FR 2021-01732

The document reviewed here is a Notice from the Department of the Treasury, published to inform the public about a request for comments on various information collection activities related to tax-exempt organizations. This notice is part of the routine process to ensure that the paperwork required by the Internal Revenue Service (IRS) complies with the Paperwork Reduction Act of 1995. The document calls for public comments by February 26, 2021, to gather input on forms and schedules that tax-exempt organizations use to report their financial details and maintain their tax-exempt status.

General Summary

The core purpose of the document is to announce the Treasury's intention to submit information collection requests to the Office of Management and Budget (OMB) for review. The notice specifically pertains to tax-exempt organizations which are required to file forms like 990 and others to comply with IRS regulations under section 501(a) of the Internal Revenue Code. These forms help ensure that these organizations meet the statutory conditions necessary to maintain their tax exemption. Additionally, the data collected serves broader statistical purposes.

Significant Issues or Concerns

One of the most significant concerns highlighted by the document is the burden associated with complying with these reporting requirements. The estimated number of respondents is pegged at 1,599,000 tax-exempt organizations, with an estimated total time commitment of 52.47 million hours. On average, an organization spends about 32.8 hours to comply with these requirements, indicating a potentially substantial time investment.

The document also outlines high associated costs, with the estimated out-of-pocket expense per respondent being approximately $921, and labor costs averaging $2,554 per organization. These estimates suggest potential inefficiencies in the reporting process, which may disproportionately impact smaller organizations that lack the resources to manage such a burden effectively.

Moreover, while the document acknowledges that most taxpayers experience lower than average burdens, it does not offer detailed insights into how burdens differ across types of taxpayers. This omission could make it challenging for affected entities to assess their situations relative to the norm.

Broad Public Impact

The public impact of this document is primarily on organizations classified as tax-exempt. Given the complexity and the costs involved in complying with the filing requirements, there may be concerns about whether these processes are overly cumbersome. Failure to streamline these operations not only affects these organizations but can indirectly affect the community services they provide, which are often supported through their tax-exempt status.

Impact on Specific Stakeholders

For larger tax-exempt organizations, while the process might be resource-intensive, such organizations may possess the necessary infrastructure to address these requirements without significant disruption. Conversely, smaller organizations might face considerable challenges. The substantial costs and extensive time commitment could strain their limited resources, affecting their operational capacities.

These disparate impacts highlight an opportunity for policymakers to consider modifications or simplifications to the existing framework, especially for smaller entities, to alleviate potential financial burdens and allow these organizations to focus more on their core missions.

In summary, while the IRS’s requirements serve significant regulatory and statistical purposes, the challenges posed by their complexity and costs warrant thorough public input to explore possible reformation or relief measures, especially for smaller tax-exempt organizations.

The document under review presents a notice from the Department of the Treasury concerning the submission of information collection requests related to tax-exempt organizations. It gives insights into the substantial financial burdens these organizations face, based on the treasury's estimates.

In examining the financial aspects highlighted in the document, it is significant to note the total estimated out-of-pocket costs for respondents, which amount to $1.47 billion. This represents the expenses tax-exempt organizations are expected to cover directly, separate from their internal labor costs, in complying with the information collection requirements.

Additionally, the document lists an estimated out-of-pocket cost per respondent of $921. This per-respondent figure provides a more tangible sense of what individual organizations might expect to incur financially. This could significantly impact smaller tax-exempt organizations, suggesting an uneven burden across different sizes of entities.

Moreover, the total estimated monetized burden (labor costs) is projected to reach $4.08 billion. This figure encapsulates the financial valuation of the time and effort that respondents' personnel will spend on tax-related activities. When broken down, the estimated total monetized burden (labor costs) per respondent is cited as $2,554. These figures highlight the considerable labor and financial resources that must be allocated to these activities, suggesting potential inefficiencies or excessive complexity in the process.

This document also provides insights into the estimated time per respondent, which is noted as being 32.8 hours. Such a timeframe can be taxing for organizations, implying that the tax reporting process may be overly burdensome or not sufficiently streamlined, necessitating improvements.

While the document mentions that most taxpayers experience lower than average burdens, it lacks specific data or examples to demonstrate how these burdens vary by taxpayer type. This absence of detailed explanation raises questions about whether the average estimates accurately portray the financial strain on smaller versus larger organizations.

These figures collectively reveal that the financial burdens imposed by the current requirements are substantial. The document suggests a need to reassess and potentially streamline the tax reporting process to alleviate the financial strain, especially for smaller tax-exempt organizations, to foster equitable compliance across the board.