WASHINGTON -- The Internal Revenue Service says it plans to beef up administrative guidance for private, nonprofit organizations by sharply increasing the issuance of revenue rulings, some of which presumably could cover issues related to tax-exempt bonds.
The dearth of revenue rulings in the 501(c)(3) area "in' my view is a prime candidate for attention in an era of reinvention," IRS assistant commissioner James McGovern told a joint meeting of the American Law Institute and the American Bar Association yesterday.
Stepping up the issuance of revenue rulings is designed to be part of an effort that the agency began in February when it asked the public for help in identifying the rules and other tax regulatory guidance that are needed for non-exempt organizations. At the time, McGovern said he wanted to reverse the IRS' "dismal track record" on guidance for 501(c)(3)s.
Since 1988, the IRS has issued only two revenue rulings in the exempt organizations area. McGovern said publication of all revenue rulings declined throughout the 1980s because there were major tax bills enacted that provided guidance on most tax matters.
The measures, including the Tax Reform Act of 1986, did not offer much guidance for exempt organizations.
"While the exempt organizations area is unique in that it has not received significant legislative attention, it is not unique in that the effort to provide guidance through the revenue ruling program has not been emphasized," said McGovern, who is assistant commissioner for employee plans and exempt organizations.
Lawyers rely heavily on the directives included in revenue rulings because they are precedential guidance that McGovern said "receive very careful policy review prior to publication." By contrast, private letter rulings are targeted to the entity requesting the guidance, and are not supposed to be relied upon by other organizations.
In the exempt organizations area, revenue rulings may be the only tool the service has for providing the guidance that has been long lacking, MeGovern said.
"Since there hasn't been significant legislative activity, if we're going to revitalize the guidance program, revenue rulings are really the only vehicle that we have," McGovern said.
The IRS will soon issue two revenue rulings that were prompted by public response to the IRS' call for input in February, McGovern said. But he said he could not reveal the issues that would be addressed.
McGovern said the IRS has received a large number of helpful submissions on a wide range of topics, from organizations like the American Bar Association and the California Bar Association's exempt organizations committee.
McGovern did not say whether any of the submissions covered issues related to non-exempt bonds. But he said bonds are an important aspect of the IRS' exempt organizations division, given that the more than one million tax-exempt organizations monitored by the IRS have a total of more than $1 trillion in 501(c)(3) bonds outstanding.