How Tax-Exempt Organizations Can Follow the IRS’s 2021-2022 Priority Guidance Plan

Recently, the U.S. Department of the Treasury and the Internal Revenue Service released their 2021-2022 Priority Guidance Plan (PGP). This plan provides guidance on the range of issues that can have a strong impact on industry groups, taxpayers and tax advisors. With 193 priority guidance projects under the plan, there is a range of sections that cover many different types of organizations and structures, such as partnerships, S corporations, corporations, estates and trusts, gifts, international concerns, benefits to employees and compensation to executives.

Because many of these types of structures fall under multiyear projects, falling on the plan for a number of years, the fluidity of the PGP, along with new legislation and regulations that are added over the course of the year, can make it problematic to keep your nonprofit organization on the right side of the PGP. This is part of the reason why the U.S. Department of the Treasury will issue regular updates throughout the year, which is a good way to keep track of changes as they come up.

Among the issues that you'll want to keep track of is your allocation of expenses for your unrelated business income purposes. It's back on the IRS Exempt Organizations' priority guidance list. It also provides guidance on the interplay between Unrelated Business Income silo rules and the CARES Act net operating loss rules. There is also information on a specific item listed in the Executive Compensation section for the final regulations included under §457(f) nonqualified deferred compensation arrangements. This is because the proposed regulations that are related to this issue were created about five years ago.

Here are the eight items you'll find on the 2021-2022 PGP List for Exempt Organizations:

1. Group exemption letters
2. Limited Liability Corporations that qualify for 501(c)(3) status
3. Final regulations for supporting organizations
4. Expense allocation for unrelated business income, including how the CARES Act can impact calculated net operating losses with relation to §512(a)(6) UBI silo rules
5. Guidance for private foundations which invest in partnerships within which the disqualified people are also partners
6. Donor-advised fund excise taxes
7. Guidance on public inspection for the IRS's authority for sharing information with appropriate state officials under §6104(c)
8. IRS church tax inquiries and examinations, as well as how to designate appropriate high-level Treasury officials under §7611

Last year, three exempt organization projects that fell under the PGP that were related to the Tax Cuts and Jobs Act were also completed. These include:

1. Final regulations effective 12/2/20 for unrelated business taxable income for separate trades or businesses
2. Final regulations effective 1/15/21 for excise tax calculated on excess executive compensation falling under §4960
3. Final regulations effective 10/14/20 covering excise tax on the net investment income of specific private colleges and universities under §4968

Additionally, the 2020-2021 PGP Exempt Organizations list also has guidance included as related to healthcare facilities and how they may delay their community health needs assessment requirements due to the disruptions caused by the COVID-19 pandemic. The guidance for hospitals and healthcare facilities was released last year, in August, and therefore was removed from this year's list.

With the extensive news over shifts of power and issues surrounding the new tax legislation we can expect to see this year and into the new year, there will almost certainly be additional items added to the PGP, so it's vital that your organization stay on top of the news in case anything that can impact your organizations is added.

Next Steps

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