IRS, ASAE Gathering Data on Group Rulings
A survey seeks input on how changes to group tax exemptions would affect associations and other nonprofits.
At the request of the IRS, ASAE is surveying associations that obtain their tax-exempt status through a group ruling and are part of a group return.
Since last year, the IRS has been considering changes to the group exemption process for tax-exempt organizations with affiliates or chapters, including possibly eliminating group returns and requiring all chapters or affiliated organizations to file their own information return.
Under the group exemption procedures that have been in place for more than 70 years, a parent organization can submit a group exemption request to the IRS and include a list of affiliates or chapters under the parent’s general control or supervision. Parent organizations holding a group exemption letter can file a group Form 990 return on behalf of those subordinate organizations that elect to be included in the group return.
The IRS Advisory Committee on Tax Exempt and Government Entities recommended in a report last year that the group exemption process be retained, but it added that changes in the law and regulatory environment point to a need for greater transparency, accountability, and responsibility in the tax-exempt sector.
The advisory group said group returns should be eliminated because they don’t provide the IRS, the states, or the public with adequate transparency about the activities of subordinate organizations covered by a group exemption, or serve as a mechanism to promote adequate accountability by the subordinate organizations individually.
Earlier this week, the IRS also began issuing questionnaires to more than 2,000 randomly selected tax-exempt organizations with chapters or affiliated groups. The agency developed the questionnaire because a significant number of subordinate organizations have recently had their tax-exempt status automatically revoked for failing to file a Form 990 for three consecutive years.
The IRS is asking parent organizations to supply information about how they provide oversight to their chapters or affiliates.