The IRS has released new Technical Guides (TGs) to assist exempt organizations in understanding their compliance obligations and preparing for potential audits. These guides consolidate and update previous resources, providing clearer instructions on how IRS examining agents interpret specific issues. Here’s a breakdown of what TG 3-8, TG 3-27, and TG 70 cover, and how they impact nonprofit organizations.
What Are Exempt Organization Technical Guides?
Exempt Organization Technical Guides are an invaluable resource for IRS agents, tax-exempt organizations, and professional advisors. They provide detailed, up-to-date information on examination procedures, legal interpretations, and compliance expectations for exempt organizations.
These guides serve as research aids and training tools, but importantly, they don’t modify any primary authority such as Revenue Rulings or IRS Procedures. Instead, they aim to consolidate IRS resources like Technical Resource Guides (TRG) and Audit Technique Guides (ATGs), offering practical insights for organizations under audit.
The Purpose of Technical Guides
The primary purpose of these guides is to provide IRS examining agents with instructions on compliance issues, including:
- Historical background on applicable IRC sections, Treasury Regulations, and relevant court cases.
- Risk areas and examination techniques for effective audits.
- Templates and checklists for documenting findings, audit steps, and the authority relied upon.
These guides are also publicly available, giving exempt organizations insight into how the IRS is likely to interpret specific issues during an audit.
What’s New for Tax-Exempt Organizations?
The IRS has recently published three new TGs—TG 3-8, TG 3-27, and TG 70—which offer guidance on crucial issues for nonprofits. Here’s a closer look:
1. TG 3-8: Disqualifying and Non-Exempt Activities, Inurement, and Private Benefit
This guide provides clarity on inurement (using tax-exempt organizations’ earnings for the benefit of insiders) and private benefit (providing benefits to private individuals or entities). It outlines the consequences of noncompliance, such as revocation of tax-exempt status, and details how IRS examiners assess these issues.
2. TG 3-27: Public Charity Classification—Other Public Charities
TG 3-27 covers less common classifications of public charities, such as organizations benefiting state or municipal colleges, agricultural research entities, and public safety testing organizations. This guide provides important insights into the classification process for nonprofits seeking public charity status under IRC Sec. 509(a)(1) and 170(b)(1)(A).
3. TG 70: Charitable Trusts
This guide focuses on charitable trusts, including non-exempt charitable trusts (NECTs) and split-interest trusts. It discusses compliance requirements, fiduciary duties, and potential risks in maintaining a trust’s tax-exempt status. It also highlights public charity classification options for trusts that are considering a Section 509(a)(3) classification.
The release of these new IRS Technical Guides brings much-needed clarity to nonprofit compliance. Whether you’re managing a charitable trust, navigating the complexities of inurement and private benefit, or working with less common public charity classifications, these guides are essential resources for staying compliant. By understanding the guidance in TG 3-8, TG 3-27, and TG 70, tax-exempt organizations can ensure they meet IRS expectations and avoid costly audit pitfalls.
