in the People First Initiative was followed up with delays in payroll tax withholding systems and payment. In response to the economic fallout of the COVID‐19 pandemic on August 28, 2020, the IRS provided guidance to employers regarding an August 8 presidential executive order allowing employers to defer the withholding, deposit, and payment of certain payroll tax obligations (Notice 2020‐65). The order also instructed the Secretary of the Treasury to explore avenues, including legislation, for eliminating the obligation to pay the deferred taxes.
On September 2, 2020, another presidential directive permitted the Social Security taxes of most federal employees to be delayed and not withheld from paychecks until 2021. The National Finance Center, which provides payroll services to over 600,000 federal employees, said at the time it would defer the withholding and payment of the employees' share of Social Security taxes effective for the first pay period beginning after September 1, 2020.
Weather‐related disasters also required special IRS declarations. IRS announced that victims of the California wildfires in counties of California (and later Oregon and Washington) and the derecho storm in an Iowa county were designated as federal disaster areas qualified for individual assistance and addition time to make tax payments and file returns. Affected individuals and businesses had until December 15, 2020, to file returns and pay taxes that were due beginning October 15, 2020, including returns and payments due September 15, 2020, and quarterly payroll and excise tax returns normally due October 31, 2020.2
Lastly, the IRS encouraged tax payers to adopt good tax recordkeeping systems and disaster preparedness. Taxpayers were reminded to create and maintain an emergency preparedness plan, including securing key documents and making copies and electronic backups of various financial statements and records, documenting valuables and content of homes, and updating emergency plans.3
Other tax compliance news prompted by COVID‐19 included:
State guidance on whether COVID‐19 telecommuters create nexus was considered in some states for workers temporarily working in another state and their employers who did not reside in that state.
Security Summit warns tax professionals about new COVID‐19 phishing scams, in the fourth installment of a series titled “Working Virtually: Protecting Tax Data at Home and at Work.” Scammers are zeroing in on opportunities presented by Economic Impact Payments and increased teleworking by practitioners.
The Tax Court made additional COVID‐19‐related procedural changes to accommodate remote operations during the COVID‐19 pandemic plus additional procedural changes.
The IRS placed a temporary stop on mailing notices regarding balances due. “Although the IRS continues to make significant reductions in the backlog of unopened mail that developed while most IRS operations were closed due to COVID‐19, this temporary adjustment to processing is intended to lessen any possible confusion that might be associated with delays in processing correspondence received from taxpayers,” the agency said. Such confusion might result among taxpayers who previously received a balance due notice and mailed a payment to IRS but the payment may still be unopened. In addition, the IRS said, the “unopened mail will be posted and credited on the date the IRS received them—rather than the date the agency opened and processed them.” Nevertheless, the IRS encouraged those who received, but not yet responded, to a balance due notice to promptly respond.
On its website, IRS has posted frequently asked questions (FAQs) on the effect of COVID‐19 on liens, levies, and other IRS collection activities.
Exempt organizations (EOs) that filed paper returns prior to 2019 were sent a reminder that, for tax years beginning after July 1, 2019, they were required to e‐file their returns.
Notes
1 1 IR 2020‐142, July 8, 2020.
2 2 IR 2020‐190.
3 3 IR 2020‐189.
CHAPTER 2 Qualifying Under IRC § 501(c)(3)
§ 2.2 Operational Test (a) Charitable Class
§ 2.2 Operational Test
(a) Charitable Class
p. 29. Add at end of first full paragraph at top of page:
I highly recommend that readers first study the following IRS private letter ruling to get a full dose of the concepts, citations, and issues that must be considered in working with tax‐exempt organizations. I hope you agree with this approach and will return to reading this private letter ruling in the future to refresh how the IRS reached its conclusion that the entity did not qualify for tax‐exemption. Throughout the discussion of new developments, one can consider how the result could have changed to achieve successful IRS recognition of exemption. Note the organization and its advisors did not contest the negative conclusion.1
IRS Private Letter Ruling Number: 202021025
We considered your application for recognition of exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a). We determined that you don't qualify for exemption under IRC Section 501(c)(3). This letter explains the reasons for our conclusion. Please keep it for your records.
Issues
Do you qualify for exemption under IRC Section 501(c)(3) for the reasons stated below?
Facts
You submitted Form 1023‐EZ, Streamline Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on B. You attested on Form 1023‐EZ that you are organized and operated exclusively to further charitable and educational purposes. You also attested that you have not conducted and will not conduct prohibited activities under IRC Section 501(c)(3).
During review of your Form 1023‐EZ, detailed information was requested supplemental to your attestations. You incorporated in the state of M on C. Your Articles of Incorporation state that your primary purpose is to support a local‐based food system that:
improves public health and well‐being by increasing dietary intake of fresh fruits and vegetables;
improves access to fresh fruits and vegetables by limited resource families;
enhances the capacity for sustainable food production, processing, and distribution by addressing the educational needs of producers;
supports tourism and economic development in the region by providing a profitable retail outlet for local agriculture producers, artisans, crafters, food vendors, and their goods,
