Church Audits - "Reasonable Belief" Requirement
The IRS may begin a church tax inquiry only if an appropriate high-level Treasury official reasonably believes, based on a written statement of the facts and circumstances, that the organization: (a) may not qualify for the exemption; or (b) may not be paying tax on unrelated business or other taxable activity. This reasonable belief must be based on facts and circumstances recorded in writing.
The IRS can obtain the information supporting a reasonable belief from many sources, including but not limited to:
- Newspaper or magazine articles or ads,
- Television and radio reports,
- Internet web pages,
- Voters guides created and/or distributed by the church,
- Documents on file with the IRS (e.g. a Form 990-T filed by the church),
- Reliable information reports from concerned members of the church or the general public and
- Records concerning the church in the possession of third parties or informants.
The IRS must derive the facts and circumstances forming the basis for a reasonable belief from information lawfully obtained. If this information is obtained from informants, it must not be known to be unreliable. Failure of the church to respond to repeated IRS routine requests for information is a factor in determining if there is reasonable cause for commencing a church tax inquiry.
IRM 188.8.131.52.1 (08-20-2010)