Housing Counseling Agencies To Be Scrutinized by the Internal Revenue Service
Earlier this year, the Internal Revenue Service’s (“IRS”) Exempt Organizations (“EO”) division unveiled its annual work plan. The plan highlights the division’s priorities for the year in determining and examining tax exempt organizations.
The work plan discusses the fact residential foreclosures have mounted and the IRS has seen an increase in the number of exempt organizations involved in foreclosure assistance activities. See page 11 of the IRS’s FY 2012 Work Plan available on the IRS website by clicking here.
In 2012, both the Determinations and Examinations offices in the EO division will focus on the activities of mortgage foreclosure assistance organizations to determine whether they are fulfilling their exempt purpose, and whether they are complying with the requirements of section 501(q) of the Internal Revenue Code (the “Code”). Read additional intelligence from Venable LLP about this scrutiny by clicking here.
Section 501(q) of the Internal Revenue Code, added by the Pension Protection Act of 2006, establishes additional standards that a credit counseling organization must satisfy to qualify for exemption under section 501(c)(3) or 501(c)(4). In 2010, the IRS Office of Chief Counsel issued a memorandum concluding that organizations that engage in housing counseling may be subject to Code section 501(q). Read more about the memorandum and its implications here.