Tax notes.

Application for Charity Status Revised

A new form from the IRS that streamlines the process by which charitable organizations seek tax-exempt status also will help the service spot potentially abusive charities (www.irs.gov/newsroom/article/0,,id=130666,00.html). In addition requiring more information up front will mean fewer contacts between the IRS and the organizations are necessary. The revised Form 1023, Application for Exemption Under Section 501(c)(3) of the Internal Revenue Code, is available online at www.irs.gov. Printed copies of the form and instructions are available from the IRS at 800-829-3676.

IRS Changes Terms for Settlement

The Appeals Division of the IRS has reassessed and tightened the guidelines under which it will accept settlement offers from taxpayers that participated in certain abusive transactions, such as reporting losses and deductions from lease strips or from inflated-basis assets derived from them or in intermediary transactions (www.irs.gov/newsroom/article/0,,id=130347,00.html).

Under the new guidelines the IRS will not settle unless taxpayers concede (agree to the disallowance of) 100% of the claimed losses or deductions, reduced only by the amount of transaction costs up to 10% of such claimed losses or deductions. Furthermore, taxpayers also must concede 50% of the accuracy-related penalty at issue. To settle their cases, taxpayers must enter into a closing agreement with the IRS that conforms to these revised guidelines.

Reminder: Mileage Rates Set for 2005

The IRS reset the optional standard mileage rates for 2005 in computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes (www.irs.gov/newsroom/article/0,,id=131232,00.html).

As of January 1, 2005, the standard mileage rates for the use of a car (including a van, pickup or panel truck) for business purposes was set at 40.5 cents a mile; for medical or moving expenses, 15 cents a mile; and when providing services to a charity, 14 cents a mile.