The IRS Tax Exempt and Government Entities Division

Introduction to the IRS Tax Exempt and Government Entities Division

Established in 1999[1], the Tax Exempt and Government Entities Division protects the public interest by applying tax fairly and provides quality service to customers by helping them understand and comply with applicable tax laws.[2] The Tax Exempt and Government Entities Division serves a customer profile that ranges from small community organizations and municipalities to universities, huge pension funds, state governments, and participants of tax exempt bond transactions.[3] The division’s customer profile also includes those taxpayers that “pay more than $220 billion in employment tax and income tax withholding and control $8.2 trillion in assets.” [4] The division also works with employee plans, exempt organizations, and government entities.

The strategic priorities of the IRS Tax Exempt and Government Entities Division include strengthening enforcement activities; advancing the public interest; fostering proactive partnerships; enhancing customer satisfaction; and promoting self-guidance and self-assistance, which may or may not include self-correction. The IRS Tax Exempt and Government Entities Division employs a diverse, motivated workforce.

The customer profile for the IRS Tax Exempt and Government Entities Division represents the following. The division serves the need of three customer segments: Employee Plans, Exempt Organizations, and Government Entities.

Three million customers range from small local community organizations and municipalities to major universities, state governments, and huge pension funds.

Customers under this profile pay more than $220 billion in employment and income tax withholding.

Customers control more than $8.2 trillion in assets.

Exempt organizations represent approximately 1.6 million tax exempt organizations, which include religious organizations.

Government Entities taxpayers hold tax exempt bonds with a total value of $1.8 trillion.

The IRS Tax Exempt and Government Entities Division taxpayer profile is extended to include 88,000 federal, state, and local entities as well as 550 federal recognized Indian tribes (IRS.gov). The division addresses four basic key customer needs, which include the following:

Education and communication
Rulings and agreements
Examination
Customer account services

Education and communication efforts focus on helping taxpayers understand their tax responsibilities. Efforts include outreach programs and activities. Rulings and agreements are specific to up-front compliance programs, which include determination, voluntary compliance, and private letter ruling programs. Examination initiatives “address non-compliance, through customized activities within each customer segment” (IRS.gov). Lastly, Customer Account Services provide accurate and timely responses to questions, requests, and concerns for information from taxpayers.

The Commissioner of the IRS Tax Exempt and Government Entities Division monitors the uniform interpretation and application of federal tax laws, providing advice and assistance through the Internal Revenue Service (“Service”), the Department of the Treasury, government agencies, Congressional committees, and state governments.

With this in mind, the IRS Tax Exempt and Government Entities Division is comprised of three business divisions: Employee Plans (EP); Exempt Organizations (EO); and Government Entities (GE). Activities under the EP division include employee plans[5], tax treatment of participants and their beneficiaries, and deductions for employer contributions and administrative provisions. The mission of the EO is to protect the public interest by applying tax laws fairly. Exempt organizations include the following:

Organizations exempt under IRC 501[i]
Political organizations[6] described in IRC 527
Organizations described in IRC 4947(a)[ii]
Prepaid legal plans[7] described in IRC 120
Welfare benefit funds described in IRC 4976

Lastly, government entities, or GEs, also serves to protect the public interest. References to government entities include federal, state, and local governments, Indian tribal governments, and tax-exempt bonds.

[1] The TE/GE Division was established as part of a modernization initiative, replacing the former Assistant Commissioner (Employee Plans and Exempt Organizations) function (IRS.gov, “Tax Exempt & Government Entities Division At-a-Glance,” 4/21/2013).

[2] See www.irs.gov

[3] (IRS.gov, “Tax Exempt & Government Entities Division At-a-Glance,” 9/8/2013).

[4] Id.

[5] According to the Tax Exempt & Government Entities Division of the IRS, employee plans include the following: qualification of pension, annuity, profit-sharing, stock bonus plans, individual retirement arrangements, simplified employee pensions, saving incentive match plans for employees, tax sheltered annuities, and IRC 457 plans (IRS.gov, “Tax Exempt & Government Entities Division At-a-Glance,” 4/21/2013).

[6] According to tax law, a political organization is defined as “a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an ‘exempt function’” (Internal Revenue Manual, “7.27.11.2 – Political Organizations,” 4/21/2013).

[7] Prepaid legal plans are also known as “group legal services plan.”

[i] List of exempt organizations include: corporation organized under Act of Congress; corporations organized for exclusive purpose of holding title to property, collecting income, and turning over entire amount to an organization which is also exempt; corporations, community chest, fund, foundation operating exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes; civil leagues; labor, agricultural, or horticultural organizations; business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues; clubs organized for pleasure, recreation, and related non-profitable purposes; and fraternal beneficiary societies, orders, or associations. The listing of organizations is not comprehensive. You may view additional categories via the Legal Information Institute housed on the Cornel University Law School campus: https://www.law.cornell.edu/uscode/text/26/501.

[ii] According to the Internal Revenue Manual, an example of this type of organization is a nonexempt charitable trust. “A trust is described in IRC 4947(a)(1) if it: has exclusively charitable interests, and is a trust for which a charitable deduction is allowed. [It] is an estate in unduly prolonged administration or a trust . . .” (IRM, “7.26..15.2 – Nonexempt Charitable Trusts,” 4/21/2013).