Temp. Reg. § 53-4958-8T(a)—Factors leading to revocation of exemption
The preamble to the temporary regulations notes that "[t]he IRS intends to exercise its administrative discretion in enforcing the requirements of sections 4958, 501(c)(3) and 501(c)(4) in accordance with the direction given in the legislative history" of section 4958. The legislative history acknowledges that revocation of exemption may be imposed in addition to intermediate sanctions, but that revocation would not normally be imposed if the excess benefits do not rise to a level sufficient to call into question the organization’s functioning as a tax-exempt organization. The preamble further states that "[t]he IRS will publish guidance concerning the factors that it will consider in exercising its discretion as it gains more experience administering the section 4958 regime." 66 Fed. Reg. at 2155.

In the Proposed Regulations Comments, we suggested that the regulations provide a list of factors to be taken into account in determining whether revocation of exemption would be appropriate. We continue to believe that such guidance would be useful for exempt organizations and examining agents. As the preamble suggests, it may not be possible at this point to anticipate all the factors that should be taken into account. However, we submit that this does not justify failing to provide any guidance at all on this subject in the final regulations themselves, which often will be referenced by exempt organizations and examining agents without the accompanying preamble language. Thus, we suggest that the following be added to the regulations:

In making a determination as to whether to revoke the exemption of an applicable tax-exempt organization that has been involved in an excess benefit transaction, the Service will consider the following factors:
 

1. The number, frequency, size, extent, willfulness and flagrancy of the excess benefit transactions;
    
2. The adoption of procedures and safeguards by the organization, whether before or after the occurrence of any excess benefit transaction, that are reasonably calculated and sufficient to prevent the occurrence of future excess benefit transactions;
    
3. The likelihood that excess benefit transactions involving the organization may recur with or without the adoption of such procedures and safeguards;
    
4. The extent and success of the organization’s regular and ongoing programs and activities that substantially further charitable, educational, religious or other tax-exempt purposes;
    
5. The impact on the ability of the organization to further charitable, educational, religious or other tax-exempt purposes if the organization’s tax-exempt status is revoked;
    
6. The proportionality of the consequences of revocation of tax-exempt status to excess benefit transactions;
    
7. The degree of oversight of the organization provided or to be provided by state and local governmental authorities, recognized independent nonprofit accreditation agencies, recognized independent nonprofit national governing bodies or associations or the like; and
    
8. All other relevant facts and circumstances.