Practitioners voiced their displeasure one day after the IRS, citing changes in the structure of the IRS Office of Chief Counsel and the relocation of the IRS's tax-exempt organizations headquarters from Washington to Cincinnati, told Tax Analysts that the agency's National Office no longer would make the letters available. Exemption letters were last distributed January 9.
Although the letters will no longer be made available to the press, they are still being provided to applicants. An IRS official told Tax Analysts March 12 that while the agency decision represents a change in process, there is still a public avenue for accessing the exemption letters. Submission of Form 4506-A, "Request for Public Inspection or Copy of Exempt or Political Organization IRS Form," is the standard process for all public requests for determination and closing letters.
Gerald M. Griffith of Jones Day called the IRS decision unfortunate. He said it seems to take the IRS months to respond to a Form 4506-A. Making a request also will be difficult without a list of new exempt organizations because there will be no way to figure out their names short of downloading and manually comparing the listings in IRS Publication 78, Cumulative List of Organizations, which is not a practical approach, he said.
Also, Griffith said, seeing the dates on the exemption letters is an indicator of how long it is taking the IRS to process the more complex cases. It also helps to see whether particular types of entities are getting exemption, he said, adding that if they are not, similar organizations may reconsider applying.
Elizabeth J. Kingsley of Harmon Curran Spielberg & Eisenberg LLP also used the word "unfortunate" to describe the IRS's action. "The practice of releasing these determinations to the press made them more accessible to the public, and it is hard to imagine that it consumed significant resources," she said, adding that Form 4506-A is a poor substitute "if only because it requires that you know the name of the organization you're inquiring about."
John Pomeranz, also with Harmon Curran, said he did not understand the rationale behind the IRS's decision, predicting it will not save any significant resources. In fact, it may cost the agency more as more requests under the Freedom of Information Act and more Form 4056-A requests are made, he said.
"I'm imagining some computer-savvy person creating a program that pulls from each update of the IRS master file the name and [employer identification number] for each newly exempt organization, and that automatically generates a 4506-A to get the determination letters and, if desired, the form 1023 or 1024 and related correspondence as well," Pomeranz said. "That would certainly end up being a greater burden on the IRS than the previous practice."
T.J. Sullivan of Drinker Biddle and Reath LLP said he was surprised by the IRS action. Now that all EO determinations are coming from Cincinnati, the IRS may have decided it would be too difficult or expensive to send the case files to Washington, he said. He added that in his practice he has followed exemption letters in the tax press, and he wondered whether a compromise could be reached in which copies of letters responding to Form 1023 applications would still be placed in the IRS's FOIA reading room for media but the case files would be made available only in Cincinnati or only after filing Form 4506-A.
"Transparency demands that they continue to be available," Sullivan said.
Mitchell L. Stump, whose practice focuses on section 501(c)(7) clubs, said it is important from a section 501(c)(7) standpoint to know how many private clubs are applying for exempt status. He said that ever since the issuance in 1996 of "horrible" section 337 regulations requiring a tax to be paid for a club to be exempt, very few clubs -- about 15 in almost 10 years -- seek exemption.
"I track the clubs that obtain tax-exempt status, as I am convinced the IRS wants to get rid of 501(c)(7) altogether -- and they are doing just that," Stump said. "If the IRS fails to disclose who obtains 501(c)(7) status, I cannot know what the ramifications of the 337 regs will be to this once-thriving tax-exempt club industry."
Christopher Bergin, president and publisher of Tax Analysts, said the IRS decision does not make sense. "I don't think the answer for an organization that is under pressure for its lack of transparency should be addressing the issue by becoming even less transparent," Bergin said. "Apparently they did not get the presidential instruction that this would be the most transparent administration we've ever seen."
The IRS began making favorable exemption letters available in 1992. They have been released under the procedures announced in Notice 92-28, 1992-1 C.B. 515. The notice provides for public inspection of a "loose-leaf file" of favorable exemption letters.
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