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GGD-85-64 1 (1985-07-08)

handle is hein.gao/gaobabnso0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON. D.C. 0846 aKNtAL GOVEUMOCT~r DIVISIN 8 JUL 1985 B-217690 Mr. S. Allen Winborne Assistant Commissioner for Employee Plans and Exempt Organizations Internal Revenue Service Dear Mr. Winborne: Subject: IRS' Examination Selection System For Exempt Organizations' Unrelated Business Income (GAO/GGD-85-64) We analyzed IRS' current examination selection system for tax-exempt organizations earning unrelated business income (UBI) as part of our overall effort to review IRS' tax return selec- tion and examination process. Our analysis showed that although IRS assessed over $41 million in additional tax and penalty upon UBI examinations in fiscal years 1981 through 1983, a substan- tial number of UBI examinations resulted in little or no addi- tional tax revenue. We also observed that IRS does not have sufficient information on UBI tax noncompliance to fully under- stand the nature and magnitude of UBI noncompliance and develop profiles of high noncompliant tax-exempt organizations engaging in UBI activity. Without such information, IRS' current selection system cannot routinely focus on high noncompliant tax-exempt UBI organizations. These are organizations which regularly do not properly report UBI earnings or pay UBI tax due. Because IRS data shows increasing UBI activity, high esti- mates of tax loss due to UBI nonreporting, and low yield from most of IRS' current UBI examinations, IRS may want to focus more on UBI organizations with a high potential for being non- compliant in addition to assuring that exempt organizations are operating in accordance with their exempt purposes. As a start, IRS could initiate efforts to begin developing, collecting, and analyzing information on UBI tax noncompliance. This informa- tion would give IRS an indication of the extent of UBI noncom- pliance and the perspective needed to develop a process for identifying and examining high noncompliant UBI organizations. More targeting of high noncompliant UBI organizations could aid in generating more revenue, increasing compliance, and result in more effective use of resources. (268179) - I - 6(0

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