Fast-track self-certification option
Taxpayer advocate report
Tax-exempt bond examinations

Fast-track self-certification option

On June 24 2013 the Internal Revenue Service (IRS) issued a report entitled "Charting a Path Forward at the IRS: Initial Assessment and Plan of Action".(1) The report offers an initial assessment by IRS Principal Deputy Commissioner Danny Werfel of the events described in the Treasury Inspector General for Tax Administration's report(2) regarding the IRS Exempt Organisations Determinations Division's use of "inappropriate criteria" in screening and processing some applications for tax-exempt status.

The report discusses the steps that Werfel and his leadership team have taken during the past month to examine and address the alleged mismanagement of some applications, and outlines an action plan for further investigation and corrective actions. Their findings and action steps are presented in three sections:

  • accountability;
  • fixing the problems with a review of applications for tax-exempt status; and
  • a broad review of IRS operations and challenges.

The highlight of the report is the introduction of an optional self-certification process that will effectively grant some applicant organisations a fast track to a favourable Section 501(c)(4) determination letter.(3) The IRS plans to send out approximately 80 letters offering an expedited path to organisations with 501(c)(4) applications which have been pending for more than 120 days as of May 28 2013 that indicate that the organisation may be involved in political campaign intervention or issue advocacy.

An eligible organisation that elects this safe-harbour option will receive an approved determination letter granting Section 501(c)(4) status within two weeks if it certifies that:

  • it devotes 60% or more of both spending and time to activities that promote social welfare, as defined by Section 501(c)(4); and
  • its involvement with political campaign intervention constitutes 40% or less of both spending and time.

These thresholds apply to past, current and future years of operation.

Notably, in defining campaign intervention for the purposes of determining eligibility for the safe harbour, the IRS goes beyond the tax law rulings on the issue(4) to include communications that are defined, in part, based on a Federal Election Commission standard.

Taxpayer advocate report

On June 26 2013 National Taxpayer Advocate Nina E Olson released her mid-year report to Congress identifying the priority issues that the Taxpayer Advocate Service will address in the coming year.(5) It includes a special report(6) addressing the issues that are plaguing the Exempt Organisations Determinations Division. Olson's report groups the factors contributing to the use of inappropriate screening criteria and processing delays into the following categories:

  • lack of guidance and transparency;
  • absence of adequate checks and balances;
  • management and administrative failures; and
  • exempt organisations' "cultural difficulty" with the Taxpayer Advocate Service.

Olson offers 16 specific recommendations to address these issues.

Tax-exempt bond examinations

On June 21 2013 IRS Lead Tax Specialist (Tax-Exempt Bonds, Compliance and Programme Management) Christopher Woodin announced during an American Institute of Certified Public Accountants conference that by the end of 2013, the IRS Tax-Exempt Bond Division will commence examinations of 1,000 tax-exempt bonds issued by various organisations. According to Woodin, the examinations will accompany changes to the post-issuance compliance rules for tax-exempt bonds found in the Internal Revenue Manual. Although this announcement is consistent with the Tax-Exempt Bond FY 2013 Work Plan,(7) it offers new insight into the breadth and scope of the planned examinations.

For further information on this topic please contact Diara M Holmes, Marcus Owens or Sharon W Nokes at Caplin & Drysdale by telephone (+1 202 862 5000), fax (+1 202 429 3301) or email (, or


(1) Available at A summary is available at

(2) May 14 2013, available at

(3) Available at

(4) Revenue Rulings 2004-6 and 2007-41, both of which are appended to the IRS template letter to organisations.

(5) Available at

(6) Available at

(7) Available at

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