Exempt organization matters on 2025-2026 Priority Guidance Plan

The PGP contains 105 guidance projects for the 12-month period from July 1, 2025, through June 30, 2026, including 11 projects that have been completed as of Aug. 31, 2025. The PGP is significantly shorter than the prior year’s PGP, which included 231 projects.

New for this year, the PGP reflects priorities in five key areas: (1) OBBBA implementation; (2) deregulation and burden reduction; (3) Tribal tax issues; (4) digital assets; and (5) SECURE 2.0. The PGP notes that some omitted projects do not belong to one of these priority categories but may be considered for inclusion on a future PGP.

PGP items affecting exempt organizations

Items in this year’s PGP directly affecting exempt organizations are as follows:

OBBBA implementation

1. Private colleges and universities: Regulations under section 4968 regarding the endowment excise tax.
2. Executive compensation: Guidance under section 4960 regarding excess compensation paid by applicable tax-exempt organizations, including the expanded definition of “covered employee.”

Deregulation and burden reduction

3. Private foundations: Regulations under section 4945 regarding expenditure responsibility requirements.
4. Donor advised funds (DAFs): Final regulations under section 4966. Note: Proposed regulations were published on Nov. 14, 2023.
5. Public inspection: Regulations under section 6104 regarding the place for public inspection of materials relating to tax-exempt organizations, pensions, and other plans.

Section 501(c)(3) issues

6. Racial discrimination: Guidance on the application of the fundamental public policy against racial discrimination, including consideration of recent caselaw, in determining the eligibility of private schools for recognition of tax-exempt status under section 501(c)(3).
7. Johnson Amendment: Guidance on the statutory prohibition in section 501(c)(3) against participation or intervention in political campaigns.

The PGP also includes other items of interest to exempt organizations and their donors, including the following:

OBBBA implementation

1. No tax on overtime: Guidance under section 225 regarding deduction for qualified overtime compensation, including transition relief.
2. Employee meals: Regulations under section 274(o) regarding meals provided at the convenience of the employer.
3. Scholarship granting organizations: Guidance under section 25F on the income tax credit for contributions of individuals to scholarship granting organizations.

Deregulation and burden reduction

4. Employer-provided meals: Regulations under section 119 regarding employer-provided meals.
5. Employee fringe benefits: Regulations updating the classification system for the line of business determination under Reg. section 1.132-4 for purposes of qualified employee discounts and no-additional-cost services.
6. Split-interest trusts: Guidance concerning the reporting of charitable contributions of trusts under section 6034.

Tribal tax issues

7. Wholly owned entities: Final regulations under section 7701 regarding the federal tax treatment of an entity wholly owned by one or more Indian Tribal governments. Note: Proposed regulations were published on Oct. 9, 2024.

Notable omissions

In proportion to the reduced size of the PGP overall, multiple projects affecting exempt organizations which appeared on the 2024-2025 PGP (many for multiple prior years) do not appear on the current-year PGP. Notable exempt organization items omitted from this year’s PGP include the following:

1. Group exemptions: Guidance revising Rev. Proc. 80-27 regarding group exemption letters. Note: Notice 2020-36 was published on May 18, 2020, pursuant to which the IRS issued a moratorium on new group exemption requests effective June 17, 2020.
2. Unrelated business income: Regulations under section 512 regarding the allocation of expenses in computing unrelated business taxable income and addressing how changes made to section 172 net operating losses by section 2303(b) of the CARES Act apply for purposes of section 512(a)(6).
3. Self-dealing: Guidance under section 4941 regarding a private foundation's investment in a partnership in which disqualified persons are also partners.
4. DAFs: Regulations under section 4967 regarding prohibited benefits, including excise taxes on donors, donor advisors, related persons, and fund management.
5. DAFs: Regulations under section 4958 regarding DAFs and supporting organizations.
6. DAFs: Guidance regarding the public-support computation with respect to distributions from DAFs.
7. Church tax exams: Final regulations designating an appropriate high-level Treasury official under section 7611. Note: Proposed regulations were published on Aug. 5, 2009.
8. VEBAs: Regulations and other guidance under sections 419, 419A, and 501(c)(9) relating to welfare benefit funds, including voluntary employees’ beneficiary associations (VEBAs).
9. Nonqualified deferred compensation plans: Regulations under section 457(f) and related guidance on ineligible plans. Note: Proposed regulations were published on June 22, 2016.

RSM US Insights

The tone of the 2025-2026 PGP differs from the previous year’s PGP in that the introductory comments include an emphasis on deregulatory projects and states that Treasury and IRS expect to add additional deregulatory items to the plan as they continue to evaluate comments received from taxpayers and tax practitioners. The public is invited to continue to provide comments and suggestions throughout the plan year.