The IRS issued a new exempt organizations governance check sheet for agents to use in capturing data about common practices and internal controls of nonprofit organizations being examined. The data will be included in a long-term study to gain a better understanding of the intersection between governance practices and tax compliance, the IRS said.
Consistent with the new Form 990, many of the questions on the check sheet are routine, such as whether the organization has a written mission statement articulating its purpose, and how many board members have voting rights. In addition, the IRS is also asking agents to look at compensation arrangements for all officers, directors, trustees and key employees and whether those salaries are approved by an authorized body with no conflict of interest. The guide sheet also has agents checking to see what comparability data is used in setting compensation, and whether those comparables are from other nonprofit organizations or for-profit companies.
ASAE is concerned that more regulations and scrutiny in the areas of compensation and governance may be forthcoming. Recently, the IRS updated its priority guidance plan for 2009-2010, which gives tax-exempt organizations some indication of where the IRS intends to focus its efforts over the coming year. Among the items on the list are final regulations on the new requirements for Type III supporting organizations (proposed regulations were published in September 2009); additional guidance for deferred compensation plans of tax-exempt organizations; regulations addressing the application of the look-back interest rules to certain pass-through entities with tax-exempt owners; and regulations regarding interest on tax overpayments by tax-exempt organizations.
The IRS has also announced it plans to conduct a three-year research study on employment tax compliance beginning in February. The study will allow the IRS to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements. Tax-exempt organizations will be part of the study, the IRS confirmed.
Records pertaining to employment tax returns and issues will be subject to review during these examinations, and employers should have all of their records available to expedite these examinations.