Month: February 2017

At times, the IRS can move extremely slowly. That is an unfortunate fact of life for organiza­tions that are either waiting for a determination or under examination. The Service's "deliberate" pace can result in many headaches. For instance, an or­ganization awaiting a determination regarding its tax-exempt status may not be eligible to obtain certain funding or even engage in specific activi­ties. For organizations that are subject to a pro­longed examination, the consequences can be far more severe.

While the focus below is on organizations that receive a notice of deficiency after their tax-ex­empt status is retroactively revoked, the principles discussed apply to all entities that receive a notice of deficiency several years after the close of a tax period, including notices of deficiency that rede­termine the amount of unrelated business income tax owed. 

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Mitigating the Income Tax Expense of a Retroactive Revocation for EOS

For many tax-exempt organizations and the prac­titioners who represent them, the prospect ofliti­gating a tax issue against the IRS is poss.ibly the scariest thing in the world. Tax litigation is there­fore often viewed as a tactic to be used only when all hope is lost Basically, most organizations and many tax lldvisors will not seriously consider the prospect of engaging in litigation over an organi­zation's tax-exemptstatus until the IRS has already revoked the organization's exempt status and dis­solution has become inevitable. This is the worst time to engage in tax litigation. 

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Enjoining the IRS – Using Litigation to Stop a Revocation

IRS examinations of tax-exempt organizations can be, and often are, long, arduous processes that can span several years. This is especially true of exami­nations that result in proposed adverse determina­tions. During IRS examinations it is important that tax-exempt organizations have the benefit of all available tools and strategies that can be used to exert a greater level of control over the duration of the examination and the administrative appeals process. In some cases the Service's own adminis­trative delays can be used to the advantage of organ­izations facing potential adverse determinations. 

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Using Section 7428 to Resolve Exempt Status Controversies