The IRS issued some interesting rulings lately, denying tax-exempt status to some organizations in several private letter rulings (PLRs). PLRs are not considered to be precedents that can be used in other cases because they are often very fact based. Nevertheless, they can provide some insight into the IRS organizational thinking and provide guidelines for future action. This outstanding article by Cory Halliburton of Freeman Law provides analyses of these PLRs.
At the same time, one has to wonder about how NFP organizations will fare in the future as the IRS plans to add 80,000 new employees. The Treasury Department has estimated the tax gap (tax revenue lost due to noncompliance) is $600 billion per year. One can see how additional IRS resources could have a meaningful impact on closing the federal budget deficit. At the same time, it is only prudent for NFP organizations to review their operations and documentation to ensure they are in fact an NFP organization for tax purposes. Larger donors receive tax deductions for charitable contributions. Losing those tax deductions by losing NFP status would be catastrophic for NFPs.
Mark Koscinski CPA D.Litt. 