IRS Briefs IRS is in the process of performing 100 examinations of nonprofits involved in grants to foreign countries. These audits are seen as helping the IRS to create additional guidance in the area of international grant making to help prevent the possibility that charitable assets are used to fund terrorist activities overseas.

IRS will conduct 30 to 40 audits of tax exempt bonds during fiscal 2006. The focus of the audits will be noncompliance with post-issuance private use rules. Private use up to 5% is generally permissible. The IRS is using 1995 and 1996 bond issuance data as its sampling years.

Also related to bonds, the IRS issued a revised Form 8038-T for reporting arbitrage rebate payments in January 2005 and issued Revenue Procedure 2005-40 on how to correct a failure to pay arbitrage rebate timely.
The TE/GE Section is changing its focus from customer service to compliance/exams. Previously, the Section was focusing 100% on customer service and education but will now focus only 20% on customer service and 80% on compliance activities.

The IRS issued its priority guidance plan for 2005-2006. It includes the following items related to exempt organizations:

• Guidance on donee reporting for car donations.
• Guidance on downpayment assistance organizations.
• Regulations under sections 501(c)(3) and 4958 on revocation standards.
• Guidance under section 501(c)(15) on the calculation of gross receipts.
• Guidance under section 527(l) with respect to the authority to waive taxes and amounts imposed on political organizations for failures to comply with notice and reporting requirements.
• Regulations under section 529 regarding qualified tuition programs.
• Tax Exempt Bond guidance to include (1) an update of Rev. Proc. 99-35 regarding the procedures for issuers to request an administrative appeal to the Office of Appeals of a proposed adverse determination; (2) Final regulations under section 141 on refundings; (3) Proposed regulations under section 141 regarding allocation and accounting provisions; (4) Final regulations under section 142 regarding solid waste disposal facilities; and (5) Final regulations under section 1397E regarding qualified zone academy bonds.