New TIGTA Report on Tax Exempt and Government Entities Division

Late last month, Treasury Inspector General for Tax Administration (TIGTA) released a new report on the IRS Tax Exempt and Government Entities Division. It offers an interesting portrait of nonprofit enforcement through fiscal year 2025.

The headline is that enforcement activity remains fairly limited. The Exempt Organizations function closed 2,777 examinations in FY 2025—down about 15% from FY 2021. Less formal compliance checks fell even more sharply, from 13,349 in FY 2021 to 4,622 in FY 2025. At the same time, the IRS is handling more applications for tax-exempt status. EO received more than 142,000 determination requests in FY 2025, compared with about 111,000 in FY 2021. Maybe, front-end application processing rather than examinations and enforcement is where the division’s limited resources are going.

Another trend that caught my attention was that automatic revocations are far more common than revocations following an audit. More than 56,000 organizations automatically lost their exemption in FY 2025 for failing to file required returns for three consecutive years. Yet, only 44 exemptions were revoked following examinations. This means that, for many nonprofits, basic filing compliance quite possibly carries as much–if not more–likelihood of risk as an audit.

The staffing picture is also worth watching. Although Tax Exempt/Government Entity staffing increased during much of the period covered by the report, TIGTA notes that subsequent workforce reductions eliminated roughly one-third of the division’s employees. That may further constrain enforcement and raises the question of how effectively the IRS can oversee a tax-exempt sector approaching two million organizations with limited examination resources.