Revenue Code section 501(r), regarding certain requirements for tax-exempt hospitals.
For hospitals, the IRS will check on the existence of a Community Health Needs Assessment under section 501(r)(3), Financial Assistance and/or Emergency Medical Care Policies under Section 501(r)(4), and Billing and Collection requirements under Section 501(r)(6).
The IRS will flag many of these issues from your organization’s form 990. We recommend that you have independent set of eyes review your form 990. We will cover many of these areas in more detail in future articles.
If you have any questions about these or other areas, please call us for assistance.