The IRS has published a formal report outlining the changes it will make to how it reviews applications for tax-exempt status and hold itself accountable for spending. The goal of these changes is to establish IRS accountability and address recent issues that surfaced where tax-exempt applications from conservative organizations were intentionally delayed for years and IRS spending on training conferences was virtually unchecked.
The report, titled Charting a Path Forward at the IRS: Initial Assessment and Plan of Action, comes from Principal Deputy Commissioner Danny Werfel.
“It is critical that the IRS takes steps to ensure accountability, address the problems uncovered in recent weeks and improve the operations of the IRS to continue to carry out our critical mission on behalf of the public,” Werfel said. “We have made a number of changes already, more are in the works, and even more will develop as we move forward.”
“The IRS is committed to correcting its mistakes, holding people accountable, and establishing control elements that will help us mitigate the risks we face,” Werfel continued. “This report is a critical first step in the process of restoring trust in this critical institution. We have more work in front of us, but we believe we are on the right track to move forward.”
However, Werfel also noted that the initial review into the delay of tax-exempt applications did not indicate any wrongdoing by IRS personnel. This stance has been questioned by members of Congress as well as conservative organizations who have filed various lawsuits against the IRS for damages caused by the delays.
The report contained three major sections. The first section concerns accountability of management in making decisions that affect how taxpayers are treated. The section notes the IRS has installed new leaders in five roles in the chain of command that failed to stop the previous actions. The IRS has also created a board to identify additional changes needed in the next 60 days as well as in the future.
The second section concerns the consistent and fair treatment of all organizations applying for tax-exempt status. The IRS has created a fast-track process for an organization to self-certify themselves as tax-exempt if the application process has not been completed within 120 days.
The IRS has also increased the number of staff persons dedicated to reviewing applications for tax-exempt status and removed the use of watch lists that could lead to the unfair targeting of certain types of organizations or individual applying for tax-exempt status.
The third section concerns establishing a consistent process across the IRS for selecting applicants for additional review and assessing areas of risk within the IRS. The IRS has established an Enterprise Risk Management Program to identify areas where abuse or violation of defined processes may occur and escalate those to leadership to address. In addition, the IRS is reviewing the selection criteria for additional review of applicants across all areas of the organizations to ensure those criteria are defined and implemented in a consistent manner.
The report also noted the IRS will continue to post updates on the work it is performing in these and other areas.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.