IRS’s Priority Guidance Plan for Exempt Organizations

By Christopher Granucci and Laura J. Kenney

Treasury and the IRS recently released their 2021-2022 Priority Guidance Plan (PGP) – their plan to work on providing guidance related to the issues that are most important to taxpayers, tax advisors and industry groups.  The plan has 193 priority guidance projects, and includes sections for corporations, partnerships, S corporations, gifts, estates and trusts, international, employee benefits and executive compensation. Many are multi-year projects and have been on the plan for many years. The PGP is always fluid – and new legislation and other matters that come up during the year may be added to it. Treasury usually issues periodic updates during the year, which are great for following guidance issued during the year.

Allocation of expenses for unrelated business income purposes is back on the IRS priority guidance list for Exempt Organizations, as is guidance on the interplay of the CARES Act net operating loss rules with the Unrelated Business Income (UBI) silo rules.  Many exempt organizations are also interested in an item on the Executive Compensation section for final regulations under §457(f), nonqualified deferred compensation arrangements. Proposed regulations related to this were issued 5 years ago.

The 8 items on the 2021-2022 list for Exempt Organizations include:

1. Group exemption letters
2. LLCs qualifying for §501(c)(3) status
3. Supporting organization final regs
4. Allocation of expenses for unrelated business income and how the CARES Act affects net operating losses for purposes of §512(a)(6) UBI silo rules
5. Private foundation guidance for an investment in a partnership in which disqualified persons are also partners
6. Donor advised fund excise taxes
7. Public inspection guidance on IRS’s authority to share information with appropriate states officers under §6104(c)
8. Church IRS tax inquiries and exams and designating an appropriate high-level Treasury official under §7611

Last year, 3 exempt organization projects on the PGP related to the Tax Cuts and Jobs Act (TCJA) were completed:

1. Unrelated business taxable income for separate trades or businesses under §512(a)(6) – final regs effective 12/2/2020
2. Excise tax on excess executive compensation under §4960 – final regs effective 1/15/21
3. Excise tax on net investment income of certain private colleges and universities under 4968 – final regs effective 10/14/2020

In addition, the 2020-2021 Exempt Organizations list included guidance related to Hospitals and delaying their community health needs assessment requirements because of the COVID-19 pandemic.  That hospital guidance was issued August 2020, and so this was taken off this year’s list.

There is no doubt that with new tax legislation expected this year, there will be new items added to the PGP, so organizations should stay tuned for further updates.