4.17.4  Procedures

4.17.4.1  (02-25-2010)
Introduction

  1. The following procedures provide direction for the preparation, review, approval, and reporting of CIPs, as well as guidelines for extensions, modifications, and terminations.

  2. Language in the CIP authorization request must be specific. Blanket language and broad, undefined coverage are not acceptable. The authorization should specifically identify the market segment and the potential area(s) of noncompliance.

  3. The CIP Authorization should have a specific completion date.

    Note:

    After the completion date (including extensions), no new taxpayer contacts may be made on cases that were not in the audit pipeline. Cases shipped to groups and updated to status 10 are considered to be in the audit pipeline for CIP purposes. Also, no new cases should be built with project data after the project completion date (including extensions.) Cases below status 10 may not be updated to status 10.

  4. Once a CIP project completion date (including extensions) is reached, any cases remaining in PSP (status 8 or below) should not be sent to the group.

  5. Data or cases (status 8 and below in PSP) remaining in PSP should be properly disposed of by the CIP coordinator at the termination of the project. This data should be disposed as soon as practical but no later than six months after the approved termination report.

  6. If the authorization request covers more than 2 tax years, justification must be included.

  7. Authorization requests that are rollovers of prior CIP’s must contain clear justification for repeating the project. The authorization request must also contain the results to date of the previous project, including the no change rate.

4.17.4.1.1  (02-25-2010)
Types of CIP Request

  1. There are four types of CIP request.

  2. Part 1 CIP - A Part 1 CIP authorization is requested when fewer than 50 taxpayer contacts are anticipated for a field office compliance initiative. Form 13502,Compliance Initiative Project Authorization - Part One, is used to request a Part One CIP Authorization.

  3. Part 2 CIP- A Part 2 CIP authorization is requested to expand a Part 1, when the Part 1 reveals documented non-compliance. Form 13498,Compliance Initiative Project Authorization - Part Two, is used to request a Part Two CIP Authorization.

  4. National Office CIP - A National Office CIP authorization is one requested by a headquarters function. Form 13502 or Form 13498 is used based on the descriptions in paragraph 2 and 3 above. See IRM 4.17.4.9.

  5. Cross-functional CIP A Cross-functional CIP authorization is one jointly requested by two or more business operating divisions. Form 13502 or Form 13498 is used based on the descriptions in paragraph 2 and 3 above. See IRM 4.17.4.10.

4.17.4.2  (02-25-2010)
Naming Convention

  1. For purposes of recording and accessing CIPs in a national database, a naming convention should be used for titling projects. It should contain the primary issue(s) and the market segment (if available), e.g., Unreported Income by Referees. The market segment should not be taxpayer specific.

4.17.4.3  (02-25-2010)
Part One CIP Authorization Request

  1. Form 13502, Compliance Initiative Project Authorization - Part One, is used to request approval for a CIP. It is hereinafter referenced as Part One CIP in this IRM.

  2. In the following circumstances the authorization request may be limited to Part One CIP only:

    • To acquire and evaluate external data; or

    • To contact 50 or fewer taxpayers (100 or fewer in Collection or Campus).

4.17.4.3.1  (02-25-2010)
Background and Objectives

  1. Provide information to explain the basis for selecting the proposed project. If the authorization request is for Part One CIP only, identify the situation above that permits the use of Part One CIP. Explain the issue(s) and additional information such as; how it was identified, the impact on compliance, etc. Include the objectives and expected results.

    Note:

    Include information from the search for similar projects or data, if applicable.

4.17.4.3.2  (02-25-2010)
Market Segment

  1. Define the specific market segment(s) and activity code(s), if known.

  2. A market segment is generally a group containing similar characteristics. Examples of market segments include but are not limited to the following:

    • Business Type – Services, Construction, Retail;

    • An Issue – Passive Activity Losses, Low Income Housing Credit;

    • Form Type – Schedule C, Form 1041; and

    • New businesses.

4.17.4.3.3  (02-25-2010)
Data

  1. Describe the data needed or to be used, including the source and whether it is internal or external. If the request is to secure data, include the expected delivery date, delivery medium, amount of time needed to use the data, and ultimate disposition. Also provide an assessment of the accuracy of the data if it is external and a description of the procedures to be used for securing and storing it, if applicable.

4.17.4.3.4  (02-25-2010)
Time Frames/Action Plans

  1. List the tasks necessary to complete the project, the estimated time to accomplish them, and the projected task completion dates. Ensure sufficient time is allowed for each task and that the overall project completion date is reasonable. Coordinate with other impacted functions/units to provide reasonable time allocations. Action plan dates should coincide with the final project completion date

4.17.4.3.5  (02-25-2010)
SBSE Review, Concurrence and Approval of Part One CIP Only

  1. SB/SE Compliance– If an authorization request originates in the field for a Part One CIP only, it will be reviewed for concurrence by the following:

    • Territory Manager of the employee initiating the authorization request;

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers); and

    • Other affected functions.

    Once concurrences has been obtained, the Part One CIP Authorization will be sent to the Area Director (or the PSP Territory Manager, if designated) for final approval. A copy of the approved Part One CIP Authorization must be forwarded to the SB/SE CIP Program Analyst for updating of the CIP database.

  2. SB/SE Speciality- If an authorization originates in SB/SE Speciality for a Part One CIP only, it will be reviewed for concurrence by the following:

    • Territory Manager of the employee initiating the authorization request;

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers); and

    • Other affected functions

    Once concurrences has been obtained, the Part One CIP Authorization will be sent to the PSP, Territory Manager for final approval. For Estate and Gift authorizations, final approval will be the Chief of Estate and Gift Tax Program. A copy of the approved Part One CIP Authorization must be forwarded to the SB/SE CIP Program Analyst for updating of the CIP database.

  3. SB/SE Campus Compliance - If an authorization originates in the campus for a Part One CIP only, it will be reviewed for concurrence by the following:

    • Program Manager: Workload Selection and Delivery;

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers); and

    • Campus CIP Headquarter Analyst.

    Once concurrences has been obtained, the Part One CIP Authorization will be sent to the Director, Campus Reporting Compliance for final approval. A copy of the approved Part One CIP Authorization must be forwarded to the SB/SE CIP Program Analyst for updating of the CIP database.

  4. SB/SE CLD (Communications, Liaison & Disclosure) – If the authorization request originates for a Part One CIP only, it will be reviewed for concurrence by the following:

    • CLD Territory Manager of the employee initiating the authorization request;

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers);

    • Other affected functions; and

    • Area PSP Territory Manager.

    Once concurrences has been obtained, the Part One CIP Authorization will be sent to the CLD Director. If it originates in a Headquarters function, it will be reviewed for concurrence by the functional director and approved by the Director, Examination Planning and Delivery (EPD). A copy of the approved Part One CIP Authorization must be forwarded to the SB/SE CIP Program Analyst for updating of the CIP database.

4.17.4.3.6  (02-25-2010)
LMSB Review, Concurrence and Approval of Part One CIP Only

  1. If an authorization request originates in the field for Part One CIP only, the following individuals will review it for concurrence:

    • The Team Manager of the employee initiating the authorization request;

    • The Territory Manager of the employee initiating the authorization request;

    • The Disclosure Officer (only if third party data is being gathered on individual taxpayers);

    • Applicable Director, Field Operations/Director, International Compliance Strategy & Policy;

    • Designated CIP Headquarter/Industry Analyst or the PSP for Foreign Resident Compliance; and

    • LMSB CIP Analyst.

    Final Approval is received from the Operations Planning & Support Senior Manager, of LMSB Planning, Quality, Analysis & Support (PQAS). If the CIP originates in a headquarters office (including Field Specialists), the CIP must be presented to the CIP Oversight Committee. A copy of the approved Part One CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

4.17.4.4  (02-25-2010)
Part Two CIP Authorization Request

  1. Form 13498, Compliance Initiative Project Authorization - Part Two, is used to request approval for a Part 2 CIP Authorization. It is hereinafter referenced as Part Two CIP in this IRM.

  2. A Part Two CIP Authorization request contains all the information required of a Part One. A Part Two is requested when there is a documented demonstrated level on non-compliance.

4.17.4.4.1  (02-25-2010)
Alternative Treatments

  1. Documented consideration should be given to identify alternative non-enforcement ways to improve voluntary compliance; as enforcement is generally very labor intensive. Examples are:

    • Taxpayer outreach/education

    • Revisions to forms or publications

    • Legislative or regulatory changes

    • Agreements with state or local business licensing authorities for tax compliance requirements

4.17.4.4.2  (02-25-2010)
Measures and Analysis

  1. Describe the measure(s) that will be used to evaluate noncompliance. Examples are:

    • Returns secured

    • Dollars collected

    • Number of returns examined; no change rate; dollars per return

    • Reasons for non–compliance (see IRM 4.10.16, Examination Operational Automation Database (EOAD)

      Note:

      If a Part 1 CIP is expanded to a Part 2 CIP, the results of the Part 1 must be included in the Part 2 CIP authorization.

4.17.4.4.3  (02-25-2010)
Cost/Benefit

  1. Describe the estimated resources needed to execute the project. Include hours/FTE’s to be expended by type of employee (RO, RA, TCO, TE, etc.). Also include costs over and above those that would normally be incurred. For example:

    • Specialized training

    • Data acquisition

    • Unusual items such as extensive travel

4.17.4.4.4  (02-25-2010)
SB/SE Review, Concurrence, and Approval for Authorization Requests from the Field

  1. SB/SE Compliance – The following individuals will review field authorization requests for concurrence:

    • Territory Manager of the employee initiating the authorization request;

    • Managers/Directors of other identified functions/units affected or that should be involved (e.g. LMSB, Appeals, District Counsel, etc.)

    • CLD Chief, Operations Support

    • Area Disclosure Officer (only if third party data is being gathered on individual taxpayers)

    • Area Director

    • PSP Territory Manager

    • Headquarters Program Manager if appropriate. i.e. Non-filer, Examination Specialization Program, IRA Penalties, etc.

    • Headquarters CIP Program Analyst

    • Headquarters Program Manager, Examination Return Selection

    If the Part Two CIP originates in a Headquarters function (other than EPD), it will be reviewed for concurrence by the functional director. Final approval will be the Director, Examination Planning & Delivery. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

  2. SB/SE Speciality - - The following individuals will review field authorization requests for concurrence:

    • Territory Manager of the employee initiating the authorization request;

    • Managers/Directors of Other identified functions/Units affected or that should be involved (e.g. LMSB, Appeals, Area Counsel)

    • CLD Chief, Operations Support

    • Area Disclosure Officer (only if third party data is being gathered on individual taxpayers)

    • Chief of affected Specialty Programs

    • Headquarters CIP Program Analyst

    Final approval will be the Director, Specialty Programs, and the Director, EPD. If the Part Two CIP originates in headquarters, it will be reviewed for concurrence by the Policy Manager and the Chief Specialty Program. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

  3. SB/SE Campus Compliance -The following individuals will review the campus authorization requests for concurrence:

    • Program Manager: Workload Selection and Delivery

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers)

    • CIP Headquarter Analyst

    Final approval will be the Director, Campus Reporting Compliance, and the Director, Examination Planning & Delivery. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

  4. SB/SE Communication Liaison & Disclosure (CLD) –The following individuals will review the CLD authorization requests for concurrence:

    • CLD Stakeholder Liaison

    • Disclosure Officer (only if third party data is being gathered on individual taxpayers)

    • Other Affected Functions

    • PSP Territory Manager

    Final Approval will be the CLD Area Director. If the Part Two CIP originates in a Headquarters function, it will be reviewed for concurrence by the functional director and approved by the Director, EPD. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

  5. SB/SE Fraud/Bank Secrecy Act - The following individuals will review field authorization requests for concurrence:

    • Territory Manager of the employee initiating the authorization request;

    • Managers/Directors of other identified functions/units affected or that should be involved (e.g. LMSB, Appeals, Counsel, etc.)

    • Area Disclosure Officer

    • Headquarters Program Manager if appropriate. i.e. non-filer, Examination Specialization Program, IRA penalties, etc.

    • Headquarters CIP Program Analyst

    Final approval will be the Chief, Criminal Investigation/Director, Fraud/BSA, and the Director EPD. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

4.17.4.4.5  (02-25-2010)
LMSB Review, Concurrence and Approval for Authorization Requests from the Field/ Headquarters Offices and LMSB International Compliance Strategy & Policy

  1. The following individuals will review authorization requests submitted by an LMSB office for concurrence:

    • Territory Manager/Headquarters Manager of the employee initiating the authorization request;

    • Disclosure Officer (only if third party data is being gathered on individuals)

    • Director Field Operations/Deputy Director/Director International Compliance Strategy & Policy

    • Designated Headquarter/Industry Analyst or the PSP for Foreign Resident Compliance responsible for CIPs

    • LMSB CIP Analyst

    After all individuals have concurred with the CIP, the CIP is presented to the LMSB CIP Oversight Committee for approval recommendation. This information will be documented in the minutes of the meeting. If the CIP is recommended for approval, then the CIP is finally approved by the Planning, Quality, Analysis & Support (PQAS), Operations Planning & Support Senior Manager as well as the PQAS Director. A copy of the approved Part Two CIP Authorization must be forwarded to the SB/SE CIP Program Analyst so the CIP database can be updated.

4.17.4.5  (02-25-2010)
Modifications to CIPs

  1. Minor modifications may be made to CIPs. The modifications should be documented by notation or addendum to the original authorization request. Examples of minor modifications include:

    • Expansion to other return types;

    • Name changes;

    • Expansion to other Post of Duty; and

    • Expansion to subsequent tax years.

    Minor modifications must not change the intent of the original CIP.

  2. Major modifications, those that change the intent of the original CIP, require the submission of a new authorization request (refer to IRM 4.17.4.3. for Part One CIP and IRM 4.17.4.4 for Part Two CIP). Examples include:

    • Changing the market segment

    • Introducing a new use for external data

    • Change or expansion of issues (except those related to the original issue(s)

    .

4.17.4.6  (02-25-2010)
Extension of Project

  1. If it is necessary to extend a project beyond the completion date, approval is required.

  2. An extension should be requested once the decision has been made that additional time beyond the project's projected completion date is needed.

    Note:

    The extension must be approved prior to the expiration of the project completion date. Requestors must factor into their timelines adequate time for the project extension to be reviewed and approved. It is recommended that CIP extension request be submitted for approval 60 business days before expiration.

  3. No extension is needed to complete project returns already in process (i.e., returns for which the taxpayer has been contacted, or the returns have already been selected for examination in connection with an Authorization and updated to Status 10 or above. However, returns in Status 08 and below, with no taxpayer contact may not be started after the project completion date. See IRM 4.17.4.1.

  4. For CIP purposes, returns are considered started the day they are placed in the audit pipeline (status 10). As long as status 10 occurs prior to the expiration of the CIP, the return is considered a valid timely started CIP return.

4.17.4.6.1  (02-25-2010)
SBSE Extensions

  1. If it is necessary to extend a project due to events not anticipated when the original authorization request was submitted, a document must be submitted detailing reasons for extension. A CIP is approved for extension in the extension of time section on the original authorization document (Form 13502, Part 1, or Form 13498, Part 2 CIP). The extension must be approved at the level of the official approving the original CIP. A copy of the Extension must be forwarded to the SB/SE CIP Program Analyst.

  2. The Director EPD must approve all extensions exceeding 6 months beyond the original completion date.

4.17.4.6.2  (02-25-2010)
LMSB Extensions

  1. If it is necessary to extend a project due to events not anticipated when the original authorization request was submitted, a document must be submitted detailing reasons for extension. A CIP is approved for extension in the extension of time section on the original authorization document.

  2. LMSB Field & Headquarter Operations

    • All Part One CIP extensions must be approved by the Director, Field Operations (DFO)/Deputy Director/Director, International Compliance Strategy & Policy and the PQAS, Operations Planning & Support Senior Manager. A copy of the Part One CIP extension must be forwarded to the SB/SE CIP Program Analyst.

    • All Part Two CIP extensions must be presented to the LMSB CIP Oversight Committee. This must be documented in the minutes of the meeting. Final approval is obtained from the Operations Planning & Support Senior Manager and the LMSB Planning, Quality, Analysis and Support (PQAS) Director. The LMSB CIP Analyst will coordinate final extension approval. A copy of the Part Two CIP extension must be forwarded to the SB/SE CIP Program Analyst.

4.17.4.7  (02-25-2010)
Project Termination and Report

  1. CIPs should be terminated prior to the authorized completion date when any of the following conditions have been met:

    • Noncompliance has been addressed.

    • Resources are no longer available.

    • Other circumstances indicate that the project is no longer viable.

  2. A termination report, Form 13497, Compliance Initiative Project Authorization - Termination Report, hereinafter referenced as termination report, must be submitted when substantially all cases have closed, but no later than 9 months after the project completion date including extensions, per the authorization.

  3. If a Part One CIP expanded to a Part Two CIP, (due to the results derived in the Part One CIP Authorization request) then the Part One CIP is considered automatically terminated and no report is needed.

  4. CIP inventory in the pipeline when a termination report has been prepared, approved, and submitted should be updated with a National office Tracking Code - 9518 (CIP Cases Closed After Issuance of Termination Report.) This will allow for the distinction between the inventory (before and after the termination report).

    Note:

    After the completion date (including extensions), no new taxpayer contacts may be made on cases that were not in the audit pipeline. Cases shipped to groups and updated to status 10 are considered to be in the audit pipeline for CIP purposes. Also, no new cases should be built with project data after the project completion date (including extensions.) Cases below status 10 may not be updated to status 10.

4.17.4.7.1  (02-25-2010)
SBSE Terminations

  1. The termination report will be prepared by the project coordinator and approved the person/position(s) who approved the CIP/Extension. A copy of the termination report must be forwarded to the SB/SE CIP Program Analyst.

4.17.4.7.2  (02-25-2010)
LMSB Terminations

  1. LMSB Field & Headquarter Operations

    • All Part One CIP Terminations must be approved by the Director, Field Operations (DFO)/Deputy Director/Director, International Compliance Strategy & Policy and the Planning, Quality, Analysis & Support (PQAS), Operations, Planning & Support Senior Manager. A copy of the Part One Termination must be forwarded to the SB/SE CIP Program Analyst.

    • All Part Two CIP Terminations must be presented to the CIP Oversight Committee. This must be documented in the minutes of the meeting. Final approval is obtained from the Operations Planning & Support Senior Manager and the LMSB Planning, Quality, Analysis and Support (PQAS) Director. The LMSB CIP Analyst will coordinate final termination approval. A copy of the Part Two CIP Termination must be forwarded to the SB/SE Program Analyst.

4.17.4.8  (02-25-2010)
Monitoring and Status Reports

  1. CIP coordinators are expected to regularly monitor projects to determine if they are still viable and proceeding according to the project authorization.

  2. During Headquarters reviews, CIP Coordinators will be asked for documentation of monitoring activities. See IRM 4.17.2.2 (1) regarding the use of the CIP Data Overview Report (DOR).

4.17.4.9  (02-25-2010)
National CIPs

  1. If the CIP issue and market segment are national in scope, a national CIP should be considered. It can originate in the Area or in the Headquarters, Campus, or Speciality functional units.

  2. The Headquarters Functional Program Analyst, Manager and Director should review field authorization requests prior to submission to the Headquarters CIP Program Analyst.

  3. Headquarters will retain the original authorization request after approval. Copies will be provided to the PSP Territory Managers/Field Director, Compliance Services for dissemination to PSP Territory Managers/Operations Managers.

  4. The Headquarter's SB/SE CIP Program Analyst will coordinate with other divisions where the CIP crosses business operating units.

4.17.4.10  (02-25-2010)
Cross-Operating Division CIP Approval Process

  1. The Operating Division CIP Coordinator (SB/SE, LMSB) will coordinate with their counterpart when it is determined that the CIP affects another division.

  2. In addition to the other approval channels, cross-operating division CIPs require the approval of the applicable division Commissioner or his/her delegate.

4.17.4.11  (02-25-2010)
Compliance Initiative Project Forms

  1. Form 13502,Compliance Initiative Project Authorization - Part One, This form is used to request a Part One CIP Authorization.

  2. Form 13498,Compliance Initiative Project Authorization - Part Two, this form is used to request a Part Two CIP Authorization.

  3. Form 13497,Compliance Initiative Project Authorization - Termination Report, - This form is used to prepare the termination report.


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