News and analysis
June 24, 2013

IRS Offers Fast-Track for Advocacy Groups Awaiting Tax Exemptions

Idit Knaan for The Chronicle

Organizations that have applied to the IRS for status as social-welfare groups but have faced inordinate delays because of the political scrutiny that engulfed the tax agency in controversy now have recourse: They can win tax-exempt status within two weeks if they pledge not to devote more than 40 percent of their time and money to partisan activities.

The IRS announced the streamlined process on Monday as part of its 83-page report, shown below, on how the agency is overhauling its process for reviewing applications for tax-exempt status. By setting the 40-percent marker, the organization for the first time was explicit about how much advocacy is acceptable for a group that has 501(c)(4) status.

Nonprofits for years have been complaining that the IRS has been fuzzy in setting out the rules, telling groups only that politicking couldn’t be the primary activity of the organization. The IRS acknowledged that gap in the report. The report, released by Daniel Werfel, the acting IRS commissioner, says that groups that have been awaiting a determination by the IRS for more than 120 days will receive approval for tax exemption under Section 501(c)(4) within two weeks “if they can certify they devote 60 percent or more of both their spending and time on activities that promote social welfare as defined by Section 501(c)(4). At the same time, they must certify that political-campaign intervention involves 40 percent or less of their spending and time,” the report states.

The report also said the IRS would stop using a special list to flag a surge of applications from similar organizations, as it acknowledges it did with Tea Party groups.

Five People Lose Titles

The IRS is still deciding exactly whom to hold accountable for the scandal, the report said, but it noted that five IRS executives whose offices were involved in giving extra scrutiny to conservative groups have been stripped of their titles, including Lois Lerner, former director of the agency’s exempt-organizations division. The IRS is still determining further personnel actions and said it could not comment on the exact types of discipline taken against the five executives because of personnel rules.

“Significant management and judgment failures occurred that contributed to the inappropriate treatment of certain taxpayers applying for tax-exempt status,” states the report

The report found no evidence of “intentional wrongdoing.” It did not find that anyone outside the IRS was involved in the targeting or that similar activities were taking place in other areas of the agency.


Send an e-mail to Doug Donovan.