IRS Operations

Nonprofit Operations

The Issue

Independent Sector supports increased funding for the Internal Revenue Service (IRS) in order for it to fully and properly fulfill its oversight duty of the charitable sector.

The IRS oversees eligibility for tax-exempt status and compliance with laws governing tax exempt organizations through its Office of Exempt Organizations. To be tax-exempt under Section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes. To secure and maintain this exempt status, organizations must complete numerous initial application forms and meet ongoing reporting requirements.

While the IRS develops and pursues its own priorities, the agency’s actions are also affected by Congressional actions in the form of decisions related to funding levels and direct inquiries from tax-writing committee members.  From 2000-2013, the number of 501(c)(3) charitable organizations increased by more than 28 percent while the number of full-time equivalent staff in the IRS Exempt Organizations Division (EO) increased by less than 6 percent.  The agency is struggling to keep pace with an exponentially growing and rapidly changing nonprofit sector.

STATUS

Last Updated: 5/1/2019