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This post was originally published on Forbes April 30th, 2015

If you are weary of the interminable, never ending IRS scandal – now on Day 721 by the TaxProf count -, you may see a glimmer of hope in the report released today by the Treasury Inspector General for Tax Administration. The report is titled Status of Actions Taken to Improve the Processing of Tax-Exempt Applications Involving Political Campaign Activities (downloads as a pdf).

The report notes that the original problems that TIGTA had identified were inappropriate criteria being used to identify organizations for review (e.g. “Tea Party” in the name), substantial delays in processing some applications and unnecessary information requests.  TIGTA found that IRS had taken significant actions in all three areas.
Inappropriate Criteria
 
The infamous “Be On The Look Out” listings (BOLO) are no longer a feature of the selection process. TIGTA determined this by interviews with a random sample of 85 employees. An Emerging Issues Committee has been established and according to TIGTA seems to be working well.

We reviewed the Emerging Issues Committee charter and related procedures and confirmed that EO function senior managers on the committee determine if emerging issues require further development. This elevates the review process above the front-line manager level in the Determinations Unit. In addition, we reviewed committee meeting minutes and resulting referrals. All of the documentation we reviewed indicates that decisions on referrals containing emerging issues are being made based upon activities and not names or policy positions. Since decisions are made by a committee and not a single front-line manager, as we found in our previous audit, the approvals provide increased assurance that emerging issues are being considered impartially.

TIGTA also approved of the training that has been put in place to assure that IRS staff are looking at activities rather than names or position and how to distinguish between campaign intervention and general advocacy.  TIGTA is concerned that the training may not be delivered in a timely manner.  There were also concerns about employees missing parts of the training and the quality of the training evaluation.
Delays
 
Processing has been completed for 149 of the 160 applications that were identified as open for lengthy periods as of December 2012. The remaining cases are either proposed adverse determinations, in Appeals or the subject of ongoing litigation. There is also now an expedited optional self-certification process for 501(c)(4) (social welfare) organizations.

For I.R.C. § 501(c)(4) applications, the IRS designed an optional expedited process in which Determinations Unit specialists send a letter to organizations whose applications include indications of political campaign intervention. Organizations can choose to make representations to the IRS under penalties of perjury regarding their past, current, and future activities and receive a determination letter based on those representations.

Essentially the organization has to promise to keep its political activity below 40% rather than pushing the envelope all the way to 50%.
TIGTA recommended that the expedited process option be extended to 501(c)(5) and 501(c)(6) (labor unions and trade associations) that have political restrictions similar to 501(c)(4).

Inappropriate Requests For Information

 
A preapproved list of questions has been instituted and a quality review process to make sure that applicants are not required to provide unnecessary information.
Unfinished Business
 
Treasury is still revising draft guidance on how to measure the “primary activity” of social welfare organizations.  Until the guidance is finalized the IRS does not have a clearly defined test for determining whether an application of a social welfare organization should be approved.  This issue has been the focus of something called The Bright Line Project sponsored by Public Citizen.
I’ll never pass up a chance to quote Winston Churchill, which is why I’m hoping that when it comes to the interminable scandal we might at least have reached the end of the beginning.