IRS Activity

New Mileage Rates for 2008

The standard mileage rate for business mileage for 2008 will be 50.5 cents per mile.

Colleges & Universities Will Get Their Turn for Compliance Check Process

At a NACUBO seminar in October, IRS representatives indicated that a compliance check for colleges and universities would likely be coming out in January 2008.

Similar to IRS initiatives surrounding executive compensation and hospital community benefit, the IRS is interested in various issues related to the higher ed industry. The IRS will likely ask questions around executive compensation, related organizations, allocation of expenses among organizations, and UBI.

In order to ask meaningful questions, the IRS intends to work with representatives of NACUBO in drafting the questionnaire. Also, the questionnaire will likely utilize some type of electronic reporting in order to more efficiently compile the responses and report the findings in a more timely manner.

IRS Released the New Form 990 for 2008

The IRS issued a new version of Form 990.

The IRS also announced a graduated transition period for smaller organizations. These organizations will be allowed to file the Form 990-EZ instead of the Form 990. For the 2008 tax year, organizations with gross receipts over $1.0 million or total assets over $2.5 million will be required to file the Form 990. For the 2009 tax year, organizations with gross receipts over $500,000 or total assets over $1.25 million will be required to file the Form 990. The filing thresholds will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year. Also, starting with the 2010 tax year, the IRS will increase the filing threshold for organizations required to file Form 990-N (the e-postcard) from $25,000 to $50,000.

The IRS also announced a phase-in of the form’s new tax exempt bond schedules. Certain identifying information will be required for the 2008 tax year, with completion of the entire schedules required for the 2009 tax year. In response to the nonprofit sector's safety and security concerns regarding disclosure of certain foreign workers and volunteers, the IRS revised the form to permit reporting of foreign activities by region, rather than by country, until other safeguards may be implemented to protect the privacy interests of such persons.

Significant changes were made to the Core Form from the draft version. As expected, the questions regarding executive compensation were removed from the first page, as well as, the percentages of total were replaced with prior year amounts. The Program Service Accomplishments were moved to a more prominent, page 2 position and the officer and director listing was moved from pages 2 and 3 to pages 7 and 8.

The IRS expects to release instructions in early 2008.

IRS Releases Helpful Publications for 501(c)(3) Organizations

Treasury has published three helpful guides for both charities and donors. These publications have incorporated the many changes implemented in the Pension Protection Act of 2006.

Publication 1771, Charitable Contributions-Substantiation and Disclosure Requirements, outlines procedures for gift reporting and substantiation.

Publication 4221-PC, Compliance Guide for 501(c)(3) Public Charities, covers (i) Activities that may jeopardize a charity's exempt status, (ii) Federal information returns, tax returns or notices that must be filed, (iii) Record retention, (iv) Changes to be reported to the IRS, (v) Required public disclosures and (vi) Resources for public charities. http://www.irs.gov/pub/irs-pdf/p4221pc.pdf

IRS Finds Issues with 501(c)(3) Bond Compliance

The IRS recently commented on the progress of the Tax Exempt Bond Compliance projects. They audited 30 charities with tax exempt bonds and found 10 cases with noncompliance issues. Among the issues were failure to pay arbitrage rebates, excess private use greater than 5%, and record retention. About 60% of the audits were hospital and healthcare organizations and 40% were housing organizations.

Last year, the IRS initiated a Tax Exempt Bond Compliance Check project by sending out questionnaires to over 200 exempt organizations. To find out more about what the IRS is looking for, take a look at the questionnaire.

Also, you can find an article "After the Bonds are Issued: Then What?" on the IRS website. It's intended to assist treasurers, comptrollers, and chief financial officers in developing policies, procedures, and systems to ensure that the bonds remain tax-exempt.

Results of FSLG FY2007

Recently, the IRS Federal, State and Local Governments division (FSLG) released its FY 2007 results, including the results of its first market segment project addressing community college compliance. Eighty eight community college project examinations were substantially started and completed during the fiscal year. The FSLG also opened 37 large entity cases (employers with annual payroll in excess of $40 Million). The focus of these cases was worker classification, fringe benefits, and information return reporting. The FSLG conducted 845 compliance checks, including the 941, 944, 945, W-2, and 1099 series.

In the latest FSLG newsletter, "A central theme in the FY 2008 Work Plan is our focus on improving enforcement activity." They anticipate opening another 29 large entity cases. It will also start its second market segment project by looking at housing authorities.

IRS Partners with States to Share Employment Tax Exam Results

Earlier this month, the IRS announced that it has entered into agreements with 29 states to share results of employment tax examinations.  Read entire news release.

“As the first state to sign a memorandum of understanding, Michigan has already begun to forge a much closer working relationship with the IRS, which has significantly increased the sharing of tax and audit information between the IRS and our unemployment insurance program,” said Keith W. Cooley, Director, Michigan Department of Labor & Economic Growth. “The exchange of data is helping to strengthen employer compliance with our unemployment insurance tax law by reducing the ability for some to manipulate the system, which burdens honest taxpaying employers with extra costs. Our objective is an unemployment tax system that is fair for all employers.”

Ohio has also signed the partnership agreement.