Over the weekend, Time.com posted an article with the headline “IRS to Rubber-Stamp Tax-Exempt Status for Most Charities After Scandal.” The story reported that the IRS had decided to stop screening 80 percent of exempt organization charitable applications each year and included an interview with IRS Commissioner John Koskinen explaining the IRS’s decision to use the new Form 1023-EZ. The article also said that the IRS’s decision risked fraud and the misuse of charities for political purposes.
Time is a little late to the story, but it has highlighted the concerns that have been expressed since the draft Form 1023-EZ was released for comment in April. Exempt organizations started using Form 1023-EZ on July 1. Koskinen’s comments to Time about the form increasing efficiency and the low risk of additional fraud are virtually identical to his statements in a release issued by the IRS when the form went into effect. At the time, practitioners and others expressed concerns the new form wasn’t asking for enough information. In this week’s Tax Notes, Brad Bedingfield argues that Form 1023-EZ represents a step toward self-certification and that the IRS will need to significantly strengthen its Review of Operations Unit if it wants to stop applicants from acting under false pretenses.
The IRS has moved very quickly to finalize Form 1023-EZ. The new draft form was released in mid-April, and comments were accepted only until April 30. At the time, many expressed reservations about the IRS’s decision to simplify EO determinations, and some thought the entire process seemed to be rushed and lacking consideration. The IRS had considered allowing more groups to use the form in 2012, but decided against it. With its exempt organization unit under siege and the entire agency starved of resources, the attempt at streamlining application approvals shouldn’t be too surprising, but the lack of deliberation is disturbing.
While Time is likely to reinvigorate some of the debate over exempt application determination, it might have been better if the general press had gotten on top of this issue a little earlier. There was almost no general press coverage of the April draft, and only a little more attention was called to the July 1 implementation date.
The mainstream press is frequently late to pick up on key tax stories. Whether it’s the low effective rate paid by U.S. multinationals, persistent abuse of offshore accounts by wealthy taxpayers, or the vague state of exempt organization law, the media frequently arrives loud and late -- typically after it’s too late to truly change things. If publications like Time paid a bit more attention to tax administration instead of sound-bite tax politics, then maybe Congress, the IRS, and the White House might give a little more attention to it too, avoiding the seeming deluge of scandals and faulty enforcement and administration that have plagued the U.S. tax system over the last few years.