TIGTA: IRS Fails to Properly Monitor 25% of Section 527 Political Organizations

The Treasury Inspector General for Tax Administration today released Improvements Have Been Made, but Additional Actions Could Ensure That Section 527 Political Organizations More Fully Disclose Financial Information (2010-10-018):

This report presents the result of our review of the filing compliance of Section 527 political organizations. ... The IRS has taken significant actions to improve its ability to identify political organizations that do not timely notify the IRS of their existence or timely submit reports of their contributions and expenditures. However, the IRS has not fully addressed noncompliance among political organizations. For example, one out of every four Political Organization Report of Contributions and Expenditures (Form 8872) that we reviewed had incomplete or missing contributor or recipient information. While some of these filings may later be deemed acceptable, we determined the IRS is not reviewing these filings to determine if they are complete or if penalties should be assessed. Also, the IRS is not always issuing notices at the appropriate time that include all information needed by political organizations to become compliant. Lastly, the IRS is not following up on information it has requested from political organizations to verify compliance. ...

Although the EO function has taken action to identify noncompliant political organizations, we believe EO function management should focus on addressing noncompliance through increased enforcement actions. The assessment of taxes and penalties for incomplete filings, when appropriate, could lead to increased accountability and disclosure by political organizations. Improvement in the notice process could also assist political organizations in complying with their responsibilities.