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IRS Streamlines the Application Process for Exempt Organizations


First Quarter 2015

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Synopsis

The IRS Tax-Exempt Division has reissued a memorandum extending a streamlined application process to all cases processed by the IRS’s exempt organizations unit using Lean Six Sigma Organization (LSSO) concepts.

Issue

Using tax-exempt cases, a streamlined application process pilot was conducted for three weeks. The IRS began by assessing the current status of the tax-exempt application process, then it determined what opportunities existed to improve it. The assessment concluded that the current process is plagued with limited resources, inaccurate forms, continuously changing procedures and non-standard processes. It also found that inadequate technical tax law training has not prepared the IRS workforce to effectively or efficiently complete the necessary work.

The assessment uncovered several key areas for improvement, namely streamlining the actual flow of work by facilitating consistent and timely determinations to organizations. The streamlined application process ultimately resulted in a simplified application. This simplified application made correspondence from the IRS easier, and has since accelerated case closures.  Even though the IRS has extended this program, it will continue to monitor and evaluate the effectiveness of it.

As the IRS implements strategies acquired from the streamlined application pilot, there appear to be several potential benefits to taxpayers.  In 2014, the IRS estimated that it had more than 60,000 exemption applications in its backlog, many of which had been pending for a minimum of nine months. The new strategies should reduce the application backlog, facilitate a more efficient exempt application system, and enable the IRS to process applications more quickly. The outcome of the streamlined application initiative should result in a reduction of lengthy processing delays, clearer and more consistent communication from the IRS, and a reduction in the information requested from charitable organizations.

What Does CohnReznick Think?
Extension of this streamlined procedure to all cases processed by the IRS will fast track processing of the exempt applications.  As a result, an organization applying for tax exempt status will receive their determination letter sooner.

Contact

For more information, please contact Thomas Lanning, a CohnReznick partner and a member of the Firm’s Not-For-Profit Industry Practice, at thomas.lanning@cohnreznick.com or 646-834-4108, or Magdalena Czerniawski, a senior manager, at magdalena.czerniawski@cohnreznick.com or 646-254-7419.


This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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