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IRS renews focus on nonprofit community.

New IRS application for exempt status. The Internal Revenue Service has released a revised application for organizations seeking 501(c)(3) tax-exempt status. The new form is intended to streamline the application process and assist the IRS in identifying potentially abusive charities. The revised Form 1023 is available online at and is the result of extensive collaboration with the tax-exempt community and recommendations received during a public comment period.


According to IRS Commissioner Mark Everson, the agency has identified the use and abuse of charities as one of its four servicewide enforcement priorities.

Exempt groups under investigation for political activities. The IRS reported recently that more than 60 charities and other tax-exempt groups are currently being investigated for possible violations of federal rules barring 501(c)(3) organizations from engaging in political activity. Organizations exempt under Section 501(c)(3) of the tax code are prohibited from participating or intervening in any political campaign on behalf of, or in opposition to, any candidate for public office.

Penalties for engaging in prohibited campaign activity include possible loss of tax-exempt status and being subject to an excise tax on the amount of money spent on the activity. The IRS also has the authority to ask a federal district court to enjoin an organization from making further political expenditures.

IRS enforces Section 527 disclosure law. The agency assessed taxes against a number of Section 527 political groups prior to the November 2 elections for noncompliance with federal disclosure laws, according to the Bureau of National Affairs.

IRS officials reportedly announced the enforcement action at a November 8 news conference, but gave no details of which or how many 527 groups were assessed for failing to disclose their finances in a timely manner. The 527 disclosure law calls for penalties of up to 35 percent of the amount an organization fails to disclose.

In August, the IRS announced its plans to contact 527 groups whose filings appear to be incomplete, were filed late, or were amended and materially different from the original filing.

Guidance on Internet, UBIT forthcoming. According to the Bureau of National Affairs, the IRS will soon issue guidance concerning the Internet and unrelated business income tax. There has been much speculation as to whether income generated from the online sale of goods and services is subject to UBIT.

For more information on these and other public policy issues, please call 202-626-2703.
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Title Annotation:HEADLINES
Publication:Association Management
Geographic Code:1USA
Date:Dec 1, 2004
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