On Wednesday, March 4, 2026, the Internal Revenue Service (“IRS”) released the fiscal year 2026 Tax Exempt and Government Entities’ (“TE/GE”) Program Service Letter.
TE/GE’s focus for FY26 is to deliver strong compliance outcomes, modernize how it conducts business, strengthen the organization, and invest in its people while improving taxpayer service and operating efficiently and responsibly.
Strengthening Compliance
Continuing in FY26, TE/GE will focus on exempt sector compliance by applying a risk-based, data-driven approach to inform treatment streams, including outreach, compliance checks, and examinations across exempt organizations, employee plans, and government entities.
TE/GE will primarily focus enforcement efforts on areas with the highest risk of noncompliance and will also expand voluntary compliance initiatives.
TE/GE aims to address highly complex and emerging issues, including examinations of tax exempt hospitals, tax exempt collectives utilizing Name, Image, and Likeness (“NIL”), arbitrage in tax advantaged financings, implementation of provisions of the One Big Beautiful Bill (“OBBB”), and combatting fraud and abusive transactions.
Modernization
Modernization is a key focus for TE/GE in FY26. To support this goal, TE/GE will continue to integrate modernized systems and will work toward incorporating emerging technologies, including artificial intelligence (“AI”), into compliance operations and inventory management.
New AI capabilities will allow TE/GE to detect indicators of noncompliance and identify suspected fraudulent or illicit activity. Additional modernization efforts include launching a modernized case management system for TE/GE determinations, as well as implementing an improved solution for accessing historical records.
These modernization efforts are intended to improve efficiency, consistency, and decision making across programs. TE/GE will maintain appropriate safeguards to protect taxpayer privacy and ensure that systems are reliable, secure, and aligned with mission objectives.
Effective and Efficient Operations
In FY26, TE/GE will continue to strive for the consistent, effective, and efficient execution of day-to-day operations. TE/GE will assess and, where necessary, refine organizational structures to improve collaboration, promote efficiency, strengthen management practices, enhance customer service, and ensure alignment with the IRS’s strategic priorities.
TE/GE will work to improve Tax Exempt Organization Search (TEOS) functionality, ensuring that data is accurate, consistent, and presented in a user-friendly format. The organization will develop and deliver training to support professional growth for all TE/GE employees to promote a technology-driven workforce. Improving efficiency and effectiveness will help TE/GE streamline processes, optimize resources, and deliver high-quality service to taxpayers.
Workforce Development
In FY26, TE/GE will aim to strengthen workforce development through focused training and leadership development with a goal of maintaining a workforce that is skilled, adaptable, and prepared to operate in a modern tax administration environment. TE/GE plans to foster a professional culture that emphasizes accountability and continuous improvement.
About Schneider Downs Tax Services
Schneider Downs’ tax advisors have experience and expertise in a wide range of industries, including Automotive, Construction, Real Estate, Manufacturing, Energy & Resources, Higher Education, Not-for-profits, Transportation and others. Our industry knowledge and focus ensure the delivery of technical tax strategies that can be implemented as practical business initiatives.
To learn more, visit our dedicated Tax Services page.
