It’s Fix the Tax Code Friday!
The IRS has become more aggressive during this election year about enforcing the prohibition against politicking by tax exempt organizations. To date, the IRS has made inquiries into charitable organizations who have supported or opposed candidates including Obama, Romney and Huckabee.
Is this good policy – or is the IRS too harsh? Today’s Fix the Tax Code Friday question is:
Should charitable organizations (and thus, tax exempt) be prohibited from politicking? Should some measure of involvement in political campaigns be allowed?
You can’t raise taxes in an election year. That wouldn’t be wise.
You can raise fees. So, of course, IRS did.
As of June 2006, the user fee for an organization with annual gross receipts which have exceeded or are anticipated to exceed $10,000 annually over a 4-year period will be $750. For those organizations that have not hit the $10,000 mark, the user fee is $300.
Pretty hefty increases (from $500 and $150, respectively). But at least they’re done raising fees, right? I wouldn’t be so sure. If you read the IRS statement on the fee increase, the IRS fails to note the actual fees. Additionally, the fees do not appear in the federal form 1023 instructions booklet; rather "fees" are used generically. Even more interesting, the IRS notes that "user fees are subject to change" on page 12 of the actual federal form 1023, advising organizations to "Check our website at www.irs.gov and type ‘User Fee’ in the keyword box, or call Customer Account Services at 1-877-829-5500 for current information." Hmm.
Yes, that is the actual statement that appears on the June 2006 version of federal form 1023 – not an interim form. The IRS prefers that this new form 1023 be used now but will accept the old form until December 1, 2006. Even if the old form is used, the new user fees still apply.
The IRS has announced increases in a number of user fees for tax-exempt organizations, effective July 1, 2006.
Specifically of interest, the fee for an initial application for exemption (federal form 1023) for organizations with anticipated annual gross receipts of less than $10,000 will increase from $150 to $300. The fee for organizations with anticipated annual gross receipts of more than $10,000 will increase from $500 to $750. The fee for group exemption will increase from $500 to $900.
These fee increases accompany those which already took effect in February for tax-exempt organization letter ruling fees, which increased fees of $155 to $2,570 to $275 to $8,700.
