4.75.16  Case Closing Procedures (Cont. 1)

4.75.16.5  (02-15-2013)
Special Situations

  1. Certain situations may arise during an audit. This section covers in depth procedures for:

    • Automatic revocations IRC 6033(j) (IRM 4.75.16.5.2)

    • Form 990-N closures (IRM 4.75.16.5.5)

    • Inadequate records (IRM 4.75.16.5.6)

    • Status 36 cases (IRM 4.75.16.5.9)

    • Terminations (IRM 4.75.16.5.10)

    • Unable-to-locate cases (IRM 4.75.16.5.11)

  2. Other common situations may arise. This section also directs you to the appropriate manuals for:

    • Administrative records (IRM 4.75.16.5.1 and IRM 4.75.32)

    • Closing agreements (IRM 4.75.16.5.4 and IRM 4.75.25)

    • Employment tax classification settlement program agreements (IRM 4.75.16.5.3 and IRM 4.23.6)

    • Installment agreements (IRM 4.75.16.5.7 and IRM 4.20.4)

4.75.16.5.1  (02-15-2013)
Administrative Record

  1. Administrative records are the written records of the administrative proceedings between the Service and exempt organizations. Administrative records are required for all unagreed audit cases subject to IRC 7428 declaratory judgment actions.

  2. Declaratory judgment actions apply to cases involving an organization’s initial or continuing qualification or classification as:

    1. An organization described in IRC 501(c)(3) or IRC 170(c)(2).

    2. A private foundation defined in IRC 509(a).

    3. A private operating foundation defined in IRC 4942(j)(3).

    4. A farmer’s cooperative under IRC 521(b).

  3. Declaratory judgment actions also apply to cases involving adverse foundation status classifications under IRC 509(a).

  4. For directions on preparing the administrative record, see IRM 4.75.32.

4.75.16.5.2  (02-15-2013)
Auto Revocations Under IRC 6033(j)

  1. With the passage of the Pension Protection Act of 2006, tax exempt organizations that fail to file an annual return or electronic postcard (Form 990-N) for three consecutive years are subject to automatic revocation of tax exempt status. An automatic revocation is reflected on the EOBMF status code field as "Status 97" . Ogden Campus posts a status 97 even if the organization is under audit. If a Status 97 posts while an organization is under audit and the taxpayer has received a notice CP120A, the agent must survey the case following procedures in this section.

    Note:

    This is effective only for tax periods beginning after 2006.

    Note:

    Employment tax returns and Chapter 42 tax returns are not subject to these procedures.

  2. An At Risk Organization, (pending status 97), is an organization exempt under IRC 501(a) where:

    • The organization failed to file annual EO information returns (Forms 990, 990-EZ, 990-PF, 990-BL ) or e-Postcard for three consecutive tax years by the due date of the third non-filed tax year, and

    • EOBMF Status 97, statutory automatic revocation, is pending. The pending period could last about six to seven months after the due date for the return for the third non-filed tax year.

    An organization is considered at-risk even if returns were postmarked (or received by the agent) on or before the due date of the return for the third non-filed tax year, but there is no TC 150 posted as of such due date. An at-risk status (pending status 97) can only be resolved by posting the following:

    • Status 97 up to six to seven months later (resulting in automatic revocation), or

    • TC 150 several weeks after the return due date for the third tax year, reflecting timely filed returns (resutling in continuation of tax-exempt status).

    Note:

    A substitute for return (SFR) with a TC 150 is not a filed return for automatic revocation purposes. However, it can prevent an automatic revocation from posting. Agents should contact the FAST if he/she believes an SFR prevented a status 97 to post.

    Note:

    For IRC 501(c)(12) and IRC 501(c)(15) organizations, the posting of an 1120 series tax return in lieu of Form 990 due to failing their respective annual computational tests is considered a filed return, satisfying the filing requirements for automatic revocation purposes.

    Reminder:

    EOBMF exemption status and AIMS status are not the same thing.

  3. A Pre-at-risk organization, exempt under IRC 501(a), is one that:

    • Failed to file annual information returns (Forms 990 , 990-EZ , 990-PF , 990-BL ) or e-Postcard for two consecutive tax years.

    • under audit during the third tax year (or its "filing season" ) following two consecutive non-filed tax years. A "filing season" for a 2012 calendar year organization is January 1 through May 15, 2013.

  4. For project cases, notify the CSCI project analyst and team leader if a case is in either EOBMF Status 97 or at-risk status

  5. Process EO-only returns in inventory for a taxpayer that is either in EOBMF Status 97, at-risk status, or pre-at-risk status as follows:

    If the AIMS Status for
    EO Returns is...
    and, the Organization’s Exempt Status is... Course of Action Solicitation
    of Returns
    AIMS Status 10, or AIMS Status 12 with initial contact only
    Status 97,

    At-Risk
    (Pending Status 97), or

    Pre-at-risk
    Survey AIMS accounts. See IRM 4.75.16.3.2.2 and IRM 4.75.16.3.2.3. See Note 1 below this table.

    Prepare Pattern Form 1900 for the case file. Exhibit 4.75.16-10.
    N/A
    All other AIMS Status 12, or AIMS Status 13 Status 97 Survey AIMS accounts after verifying that organization is listed as automatically revoked, and has received a Notice CP120A. See Notes 1 and 2 below this table. See IRM 4.75.16.3.2.2 and IRM 4.75.16.3.2.3

    Issue the closing letter in Exhibit 4.75.16-9.

    Prepare Pattern Form 1900 for the case file. See Exhibit 4.75.16-10.
    Do not solicit EO returns.

    If filed, submit returns for processing to the FAST Unit See Note 3 below.
    At-Risk (Pending Status 97)
    Suspend the audit using AIMS Status 39 until EOMF Status 97 posts, or until TC 150 posts indicating a timely filed return by the due date of the third consecutive non-filed tax year, unless there is a "compelling reason" to continue the audit.

    Suspense begins the day after the due date of the third non-filed consecutive tax year.


    Continue to protect the statute of limitations for filed returns under audit.
    Do not solicit EO returns.

    If filed, hold EO returns until a Status 97 posting on EO BMF. Prepare the returns for processing per IRM 4.75.22.4
    Pre-at-risk

    Expedite completion of the audit to prevent suspension of the case. Do one of the following by the 15th day of the 4th month into the filing season for the third tax year following two consecutive non-filed tax years (April 15 for calendar year organizations):

    (1) If the organization is required to file annual EO returns, send secured returns to the FAST for posting. Request expedite processing on the Form 3198-A attached to the returns. An organization that is eligible can file Form 990-N electronically.



    (2) If the organization is not required to file annual EO returns (or e-postcard), send Form 2363-A to the FAST in order to post a change in filing requirement reflecting the organization was not required to file annual EO information returns and e-postcard.





    Be proactive in assisting your taxpayers to file complete EO returns (or Form 990-N, if eligible) in order to avoid suspension of the case (at-risk status) and automatic revocation.




    For Pre-at-risk cases to be closed to Mandatory Review, close the case to Mandatory Review by the end of the third tax year following two consecutive non-filed tax years (December 31 for calendar year taxpayers). This should allow a Form 2363-A reflecting exam results to post by no later than the due date of May 15 of the following year for a calendar year taxpayer, thereby preventing an automatic revocation, and allowing exam results to post.


    If you do not meet these time frames, your case may become at-risk for status 97 (requiring suspension at group level), and ultimately auto-revoked (requiring survey after assignment).


    Solicit EO returns and expeditiously submit them for processing to the FAST. The FAST must receive returns in enough time before the due date of the third non-filed tax year to post a TC 150 by that date. See Note 3 below.
    Note 1: Coordinate any surveyed account with project leaders or CSCI team members, if applicable.

    Note 2: Check the Automatic Revocation of Exemption List at the Charities & Non-Profits tab in www.irs.gov. Use EO Select CheckEO Select Check to access this database. An organization will be deemed to have received Notice CP120A two weeks after the posting date on the automatic revocation list. The date posted to the list is the same date the CP120A was generated and mailed to the taxpayer by Ogden Campus.

    Note 3: Follow delinquent return and remittance procedures per IRM 4.75.22, except that:
    1. Do not establish returns on AIMS

    2. Do not apply delinquency penalties

    3. On Form 3198-A for both late and timely returns, check "Other" box in the Expedite Processing section, and state, "AT-RISK FOR AUTO-REVOCATION"

    4. Prepare Form 4844 and send to the FAST Unit for processing

    5. Send returns and payments to the FAST. Payments must be submitted within 24 hours of receipt.


  6. The Director, EO Examination's delegate approves all cases determined to have a "compelling reason for audit" . Submit the request to continue the audit to the Director's delegate by secure e-mail. The following are examples of compelling reasons:

    • You developed a case to the point where you reasonably believe there is a substantial tax liability under Chapter 42, and the government and the public interest would better be served by recognizing an earlier effective date of revocation for a noncompliant organization, only possible by issuing an examination report.

    • Referral cases from the U.S. Justice Department or IRS Criminal Investigations, if the act of surveying the returns will jeopardize criminal proceedings.

    • Certain claim cases that must continue to be audited in order to ascertain the correctness of the claim.

  7. If an organization:

    • Is in at-risk status (pending status 97) longer than six months after the due date for the return of the third non-filed tax year, or

    • Has a TC 150 for a substitute for return that could prevent a lawful posting of Status 97,

    Contact the FAST by fax or e-mail. The FAST will help agents resolve these accounts by doing the following:

    • Determine if the organization is subject to auto-revocation

    • Through IDRS research, identify issues that have restricted the auto-revocation process

  8. If a taxpayer under audit claims that its exempt status was auto-revoked (Status 97) in error, carefully investigate if an auto-revocation was truly in error. If you are convinced that the exempt status was auto-revoked in error, ask the taxpayer to produce a written request for reinstatement of tax-exemption and the reasons. Unless you are already in possession of sufficient evidence, ask the taxpayer to produce evidence to support their contention. Submit all supporting documents to the FAST, who will then make the necessary changes. The case will remain in AIMS Status 39 until the issue is resolved. If the organization was correctly auto-revoked, close the case as described above for Status 97 cases. If the exemption is restored, continue your audit and reinstate AIMS Status 12.

  9. Identify at-risk (pending status 97) organizations and status 97 organizations with either Project Definer Codes (PDC) 1160, Assign to the Initial Primary Return, or 1161, Assign to Additional Return Pick-ups.

  10. Cases are not subject to Mandatory Review merely because an organization is auto-revoked under IRC 6033(j).

4.75.16.5.3  (02-15-2013)
Classification Settlement Program Agreements

  1. Employment tax cases that involve worker reclassification may result in Classification Settlement Program (CSP) agreements. These agreements are only available for worker reclassification issues, and are not available outside of audits.

  2. When auditing a worker reclassification issue, consult IRM 4.23.6 for directions on CSP agreements.

4.75.16.5.4  (02-15-2013)
Closing Agreements

  1. Closing agreements are used to resolve matters that cannot be resolved through normal compliance processing procedures and to encourage future voluntary compliance. See procedures for closing agreements in IRM 4.75.25.

  2. Taxpayers may request closing agreements, either during the audit, or by voluntarily contacting the Area Office outside the context of an audit (normally referred to as "walk-in" closing agreements). Taxpayers must meet certain requirements to qualify for a closing agreement. Walk-in requests must be forwarded to the EO Examinations Closing Agreement Coordinator (Attn: EOCAC) in Mandatory Review.

4.75.16.5.5  (02-15-2013)
Form 990-N

  1. Follow normal audit closing procedures.

  2. To recognize a Form 990-N filing on BMFOLT, refer to the 4th and 5th digits of the DLN containing "8" and "9" respectively, or by checking online at the select check site, http://www.irs.gov/app/ePostcard.

    Note:

    Note that Form 990-N is not a "return" even if filing one creates a TC 150. It does not start the statutory period of limitations for assessment, even if one is automatically generated. See Treas. Regs. 1.6033-6(c)(3) and (4).

  3. If you determine that an organization was required to file an annual information return, solicit the delinquent return(s) for each tax year for which there is a filing requirement. See IRM 4.75.22.6.4 (11/21/2010).

  4. A dummy Form 990 must be in the case file.

4.75.16.5.6  (02-15-2013)
Inadequate Records

  1. IRC 6001 provides that every person liable for any tax imposed by Title 26, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and Regulations as the Secretary or his delegate may from time to time prescribe.

  2. Whenever in the judgment of the Secretary or his delegate, it is necessary, he may require any person, by notice served upon such person or by Regulations, to make such returns, render such statements, or keep such records, as the Secretary or his delegate deems sufficient to show whether or not such person is liable for tax under Title 26.

  3. IRC 6033 provides, in general, that every organization exempt under IRC 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the Internal Revenue laws as the Secretary may by forms of regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and Regulations as the Secretary may from time to time prescribe.

  4. Treasury Regulation Section 1.6001-1(c) provides, in part, that organizations exempt from tax under IRC 501(a) shall "keep such books and records as are required to substantiate the information required by IRC 6033."

4.75.16.5.6.1  (02-15-2013)
Inadequate Records Notice

  1. An "Inadequate Records Notice" places taxpayers on notice that their record keeping practices are deficient and must be improved to meet the requirements of the law. The issuance of an Inadequate Records Notice may result in a follow-up audit or compliance check. The notice is a tool to enforce compliance with the requirement to keep adequate records for filing complete and accurate returns.

  2. The following items together constitute an "Inadequate Records Notice" (the Notice) for issuance by Mandatory Review:

    1. Modified Letter 4095. See Exhibit 4.75.16-20.

    2. If agreed, signed Form 2807.

    3. If unagreed, attachment titled, Explanation of Inadequate Records. Form 2807 is not used since the title implies an agreement. This notice must be sent by certified mail.

      Note:

      Explain the reason the records were inadequate on the top of the page. Copy the list of inadequate records from Form 2807, and paste them onto bottom half of the page.

    4. Attachment titled, Applicable Provisions of the Internal Revenue Code and Regulations

    5. If applicable, attachment titled, Other Deficiencies Identified in the Examination.

      Note:

      List other defects noted in the audit. These include examples such as engaging in excessive lobbying activities, or failure to file other returns. Title the attachment: "Other Deficiencies Identified in the Examination"

  3. Use your judgment to determine whether a taxpayer has:

    • Maintained adequate records

    • Complied with a record retention agreement

  4. Consider the facts and circumstances, including (but not limited to) the following factors:

    1. Prior history and present degree of noncompliance

    2. Indications of willful intent

    3. Evidence of refusal to keep records

    4. Other evidence of harm to the Government

    5. Probability that poor record keeping results in significant changes to the return

    6. Likelihood that compliance can be enforced if the taxpayer fails or refuses to correct the inadequacies

    7. Anticipated revenue in relation to the time and effort required to obtain compliance

  5. If the taxpayer has failed to maintain adequate books and records, discuss the inadequacies with your group manager to determine whether to issue an Inadequate Records Notice.

  6. When discussing the inadequate records issue with the taxpayer:

    1. Avoid criticizing the work of the taxpayer's employees, accountants, or attorneys in a way that would suggest wrongdoing or negligence.

    2. Focus on explaining how the taxpayer's books and records are inadequate.

    3. Explain the steps that need to be taken to bring them into compliance with applicable statutes.

  7. Document:

    1. The nature of the inadequacies of the taxpayer's records

    2. Managerial discussions

    3. The basis for the conclusion reached

    4. The date the organization was verbally informed that records were not adequate, on Form 5464 and in the record of service section on the bottom of the attachment to Modified Letter 4095 titled, Applicable Provisions of the Internal Revenue Code and Regulations

    5. The date of delivery or service of Form 2807 on Form 5464, and in the record of service section on the bottom of the attachment to Modified Letter 4095 titled, Applicable Provisions of the Internal Revenue Code and Regulations. If certified-mailed, the return receipt constitutes record of service. Attach it to the copy of the Form 2807 retained in the case file. If hand-delivered, include the name of the individual served

    6. The date you solicited an agreement, on Form 5464, and in the record of service section on the bottom of the attachment to Modified Letter 4095 titled, Applicable Provisions of the Internal Revenue Code and Regulations

  8. If the case involves a potential or existing record retention agreement, contact the Large Business and International (LB&I) Operating Division. Use the Specialist Referral System (SRS) to obtain the assistance of a Computer Audit Specialist.

  9. If you and your group manager agree that an Inadequate Records Notice is appropriate, take the following steps:

    1. Prepare Form 2807Agreement to Maintain Adequate Books of Account and Records. See Exhibit 4.75.16-11. Include the date the taxpayer was verbally notified that the records were inadequate or not in compliance with a record retention agreement; the tax years examined; a description of the specific books and records; and, a clear and concise statement specifying how the taxpayer's records were inadequate or not in compliance with a record retention agreement.

    2. Personally serve Form 2807 or send by certified mail. If you hold a closing conference with the organization, serve Form 2807 to an officer or trustee authorized to sign tax returns. Allow no more than 15 days.

    3. Solicit an agreement with the taxpayer on Form 2807.

    4. If the taxpayer does not sign Form 2807, discuss the facts and circumstances with your group manager.

      Reminder:

      Document all managerial discussions.

    5. Print the attachments to Modified Letter 4095, which are listed in paragraph (2). Paperclip them to Form 2807. Place the documents where closing letters would go according to case file assembly instructions. See paragraph (2) above for list of attachments. Indicate "Exhibit 4.75.16-20, Modified Letter 4095" at the heading of Form 5772 and in the Mandatory Review section of Form 3198-A.

    6. Prepare Form 5666, TE/GE Referral Information Report. State in the "Information Obtained" section that the package is documentation for an Inadequate Records Notice. See instructions at Exhibit 4.75.16-8.

      Note:

      Recommend a follow-up audit on Form 5666 for no less than two years subsequent to the year of the current audit.

    7. Place the Form 5666 on the left hand side of the folder, even if the case is totally electronic.

    8. Form 5599. Use Disposal Code 08, Written Advisory - Form 5666 Required. Close the case to Mandatory Review. Mandatory Review will mail the Notice of Inadequate Records after the review is completed.

4.75.16.5.6.2  (02-15-2013)
Follow Up Procedures After Issuance of Inadequate Records Notice

  1. You may be assigned a follow up audit or compliance check of the taxpayer. Document in your workpapers your consideration of the inadequate record-keeping issue. State whether or not the taxpayer has corrected the inadequacies.

  2. If the taxpayer is substantially complying with requirements to keep adequate records, follow normal audit procedures with regard to the scope of the audit.

  3. When closing the case, include the inadequate records notice information in the case file.

  4. If, upon follow-up, the taxpayer is still not keeping adequate records, consider additional enforcement measures, including:

    • assertion of accuracy penalties

    • revocation

4.75.16.5.6.3  (02-15-2013)
Revocation Due to Inadequate Records or Failure to Provide Requested Information

  1. Every organization which is exempt from tax, whether or not it is required to file an annual information return, must submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F, Chapter 1 of subtitle A of the Code, IRC 6033, and Chapter 42 of subtitle D of the Code. Treas Reg 1.6033-2(1)(2).

  2. Any organization exempt from tax under IRC 501(a) is required to supply the Service with such information as is required by the revenue procedures and the instructions for Form 990, Return of Organization Exempt From Income Tax, and Schedules thereto and to keep such books and records as are necessary to substantiate such information. IRC 6033 , Treas. Reg. 1.6001-1(c) and Treas. Reg. 1.6033-2(a)(1) and 1.6033-2(i)(2).

  3. Failure to maintain proper books and records, and make them available to the agent, may result in revocation of tax-exempt status because the organization is not observing the conditions required for such status.

    Caution:

    Except in unusual circumstances, do not propose revocation due to inadequate records unless an Inadequate Records Notice was issued as a result of a prior audit.

  4. Although drafted prior to enactment of IRC 6652 , Rev. Rul. 59-95 has never been withdrawn and can be used to support a revocation, where the organization will not supply the information necessary to enable the Service to make a determination as to whether there have been any substantial changes in the organization's character, purpose, or method of operation, and there is a substantial doubt that the organization should continue to be exempt.

  5. If the organization has continued to fail to comply substantially with the law and regulations for maintaining adequate books and records, or fails to provide requested information, discuss the inadequacies with your group manager to determine whether to propose revocation of tax-exempt status.

  6. If you and your group manager decide revocation is appropriate, your workpapers and report of examination must demonstrate:

    1. How the information requested from the taxpayer is material in establishing the organization's right to continued exemption.

    2. That the organization was given an adequate opportunity to provide the requested information.

    3. That the organization was advised of the consequences of failing to provide such information.

    Note:

    Group Manager: consider requesting advice from Area Counsel during the development of a revocation issue based on the failure to maintain or provide records.

4.75.16.5.6.4  (02-15-2013)
Appeal Rights - Form 2807

  1. An Appeals conference is not given to taxpayers who agree to proposed adjustments but do not execute Form 2807.

  2. If the taxpayer does not execute Form 2807and the case is unagreed, the taxpayer will be informed of the further opportunity to discuss the matter at an Appeals conference.

4.75.16.5.7  (02-15-2013)
Installment Agreements

  1. For situations where payments are secured from a taxpayer, see IRM 4.75.22.4.1, Payment Processing for instructions on how to process the payment.

  2. For situations where the taxpayer is unable to pay in full, regardless of whether the payment is for a delinquent return, a proposed assessment, or a current outstanding balance, see IRM 4.20.3, Soliciting Payment, for guidance. This manual discusses use of the tiered interview to determine the faster time frame in which full payment may be secured.

  3. If the taxpayer requests an installment agreement (a situation where a balance is not paid within 120 days), see IRM 4.20.4, Installment Agreements, for guidance. EO Examination agents have the same authority with respect to installment agreements as SB/SE Examination agents.

  4. The completed Form 3177, Notice of Action for Entry on Master File, with TC 971 AC 043, will be faxed or secure e-mail to the FAST unit. Form 9465, Installment Agreement Request, for individuals should be forwarded to the appropriate service campus for processing by the agent based on the instructions to these forms. A copy will be placed in the audit workpapers for information purposes only.

4.75.16.5.8  (02-15-2013)
Not Required to File Form 990

  1. As a general rule, it is necessary to establish a return on the AIMS/BMF database before closing a case to ESS.

  2. If, during the course of an audit, it is determined a non-filing organization was in fact not required to file a Form 990 or Form 990-N, the AIMS/NMF account with a dummy return in the file is sufficient to close the audit.

  3. The types of organizations not required to file a Form 990 include:

    • Organizations under a group ruling who are included on the parent organization's return

    • Churches, their integrated auxiliaries, and conventions or associations of churches, and

    • Certain IRC 527 political organizations.

    Note:

    Organizations described in Treas. Reg. 1.6033-2(g)(1) as supplemented by Rev. Proc. 95-48, Rev. Proc. 96-10, and Rev. Proc. 2011-15, are excepted from filing annual information returns. However, an organization that is excepted from filing annual information returns because it normally does not receive more than $50,000 ($25,000 for tax years beginning prior to 2010) in annual gross receipts must file Form 990-N.

    Note:

    IRC 509(a)(3) organizations are required to file Form 990 or 990-EZ, except for IRC 509(a)(3) supporting organizations, the gross receipts of which are normally not more than $5,000, that supports an IRC 501(c)(3) religious organization. Such a supporting organization must file Form 990-N.

  4. If, during the course of an audit, it is determined the non-filing organization no longer qualifies for exempt status resulting in either proposed revocation or termination, follow these steps:

    1. Establish a module on master file via RCCMS using Push Code 036 to generate a Substitute for Return. The TC 150 will post within two cycles.

    2. Prepare a Form 10904, electronically signed by the group manager to delete the AIMS NMF establishment once the MF TC 150 has posted.

    3. When the agent has completed the audit, the case should be forwarded on RCCMS to Mandatory Review.

    4. Form 10904 will remain with the case file (uploaded to RCCMS) until completion of the case by Mandatory Review at which time it will be forwarded to the AIMS Coordinator in ESS for processing.

  5. In all other circumstances, it is necessary to establish Form 990 returns on AIMS/BMF before closing the case to ESS.

4.75.16.5.9  (02-15-2013)
Status 36 Cases

  1. In status 36 cases, a taxpayer declares tax-exempt status under IRC 501(c) other than IRC 501(c)(3), 501(c)(9), and 501(c)(17) for specified tax years by filing Form 990. The taxpayer has not:

    • Submitted a Form 1024, Application for Recognition of Exemption Under Section 501(a) or

    • Received a favorable ruling or determination letter from the Internal Revenue Service (IRS) granting tax-exempt status under IRC 501(a).

  2. Because these organizations were never recognized as tax-exempt, they cannot be revoked or modified. Agents must determine whether the organization qualifies for tax-exempt status for the specific tax years under audit.

  3. If the organization qualifies for the exempt status it declared on Form 990, the examination will be treated like any other audit of a tax-exempt organization; for example, a status 36 organization could be subject to UBIT, and public disclosure requirements of EO's.

  4. Encourage taxpayers to apply for tax exempt status. A user fee schedule is provided in Rev. Proc. 2012-8 (updated annually). EO Examinations does not have the authority to demand taxpayers to apply for tax-exempt status.

  5. If a status 36 organization fails to meet the requirements for any tax year declared to be exempt, EO agents will issue a report of examination and 30-day letter over the qualification issue.

    1. For agreed disqualifications, solicit tax returns for the examined tax years and all subsequent tax years.

    2. If a tax return is secured, follow delinquent return procedures.

    3. Prepare Form 2363-A. See Exhibit 4.75.16-14.

    4. Prepare Form 5666 for SB/SE or LB&I, or enforce the income tax. See IRM 4.75.31 for procedures on enforcing income taxes.

  6. Use DC 13 (501), Referrals to Other Operating Divisions, for agreed and unagreed without protest disqualifications unless a higher priority disposal code applies. There are six scenarios which present common resolutions for status 36 cases. See Exhibit 4.75.16-12 for the scenarios and the procedures for processing each one.

    Note:

    Unagreed without protest Status 36 disqualification cases need not close to Mandatory Review, unless mandatory review is required for other reasons.

  7. The list of letters used in Status 36 cases in Exhibit 4.75.16-12 are listed as follows:

    • Letter 4097, Status 36 Case - Not described in any Code section - Agreed - Form 1120 Secured. This letter is a closing letter.

    • Letter 4098, Status 36 Case - Not described in any Code section - Unagreed Form 1120 Not Secured. This letter is a 30-day letter.

    • Letter 4099, Status 36 Case - Described in Code section other than what 990 was filed under - Agreed. This letter is a closing letter.

    • Letter 4100, Status 36 Case - Described in other section but taxpayer is not interested - Agreed - Form 1120 Secured. This letter is a closing letter.

    • Letter 4101, Status 36 Case - Described in other section but taxpayer is not interested - Form 1120 Not Secured. This letter is a 30-day letter.

    • Letter 4102, Status 36 Case - No Change. This letter serves as an advisory letter.

  8. All no-change closing letters for Status 36 cases are advisories that must, at a minimum advise the taxpayer about the application for exemption. Consequently, disposal Code 02 (107), No Change, cannot be used for Status 36 cases.

    Reminder:

    In advising the organization about the application for exemption, remember that such organizations are not required to apply for tax-exemption. Only IRC 501(c)(3), (9) and (17) organizations are required to apply for tax-exemption.

4.75.16.5.10  (02-15-2013)
Terminations

  1. The Service can not initiate the termination of an organization. Most tax-exempt organizations that end their operations, either through shutting down, transferring their assets or merging with another tax-exempt organization, must inform the IRS about the details of the action. This can be in the form of filing a final return with the Ogden Service Center.

  2. Only an organization can initiate a termination by formally dissolving its structure and distributing its assets. Refer to Publication 4779, Facts about Terminating or Merging Your Exempt Organization, for information available to taxpayers.

  3. This subsection provides criteria and procedures for EO agents to recognize a proper termination, whether or not the Service has been previously notified (such as by a final return or by notification of the Determinations function).

  4. Organizations that have received a ruling or determination letter granting tax-exempt status under IRC 501(c) or 501(d) are subject to these termination procedures.

  5. Organizations can be terminated by Ogden Campus due to inactivity. However, terminations by Ogden Campus may be reversible if the organization later becomes active.

  6. EO Rulings and Agreements issues a "determination letter" recognizing a proper termination. See termination letter 2242 issued by EO Rulings and Agreements at Exhibit 7.21.5-41.

  7. EO Examinations has the responsibility to resolve a formal dissolution and final distribution of assets as either proper or incomplete, whether or not the entity is already in EOMF Status 20. Some termination cases may be referrals from EO Rulings and Agreements.

  8. In those cases where the organization is automatically revoked (Status 97) or in pending Status 97, the agent will survey or suspense the EO return under audit. See IRM 4.75.16.5.2.

  9. In those cases where the EO agent is unable to locate the organization or its officers, follow unable-to-locate procedures. See Exhibit 4.75.16-17. A termination can be considered proper and complete under the facts and circumstances in Examples 1 and 3 of that exhibit.

  10. In those cases where the EO decides to terminate while the audit is in process, the agent must continue with the examination for the specified tax years under audit, and issue a report of examination. If additional taxes need to be assessed, including taxes that may arise due to change in foundation status, do not terminate the organization.

  11. Agents are not required to print the termination letter. Agents will indicate the proper exhibit number in the "Letter Number" block at the heading of Form 5772 and in the Mandatory Review section of Form 3198-A. Termination letters are issued by Mandatory Review. See examples in IRM Exhibit 4.75.16-15., Exhibit 4.75.16-16 and Exhibit 4.75.24-3 for central organizations in a group ruling.

  12. Unlike termination letters issued by EO Rulings and Agreements, termination letters issued by EO Examinations constitute return information in the form of "examination closing letters" , and are not subject to public inspection, except to the extent the states must be notified under IRC 6104(c). See IRM 4.75.21.

  13. EO Exam termination letters are only issued if the organization satisfies all of the following criteria:

    • Final Returns. A complete and substantively correct final return must be secured. See IRM 4.75.16.5.10.1.

      Exception:

      Organizations that are not required to file annual EO information returns, such as churches. Organizations described in Treas. Reg. 1.6033-2(g)(1) as supplemented by Rev. Proc. 95-48, Rev. Proc. 96-10, and Rev. Proc. 2011-15, are excepted from filing annual information returns.

    • Secured Written Statement. A signed written statement by a principal officer of the EO showing the final disposition of any assets on hand at the date of dissolution must be secured. See IRM 4.75.16.5.10.2.

    • Dissolution Document. The agent must secure the appropriate dissolution document showing the organization has terminated its existence. See IRM 4.75.16.5.10.3.

  14. If the EO has properly terminated:

    1. Recommend the issuance of termination letters in Exhibit 4.75.16-15. and Exhibit 4.75.16-16 on the heading of Form 5772and on the Mandatory Review section of Form 3198-A. If the content of a termination letter must deviate from the exhibited pattern letters, the agent must prepare the letter with the group manager's approval.

      Note:

      Corporations can be "administratively dissolved" by the state where reinstatement is possible. The organization is not terminated. If you are not certain whether an organization is terminated by state law, consult with Area Counsel.

      Note:

      The termination letter at Exhibit 4.75.16-15 includes the sentence "Contributions to you are not deductible after [insert date]." Enter the date of dissolution.

    2. Prepare Form 2363-A, Request for IDRS Input for BMF/EO Entity Change, to update the status code on the EO/BMF to 20, Termination.

    3. Prepare Form 3198-A. Check the box for Mandatory Review. Type "Termination" on the line below. For IRC 501(c)(3) cases, check the box for Other Instructions. Type "IRC 6104(c) Notification Requirements" on the line to the right. Indicate the termination letter in Exhibit 4.75.16-15 or Exhibit 4.75.16-16 that must be prepared and issued by Mandatory Review.

    4. Prepare Form 5599 . Use Disposal Code 14, Termination, unless a disposal code with a higher priority applies.

  15. Follow case file assembly procedures and close the case to Mandatory Review.

    Reminder:

    Make sure that you have secured the dissolution documents. Termination cases without dissolution documents indicated in the table at IRM 4.75.16.5.10.3 will be returned to the groups.

4.75.16.5.10.1  (02-15-2013)
Termination - Final Returns

  1. In many instances the Service is informed of a termination by an organization filing a final return with the Ogden Service Center. However, in those cases where a final return has not yet been filed, you must secure the final return. Final returns are due 4 months and 15 days after the dissolution or termination is completed. Organization managers are responsible for filing final returns and are personally liable for penalties under IRC 6652(c)(2)(B) for failing to file final returns upon written demand.

    Exception:

    Under IRC 6043(b)(1), a church, integrated auxiliary of a church, or a convention or association of churches, are not required to file a final return.

  2. If an organization is required to file a final Form 990-N, it would have to be filed after the expiration of the tax year to which it pertains. Consequently the agent may not be able to recognize a termination without a final e-postcard filed. Unless the Form 990-N organization is willing to file a final Form 990, 990-EZ or 990-BL with the agent, do not wait for the current year to expire to recognize a termination. Instead, issue an advisory reminding the organization to file a final return before the due date for a final return, or to file a final Form 990-N after the end of the tax year, and that it must indicate that the organization is terminating or going out of business.

    Note:

    Organizations described in Treas. Reg. 1.6033-2(g)(1) as supplemented by Rev. Proc. 95-48, Rev. Proc. 96-10, and Rev. Proc. 2011-15, are excepted from filing annual information returns. However, an organization that is excepted from filing annual information returns because it normally does not receive more than $50,000 ($25,000 for tax years beginning prior to 2010) in annual gross receipts must file Form 990-N.

  3. A private foundation must file a final return on Form 990-PF.

  4. An IRC 509(a)(3) organization must file a final Form 990 or 990-EZ, even if it is described in Rev. Proc. 95-48 and Rev. Proc. 96-10.

    Exception:

    IRC 509(a)(3) supporting organizations, the gross receipts of which are normally not more than $5,000, that supports an IRC 501(c)(3) religious organization are not required to file an annual information return, but must file Form 990-N.

  5. A secured final return must be substantively correct and complete before recognizing a termination. A final return is not "correct" if the organization files a return that it is not eligible to file, such as Form 990-EZ or e-postcard. Note that Schedule N is required for Forms 990 and 990-EZ. A terminating organization that files a substantively incorrect or incomplete final return without reasonable cause can be subject to penalties and/or revocation, unless the missing information is provided or an amended return is secured.

  6. Generally, inactive organizations might not file their annual information returns or e-postcards. In such cases, automatic revocation or a pending auto-revocation status may preempt an examined closing. See procedures for automatically revoked organizations and organizations pending auto-revocation at IRM 4.75.16.5.2.

4.75.16.5.10.2  (02-15-2013)
Termination - Secured Written Statement

  1. The secured written statement must show the disposition of any assets on hand at the date of dissolution. Inspect copies of any final bank statements. Secure copies of evidence of actual disposition, such as a contemporaneous written acknowledgment from a recipient charitable organization.

  2. For the following IRC sections, verify that the assets were distributed as required by the specific subsection:

    • IRC 501(c)(3)

    • IRC 501(c)(9)

    • IRC 501(c)(12)

    • IRC 501(c)(16)

    • IRC 501(c)(19)

    • IRC 501(c)(22)

    • IRC 501(c)(27)

    • IRC 501(e)

    • IRC 501(f)

  3. Valid distributions for IRC 501(c)(3) include:

    1. For exempt purposes within the meaning of IRC 501(c)(3).

    2. To a state or local government for public purposes.

    3. To the federal government.

    4. To an entity/entities exempt under IRC 501(c)(3).

      Note:

      Consider the special distribution considerations for private foundations. See IRM 4.75.16.5.10.5 and 7.26.7.

  4. If the final distributions are improper, solicit correction. If no correction is made, consider revocation of tax-exempt status. For example, if the assets weren't distributed properly, tell the EO to recover the assets. Ask the EO to redistribute them properly.

    If the EO You are to
    Recovers and redistributes the assets Secure documentation of the redistributions
    Refuses to attempt to recover the assets Propose revocation for the year (or years) in which the distributions were made
    Tries to but cannot recover the assets Secure a written, signed statement by an officer of the actions taken by the EO. Confer with your manager as to proposing revocation or accepting the termination.

  5. Improper distributions may be taxable income to the recipients. If taxable, verify if they were reported on Forms 1099. If not reported, secure the delinquent information returns. Prepare a penalty file, if applicable.

  6. Verify if the income was reported on the recipient's tax return. If not, propose a discrepancy adjustment. See IRM 4.75.28, EO Discrepancy Adjustments. For those recipients who are not yet required to report the income, prepare a referral (Form 5666, TE/GE Information Report) to SB/SE for a current year audit.

    Note:

    If the organization was exempt under IRC 501(c)(3) or 501(c)(4), pursue an IRC 4958 assessment, if applicable.

4.75.16.5.10.3  (02-15-2013)
Termination - Dissolution Document

  1. Appropriate dissolution documents for terminations vary based on the type of entity.

    If the EO is... Then secure...
    A corporation,
    that has filed Articles of Dissolution with the State
    A complete copy of the articles of dissolution, and proof of filing with the state, such as a "date-filed" stamp. If incorporated in multiple states, obtain the documents for each state.

    Note:

    Some states require all taxes be paid before dissolution. Check the state's requirements.

    An association A resolution signed by at least two officers of the entity. The resolution must state the date of dissolution.
    A trust A copy of the court order dissolving the trust. If there is no court order, a resolution signed by at least two trustees. The resolution must state the date of dissolution.
    An organization chartered by a parent organization in a group exemption ruling See IRM 4.75.24.4

  2. If there is conflicting information about whether an organization is dissolved, secure a statement signed by a majority of the officers, directors, or trustees, stating they agree to dissolve the organization. Consult with Area Counsel if unsure whether a dissolution document is appropriate.

4.75.16.5.10.4  (02-15-2013)
Termination - IRC 501(c)(3) Organizations

  1. To the extent terminations apply to IRC 501(c)(3) organizations they are subject to the rules on state notification under IRC 6104(c).

  2. Verify the correct foundation status. If an organization:

    • Is described under IRC 170(b)(1)(A)(vi) or 509(a)(2),

    • Has been in existence for more than five tax years,

    • Has failed the public support test for two consecutive tax years beginning with the fifth tax year in existence, and

    • Does not otherwise qualify for an exclusion from private foundation status,

    it must be reclassified as a private foundation after its fifth year of existence effective the first day of the second consecutive taxable year it fails the public support test. If such an organization is later revoked it will be a taxable private foundation for IRC 507, 4940 and IRC 6033 purposes in that year. For all succeeding tax years, the organization will be treated as private foundation for all purposes.

  3. Special foundation reclassification rules for inactive, discontinued and abandoned organizations. First, determine whether there would be additional Chapter 42 or IRC 507(c) tax on the organization and its disqualified persons if the organization were to be reclassified as a private foundation. If there would be such additional tax (after considering IRC 4962), the agent must propose a modification of private foundation status, and propose the appropriate taxes. In such cases, the agent will not recognize a proper termination due to tax deficiencies and needed corrections.

    Note:

    An inactive, discontinued and abandoned public charity described in IRC 170(b)(1)(A)(vi) or 509(a)(2) with zero gross receipts for a period of time will fail the 33 1/3 percent public support test by default due to a persistence of zero public support for two or more years. In the interest of efficient tax administration, such an organization will generally not require a reclassification to foundation status if there are no tax implications after it would become a private foundation. In such cases, the organization must either be unable-to-locate, or, if locatable, all termination criteria in IRM 4.75.16.5.10 must be satisfied. If all termination criteria are not satisfied for a locatable organization, a reclassification of foundation status is required in the event the organization later becomes active, whether as an EO or a taxable private foundation.

  4. Determine whether tax-exempt bonds were outstanding at the time of the termination. If so, prepare Form 5666, addressed to TE/GE Tax Exempt Bonds, identifying the year of termination.

4.75.16.5.10.5  (02-15-2013)
Termination - Private Foundations

  1. The secured written statement for a private foundation must indicate a proper final disposition of assets before the agent can recognize a termination of existence. All remaining assets may be distributed by:

    • Making what would be a qualifying distribution under IRC 4942(g)(1)(A) with respect to all remaining assets.

    • Transferring all remaining assets to certain public charities within the meaning of IRC 507(b)(1)(A). This also serves to terminate private foundation status.

    • Transferring all remaining assets to another private foundation within the meaning of IRC 507(b)(2).

      Note:

      Such transfers result in a carry-over of certain tax attributes and characteristics of the transferor organization to the transferee foundation. See Treas. Reg. 1.507-3(a)(1).

    • Paying a termination tax under IRC 507(c) to the government. This also serves to terminate private foundation status.

  2. A transfer to another private foundation must satisfy the requirements of all pertinent provisions of Chapter 42 of the Code. For example, if the transfer constitutes a taxable expenditure as defined in IRC 4945, the transferor is liable for the Chapter 42 tax that is incurred. See Treas. Regs. 1.507–3(d). Consequently no termination letter can be issued until the taxable expenditure is fully corrected, and the initial tax deficiency has been fully processed and assessed (or abated under IRC 4962).

  3. A termination of existence cannot be recognized until all Chapter 42 taxes against the foundation are assessed (or abated under IRC 4962) for acts or failures to act that occurred during the years of audit or as a result of the transfer, and such acts are corrected.

  4. If a transfer described in IRC 507(b)(2) constitutes a willful and flagrant violation of Chapter 42, as described in IRC 507(a)(2)(A), then the provisions of IRC 507(a)(2) dealing with involuntary terminations are applicable, rather than the provisions of IRC 507(b)(2). In that event, the transferor foundation would be subject to IRC 507(c) tax. See Treas. Regs. 1.507– 3(d) and 1.507–4(b).

  5. For IRC 507(b)(2) transfers, the group may expand the audit or prepare Form 5666 for a future year audit of the transferee private foundation to ensure that the transferee properly assumed the Chapter 42 attributes of the transferred assets.

4.75.16.5.11  (02-15-2013)
Unable to Locate

  1. Before closing a case as unable to locate, follow the procedures outlined below for locating the taxpayer.

  2. If contact can not be made, determine whether there is information available about the dissolution of the organization. Refer to Exhibit 4.75.16-17 for closing procedures for various “unable to locate” situations. This exhibit includes procedures for AIMS/RCCMS where returns have or have not been filed.

  3. If you are unable to locate the taxpayer, and/or the initial contact letter is returned by the Post Office as undeliverable, take the following steps to obtain the taxpayer's current address:

    1. Inspect any correspondence in the case file for any change of address noted by the U.S. Postal Service.

    2. Review the case file for possible sources of information that may lead to the taxpayer's whereabouts.

    3. Request the determination file containing the original application for exemption Form 1023 or 1024, from the EO Determinations Record Unit in Cincinnati. Provide the name, address and EIN for the organization in the request. See IRM 4.75.10 for requesting the Determination File.

    4. Use Accurint™ to find the organization's or an officer's, director's, or trustee's current address and telephone number.

    5. Check telephone and/or city directories for names and addresses of officers, directors, or trustees and the organization.

    6. Check the current address by submitting Form 6882 , IDRS/Master File Information Request (or Form 5644, TE/GE Inquiry Request). Extract the latest address from the most recent return posted to master file.

    7. Request the most recently filed return to identify the current officers or power of attorney (POA). Check the names of the officers in the telephone directory.

    8. Contact the Post Office for a current address using Form 4759, Address Information Request - Postal Tracer.

  4. Additional steps to pursue in the event the preceding steps are unsuccessful in locating either the organization or officers, directors, or trustees of the organization include:

    1. Check Internet resources for possible leads.

    2. Check to see if the organization has a website.

    3. Contact the state agency that processes the records of incorporation. Obtain the names and addresses of the statutory agent or officers listed on the Articles of Incorporation.

    4. Contact the state agency that processes charitable registration or charitable solicitation information sheets and applications for liquor or gaming licenses. Obtain the names and addresses of the statutory agent or officers listed on these information sheets, liquor or gaming licensees and review the ed financial data.

    5. If the organization is a subordinate of a group ruling, contact the parent of the group ruling for the names and addresses of officers and trustees, and review the reported financial data.

    6. Contact third parties such as current or former employees or return preparers.

      Caution:

      Be sure to follow all third-party procedures in Treasury Regulation 301.7602-2. See IRM 4.75.21.14, Third Party Contacts.

  5. If the taxpayer cannot be located after following the applicable procedures above, send audit letters by certified mail to the organization’s last known address and the last known officers, as reported to the state or to the Service, whichever was most recently reported.

  6. Put a respond-by date on the letters, such as 30 days after the date of the letter.

4.75.16.6  (02-15-2013)
Cases Subject to Mandatory Review

  1. Refer to IRM 4.75.16.4.2.1 for statute requirements of cases subject to Mandatory Review. Except as indicated in paragraph (2) below, the following types of cases are subject to Mandatory Review:

    1. Proposed revocations of tax-exempt status or IRC 170(c)(2) status

      Note:

      This does not include organizations that have already been automatically revoked by IRC 6033(j), which are surveyed and closed to ESS.

      Note:

      If there is a converted return case file, it must accompany the revocation case file to Mandatory Review for suspense. Mandatory Review will send the converted return case back to the group for either enforcement or deletion after the revocation matter is settled (or if the statute date expires within 270 days).

    2. Proposed modifications of exempt status (non-501(c)(3) only)

      Note:

      Organizations cannot modify to an IRC 501(c)(3), 501(c)(9) and 501(c)(17) status. These organizations must apply for tax-exempt status. See IRC 508(a) and 505(c).

      Note:

      Agents may not modify a ruling or determination letter to a type of organization that must acquire its tax-exempt status from EO Technical. Agents may seek advice on requesting a Technical Advice Memorandum. For a list of these organizations, see IRM 7.20.1.4. See Technical Advice procedures at IRM 4.75.36.

    3. Proposed modifications of foundation status. All such modifications are subject to IRC 7428(a)(1)(B)

      Reminder:

      A private foundation cannot be modified to a public charity. It must terminate its private foundation status under IRC 507.

    4. Unagreed cases, with or without protest

      Exception:

      Unagreed without protest of the following: (1) gaming excise taxes, (2) employment taxes (non-worker classification issues only), and (3) Status 36 disqualification cases.

    5. Excepted agreed cases, the finality of which depends on the outcome of a matter before Mandatory Review

    6. Terminations of exempt status. See Disposal Code 14 (212)

    7. Inadequate records (Form 2807 issued). See Disposal Code 08 (213)

    8. NRP cases

    9. Abatements of IRC 4962 first tier taxes. This includes those that are assessed, and those that were not assessed because they resolved by tolerance or by reasonable cause.

    10. IRC 6700, 6701, 6702, 6707, 6707A penalties

    11. Church tax inquiries and examinations, or any determination that an organization that has claimed to be a church is not a church.

      Reminder:

      Prepare and attach an "EO Church Approvals Coversheet" to the front of the case folder for all EO church case submissions. See IRM 4.76.7, Church Tax Inquiries and Examinations - IRC Section 7611.

    12. A school below college level affiliated with a church or operated by a religious order

    13. Proposed IRC 4958 tax arising from transactions between a disqualified person and a church

    14. Critical initiative cases designated as requiring mandatory review

    15. Credit counseling organizations

    16. All cases with an AIMS "W" freeze code

    17. Cases closed on the basis of Technical Advice Memorandum.

  2. Notwithstanding mandatory review criteria in paragraph (1), the following cases are not subject to Mandatory Review:

    1. Any reopened case at the direction of Special Review staff. All reopened cases are closed to Special Review. The AIMS Status codes for Mandatory Review are the same for Special Review.

    2. Any Team Examination Program (TEP) case.

      Note:

      Signing, issuing and suspending of 90-day letters remain the responsibility of Mandatory Review in accordance with current delegation orders; however, the TEP group remains responsible for preparing its 90-day letters and the mailing package in all cases. While the key file folder containing closing documents may ultimately close to mandatory review for 90-day suspense, the TEP case is not assigned to a reviewer.

  3. Cases subject to Joint Committee of Taxation procedures (IRM 4.36) are closed to Mandatory Review for processing purposes. Mandatory Review will not review such cases, unless the agent indicates on Form 3198-A that the case is subject to review for one of the reasons listed in paragraph (1) above..

  4. Reviewers issue the following closing letters:

    • Final adverse determination letters (IRC 7428 cases) - A 90-day Letter. See IRM 4.75.20

    • Final agreed revocation and modification letters. See IRM Exhibit 4.75.31-9

    • Statutory notices of deficiency - A 90-day Letter. See Letter 531 series letters and Letter 1753

    • Notices of determination of worker classification - A 90-day Letter. See Letter 3523

    • Notices of inadequate records. See Modified Letter 4095 (Exhibit 4.75.16-20)

    • Statutory notices of claim disallowance (See Letters 905 and 906 , IRM 4.19.16, and IRM 4.10.8.11.11.)

    • Termination letters (See IRM Exhibit 4.75.16-15. and Exhibit 4.75.16-16)

    • Abatement letters for Chapter 42 excise taxes, Letters 693 or 2738.

    • Closing letters for cases otherwise subject to mandatory review

    If the ASED is less than 270 days, the examination group assumes responsibility for preparing the closing letter and the mailing package, including the mailing envelope.

  5. For all cases subject to a formal protest to Appeals, verify that the protest provides:

    • The organization's name, address, and employer identification number

    • A statement that the organization wants to appeal the IRS findings to the Appeals Office

    • A copy of the 30-day letter (or the date and symbols from the letter)

    • The tax periods or years involved

    • An itemized list of the adjustments with which the organization does not agree

    • A statement of facts supporting the organization's position in any contested factual issue

    • A statement outlining the law or other authority the organization is relying on

    • A statement as to whether a hearing is desired

    • A signed jurat statement

    Note:

    The officer, director, or trustee's jurat statement must read "Under penalties of perjury, I declare that I have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and, to the best of my knowledge and belief, they are true, correct, and complete."

    Reminder:

    A power of attorney submitting the protest must submit their own substitute statement. They must state that they prepared the appeal and accompanying documents, and whether they know personally that the statements of fact contained in the appeal and accompanying documents are true and correct. See Pub 892.

  6. Prepare a rebuttal for all formal protests to Appeals. See IRM 4.75.15.

4.75.16.7  (02-15-2013)
Case File Assembly

  1. Electronic folders in RCCMS are available for immediate use when organizing electronic case files. Instructions on using folders are available in the TE/GE website, TE/GE Systems Information and Automation Guide, RCCMS Release 2.3, Attachment A - Folders. See Exhibit 4.75.16-18, Guidelines on EO Sub-Folders

    1. The first level of folders in RCCMS is based on Form 5772.

    2. There are also four additional folders to organize electronic case files in accordance with the IRM. Available folders are:

    • 1 – Non-Disclosure

    • 2 – RAR and Related Documents

    • 3 – Administrative Record

    • 4 – Correspondence

    • "A – Preaudit" through "L – Audit Considerations," are based on Form 5772.

  2. See Exhibit 4.75.16-18 for the tables that provide general guidelines on the placement of forms, letters, and other documents within the RCCMS Office Documents Folder (using the Pre-defined EO Sub-Folders) and the Research Folder (using the “Returns” and “Queries” Sub-Folders).

  3. Assemble the paper case file (and electronic case file) properly, and index your workpapers. Purge unnecessary documents, as needed.

    Reminder:

    Do not print workpapers or forms for cases that are surveyed or closed as no change (if using RCCMS). The applicable AIMS disposal codes are 02, 04, 05, 06, 08, 31, 32, 36, 52, and 53 (107, 205, 207, 208, 213, 910, 908, 909, 214, 302).

    Caution:

    If subject to Mandatory Review, do not purge items such as duplicate letters sent to representatives, certified mail receipts, or envelopes.

  4. Index all supporting workpapers in the case file to the Forms 5772, 5773 and 5774. If using RCCMS for case file management, upload the workpapers to the appropriate folders that corresponds to their placement in Form 5772.

  5. In situations involving a paper case file, use a separate folder for each type of return MFT. Place multiple years of the same return for one taxpayer in one folder.

    Example:

    In an audit of the 200812 and 200912 Forms 990 and 990-T, there would be two folders, one for the 200812 and 200912 Forms 990 and another for the 200812 and 200912 Forms 990-T.

  6. Place the administrative record in a separate folder (or folders). The electronic case file must have an Administrative Record sub-folder for electronic administrative records.

  7. For most cases, use brown or manila folders. Use "red folders" on all cases with less than 270 days (nine months) left before the ASED. Otherwise, place special project cases in a colored folder, as required by the project coordinators. Pink folders are only used for claims.

    Note:

    It is also acceptable to use Form 10364-A if ordered from the National Distribution Center under catalog number 24613P (it will be delivered as a pre-printed red folder).

4.75.16.7.1  (02-15-2013)
Forms Attached to Outside of Folder

  1. Attach the following forms and documents to the outside of the case folder, top to bottom, as applicable:

    1. Form 895, Notice of Statute Expiration. See IRM 4.75.16.4.2

    2. Form 3198-A, TE/GE Special Handling Notice

    3. EO Church Approvals Coversheet

    4. Form 5456, Reviewer's Memorandum - EP/EO

    5. Form 5457, Response to Reviewer's Memorandum - EP/EO

    6. Form 5599, TE/GE Examined Closing Record

    Note:

    When using RCCMS, these documents must be placed directly into the Office Documents folder.

4.75.16.7.2  (02-15-2013)
Forms Attached to Left Inside of Case Folder

  1. Attach the following forms and disks to the inside left of the case folder, top to bottom, as follows:

    1. Form 5666, TE/GE Referral Information Report

    2. Form 2363-A, if subject to Mandatory Review

      Note:

      Place Form 2363-A for unagreed revocations or modifications in a "To be opened by addressee only" envelope. Write on the envelope: "Form 2363-A to be processed if action upheld."

    3. Form 5595, TE/GE Update, if not using RCCMS

    4. Computer disks, if the case is protested to Appeals.

      Note:

      Enclose any discs in a disc sleeve. Staple the disc sleeve to the left hand side of the folder.

  2. Documents to the left-inside of the case file folder must be placed in the "1 - Non-Disclosure" sub-folder in RCCMS

4.75.16.7.3  (02-15-2013)
Returns, Forms, and Other Documents Enclosed in the Case File

  1. Arrange the forms, audit reports, workpapers and other documents in the case file in packages. Clip or staple the packages together and place them inside the folder as follows, top to bottom:

    1. Confidential information. See IRM 4.75.16.7.3 (2).

    2. Form 872-T, Notice of Termination of Special Consent to Extend Time to Assess, if initiated by the Service.

    3. Checksheets. See IRM 4.75.16.7.3 (3).

    4. Signed waiver/acceptance forms and closing agreements. See IRM 4.75.16.7.3 (4).

    5. Final closing letter(s) IRM 4.75.16.7.3 (5).

    6. Succeeding letters to a 30-day letter in chronological order, including rebuttal letter, most recent on top.

    7. 30-day Letters

    8. Report of examination. See IRM 4.75.16.7.3 (6).

    9. Returns. See IRM 4.75.16.7.3 (7).

    10. Workpapers. See IRM 4.75.16.7.3 (8).

    11. Other Correspondence. See IRM 4.75.16.7.3 (10).

    12. Miscellaneous documents. See IRM 4.75.16.7.3 (11).

  2. Enclose referrals, informants' reports, and other confidential information in a "To be Opened by Addressee Only" envelope with a Form TD F 15-05.11, Sensitive But Unclassified (SBU) Cover Sheet (Catalog Number 56033J,) stapled to the front of the envelope. If the documents are too numerous, use a separate file folder with the same cover sheet.

    Note:

    Use Form TD F 15-05.11 to alert others to the sensitive nature of the information.

  3. Enclose the applicable checksheets. E-mail the checksheet to the appropriate mailbox and if using RCCMS, upload the checksheet to the appropriate folder in RCCMS.

    Example:

    For instance, a case may have a governance checksheet, and a project checksheet.

  4. Use the correct waiver/agreement form. See IRM 4.75.15. Place any closing agreements after the signed waiver forms. Available waiver forms include:

    • Form 6018, Consent to Proposed Adverse Action

    • Form 6018-A , Consent to Proposed Action-Non Declaratory Judgment

    • Form 870 , Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment (use with Form 4549-A )

    • Form 870-E, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessment

    • Form 2297 , Waiver of Statutory Notification of Claim Disallowance

    • Form 3363 , Acceptance of Proposed Disallowance of Claim for Refund or Credit

    • Form 2504 , Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment

    • Form 2504-E , Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (for gaming excise taxes - use with Form 5385 )

    • Form 2504-S, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment (including section 530 statement)

    • Form 2504-WC , Agreement to Assessment and Collection of Additional Employment Tax and Acceptance of Overassessment in Worker Classification Cases

    • Form 4549 , Income Tax Examination Changes, (for initial UBIT and converted return s)

    • Form 4549-E, Income Tax Discrepancy Adjustments (for discrepancy adjustments)

    • Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection

    • Closing Agreement on Final Determination Covering Specific Matters

  5. Enclose originals and copies of closing letters. Use Letter 3597 if sending copies to a power of attorney. Group Manager: Date and sign/stamp the closing letters when issued. Leave blank if closing to Mandatory Review. Mandatory Reviewer: Date and sign/stamp the letters when issued.

    Note:

    Stamp/mark copies with "Copy" or "File Copy" in the top margin.

    Example:

    Closing letters include no-change, no-change advisory, and agreed change letters. Closing letters also include letters indicated in IRM 4.75.16.6, such as 90-day letters, termination letters, and inadequate records notice issued by Mandatory Review.

  6. Enclose a copy of the audit report. The audit report includes the following forms, schedules, and documents as necessary:

    1. Form 4621, Report of Examination - Exempt Organization (for status changes and Chapter 42 tax changes)

    2. Form 4621-A, Report of Examination-Exempt Organizations (for revocations/modifications)

    3. Form 4549, Income Tax Examination Changes (for initial UBIT and converted return reports)

    4. Form 4549-A, Income Tax Discrepancy Adjustments (for formal UBIT and converted return reports - use with Form 870)

    5. Form 4549-E, Income Tax Discrepancy Adjustments (for discrepancy adjustments)

    6. Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection (for initial gaming excise tax reports)

    7. Form 5385, Excise Tax Examination Changes (for formal gaming excise tax reports - use with Form 2504-E)

    8. Form 4666, Summary of Employment Tax Examination.

    9. Form 4667, Examination Changes - Federal Unemployment Tax

    10. Form 4668, Employment Tax Examination Changes Report

    11. Form 4668-B, Report of Examination of Withheld Federal Income Tax for Withholding Reported on Forms 1099 and W-2G.

    12. Form 886-A, Explanation of Items

    13. Exhibits

    14. Schedules

    15. Other documents included in the Report of Examination as attachments

    Note:

    Stamp/mark copies with "Copy" or "File Copy" in the top margin.

  7. Returns include original returns obtained from the Service Campus, SMIPS returns obtained from Online SEIN, RICS returns, Substitutes for Return, and copies of returns secured from Foundation Center or Guidestar. Use dummy returns for organizations not required to file returns and for Form 990-N. Attach documents to the return as listed in IRM 4.75.16.7.4.

    Note:

    The returns referenced here are the returns being used to close the case. Purge or place in the supplemental workpapers any copies of returns or RICS returns that are not being used to close the case. If a case is assigned with a RICS return and the original is received before the case is closed, place the RICS return in the supplemental workpapers as it may be needed for a TEQMS review.

  8. The workpaper file consists of

    1. Form 5772, EP/EO Workpaper Summary

    2. Form 5773, EP/EO Workpaper Summary Continuation Sheet

    3. Form 5774, Private Foundation Workpapers

    4. Form 5464, Case Chronology Record

    5. Supplemental workpapers (see IRM 4.75.16.7.3 (9) below)

  9. Supplemental workpapers provide the support for audit results, such as status or tax changes. For a discussion of workpaper creation, see IRM 4.75.11. Index the workpapers to correlate to the Forms 5773 and 5774. If using RCCMS, upload the files to the appropriate folders as per Form 5773.

    Note:

    Provide information necessary to support adjustments made to related returns in the case file for the primary return. These workpapers, including Forms 5772 and 5773, for related returns need only address the issues relating to these returns. For example, the case file for a Form 990-T, related to the audit of a Form 990, only addresses the unrelated business issues.

  10. Assemble correspondence in chronological order, with the newest letter/document on top, and the oldest on the bottom. Correspondence includes letters exchanged with the taxpayer or the designated representative during the course of the audit, and information documents requests.

    Caution:

    Do not index taxpayer correspondence. Form 5773 item C-6 is for review of a taxpayer's correspondence with other parties.

  11. Miscellaneous documents include:

    • Copies of audit reports of related returns. (Include in the case folder of the primary return. Label/stamp with "Copy" on the top of the first page)

    • Printouts of IDRS research

    • Review of Operations and Exempt Organizations Compliance Unit pre-audit packages

4.75.16.7.4  (02-15-2013)
Documents Attached to the Return

  1. Staple to the front of the return, top to bottom, as applicable:

    • A current AMDISA print

    • Form 3244-A, Payment Posting Voucher

    • A copy of any check(s) paid with the return

    • Form 4571, Explanation for Filing Late or Paying Tax Late, or written request for penalty relief

  2. Staple Form 2848 to the back of the first page of the return.

  3. Staple to the back of the last page of the return, top to bottom, facing out:

    • Form 872, Consent to Extend the Time to Assess Tax

    • Form 56, Notice of Fiduciary Relationship

    • Form 8821, Tax Information Authorization

    • Form 5546, Examination Return Charge-Out Sheet

    • Amended returns

    • Form 843, Claim for Refund

    • Form 1045, Application for Tentative Refund

    • Form 1139, Corporation Application for Tentative Refund

      Note:

      If the taxpayer filed the amended return directly with you during the audit, note this on a Form 3198-A.

4.75.16.7.5  (02-15-2013)
Multiple folders

  1. Large case files often require more than one folder. Use expanding folders if a manila folder is inadequate. Label all folders with the organization's name, EIN, type of return, and year. Number multiple folders in consecutive order. Indicate the number of file folders on the Form 3210 prepared to transmit the case for closing.

  2. In audits involving multiple case folders, ensure all case folders remain together. Attach a Form 3198-A to each case folder. Write on the bottom of the form in large red letters: "Multiple Returns/Case Folders Involved - DO NOT SEPARATE" .

    Exception:

    See examples of permissible separation of case file folders at IRM 4.75.16.8.2(7).

4.75.16.8  (02-15-2013)
Closing the Case

  1. For all cases, ensure that the correct AIMS status codes are used:

    If... The correct status code is...
    The case is selected for an audit and is not yet assigned to a group 08
    The case is assigned to a group and/or agent 10
    You have opened the case (made contact with the taxpayer). If contact is by letter and the letter is returned undeliverable, place the case back in status 10 until contact is actually made.) 12
    You have issued a 30-day letter 13
    You issued a 30-day and a protest was received 12
    You are forwarding a $2,000,000 refund case to the Joint Committee (see IRM 4.36) 21

  2. Send all cases through the group manager for closing.

  3. Group Manager: ensure each month that RCCMS and AIMS reflect accurate information.

  4. Group Manager: if requiring action by another group or area before final closing, contact the other group or area and then update the status before forwarding the case.

  5. Use the correct alpha code when applicable. See IRM 25.6.23.

  6. See the chart below for closing status codes:

    When closing, if the case is... Update RCCMS/AIMS to status code
    Subject to Mandatory Review 20 (Mandatory Review)
    Subject to Special Review 20 (Special Review)
    Not subject to Mandatory Review and has a "V" or other AIMS freeze code 60 (Classification-Referrals)
    Not closing to Mandatory Review or Classification-Referrals 51 (ESS)

4.75.16.8.1  (02-15-2013)
Closing to the Manager

  1. Prior to closing, verify that the address on file is correct. If not, send Form 2363-A to the FAST unit.

  2. Verify that the filing requirements are correct. If not, send Form 2363-A to the FAST unit.

    Exception:

    Do not send Form 2363-A to the FAST unit for changes that require approval by Mandatory Review, such as changes in filing requirements as a result of an unagreed issue or a proposed revocation.

  3. If subject to Mandatory Review, print out all of the workpapers and correspondence.

  4. Verify that the time on Forms 5599 and 5464 match, and that they reconcile to Form 5772 and 6490 (WebETS).

  5. Prepare and print out the closing letters. Place the letters in the file.

    Exception:

    You need not print final closing letters that must be issued by Mandatory Review. Instead, indicate the letter number or the IRM exhibit number of the letter at the heading of Form 5772 and in the Mandatory Review section of Form 3198-A..

4.75.16.8.2  (02-15-2013)
Group Manager: Closing from the Group

  1. Review the case on RCCMS and/or paper.

  2. Verify the final case grade is accurate.

  3. Approve the case for closing. Note your approval of the case on both the RCCMS version of the Form 5464 and the printed version, if applicable.

  4. IRC 6751 requires written documentation of your involvement in any decision to assess most penalties. Document your interaction on Form 5464. The following penalties do not require your approval:

    • IRC 6651, Failure to File or Failure to Pay - except where fraud is involved

    • IRC 6654, Failure to Pay Estimated Tax for Individuals

    • IRC 6655, Failure to Pay Estimated Tax for Corporations

    • Any other penalties automatically calculated through electronic means

  5. Return the case to the agent as needed.

  6. Contact the Manager, Mandatory Review if required. See IRM 4.75.16.4.2.

  7. Close to the appropriate function. See IRM 4.75.16.8 (6).

    Note:

    If a case has a group of returns that are subject to mandatory review, such as unagreed tax change to Form 990-T, and another group of returns that do not require mandatory review, such as a no-change-advisory (MFT 67) and agreed employment taxes, the group manager or agent may divide the case for shipping purposes. The unagreed Form 990-T case file will go to Mandatory Review, and the MFT 67 and employment tax case files go to ESS. However, in this example, before dividing a case for shipment purposes, agents must make copies of returns and relevant workpapers in the Form 990 case file for the unagreed Form 990-T case file, in order to facilitate the resolution of UBIT issues by Appeals.

    Example:

    Agent proposes an increase in tax to XYZ Charity while conducting an audit of Forms 941 and 990-T. The proposed deficiencies were agreed. However, the Form 990 audit revealed that the taxpayer had inadequate records to substantiate the conduct of activities in furtherance of exempt purposes. Generally, all agreed cases are closed directly to ESS, unless it meets one of the other Mandatory Review criteria. Send the 940 and 990-T case with agreed tax changes to ESS. Send the Form 990 case file, inadequate records case to Mandatory Review, because inadequate records cases meet Mandatory Review criteria.

    Note:

    An exception for shipping agreed cases directly to ESS applies to excepted agreed cases. See the following example for excepted agreed cases applicable to Form 990-T. See definition of excepted agreed cases at IRM 4.75.15.

    Example:

    Agent proposes a revocation to ABC Charity while conducting an audit of Form 990. The proposed revocation is unagreed, but the organization agreed to additional unrelated business income tax by signing Form 4549 in the event its exemption is sustained. Because the agreed issue cannot be finalized due to the pending revocation issue, the Form 990-T audit is excepted-agreed. Therefore, the Form 990-T case file will ride with the Form 990 file to Mandatory Review. Note that an open Form 990-T audit must be addressed as an alternative issue in a revocation RAR, whether agreed or unagreed.

4.75.16.9  (02-15-2013)
Shipping From the Group

  1. Group Manager: generate Forms 3210 in triplicate for any paper case files, addressed to the appropriate unit. Sign the forms and include your phone number. Include two copies of the Form 3210 with the closed case and maintain one copy in the group. When the acknowledgment copy of the Form 3210 is received in the group, staple it to the originator's copy. The addresses for the three functions are:

    ESS Closing Unit EO Mandatory Review EO Special Review EO Classification-Referrals
    Internal Revenue Service
    TE/GE EO ESS
    MC: 4980 DAL
    1100 Commerce St.
    Dallas, Texas 75242


    Internal Revenue Service
    TE/GE EO Mandatory Review
    MC: 4920 DAL
    1100 Commerce St.
    Dallas, Texas 75242
    Internal Revenue Service
    TE/GE EO Special Review
    MC: 4970 DAL
    1100 Commerce St.
    Dallas, Texas 75242
    Internal Revenue Service
    TE/GE EO Classification-Referrals
    MC: 4910 DAL

    1100 Commerce St.
    Dallas, Texas 75242

  2. Double package the returns and related workpapers. See the chart below for shipping guidance:

    The ASED expires... The case is... Ship the case via...
    Over 270 days from now Agreed or a no change UPS ground
    Over 270 days from now Unagreed with or without a protest to Appeals UPS ground
    Between 180 and 270 days from now Not subject to Mandatory Review UPS ground
    Between 180 and 270 days from now Subject to Mandatory Review or Special Review UPS next day air
    Between 30 and 180 days from now Not subject to Mandatory Review or Special Review UPS second day air
    Between 30 and 180 days Subject to Mandatory Review or Special review UPS next day air
    Less than 30 days Any type of closure UPS next day air

4.75.16.9.1  (02-15-2013)
Paperless Closures

  1. To process as totally electronic, the case must be established on RCCMS with Requisition Code 3.

  2. Only cases with disposal codes 02 (107), 04 (205), 05 (207), 06 (208), 08 (213), 31 (910), 32 (908), 36 (909), 52 (214), and 53 (302), qualify for totally electronic closure.

    Exception:

    AIMS NMF cases may not be closed totally electronic.

  3. Note "RCCMS Totally Electronic No Change Cases" and the disposal code on Form 3210. Do not use e-mails and messages generated by RCCMS for notification in lieu of Form 3210.

    1. Print Forms 3210 for paperless cases closed to Dallas ESS directly to the printers of the Manager, ESS or Group Secretary, ESS. Submit an OS Get Services ticket to get proper printer connections.

  4. Scan any paper document that is critical to the case file as substantiation or evidence into the electronic case file. Do not scan irrelevant or unnecessary paper documents into the case file.

    Note:

    Documents with original signatures (i.e. Forms 2848, 8821 and 872) must be maintained in a "correlating paper file" .

  5. Forward "correlating paper files" containing documents that have original signatures to the closing unit, with a copy of the Form 3210, to the address indicated below. ESS will then forward to the Ogden Service Center for filing.

    ESS – Dallas Closing Unit EO Classification-Referrals
    Internal Revenue Service
    MC 4980 DAL
    1100 Commerce Street
    Dallas, Texas 75242
    Internal Revenue Service
    TE/GE EO Classification
    MC 4910 DAL

    1100 Commerce Street
    Dallas, Texas 75242

  6. Scan Informant Letters, Referrals, and Referral Committee notes into the electronic RCCMS file.

  7. Group Managers: when closing the case to the closing unit, use PBC: 400, SBC: 11115, and EGC: 7996. Include in the RCCMS comments section either "100% Paperless Case" or "100% Paperless Case, Forms 2848, 8821 and/or Form 872 sent by UPS" .

Exhibit 4.75.16-1 
Instructions for Preparing Form 1900

Instructions for Preparing Form 1900
Returns: Check or enter the applicable form number of the return(s) being surveyed.
Name and address on latest return or claim: Enter the last known name and address.
SSN/EIN: Enter applicable numbers from the returns being surveyed.
Documents surveyed: Identify the types of document(s) included with Form 1900.
Recommended action: Complete this block to indicate recommended action.
a) Accepted As Filed: If surveying original returns on which no action has been taken, original returns on which tentative carryback allowances have been made, and amended returns filed after the due date and reporting additional tax liability.
b) Allow in full or Allow as corrected: Where claims or amended returns filed as claims are surveyed, whichever is appropriate.
Related Cases: Cases listed here would be those cases requiring adjustments of items of income or deductions reported on another taxpayer's return to secure consistent treatment of the issue (whipsaw issues).
Taxable year or period: List each year's return being surveyed on a separate line.
a) Calendar year: Show ending date (12-31-2010).
b) Fiscal year: Show ending date (6-30-2010).
c) Short period: Show both beginning and ending date (1-1-2010 and -9-30-2010)
d) 52/53 week year: Show last day of year (6-29-2010).
Adjusted gross or taxable income ed: Enter the last income figure computed by the taxpayer on the last processed return for the year being surveyed.
Tax liability ed, Claim allowable, Tentative allowance approved: Generally, there will be just one return being surveyed and no administrative adjustments will have been made to the tax liability reported. As needed, the following procedures are applicable:
a) If more than one return was filed for the same year prior to the due date of the return, the last return filed constitutes the original return and the tax liability shown on this last return should be entered.
b) If a claim reducing the tax liability shown on the original return was filed after the due date of the return, the amended return is considered to be a claim and the tax shown on the original return should be entered under Tax Liability Reported. The difference between the tax liability reported on the original return and the amended return is entered under Claim Allowable.
c) If an amended return, increasing the tax liability shown on the original return was filed after the due date of the return, and the additional tax was assessed, then the tax as shown on the amended tax return should be entered under Tax Liability Reported.
d) Where tentative carrybacks have been filed (Form 1045 or Form 1139) and the refunds have been made to the taxpayer, the tax as shown on the return before administrative adjustment is entered under Tax Liability Reported. The amount refunded as a result of the filing of the tentative carryback is shown under Tentative Allowance Approved.
e) Where claims for refund (including amended and informal claims) have been filed, enter the tax liability as reported on the last processed return under Tax Liability Reported and enter the amount of the claim under Claim Allowable.
Explanation: Explain why the return is being surveyed. If necessary, include computations.
Enclosures: List returns, claims, and other documents enclosed in the case file.
Examining Officer/Date: Signature of the surveying agent and the date the form was completed.
Approved By/Date: The signature and the title of approving management official, usually the agent's manager, and the date of concurrence.

Exhibit 4.75.16-2 
Instructions for Preparing Form 2503

Instructions for Preparing Form 2503
Excise Tax and Employment Tax: For exempt organization or private foundation excise taxes, check the box for excise tax.
Name and present address of taxpayer: Enter the last known name and address and EIN/SSN for the taxpayer.
Type of Survey: Check the box for office examination, if the return or claim was assigned as an OCEP examination, otherwise, check the box for field examination
Place of Survey: Enter the group number and symbols.
Date of Survey: Enter the date the form was completed.
Return(s) Form Number: Enter the form number of the return to which the documents included with the Form 2503 apply.
Director, Specialty Tax: Enter "N/A" in this block.
Time Spent: Enter the time spent reviewing the return or claim.
Returns and Claims Surveyed: Check the appropriate box(s).
Related Cases: If the return or claim is filed by an individual: organization manager, foundation manager or disqualified person, list the name of the related organization.
Recommended Action: Complete appropriate block to indicate recommended action.
a) Accept as Filed: Check this box if surveying original returns on which no action has been taken or amended returns that do not show a decrease in tax liability.
b) Allow in Full: Check this box when amended returns filed as claims reporting a decrease in tax liability or claims are surveyed and the claim is allowed in full.
Type of Tax and Code Section: Enter "excise" and the IRC section.
Period: List each year's return being surveyed on a separate line.
a) Calendar year: Show ending date (12-31-2010).
b) Fiscal year: Show ending date (6-30-2010).
Tax liability assessed and Claim allowable: Generally, there will be just one return being surveyed and no administrative adjustments will have been made to the tax liability reported. As needed, the following procedures are applicable:
a) If more than one return was filed for the same year prior to the due date of the return, the last return filed constitutes the original return and the tax liability shown on the last return should be entered.
b) If a claim reducing the tax liability shown on the original return was filed after the due date of the return, the amended return is considered to be a claim and the tax shown on the original return should be entered under Tax Liability Reported. The difference between the tax liability reported on the original return and the amended return is entered under Claim Allowable.
c) If an amended return, increasing the tax liability shown on the original return was filed after the due date of the return, and the additional tax was assessed, then the tax as shown on the amended tax return should be entered under Tax Liability Reported.
d) Where claims for refund (including amended and informal claims) have been filed, enter the tax liability as reported on the last processed return under Tax Liability Reported and enter the amount of the claim under Claim Allowable.
Explanation: Explain why the return is being surveyed. If necessary, include computations.
Enclosures: List returns, claims, and other documents enclosed in the case file.
Examiner: Enter the agent's name.
Approved By: The signature and the title of approving management official (usually the agent's manager).

Exhibit 4.75.16-3 
Principal Issue Codes - Examples of Usage: No Change Cases

Example 1
The agent is working a full scope training case, Form 990, exempt under IRC 501(c)(8). During the audit the agent pursues advertising income, bar income, and rental income listed on the Form 990 as potential unrelated business income. No Form 990-T was previously filed by the organization.

The agent spent time determining there is no unrelated business income. The advertising income meets the volunteer labor exclusion. The agent also determines there is no non-member bar income. The agent determines there are no services involved with the rental income and the property is not debt-financed.

The Form 990 could be closed with disposal code "02 (107), No Change" if no advisories are issued, or "52 (214), Written Advisory" if the agent has advisories to issue.

If the Form 990 is closed with a no change to the UBI issue and an advisory is not issued, select "10A, UBI Issues - No Change." If an advisory is issued, select the PIC(s) which best applies. (i.e., select 10B, UBI Issues-Advisory.).
Example 2
The agent is working a full scope market segment study, Form 990, exempt under IRC 501(c)(3). During the audit, the agent spent time pursuing unrelated business income on advertising income listed on Form 990 and lack of adequate records as potential issues. No Form 990-T has been filed by the organization.

As a result of the audit, the agent determines the advertising income is not taxable due to the volunteer labor exclusion. The agent determines the lack of adequate records is not severe enough to propose revocation, but does recommend to the group manager an inadequate records notice be issued. The manager concurs with the agent. An inadequate records notice will be issued.

The Form 990 is closed with disposal code "08 (213), Written Advisory – Form 5666 Required" .

The first PIC on the RCCMS closing record should be “01N, Filing Req.- Inadequate Records to Substantiate Rtrn” because the inadequate records notice could result in the organization losing its tax-exempt status in the future if they do not comply - an exemption issue. The second PIC should be “10A, UBI Issues-No Change.
Example 3
The agent is working a single issue Executive Compensation project, Form 990, exempt under IRC 501(c)(3). The purpose of the exam is to determine whether or not the compensation paid to the officer is excessive and whether or not there are fringe benefits paid to the officer that are not included as compensation but should be and are therefore excess benefit transactions.

After spending time reviewing the compensation and seeing if there are any other payments made to the officer, the agent concludes the salary is reasonable and does not find any other payments made to the officer that should have been included in compensation. There are no other issues the agent pursued in this case.

The Form 990 is closed with disposal code "02 (107), No-Change" .

The agent should use PICs "06A, Inurement/Private Benefit Issues - No Change" and "12A, TFB - No Change" on the closing record for Form 990.

Exhibit 4.75.16-4 
Principal Issue Codes - Examples of Usage: Change/Unagreed Cases

Example 1
The agent is working a full scope training case, Form 990, exempt under IRC 501(c)(8). During the audit, the agent pursues advertising income, bar income, and rental income listed on the Form 990 as potential unrelated business income. No Form 990-T was previously filed by the organization.

The agent determines there is tax due on the Form 990-T for the advertising income and the non-member bar income. The agent determines there are no services and no personal property involved with the rental income, and the property is not debt-financed. The agent determines the rental income is not unrelated business income.

The largest source of unrelated business income tax results from the non-member bar income. The agent secures and audits the delinquent Form 990-T.

The Form 990 is closed with a disposal code of "05 (207), Delinquent Related Return Secured" .




Based only on the facts provided, both the 990 and 990-T will close using PICs "01D, Filing Req. - Secured Del. 990-T Rtrms" , "10I, UBI - Non Member Inc." and "10L, UBI - Advertising" . Regarding the rental income issue on the Form 990, the agent will not record the PIC.
Example 2
The agent is working a full scope market segment study, Form 990, exempt under IRC 501(c)(6). Form 990-T, Form(s) 941, and Form 940 were previously filed by the organization.

As a result of the audit, the agent determines the expenses taken on the advertising calculation on Form 990-T were not allocated properly, workers were being treated as independent contractors when they were in fact employees, and the organization was paying out a set monthly car allowance under a non-accountable plan.

The agent makes the adjustment to the Form 990-T, Form(s) 941 and Form 940 for the year under audit and the organization agrees. Within the employment tax adjustments, the larger adjustment is the reclassification issue and the smaller adjustment is the fringe benefits.

The Form 990 is closed using disposal code "04 (205), Change to Related Return" . Based only on the facts provided, the Form 990 will close using PICs "10C, UBI Income/Exp Allocation" , "15B, EE Class.- Conv of Indep. Contr. to EE" and "12J, TFB-Non-Accountable Exp. Plan" .

The Form 990-T is closed with PIC "10C, UBI Income/Exp Allocation" . The Forms 941 and 940 are closed with PICs "15B, EE Class.- Conv of Indep. Contr. to EE" and "12J, TFB-Non-Accountable Exp. Plan" .
Example 3
The agent is working a single issue Executive Compensation project, Form 990, exempt under IRC 501(c)(3). The purpose of the exam is to determine whether or not the compensation paid to the officer is excessive and whether or not there are fringe benefits paid to the officer that are not included as compensation but should be and are therefore excess benefit transactions.

The agent concludes the salary is unreasonable and proposes excess benefit tax on the officer. The agent did not find any fringe benefits being paid to the officer that should have been included in compensation.

No Form 4720-A was previously filed by the officer. The officer agrees with the agents conclusions and makes correction.

The Form 990 is closed using disposal code "05 (207), Delinquent Related Return Secured" . Based on the facts provided, the Form 990 will use PICs "01G, Filing Req. Sec. Del 4720 Rtrns" and "06B, IRC 4958 Sanctions - Excise Tax Assessment." Also use "12A, TFB - No Change" for the fringe benefits issue.

The Form 4720-A on the officer is closed with PICs "01G" and "06B" only.
Example 4
The agent proposes revocation of an IRC 501(c)(3) organization due to inurement, political activities and substantially operating a commercial business. Among the exemption issues, the commercial business issue is the most significant issue. The agent also secured a delinquent Form 4720-A from the disqualified person for payments by the organization.

With regard to the Form 990, there are four codes that can be used just relating to the revocation: "04B, Revocation - Not Operating for Exempt Purposes" , "04C, Revocation-Inurement/Private Benefit" , "04D, Revocation -Political Activity." Also use "01G, Filing Req.-Secured Del. 4720 Rtrns" because the secured delinquent return is also considered an "exemption issue" within a "change issue." (See paragraph (4) of 4.75.16.4.4.2 where a secured delinquent returns are regarded as "change issues" for PIC purposes). Note that Form 4720-A filed by a disqualified person is treated as a related return for PIC purposes.

Exhibit 4.75.16-5 
Form 2363-A Required Input Chart

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Exhibit 4.75.16-6 
Instructions for Preparing Form 2363-A

The Form 2363-A, , Exempt Organization BMF-EO Entity Change, is the form used to establish or change accounts on the BMF. An agent is required to complete the form to record changes to the organization's account resulting from the audit.

The table below shows the required fields that must be completed when preparing a Form 2363-A. To use the table, find the "type of change" being made (e.g. address, name, etc.) in column 1 and then follow across the row to determine which items must be completed on the Form 2363-A. The numbers in the column headings correspond to the item numbers on the form. Those required for a particular change are marked with an "X." The Transaction and/or Definer Codes that must be input are also shown.

Note:

The table provides the required input for changes relating to a single organization. For mass changes to subordinates covered under a group ruling, Document Code 81 should be used.

Form 2363-A Line Item Instructions 1
ITEM: ENTER:
Item 1, Employer ID Number The 9 digit employer identification number.
Item 2, Name Control The four digit name control. The name control for an exempt organization is derived from the first four significant characters of the name. The first position must be an alpha or numeric character. The remaining positions must be alpha or numeric, blank, ampersand or hyphen. Blanks in the Name Control are permissible only at the end of the Name Control to make it a four-position Name control. When the word "the" begins the organization's name, it should not be used to form the name control. Also, for "trusts" select a Name Control from the surname.
Item 3, Document Codes 80 "X" to update one account on the BMF or may also be used to update one subordinate of a group ruling.
  81 "X" for mass establishments, additions or changes for organizations covered under a group ruling.
Item 4 Transaction Codes "X" in the appropriate box. Only one transaction code (TC) is allowed per form. The transaction codes determine the consistency and validity checks that will be performed.
Item 5, Definer Codes Definer code(s) "A" "B" and/or "C" , as appropriate. These codes are used with TC 012 and TC 016. Up to three definer codes may be entered with TC 016. Definer code "A" is the only code that can be used with TC 012.
Item 6, Posting Delay Code Use this code when multiple Forms 2363-A need to be prepared. Values are 1 through 6.
Item 7, New Name Control The new name control when the organization's name is being changed.
Item 8, Primary Name The legal name of the organization.
Item 9, Continuation of Primary Name The continuation of the legal name of the organization.
Item 10, Sort Name The name the organization is doing business under. It may be different from the Primary Name. The "Sort Name" can be deleted by entering two dollar signs ($$) in Item 10.
Item 11, "In care of" name The "in care of" name if specified by the organization. The "In care of" Name can be deleted by entering two dollar signs ($$) in Item 11.
Item 12 Foreign Street The street address for an organization located in a foreign country.
Item 13, Mailing Street or foreign city/ZIP The street address where the organization receives its mail. For foreign organizations enter the city/ZIP in this field.
Item 14, Mailing city/state/ZIP or foreign country The city/state/ZIP where the organization receives its mail. For foreign organization enter the country.
Item 15, Location street address The street address where the organization is physically located.
Item 16, Location city/state/ZIP The city/state/ZIP where the organization is physically located.
Item 17, Subsection The subsection code from Document 6379.
Item 18, Foundation Code The foundation code must be input if subsection code is "03." Valid foundation codes are:
  02 Exempt operating foundation
  03 Private operating foundation
  04 Private non-operating foundation
  09 Suspense
  10 Church - IRC 170(b)(1)(A)(i)
  11 School - IRC 170(b)(1)(A)(ii)
  12 Hospital IRC 170(b)(1)(A)(iii)
  13 Organizations operated for the benefit of a college or university - IRC 170(b)(1)(A)(iv)
  14 Federal, State or local government unit - IRC 170(b)(1)(A)(v)
  15 Organization receiving support form governmental unit or general public - IRC 170(b)(1)(A)(vi)
  16 General, public charity - IRC 509(a)(2)
  17 Public charity supporting organization - IRC 509(a)(3)
  18 Public Safety - IRC 509(a)(4)
Item 19, Classification Code Appropriate classification code from Document 6379 if the TC is 000, 012 or 016.
Item 20 Affiliation Code The affiliation code. Valid affiliation codes are:
  1 Central Organization (Individual ruling)
  2 Intermediate organization (Individual ruling)
  3 Independent organization (Individual ruling)
  6 Parent of a group ruling (not a church)
  7 Intermediate parent (subordinate by state)
  8 Parent of a church
  9 Subordinate of a group ruling (also, group return)
Item 21 Type of Organization The type of organization code. Valid type of organization codes are:
  1 Corporation
  2 Trust
  3 Cooperative
  4 Partnership
  5 Association
  6 NECT (Subsection must equal 91 or 92)
Item 22 Status Code and Date The status (SS) of the organization and the date (YYYYMM) the status became effective (SSYYYYMM). Valid status codes are:
  00 EO section established without status
  01 Unconditional exemption-Active
  02 Conditional exemption-Active
  06 State operated university or college filing Form 990-T
  07 Church filed a Form 990-T Active
  10 Pre-examination of church-Active
  11 School certification-Active
  12 A formal exemption not granted - filing an EO Return - (Form 990 Under IRC 4947(a)(1); Form 990-PF Under IRC 4947(a)(1); Form 5227, Non-Exempt Charitable Trust)
  18 Temporary revocation of private foundation (Trust). Required to file Forms 990-PF and Form 1041 - Active
  19 Revocation of private foundation. Required to File Forms 990-PF and 1120 - Active
  20 Termination-Inactive (Out of Business, etc.)
  21 Unable to locate-Inactive/Active New address needed
  22 Revocation-Inactive
  23 507(a) Termination-Inactive
  24 507(b)(1)(A) Termination-Inactive
  25 507(b)(1)(B) Termination-Inactive
  26 Termination merger - Inactive
  28 No longer a member of group ruling.
  29 A group ruling has been dissolved.
  30 Churches voluntarily file Form 990 (2001)
  31 Small Organizations other than Private Foundations (2001)
  32 Non Responders to CP 140 (2001)
  33 Foreign Private Foundations described in IRC 4948(b) (2001)
  34 IRC 527 Political Organization (2001)
  35 Canadian Charities without Foundation Classification
  36 Non IRC 501(c)(3), (9) or (17) Filers - no official exemption
  40 Application pending-Inactive-No exemption
  41 No reply to solicitation - Inactive - No exemption
  42 Extension of time to file
  70 Denied - Inactive - No exemption
  71 Incomplete application - No exemption granted
  72 Refusal to rule - Inactive - No Exemption
  97 Exemption Revoked (Failure to file Form 990N or a 990 for 3-consecutive years). Form 1120 Filing Requirement will replace all Return FRC.
  98 Terrorist Organizations
  99 Returns that could not be posted in prior EO status codes 20, 22, 41, 70-72; used by EO Compliance
Item 23, Ruling Date Date the determination or ruling letter was issued.
Item 24, Activity Codes Leave Blank. These codes were obsolete after 1/1/2002.
Item 25, Deductibility Code The deductibility code (CC) and year (YYYY) in CCYYYY format. Valid deductibility codes are:
  1 Contributions are deductible
  2 Contributions are not deductible
  4 Contributions are deductible under treaty provisions.
Item 26, From GEN The group exemption number (GEN) when changing a GEN or updating a group exemption.
Item 27, New GEN The new GEN to change an individual determination/ruling to a group determination/ruling.
Item 28, Wages Paid Date Use this when establishing Form 945 filing requirements. Enter month and year wages were first paid.
Item 29, District Location The two digit universal location code from IRM 25.7.2, Exhibit 25.7.2-3 to reflect where the principal place of business is located.
Item 30, Pension Plan Enter the applicable pension plan code, as follows:
  1 Yes
  2 No or not known
Item 31, Adv. Ruling Date The date when advance ruling period is due to expire.
Item 32, Large Case Code The appropriate large case code if the case is or has previously been included in the Team Examination Program (TEP), previously known as the Coordinated Examination Program (CEP). Valid large case codes are:
  1 When a case is to be included in Team Examination Program.
  2 Was previously a Team Examination Program. case.
  9 To remove a case from the Team Examination Program.
Item 33, Cumulative List Indicator The Cumulative List Indicator code to identify an organization that is to be included in the Cumulative List (Pub. 78) Supplement. Valid Cumulative List Indicator codes are:
  3 to include EO in next quarterly supplement of Publication 78
  9 to delete a Cumulative List Indicator
Item 34, Employment Code A "W" for a IRC 501(c)(3) organization (other than an instrumentality of a state, municipality or other local governmental unit) not subject to FUTA tax.
  Exception: Do not enter a "W" for churches that have timely filed Form 8274, electing exemption from employer social security taxes. The Service Center establishes the employment code for these entities.
Item 35, Fiscal Year/Month Month in which the exempt organization's fiscal year ends
Item 36, NTEE National Taxonomy of Exempt Entities Code. This code is assigned by and normally changed by Cincinnati. NTEE codes may still be present on accounts, however, they are no longer assigned or actively used. See IRM 3.13.12.5.2(2)j.
Item 37, NAICS Code North Atlantic Industry Classification System Code from IRM 25.7.2 Exhibit 25.7.2-6.
Item 38, Filing Requirements Filing requirement codes from Document 6379.
  Note: When changing from one filing requirement to another, be certain to enter a zero (0) or two zeros (00) in the filing requirement box to be deleted.
  For example, if changing from a public charity to a private foundation enter "1" in the 990-PF box and "00" in the 990 box.
Item 39, Remarks A description of change to leave a history for future reference, e.g., Foundation Code follow-up. Remarks must consist of 10-35 characters with no consecutive blanks.
Item 40, Prepared by The agent's name and the current date.
Item 41, Organization Symbols Enter the preparer's organization symbols as indicated in pages 2-11 of Document 6379.
Item 42, Preparers Group or IDRS Number Enter the preparer's 4-digit group number or 10-digit IDRS number.
Item 43, Preparers phone number Enter phone number of preparer.
1 Detailed instructions, explanations, and allowable codes for each item can be found in IRM 25.7.2, EO/BMF Processing Procedures.

Exhibit 4.75.16-7 
Instructions for Preparing Form 4881

The following items should be completed by the agent unless otherwise noted.

Item Description Definition
Form No. Enter the appropriate Form Number (either 4720 or 990-BL).
MFT For Form 4720, enter MFT 50. For Form 990-BL, enter MFT 56.
Tax Period Enter the Tax Period (in YYYYMM format) for which Chapter 42 taxes are being assessed.
    Reminder: Prepare a separate Form 4881 for each Tax Period in which Chapter 42 taxes are being assessed.
Name/
Address/Zip Code of Taxpayer
If available, attach an address label from the temporary EIN account established on AIMS. If a label is not available, enter the complete name and address of the person or organization being assessed Chapter 42 taxes.
    Reminder: When more than one person or organization is being assessed taxes, complete a separate Form 4881 for each one involved.
Taxpayer Identification No. (TIN) Enter the SSN of the person (or the EIN of the organization) being assessed Chapter 42 taxes.
Adjustments Enter the following information as applicable. Use a separate column for each type of tax being assessed.
IRC Section Enter the appropriate 4-digit IRC section number.
  4941 For self-dealing
  4944 For investments which jeopardize charitable purposes.
  4945 For taxable expenditures
  4958 For excess benefit transactions
Abstract Code Enter the appropriate 3-digit code:
  150 For IRC 4941
  153 For IRC 4944
  154 For IRC 4945
  Blank For IRC 4958
    Note: As of 3/2003 an abstract code had not been programed for IRC 4958. This item should be left blank until an abstract code is programed and published.
Initial Tax Enter the amount of the initial tax.
Additional Tax If applicable, enter the additional tax. If additional tax is not to be assessed, leave this item blank.
Total Tax Enter the sum of the Initial and Additional Taxes.
Penalty Type Enter the applicable type of penalty (6651 or 6684). If a penalty is not being imposed, leave blank.
Penalty Amount If a penalty is being imposed, enter the amount. In all other instances, leave blank.
Related Private Foundation/Organization
Name/
Address/Zip Code of Taxpayer
Enter the complete name and address of the private foundation or organization to which the person or organization being assessed Chapter 42 taxes is related.
Taxpayer Identification No. Enter the EIN of the private foundation or organization to which the person or organization being assessed Chapter 42 taxes is related.
Form No. Enter the Form Number of the primary return filed by the private foundation/organization related to the person or organization being assessed Chapter 42 taxes.
Tax Period Enter the Tax Period (in YYYYMM format) of the return filed by the private foundation/organization related to the person or organization being assessed Chapter 42 taxes.
Prepared By Enter the name of the person preparing this .
Area Office Enter the Area Office in which the audit was conducted.
Date Enter the date of the .
Other Information Use this item to record any additional information pertinent to the case.
    Note: Review staff must enter the annotation "REVIEWED" along with the Reviewer’s initials and the date.

Exhibit 4.75.16-8 
Instructions for Preparing Form 5666

Form 5666 is prepared whenever an information notice is required or a referral for a future year audit is recommended. A review of the data from CC BRTVU should be used in making the determination to examine returns filed in the two prior years, as well as the current year. Form 5666 will also act as a MF requisition. Prepare Form 5666 as follows:
Position Number Description Definition
Line 1
1–5 CC AM424 Self-explanatory.
6 Definer Code Enter a "P" for EPMF only
Referral or Information Report "X" the applicable box to indicate whether it is a referral or an information request.
A Organization / Taxpayer / Plan Name Enter the complete name of the organization, taxpayer or plan name.
B Street Address Enter the organization’s, taxpayer’s or plan name’s complete street address.
C City, State and Zip Code Enter the city, state and zip code.
7–8 Source Code Enter the appropriate 2-digit source code. Refer to the following for a listing of valid source codes:
• Doc. 6476 (EP)
• Doc. 6379 (EO)
• Doc. 11308 (GE)
10–12 Primary Business Code (PBC) Enter the 3-digit business segment code established for the TE/GE Technical Time Reporting System (WebETS).
14–18 Secondary Business Code (SBC) Enter 5 zeros (00000) - the secondary business code is currently not being used for TE/GE.
20–23 Employee Group Code (EGC) Enter the appropriate 4-digit employee group code established for the TE/GE Technical Time Reporting System (ETS). The Employee Group Code must be in the range of:
• 7600-7699 (EP)
• 7900-7999 (EO); and effective 1/2004: 77XX
• 7200-7299 (GE).
25–26 MFT Enter the appropriate two-digit Master File Tax account code (MFT). Refer to the following for a listing of valid MFTs:
• Doc. 6476
• Doc. 6379
• Doc. 11308
28–29 Status Code Status code "06" is preprinted on the form. Do not make any changes to this entry.
31 Return Not Requested When only an examination assembly is required, enter an "X" in the box. When both the return and an examination assembly are required, leave this item blank.
33–36 Project Code Enter the appropriate 4-digit project code. If a project code does not apply, leave this item blank. Refer to the following for a listing of valid project codes:
• Doc. 6476 (EP)
• Doc. 6379 (EO)
• Doc. 11308 (GE)
38 EP Plan Type For EPMF Returns Only Enter the 1-digit type of plan. Valid plan types are:
• 1 - Defined Benefit
• 2 - Defined Contribution
39–40 Aging Reason Code Leave blank not used by TE/GE
41–43 Push Code When establishing an account for which the return has not yet posted (delinquent return, substitute for return, current or future year pick-up, etc.), enter the appropriate 3-digit Push Code:
• EP Push Code 081
• EO/GE Push Code 022, 023, 024 or 025.
•If push code does not apply, leave this item blank.
Reminder: If the Push Code is for a "Future" year return, the tax period cannot be greater than one year from the input month and year. Effective 01/2006, EP/EO/GE Push Code 036 for Substitute For Return
45–46 Alpha Day Enter a 2-character alpha statute code, if needed. The 2-character alpha code will overlay the "DD" (day) portion of the statute date that comes from MF.
48 Flowthru Indicator Enter a "1" if this is a discrepancy adjustment referral/request, or a referral/request for Form 1040, 1041, 1065, 945 & 1120.
Line 2
1–12 TIN/File Source Beginning in the left-most position, enter the organization/taxpayer/plan name 9-digit EIN/SSN (including the dashes).
Example: EIN is 12-1234567 or 12-3456789P. SSN is 123-45-6789.
14–17 Name Control/Check Digit Enter the 2-digit check digit. If the check digit is not available, enter the four-character name control.
19–24 Tax Period Enter the tax period being requested in YYYYMM format.
Example: If a 1999 return is being requested, enter 199912.
26–28 Activity Code If the activity code is not known, it should be estimated. When the record comes down from IMF or BMF, the correct activity code will be entered automatically.
Exception: If the request is for substitutes for return and returns manually re-established from the retention register. On substitutes for return, enter an estimated activity code because this activity code will override the BMF activity code of 000.
29–38 Amount Claimed (Dollars Only) If a claim is involved, enter the amount (in dollars only). Right-justify the entry and do not enter leading zeros, commas, a decimal point, or a dollar sign. If a claim is not involved, leave this item blank.
Example: A claim for $11,233.35 would be entered 11233.
40–42 Plan Number (MFT 74) /Report Number (MFT 46) Enter the 3-digit plan or number as reflected on the annual return.
D Forward to: (Name/Date/Organization/Telephone) For a referral/information notice enter the name, date, organization and telephone number which the notice is to be sent. For a future year audit, enter "ADMINISTRATIVE FILE."
E Source of Information For an information notice, indicate the source of the information by entering an "X" in the applicable box. Leave blank for a future year audit.
F Tax Period Enter the tax period in YYYYMM format.
G MFT/Plan/Report Number Enter the 2-digit MFT or 3-digit Plan/Report Number.
H Future Year (EP/EO/GE) For an information notice, leave this item blank. For a future year audit, enter the tax year for which the future audit is being recommended.
I Future Year Code (EP/EO/GE) For an information notice, leave this item blank. For a future year audit, enter the Push Code that was used on Form 5597, prepared to establish the future year request on IMF/BMF. The Push Codes are:
• 022 - Follow-up: Exemption Granted (EO/GE Only)
• 023 - Follow-up: UBI (EO/GE Only)
• 024 - Follow-up: Payment Provisions (EO Only)
• 025 - Follow-up: Other (EO Only)
• 081 - Future Year Returns (EP Only)
J Name/EIN of Related Cases Enter the name and EIN of any related cases.
K Statute Date Enter the statute of limitations date in MMDDYYYY format.
L Prepared By Enter the preparer’s name.
M Approved by/Date Requests for returns or AIMS controls initiated by an agent must be signed by the manager, or their designee, of the preparer and include their title and the date.
N Record on File These items are completed by the Terminal Operator and are completed whenever an account being established is already on AIMS. The following information (reading columns from left to right) is recorded when applicable:
•Tax Period
•Source Code
•Area Office Code
•Employee Group Code or Appeals Office Code
•Status Code
•Serial Number
•Date
•Transferee's PBC
•Comments
O Information Obtained Provide the information needed by the receiving function to handle the referral. If an audit is being recommended, include a brief description of the circumstances involved, the appropriate Code section, dollar amount and statute date.
P Action Taken Leave this item blank. To be completed by the function receiving the referral.
Q Examination Classification Action Leave this item blank. To be completed by the function receiving the referral.

Exhibit 4.75.16-9 
Closing Letter for Automatic Revocation Under IRC 6033(j)

 
Internal Revenue Service   Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street MC 4980 DAL
Dallas, TX 75242
 
 
Date: [Insert date]   Form:
[Insert form number]
Tax Year Ended:
[Insert tax periods]
Taxpayer Identification Number:
[Insert TIN]
Person to Contact:
[Insert name]
Employee Identification Number:
[Insert ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
  Employee Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
 
Dear Sir or Madam,
Our records show that your organization's exemption from Federal Income tax has been automatically revoked by operation of law pursuant to Section 6033(j) of the Internal Revenue Code because you did not file an annual information return (Form 990, Form 990-EZ, Form 990-BL or Form 990-PF) or an electronic notice (Form 990-N, e-Postcard) for three consecutive years. Because you are no longer tax-exempt and are now responsible for filing Federal income tax returns on Form [1120 or 1041] for taxable periods subsequent to [enter date], which is the effective date of the automatic revocation mandated by application of section 6033(j), we are now terminating our current examination of your organization. (Private Foundations must continue to file Form 990-PF in addition to [Form 1120 or 1041]).
Our records also indicate that a separate notice (Letter CP120A) was issued to your organization from the Internal Revenue Service's Ogden, Utah Service Center informing you about the application of section 6033(j) and the automatic revocation of your exempt status. That letter included information about the processes your organization may use to reinstate tax-exempt status.
This letter is your official notification of the termination and closing of the examination of the above referenced year(s). If you have any questions, please call the contact person at the telephone number shown in the heading of this letter. If you write, please provide a telephone number and the most convenient time to call if we need to contact you.
Thank you for your cooperation.
  Sincerely,
 
 
      [Insert name]
Director, EO Examinations

Exhibit 4.75.16-10 
Sample Form 1900 for Automatic Revocation Under IRC 6033(j)

The table below contains boilerplate entries for completing Form 1900 for cases involving automatic revocation under IRC 6033(j). Replace the name, address, Employer Identification Number, tax year, and other entries as appropriate.

     
Income Tax
Survey After
Assignment
Return(s) Name and address on latest return or claim
XYZ Charity, Inc.
1220 Street
City, State 99999
_ 1040 _ 1120
_ 1065 _ 1041
Form 990
  SSN/EIN
99-9999999
 
Documents Surveyed Recommended Action  
_ Returns _ Amended
Returns
_ Claims _ Accept as
filed
_ Allow in full _ Allow as
corrected
 
Related cases  
 
Taxable year
or period
Adjustable gross or taxable
income ed
Tax liability
ed
Claim allowable Tentative allowance
approved
 
201112          
           
           
           
           
           
Explanation (if necessary use other side)  
ORGANIZATION AUTO-REVOKED BY OGDEN CAMPUS WHILE OPEN FOR EXAMINATION  
By reason of IRC section 6033(j), the exempt status of the organization has been auto-revoked by the Ogden Service Center for failing to file annual EO information returns or Form 990-N for three consecutive tax years ending [20YYMM, 20YYMM and 20YYMM]. EO BMF Status 97 posted on [date] while the EO returns were open for examination. The Ogden Service Center issued Notice CP120A to the taxpayer on [ date ]. The effective date of auto-revocation is [due date of return for 3rd tax year].

Because the organization is no longer tax-exempt this examination has been terminated and the returns for the years indicated must be surveyed.
 
Enclosures Examining officer
U.R, Agent, RA
Date
8/1/2011
 
Approved by/Title
Maria Manager, Group Manager
Date
8/1/2011
 

Exhibit 4.75.16-11 
Sample Form 2807

Do not use this verbatim. Tailor your agreement to fit your issues.

Form 2807 DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE
(Rev. July 1980) AGREEMENT TO MAINTAIN ADEQUATE BOOKS OF ACCOUNT AND RECORDS
During the examination of my Federal income tax return for the year(s) shown, consideration was given to the adequacy of the books of account and records I now maintain. As a result, I agree that, to be able to make a proper return of income in the future, I will maintain the specific books of account and records described below. YEAR(S)


12/31/2011
DESCRIPTION






Section 6001 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that every person liable for any tax imposed by title 26, or for the collection thereof, shall keep such records, render such statements, make such returns and comply with such rules and regulations as the Secretary or his delegate may from time to time prescribe. Whenever in the judgment of the Secretary or his delegate it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary or his delegate deems sufficient to show whether or not such person is liable for tax under title 26.


Section 6033 provides, in general, that every organization exempt under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.

You were notified on [date] that your books and records are not adequate to permit the Internal Revenue Service to determine the correctness of your Forms 990 and the extent of your unrelated business income tax liability. The amounts ed on your Form 990 do not agree with documents you have provided us. You did not maintain original source documents to support your transactions. Specifically, we cannot determine how and under what circumstances your funds were distributed. Also, we cannot confirm who your recipients were for charitable distributions, and whether they were charitable organizations or of a charitable class. Consequently, we cannot ascertain whether your assets are dedicated exclusively for charitable purposes in order to justify continued recognition of your tax-exempt status under IRC 501(c)(3) of the Code.

Your records also do not permit us to confirm whether amounts you received are contributions or sales of goods and services. For some transactions we believe to be contributions, we cannot identify your sources for purposes of determining your proper foundation status, and ultimately your tax liability under Chapter 42 of the Code, if any. We found you liable for unrelated business income tax for the sale of widgets, but your records do not permit us to determine the extent of your sales. You erroneously ed a substantial amount of your gross income from sales as contributions, and you did not all of the amounts you received.

You are required to maintain the books and records listed below:
• Names, addresses and contact information for individual and corporate donors
• Copies of all acknowledgments of charitable contributions issued to donors

• Copies of contribution agreements and correspondence with donors
• Records of any goods or services provided to any donor
• Documentation pertaining to any in-kind donations received
• Taxpayer Identification Numbers of all recipients of grants from your organization
• Copies of determination letters issued by the IRS to the grant recipients, as applicable
• Documentation of how grants are/were used by the grant recipients
• Documentation of (internal) approval determinations for all grants made
• Documentation of all transactions for the provision of goods or services with all parties

• Documentation of sales (such as a sales journal), and copies of orders for widgets from customers.
SIGNATURE OF TAXPAYER (OR PARTNER)

ADDRESS DATE
SIGNATURE OF SPOUSE IF PRIMARILY RESPONSIBLE FOR KEEPING ALL OR PART OF NECESSARY RECORDS
ADDRESS DATE

Exhibit 4.75.16-12 
Status 36 Case Scenarios

Scenario 1
Not described in any code section - Agreed/Secured Form 1120
Facts and Instructions
Organization A has never applied for exemption with the IRS. A is filing a Form 990 indicating it is described in IRC 501(c)(6). The BMFOLO shows a current status code of "36" and subsection of 06.

During the audit, you determine that A is not described in any subsection of IRC 501(c).



After reviewing your report on Form 4621-A (including Letter 4098, 30-day letter), A signs a Form 6018-A agreeing that it is not exempt from tax under IRC 501(a).


You secure the delinquent Form(s) 1120 after presenting your report.

Note:

When completing your report on Form 4621-A, Report of Examination - Exempt Organizations, do not check any box in Item 12. Instead, make Item 13, Remarks, a continuation of item 12 by beginning your explanation in Item 13 with, “The nature of the proposed status change is denial of tax-exempt status effective for the tax periods under examination.” If there is insufficient space in Item 13 for facts, laws, etc., then prepare Form 886-A, Explanation of Items, as an attachment to Form 4621-A setting forth the facts, laws, etc. When presenting the report to the taxpayer, explain appeals procedures and the taxpayer's right to discuss the proposal with your group manager.




How to proceed after the taxpayer agrees with your report:
Prepare Form 2363-A. See Exhibit 4.75.16-14. Forward the Form 2363-A to the FAST for processing.

Follow the delinquent return package procedures in IRM 4.75.22 for the secured Form(s) 1120. Send the package(s) to the FAST after the filing requirement change has posted.



Prepare Letter 4097, Status 36 Case - Not described in any Code section - Agreed and Secured Form 1120. This letter is an agreed examination closing letter.


Mail the Letter 4097 and a copy of the report of examination to the taxpayer.

Complete Form 5599. Use Disposal Code 05 (207), Delinquent Related Return Secured.





Complete Form 5666, TE/GE Referral Information Report, only if the secured Form(s) 1120 or 1041 are complex or appear to be prepared incorrectly.



Forward the case for normal processing through ESS.
Scenario 2
Not described in any code section - Unagreed/1120 not secured
Facts and Instructions
Organization B has never applied for exemption with the IRS. Organization B is filing a Form 990 indicating it is described in IRC 501(c)(6). The BMFOLO shows a current status code of "36" and subsection of 06.

During the audit, you determine that B is not described in any subsection of IRC 501(c).

After reviewing your report on Form 4621-A (including Letter 4098, 30-day letter), B does not agree that it is not exempt from tax under IRC 501(a), and does not file Form(s) 1120.

Note:

When completing your report on Form 4621-A, Report of Examination - Exempt Organizations, do not check any box in Item 12. Instead, make Item 13, Remarks, a continuation of item 12 by beginning your explanation in Item 13 with, “The nature of the proposed status change is denial of tax-exempt status effective for the tax periods under examination.” If there is insufficient space in Item 13 for facts, laws, etc., then prepare Form 886-A, Explanation of Items, as an attachment to Form 4621-A setting forth the facts, laws, etc. When presenting the report to the taxpayer, explain appeals procedures and the taxpayer's right to discuss the proposal with your group manager.




How to proceed after the taxpayer responds to your report:
Prepare Form 2363-A. See Exhibit 4.75.16-14. If taxpayer responded with a protest to Appeals, keep Form 2363-A in the case file for Appeals. If the taxpayer failed to respond to the 30-day letter or failed to submit a valid protest, send Form 2363-A to the FAST.


If the taxpayer responds with a protest, prepare and mail a rebuttal to the taxpayer. Place a copy of the signed and dated rebuttal in the case file. If taxpayer does not respond or does not submit a valid protest, Letter 4098 becomes final as to nonexempt status.










Complete Form 5599. Use Disposal Code 07 (601), Unagreed-Protest to Appeals, or Disposal Code 10 (604), Unagreed - Without Protest, as applicable.

Prepare Form 5666, TE/GE Referral Information Report, to inform SB/SE or LB&I that the organization has not filed required tax returns on Form 1120 or Form 1041.

If the taxpayer protested, forward the case to Mandatory Review. Mandatory Review then forwards the case to Appeals after reviewing the case. Otherwise close the case to ESS. No mandatory review is required in status 36 cases where no protest is received.
Scenario 3
Described in code section other than what Form 990 was filed under - Agreed
Facts and Instructions
Organization C has never applied for exemption with the IRS. C is filing a Form 990 indicating it is described in IRC 501(c)(7). The BMFOLO shows a current status code of "36" and subsection of 07.

During the audit, you determine that C is not described under IRC 501(c)(7), but does meet the rules under IRC 501(c)(4).

After reviewing your report on Form 4621-A (including Letter 4101, 30-day letter), C signs a Form 6018-A agreeing to not being described under IRC 501(c)(7) for the period(s) under examination but being described under IRC 501(c)(4) for the same periods.





How to proceed after the taxpayer agreed to your report:

Prepare Form 2363-A reflecting a change in subsection. See Scenario 3 table at Exhibit 4.75.16-14. Send the Form 2363-A to the FAST.


Consider all appropriate UBI issues under the revised code section and make any necessary adjustments to the Form 990-T as required.


Prepare Letter 4099, Status 36 Case - Described in Code section other than what 990 was filed under - Agreed. This letter is an examination closing letter. Include an addendum with advisory paragraphs for other issues encountered in the examination of Form 990.


Mail the Letter 4099 and copy of report of examination to the taxpayer.

Prepare Form 5599: Use Disposal Code 52 (214), Written Advisory – No Form 5666 Required. (As long as no other issues exist that would require a different disposal code). Note that "modification" disposal codes are not applicable to Status 36 organizations since these organizations are not recognized as tax-exempt.

Forward the case for normal processing through ESS.
Scenario 4
Described in IRC section other than what Form 990 was filed under – but does not want that section – Agreed/Secured Form 1120
Facts and Instructions
Organization D has never applied for exemption with the IRS. D is filing a Form 990 indicating it is described in IRC 501(c)(7). The BMFOLO shows a current status code of "36" and subsection of 07.

During the audit, you determine that D is not described under IRC 501(c)(7), but does meet the rules under IRC 501(c)(4).

D does not want to be under the IRC 501(c)(4) rules and D decides to file the Form 1120 instead.

After reviewing your report on Form 4621-A (including Letter 4101, 30-day letter), D signs a Form 6018-A agreeing it is not exempt from tax under IRC 501(c)(7). See Exhibit 4.75.16-13.

You secure the delinquent Form(s) 1120.


How to proceed after taxpayer agreed to your report:
Prepare Form 2363-A. See Exhibit 4.75.16-14. Forward the Form 2363-A to the FAST for processing.


Follow the delinquent return package procedures in IRM 4.75.22 for the secured Form(s) 1120. Send the package(s) to the FAST after the filing requirement change has posted.

Prepare Letter 4100, Status 36 Case - Described in other section but taxpayer is not interested - Form 1120 Secured. This letter is a closing letter.



Mail the Letter 4100 and report of examination to the taxpayer.


Complete Form 5599. Use Disposal Code 05 (207), Delinquent Related Return Secured.



Complete Form 5666 only if the Form(s) 1120 secured are complex or appear to be prepared incorrectly.



Forward the case for normal processing through ESS.
Scenario 5
Described in code section other than what Form 990 was filed under – but does not want that section – Unagreed/1120 not secured
Facts and Instructions
Organization E has never applied for exemption with the IRS. Organization E is filing a Form 990 indicating it is described in IRC 501(c)(4). The BMFOLO shows a current status code of "36" and subsection of 04.

During the audit, you determine that E is not described under IRC 501(c)(4), but does meet the rules under IRC 501(c)(7). In addition, the taxpayer has $4,000 in investment income derived from 100% debt-financed property.

After reviewing your report on Form 4621-A (including Letter 4101, 30-day letter), Organization E does not want to be under the IRC 501(c)(7) rules and files a Form 990-T reporting its taxable unrelated business income from debt-financed investments in the capacity of an IRC 501(c)(4) organization. Organization E does not agree it is not described in IRC 501(c)(4). E does not agree to file Form 1120 and does not sign a Form 6018-A.

Note:

When completing your report on Form 4621-A, Report of Examination - Exempt Organizations, indicate in the report the organization is not described in IRC 501(c)(4) but may qualify under IRC 501(c)(7) . When presenting the report, explain appeals procedures and the taxpayer's right to discuss the proposal with your group manager.




How to proceed after the taxpayer responds to your report:
Follow the delinquent return package procedures in IRM 4.75.22 for the secured Form(s) 990-T. Consistent with the organization's current status, send the package(s) to the FAST before a change in filing requirement posts.

Prepare Form 2363-A to change the filing requirement. See Exhibit 4.75.16-14. If taxpayer responded with a protest to Appeals, keep Form 2363-A in the case file for Appeals. If the taxpayer failed to respond to the 30-day letter or failed to submit a valid protest, send Form 2363-A to the FAST (but after the Form 990-T posts a TC 599).

If the taxpayer responded with a protest, prepare and mail a rebuttal to the taxpayer. Place a copy of the signed and dated rebuttal in the case file. If taxpayer did not respond or did not submit a valid protest, Letter 4101 becomes final as to nonexempt status.


Complete Form 5599. Use Disposal Code 07 (601), Unagreed-Protest to Appeals, or Disposal Code 10 (604), Unagreed-Without Protest, as applicable.


Prepare Form 5666, TE/GE Referral Information Report, to inform SB/SE or LB&I that the organization has not filed required tax returns on Form 1120 or Form 1041, but that any payments and credits in connection with the filed Form 990-T for the same tax year are available for transfer to the Form 1120 or Form 1041 module.

If the taxpayer protested, forward the case to Mandatory Review. Mandatory Review then forwards the case to Appeals after reviewing the case. Otherwise close the case to ESS. No mandatory review is required in status 36 cases where no protest is received.
Scenario 6
Described in code section that Form 990 was filed under
Facts and Instructions
Organization F has never applied for exemption with the IRS. F is filing a Form 990 indicating it is described in IRC 501(c)(7). The BMFOLO shows a current status code of "36" and subsection of 07.

During the audit, you determine that Fdoes meet the exemption rules under IRC 501(c)(7).

How do you proceed?

Suggest that an application can be filed in accordance with the instructions for Form 1024, so that the IRS will recognize them as being exempt. Do not force a taxpayer to file an application.

Prepare Form 5599: Use Disposal Code 52 (214), No Change - Written Advisory - No Form 5666 Required. Status 36 organizations never close with a disposal code 02 (107).

Prepare Letter 4102, Status 36 Case - No Change. This letter is a closing letter issued by the examination group. This letter serves as an advisory.

Mail the Letter 4102 to the taxpayer.

Forward the case for normal processing through ESS.

Exhibit 4.75.16-13 
Status 36 Case: Form 6018-A Instructions

Form 6018-A: Scenarios 1 and 2
1 Enter the name and address of the organization.
2 Enter the employer identification number.
3 Enter the date of the Letter 4097/4098 as the date of proposed action letter.
4 Under Other (specify), type "You were not exempt from income tax under IRC IRC 501(a) for the tax periods ended" [insert years in Month, Day, Year format] "because you were not described in IRC 501(c)."
5 Enter the name of the organization.
Form 6018-A: Scenarios 3, 4, and 5
1 Enter the name and address of the organization.
2 Enter the employer identification number.
3 Enter the date of the Letter 4099/4100/4101 as the date of proposed action letter.
4 Under Other (specify), type "For the tax periods ended" [insert years in Month, Day, Year format] "the organization was not described in IRC §(" [insert section number]"). These findings are only relative to the period(s) under examination."
5 Enter the name of the organization.

Exhibit 4.75.16-14 
Status 36 Case: Form 2363-A Instructions

Form 2363-A: Scenarios 1, 2, 4, and 5
1 In box 1, enter the EIN
2 In box 2, enter the four letter Name Control
3 In box 3, check Document Code 80
4 In box 4, check Transaction Code 16
5 In box 5, enter Definer Code AB
6 In box 8, enter the name of the organization
7 In box 17, enter the current subsection code
8 In box 18, enter the foundation code as 00 if anything other than 00 presently
9 In box 19, enter the current classification code
10 In box 22, enter 22 followed by the first month of the first year under audit in the YYYYMM format
11 In box 35, enter the fiscal year ending month
12 In the filing requirement boxes, enter a 01 under 1120, and 00 under 990 and 990-T
13 Add 01 and 1 requirements for Forms 941 and 940, as applicable
14 In the comments field, state "Updating filing requirement to 1120"
Form 2363-A: Scenario 3
1 In box 1, enter the EIN
2 In box 2, enter the four letter Name Control
3 In box 3, check Document Code 80
4 In box 4, check Transaction Code 16
5 In box 5, enter Definer Code A
6 In box 8, enter the name of the organization
7 In box 17, enter the new subsection code
8 In box 18, enter the foundation code as 00 if anything other than 00 presently
9 In box 19, enter the new classification code
10 In box 35, enter the fiscal year ending month
12 In the filing requirement boxes, enter a 01 or 00 for the 990-T, as applicable
13 Add 01 and 1 requirements for Forms 941 and 940, as applicable
14 In the comments field, state "Changing code section"

Exhibit 4.75.16-15 
Draft Examination Termination Letter IRC 501(c)(3)

 
Internal Revenue Service   Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street MC 4920 DAL
Dallas, TX 75242
 
 
Date: [Insert date]  
Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert form number]
Tax Period Ended:
[Insert tax period]
Person to Contact:
[Insert name of reviewer]
Employee Identification Number:
[Insert ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
Employee Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
 
Dear Sir or Madam,
We have concluded our examination of your Form[s] [990/990-EZ/990-N], [Return of Organization Exempt from Income Tax/Short Form Return of Organization Exempt From Income Tax/( electronic postcard)] for the year[s] ended [insert tax year(s)]. We have accepted your return[s] as filed.
On [insert date] you dissolved your organizational document and have discontinued operations. You have distributed your residual assets to another organization recognized as tax exempt under section 501(c)(3) of the Internal Revenue Code.
As a result of the dissolution, your exempt status under section 501(a) of the Internal Revenue Code as an organization described in section 501(c)(3) is terminated and no longer effective after [insert date of dissolution].
Contributions to you are not deductible after [insert date of dissolution].
If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.
Thank you for your cooperation.
  Sincerely,
 
 
  [Insert name]
Director, EO Examinations

Exhibit 4.75.16-16 
Draft Examination Termination Letter IRC 501(c)(other)

 
Internal Revenue Service   Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street MC 4920 DAL
Dallas, TX 75242
 
 
Date: [Insert date]  
Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert form number]
Tax Period Ended:
[Insert tax period]
Person to Contact:
[Insert name of reviewer]
Employee Identification Number:
[Insert ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
Employee Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
 
Dear Sir or Madam,
We have concluded our examination of your Form[s] [990/990-EZ/990-N], [Return of Organization Exempt from Income Tax/Short Form Return of Organization Exempt From Income Tax/( electronic postcard)] for the year[s] ended [insert tax year(s)]. We have accepted your return[s] as filed.
On [insert date] you dissolved your organizational document and have discontinued operations. You have distributed your residual assets to another organization recognized as tax exempt under section 501(c)(_) of the Internal Revenue Code.
As a result of the dissolution, your exempt status under section 501(a) of the Internal Revenue Code as an organization described in section 501(c)(_) is terminated and no longer effective after [insert date].
If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.
Thank you for your cooperation.
  Sincerely,
 
 
  [Insert name]
Director, EO Examinations

Exhibit 4.75.16-17 
Closing Procedures for "Unable to Locate" Situations

  Example 1 Example 2 Example 3
Facts
The organization is a: Corporation Corporation Corporation
Certified letters were: Undeliverable Undeliverable Undeliverable
There is reliable 3rd party information that the organization has engaged in non-exempt activities No No No
Dissolution Articles of Dissolution filed with State Administratively dissolved by the State but CAN be reactivated currently.
See footnote 2
Administratively dissolved by the State but CAN NOT be reactivated.
See footnote 3.
Development and Closing
Update the EO/BMF status 20 Termination
See footnote 4
See footnote 5 20 Termination
See footnote 4
AIMS closing
Return filed - BMF account established 14 Termination 32 Survey After Assignment 14 Termination
No return filed 14 Termination (Establish on BMF) 99 Miscellaneous Form 10904
See footnote 6
14 Termination (Establish on BMF)
Closing letter or required Termination letter
See footnote 7
None Termination letter
See footnote 7
Is 90-day letter required in declaratory judgment cases? No No No
Is the case subject to Mandatory Review? Yes No Yes
  Example 4 Example 5 Example 6
Facts
The organization is a: Corporation, Unincorporated Association, or Trust Corporation, Unincorporated Association, or Trust Corporation, Unincorporated Association, or Trust
Certified letters were: Delivered but no response was received Undeliverable or delivered and no response received Undeliverable
There is reliable 3rd party information that the organization has engaged in non-exempt activities No Yes
See footnote 1
No
Dissolution No information available No information available No information available
Development and Closing
Update the EO/BMF status 22 Revocation
See footnote 4
22 Revocation
See footnote 4

See footnote 5
AIMS closing
Return filed - BMF account established 10 Unagreed without protest 10 Unagreed Without Protest 32 Survey After Assignment
No return filed 10 Unagreed without Protest (Establish on BMF) 10 Unagreed Without Protest (Establish on BMF) 99 Miscellaneous Form 10904
See footnote 6
Closing letter or required Letter 3618 or 3610 and RAR
See footnote 8
Letter 3618 or 3610 and RAR
See footnotes 9, 10
None
Is 90-day letter required in declaratory judgment cases? Yes
See footnote 11
Yes
See footnote 11
No
Is the case subject to Mandatory Review? Yes Yes No
# Applies to Examples: Footnote:
1 5 There is reliable 3rd party information that supports a proposed revocation on the basis that the organization has engaged in non-exempt activities and Area Counsel agrees that this information supports a proposed revocation. Such cases should be rare.
2 2 The organization has been administratively terminated by the State for failure to file annual reports or pay required filing fees. The state allows a corporation to be reactivated or the state allows reactivation during a proscribed period of time and the period in during which reactivation is permitted has not expired.
If the State allows reactivation during a prescribed period of time only, the agent will prepare a Form 5666 recommending the year in which the corporation can no longer be reactivated for termination.
3 3 The organization has been administratively terminated by the State for failure to file annual reports or pay required filing fees. The state does not allow a corporation to be reactivated or the State allows reactivation during a proscribed period of time but the period in during which reactivation is permitted has expired.
4 1, 3, 4, and 5 Agents prepare Form 2363-A to update the EO/BMF to the correct status code. Mandatory Review will sign as reviewer and process Form 2363-A with the FAST once it concurs by issuing the final letter. A marked copy of Form 2363-A will be retained in the case file indicating the date Mandatory Review submitted the form for processing.
5 2 and 6 The agent should update the organization’s status to "unable to locate" by preparing Form 4844, Request for Terminal Action. The transaction code should be 593 and the closing code(CC) should be 82. (TC 593-CC 82). See Exhibit 4.75.16-19.

Note:

Form 3198-A should state, in the other instructions section, "Please process Form 4844."

6 2 and 6 Close with Closing Code 99, Information Report and Miscellaneous. Prepare Form 10904. The reason for the request should be "Unable to locate taxpayer and examination is not to take place" .
7 1 and 3 See Exhibit 4.75.16-15 and Exhibit 4.75.16-16 for sample termination letters. The termination letters will be mailed by Mandatory Review.
8 4 Revocation is proposed because of the organization's failure to provide information verifying its continued qualification for exempt status. See IRC 6033, Treas. Reg. 1.6001-1 and Rev. Rul. 59-95. The agent will prepare the Revenue Agent’s Report (RAR), 30-day letter and mail it to the taxpayer. Mandatory Review will prepare and mail the final letter.
9 5 Agents, through the group manager, must secure Area Counsel’s written agreement that the 3rd party facts support revocation. If Area Counsel agrees with the revocation, the agent will prepare the Revenue Agent’s Report (RAR), 30-day letter and mail it to the taxpayer. Mandatory Review will prepare and mail the final revocation letters.
10 5 If the letters were undeliverable in example 5, the basis for revocation is the 3rd party information. If the letters were delivered but there was no response, the basis for revocation will include both issues, failure to provide records and the 3rd party information.
11 4 and 5 Area Counsel must review and approve all 90-day letters involving IRC 501(c)(3) organizations.

Exhibit 4.75.16-18 
Guidelines for Using EO Sub-Folders in RCCMS

The tables below provide general guidelines on the placement of forms, letters, and other documents within the Office Documents Folder (using the pre-defined EO sub-folders) and the Research Folder (using the “Returns” and “Queries” Sub-Folders).

Folder Description
Office Documents Folder (no sub-folder) Form 895, Form 3198-A, Form 5599.
These forms are traditionally placed on the outside of the paper folder. See IRM 4.75.16.7.1. Forms attached to Outside of Folder.


In RCCMS, when the Office Documents Folder is selected, all documents will be displayed. If the documents are sorted by Folder (click on Folder column) the documents not in a sub-folder will be displayed at the top of the list view.
1- Non-Disclosure This folder should be used for Confidential Information (See IRM 4.75.16.7.3 (2)). Related Return Sheet, Form 5666, Form 2363-A, etc. Traditionally known as the 'left hand side of the folder'.
2- RAR and Related Documents This folder should be used for the 30 day letter, response to 30-day letters, rebuttal letter and closing letter, RAR, Project Checksheet, Form 5772, 5773, 5774, 5464, etc. The documents in this folder would be those that go on top of the workpapers.
3- Administrative Record See IRM 4.75.32
4- Correspondence All other correspondence sent to or received from the taxpayer.
A – Preaudit
B – Organizational Documentation
C - Operational
…..Through…..
L – Audit considerations
Folders A through L are based on main categories from Form 5772. Only create the folders that apply to the specific case. You should only add the applicable folders for the case.
Research Folder
Returns Subfolder The RICS return will be placed in this folder. BRTVU or RTVUE prints. Scanned copies of returns received from the taxpayer.
Queries Subfolder Used to hold results of manual queries (i.e. IDRS). I.e. AMDISA, BMFOLT, etc

Note:

No documents can be posted directly in the Research folder. Documents should be posted to one of the subfolders described above.

Exhibit 4.75.16-19 
Form 4844, Request for Terminal Action

This image is too large to be displayed in the current screen. Please click the link to view the image.

Exhibit 4.75.16-20 
Modified Letter 4095, Inadequate Records Notice

Internal Revenue Service   Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street MC 4920 DAL
Dallas, TX 75242
 
   
Date: [Insert date]  
Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert form number]
Tax Period Ended:
[Insert tax period]
Person to Contact:
[Insert name of reviewer]
Reviewer's Identification Number:
[Insert ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
Reviewer's Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
CERTIFIED MAIL
Dear Sir or Madam,
Our examination of the information return listed above indicates your organization is not maintaining adequate records. We have accepted your return(s) for the years shown above as filed and are not proposing an adverse determination regarding your exempt status at this time. However, as a tax-exempt organization the law requires you to keep permanent records and supporting documents.
This letter is your official notice to maintain complete records to establish compliance with the requirements of your tax-exempt status. Along with this letter you will find the following enclosures:
 
• A copy of the signed Form 2807, Agreement to Maintain Adequate Books of Account and Records, if applicable;
• An explanation of why your records are inadequate;
• Any applicable provisions of the Internal Revenue Code and Regulations;
• Any additional deficiencies, if applicable, which if not corrected, may result in taxes, penalties, and/or loss of tax-exempt status in the future.
If you do not maintain the records we have identified in the first enclosure and present them to us upon request, then we may revoke your tax-exempt status at a later date.
As part of your rights as a taxpayer you may contact the Taxpayer Advocate office. The Taxpayer Advocate can see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. They cannot however, reverse a legally correct tax determination or extend the time fixed by law that you have to file a petition in a United States court. Their assistance is also not a substitute for established IRS procedures such as the formal appeals process. You may call toll-free 1-877-777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact your local Taxpayer Advocate at:
Internal Revenue Service
Office of the Taxpayer Advocate
[ENTER STREET ADDRESS]
[ENTER STREET ADDRESS]
[ENTER CITY, STATE ZIP]
[PHONE NUMBER]
If you have any questions, please call the contact person at the telephone number shown in the heading of this letter.
Thank you for your cooperation.
    Sincerely,
   
   
    [Insert name]
Director, EO Examinations


Enclosures:

[Form 2807] or [Explanation of Inadequate Records]
Applicable Provisions of the Internal Revenue Code and Regulations
Other Deficiencies Identified in the Examination

Use the following page in lieu of Form 2807 if your conclusion regarding inadequate records is unagreed. Refer to Form 2807 at Exhibit 4.75.16-11, the signed copy of which must be attached here for agreed inadequate records.

Explanation of Inadequate Records


Your records are not adequate because:



You were notified on [date] that your books and records are not adequate to permit the Internal Revenue Service to determine the correctness of your Forms 990 and the extent of your unrelated business income tax liability. The amounts ed on your Form 990 do not agree with documents you have provided us. You did not maintain original source documents to support your transactions. Specifically, we cannot determine how and under what circumstances your funds were distributed. Also, we cannot confirm who your recipients were for charitable distributions, and whether they were charitable organizations or of a charitable class. Consequently, we cannot ascertain whether your assets are dedicated exclusively for charitable purposes in order to justify continued recognition of your tax-exempt status under IRC 501(c)(3) of the Code.

Your records also do not permit us to confirm whether amounts you received are contributions or sales of goods and services. For some transactions we believe to be contributions, we cannot identify your sources for purposes of determining your proper foundation status, and ultimately your tax liability under Chapter 42 of the Code, if any. We found you liable for unrelated business income tax for the sale of widgets, but your records do not permit us to determine the extent of your sales. You erroneously ed a substantial amount of your gross income from sales as contributions, and you did not all of the amounts you received.









You are required to maintain the books and records listed below:

• Names, addresses and contact information for individual and corporate donors
• Copies of all acknowledgments of charitable contributions issued to donors
• Copies of contribution agreements and correspondence with donors
• Records of any goods or services provided to any donor
• Documentation pertaining to any in-kind donations received
• Taxpayer Identification Numbers of all recipients of grants from your organization
• Copies of determination letters issued by the IRS to the grant recipients
• Documentation of how grants are/were used by the grant recipients
• Documentation of (internal) approval determinations for all grants made
• Documentation of all transactions for the provision of goods or services with all parties
• Documentation of sales (such as a sales journal), and copies of orders for widgets from customers

The following page is attached to Inadequate Records Notices:

Applicable Provisions of the Internal Revenue Code and Regulations



Section 6001 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that every person liable for any tax imposed by title 26, or for the collection thereof, shall keep such records, render such statements, make such returns and comply with such rules and regulations as the Secretary or his delegate may from time to time prescribe. Whenever in the judgment of the Secretary or his delegate it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary or his delegate deems sufficient to show whether or not such person is liable for tax under title 26.

Section 1.6001-1(c) of the Regulations provides, in part, that organizations exempt from tax under section 501(a) shall "keep such books and records as are required to substantiate the information required by" section 6033.

Section 6033 provides, in general, that every organization exempt under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.



Section 1.6033-2(a)(1) of the Regulations provides, in part, that, except for certain exceptions not here applicable, every organization exempt from taxation under section 501(a) shall file an annual information return specifically setting forth its items of gross income, gross receipts and disbursements, and such other information as may be prescribed in the instructions issued with respect to the return.

Section 1.6033-2(i)(2) of the Regulations provides, in part, that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F, chapter 1 of subtitle A of the Code, section 6033, and chapter 42of subtitle D of the Code.

ORIGINAL OR THIS NOTICE SERVED AS INDICATED


Organization's name
Employer Identification Number
Date organization was verbally informed that records were not adequate
Agreement Form 2807 solicited
 Secured  Not Secured
Date solicited
Original of this notice personally served on (name)
Date served
Address where notice was served
Signature of person serving notice

Title

The following page, if applicable, is the last attachment to the Inadequate Records Notice.

Other Deficiencies Identified in the Examination


Our review of your return, Form 990, and related records indicated that you did not file Forms 1099, and you did not furnish Forms 1099 to recipients. Under Section 6041 of the Internal Revenue Code, you are required to issue Forms 1099 to recipients of prizes, awards, or fees of $600 or more during a calendar year. Even though we have now obtained these returns, we have determined that you did not have reasonable cause for these failures, and we have recommended imposition of penalties under IRC 6721 and 6722 of the Internal Revenue Code, which is $100 per Form 1099 not filed with the Service, and another $100 per return not furnished to a recipient. Please file these returns timely to avoid additional penalties.









Exhibit 4.75.16-21 
Principal Issue Code List

3-Digit PIC Numbers and Initial Titles for AIMS and RCCMS for FY 2013 - EO-EP-GE Master List (as of Nov. 2012)

PIC Title Major Category
  Filing Requirement Exemption Issues
01A Filing Req.-No Change  
01B Filing Req.-Secured Del. 990/990EZ Rtrns  
01C Filing Req.-Secured Del. 990PF Rtrns  
01D Filing Req.-Secured Del. 990-T Rtrns  
01E Filing Req.-Secured Del. 940/941/944/945 Rtrns  
01F Filing Req.-Secured Del. 1120-POL Rtrns  
01G Filing Req.-Secured Del. 4720 Rtrns  
01H Filing Req.-Secured Del. 1099/1096 Rtrns  
01I Filing Req.-Secured Del. W-2/W-3/W-4 Rtrns  
01J Filing Req.-Secured Del. 730/11-C Rtrns  
01K Filing Req.-Secured Del. 1042 Rtrns  
01L Filing Req.-Incomplete Returns - 990 Info Rtrns  
01M Filing Req.-Non-Filer-990 Info Rtrns  
01N Filing Req.-Inadequate Records to Substantiate Rtrn  
01O Filing Req.-Other  
  Organizational Requirements Exemption Issues
02A Org. Req.-No Change  
02B Org. Req.-Advisory  
02C Org. Req.-Other  
  Operational Requirements Exemption Issues
03A Operational Req.-No Change  
03B Operational Req.-Advisory  
03C Operational Req.-Other  
  Revocation/Discontinued Operations Exemption Issues
04A Revocation/Disc. Ops Consideration-No Change  
04B Revocation-Not Operating for Exempt Purpose  
04C Revocation-Inurement/Private Benefits  
04D Revocation-Political Activity  
04E Revocation-Substantial Legislative Activity  
04F Disc. Ops-Entity Dissolved/Terminated  
04G Revocation/Disc. Ops-Other  
  Foundation Status/Modification Exemption Issues
05A Fdn. Status/Modification-No Change  
05B Fdn. Status - Advisory  
05C Fdn. Status-Supporting Org. Issues  
05D Modification-Change in Subsection  
05E Fdn. Status - Change in Fdn. Status 501(c)(3) Only  
05F Fdn. Status/Modification-Other  
  Inurement/Private Benefit Exemption Issues
06A Inurement/Private Benefit Issues - No Change  
06B Inurement/Prvt. Benefit-Advisory  
06C Inurement/Prvt. Benefit-By Prvt. Med. Practices  
06D Inurement/Prvt. Benefit-Tax Shelter Issues  
06E IRC 4958 Sanctions - Excise Tax Assessed  
06F Inurement/Prvt. Benefit-Other  
  Legislative Activities Exemption Issues
07A Legislative Activities-No Change  
07B Legislative Activities-Advisory  
07C IRC 4912-Disqual. Lobbying Expenditures  
07D IRC 4911 - Excess Expend. To Infl. Legislation  
07E Legislative Activities-Other  
  Political Activities Exemption Issues
08A Political Activities-No Change  
08B Political Activities-Advisory  
08C Political Act. - Ex. Function vs Tax. Expenditures  
08D Political Act.-Net Investment Inc. Adj.  
08E Political Act.-Forms 8871/8872 Reporting Req.  
08F Political Act.-Failure to Prop. Report Fundraising  
08G IRC 4955-Political Expend. of 501(c)(3)s  
08H Political Act.-Other  
  Governance Exemption Issues
09A Governance-No Change  
09B Governance-Gov. Body+Mgt-Size of Gov. Body (Advisory)  
09C Governance-Org. Control-Family Board (Advisory)  
09D Governance-Proc. for Determ. Exec. Comp. Faulty (Advisory)  
09E Governance-Conflict of Int. Policy or Adherence (Advisory)  
09F Governance-Financial Oversight of Gov. Body (Advisory)  
09G Governance-Other  
  Unrelated Business Income UBI Issues
10A UBI Issues-No Change  
10B UBI Issues-Advisory  
10C UBI-Inc./Exp. Allocation  
10D UBI-Service vs. Royalty Issue  
10E UBI-NOL Adj. Issues  
10F UBI-Inc. from Contrl'd/Contrl'ing Corp under 512(b)(13)  
10G UBI-Rental Activity  
10H UBI-Debt Financed Property  
10I UBI-Non-Member Inc.  
10J UBI-Inv. Inc.  
10K UBI-Gaming (Pull Tabs, etc.)  
10L UBI-Advertising  
10M UBI-Inc./Exp. Adjustments  
10N UBI-Other  
  Unreported Compensation Employment Tax Issues
11A Unrep. Comp-No Change  
11B Unrep. Comp-Gaming Wages(Bingo, etc.)  
11C Unrep. Comp-Exec. Ees  
11D Unrep. Comp-Commissions  
11E Unrep. Comp-Legal Settlement  
11F Unrep. Comp-Stipends  
11G Unrep. Comp-Loan Forgiveness  
11H Unrep. Comp-Deferred Comp  
11I Unrep. Comp-Illegal Income  
11J Unrep. Comp-Pmnts Made After EE Death  
11K Unrep. Comp-Bonuses  
11M Unrep. Comp-Awards/Prizes  
11N Unrep. Comp-Loans Below Mkt Int Rates  
11O Unrep. Comp-Sever. Pay  
11P Unrep. Comp-Gross Up Wages ER pays EE taxes  
11Q Unrep. Comp-Scholarships/Fellowships  
11R Unrep. Comp-Sick Pay  
11S Unrep Comp-Vacation Pay  
11T Unrep. Comp-Other Comp  
11U Unrep. Comp-Unrep. Tips  
11V Unrep. Comp-Other  
  TFB (Taxable Fringe Benefits) Employment Tax Issues
12A TFB-No Change  
12B TFB-Employee Discounts  
12C TFB-Moving Expenses  
12D TFB-Personal Use of Co. Vehicles  
12E TFB-Housing Allowance  
12F TFB-Housing Provided by Er  
12G TFB-Athletic Tickets  
12H TFB-Pmt. for Continuing Ed(Credits)  
12I TFB-Personal Use of Facilities  
12J TFB-Non-Accountable Exp. Plan  
12K TFB-EE Gift of Case Equiv.(gift cert, etc.)  
12L TFB-EE Cafeteria Plans  
12M TFB-Working Condition  
12N TFB-No-Additional Cost Fringe  
12O TFB-Qualified Transportation  
12P TFB-On-Premises Gyms/Athl. Facilities  
12Q TFB-Meals & Lodging  
12R TFB-Group Term Life Ins.  
12S TFB-Dependent Care Assistance  
12T TFB-Dependent Care/Adoption Assistance  
12U TFB-Medical & Accident Benefits  
12V TFB-Other  
  Accountable Plans Employment Tax Issues
13A Acct. Plans-No Change  
13B Acct. Plans-1701 Er Provided Autos  
13C Acct. Plans-Er Provided Aircraft  
13D Acct. Plans-Er Provided Trans. Other  
13E Acct. Plans-Ee Provided/Use of Autos  
13F Acct. Plans-Ee Provided Trans. Other  
13G Acct. Plans-Entertainment  
13H Acct. Plans-Uniforms/Clothing Er Provided  
13I Acct. Plans-Uniform Allowance Pd  
13J Acct. Plans-Cell Phone Allowance Pd  
13K Acct. Plans-Travel/Vehicle Allowance Pd  
13L Acct. Plans-Equip. Provided  
13M Acct. Plans-Equip. Allowance  
13N Acct. Plans-Other  
  TIPs - Unreported TIPS Employment Tax Issues
14A TIPs-No Change  
14B TIPs-Additional Tips  
14C TIPs-Decrease in Tips  
14D TIPs-Allocated Tips  
14E TIPs-Other  
  EE Class.-Worker Classification Employment Tax Issues
15A EE Class.-No Change  
15B EE Class.-Conv. of Indep. Contr. to EE  
15C EE Class.-3rd Party Pmts.  
15D EE Class.-Class. Settlement Prog.(CSP)-IC to EE  
15E EE Class.-Conv. of Stat. EE  
15F EE Class.-Sec. 530 Relief  
15G EE Class.-Public Officials-Elect.& Appt  
15H EE Class.-218 Covered Worker Class.  
15I EE Class.-Other  
  FUTA-Noncompliance Employment Tax Issues
16A FUTA-No Change  
16B FUTA-Adj. Made  
16C FUTA-Other  
  FICA Employment Tax Issues
17A FICA-No Change  
17B FICA-Student FICA Exception(RP-16)  
17C FICA-Sec 3121(a)(16)-Remun. to EE<$100  
17D FICA-Medicare Only-MQGE Adj.  
17E FICA-Mandatory Medicare–Sect. 218 Covered  
17F FICA-Mand. Social Security–Sect. 218 Covered  
17G FICA-Optional 218 Excl.  
17H FICA-Retirement System Coverage-Rehired Annuitant  
17I FICA-Medicare Continuing Employment Exception(GE)  
17J FICA-Mandatory Exclusion  
17K FICA - Other Adjustment Made  
  Fed. Withholding(W/H)-Noncompliance Employment Tax Issues
18A Fed. W/H-No Change  
18B Fed. W/H-Adj. Made  
18C Fed. W/H-Other  
  Backup W/H-F945 Noncompliance Employment Tax Issues
19A Backup W/H-No Change  
19B Backup W/H-Indep. Contr.(F945)  
19C Backup W/H-Prizes & Awards(F945)  
19D Backup W/H-Reg. W/H-Gaming Winnings(F945)  
19E Backup W/H-Other  
  Non Res. Alien(NRA) - W/H Noncompliance Employment Tax Issues
20A NRA-No Change  
20B NRA-Adj. Made to Reportable Amt  
20C NRA-EE FICA  
20D NRA-EE Inc. Tax W/H  
20E NRA-Inc. Tax W/H for Indep. Contr.  
20F NRA-Foreign Students  
20G NRA-Student FICA Exception(RR 98-16)  
20H NRA-Tuition/Waivers Reclass. To Wages/Scholarships  
20I NRA-Other  
  International Activities Issues Other Issues
21A International Act.-No Change  
21B Gifts in Kind  
21C US Territory Issues  
21D Captive Offshore Ins. Issues  
21E Foreign Grants  
21F FBAR Issues  
21G Foreign Conduit Issues  
21H Undisclosed Assets & Operations  
21I International Activities-Other  
  EO-Healthcare Issues/EP-Deduction Adj. Other Issues
22A Healthcare Issues-No Change  
22B Healthcare-Comm. Health Needs Assess. Issues  
22C Healthcare-Financial Assistance Policy Issues  
22D Healthcare-Emergency Med. Case Policy Issues  
22E Healthcare-Billing & Collection Issues  
22F Healthcare-Limitation of Charges Issues  
22G Healthcare Issues-Other  
22U EP-Deduction-404(a)(6) Late Pmt  
22V EP-Deduction-404 Limit Excess  
22W EP-Deduction-415 Excess  
22X EP-Deduction-401(a)(17) Comp. Excess  
22Y EP-Deduction-404(k) Excess Dividend  
22Z EP-Deduction-Other  
  EE Benefit Plans-Ref. to Other Functions Other Issues
23A EE Benefit Plans-Ref. to EP  
23B EE Benefit Plans-Ref. to TEB  
23C EE Benefit Plans-Ref. to Other  
23D EE Benefit Plans-Other  
  Discrepancy Adjustments Other Issues
24A Disc. Adj.-No Change  
24B Disc. Adj.-Corp. Officer  
24C Disc. Adj.-Other EE  
24D Disc. Adj.-Non-EE/Taxable Entity  
24E Disc. Adj.-Other  
  Tax. Sub. - Taxable Subsidiaries & Related Entities Other Issues
25A Tax. Sub.-Part Owned merged into LLC/other corp. owned 100% by Parent  
25B Tax. Sub -Part Owned merged into LLC/other corp. owned 100% by tax. ent.  
25C Tax. Sub.-Other Tax. Sub. Issues  
25D Tax. Sub.-Reduct. in NOL Carryover  
25E Tax. Sub.-Inc. in NOL Carryover  
25F Tax. Sub.-Reduct. in NOL Carryback  
25G Tax. Sub.-Inc. in NOL Carryback  
25H Tax. Sub.-NOL Deduction  
25I Tax. Sub.-NOL Ded. disallow to for-profit attrib. to EO  
25J Tax. Sub.-Bad debts  
25K Tax. Sub.-Reclass. Of Mgt. contracts from affil. corps.  
25L Tax. Sub.-Contr. of capital-Shareholder contrib.  
25M Tax. Sub.-Contr. of capital - Non-Shareholders contrib.  
25N Tax. Sub.-Contr. of capital - Income vs. Capital contrib.  
25O Tax. Sub.-Other Non-Related Issues  
25P Tax. Sub.-Delinq. Rtns.-1120, 1120S  
25Q Tax. Sub.-Delinq. Rtns.-1065  
25R Tax. Sub.-Delinq. Rtns.-Other Forms  
25S Tax. Sub.-Converted Returns  
25T Tax. Sub.-Other  
  EO-Chapter 42 Taxes/EP-UBI IRC 511-514 Excise Tax Issues
26A Chapter 42 Taxes-No Change  
26B IRC 4940-Tax on Invest. Income  
26C IRC 4941-Tax on Self Dealing  
26D IRC 4942-Tax on Failure to Distrib. Inc.  
26E IRC 4943-Tax on Excess Bus. Holdings  
26F IRC 4944-Tax in Jeopardizing Inv.  
26G IRC 4945-Tax on Tax. Expenditures  
26H IRC 4947-Tax on Certain Non-Exempt Trusts  
26I IRC 4948-Tax on Foreign Orgs  
26J IRC 4965-Prohibited Tax Shelter Trans.  
26K IRC 4966-Tax Distrib. By Sponsor. Org. (each DAF)  
26L IRC 4967-Tax on Prohibited Benefits  
26M IRC 170(f)(10)(F)-Tax on Prem. Paid  
26N IRC 664(c)(2)-Excise Tax on CRATS & CRUTS  
26O Chapter 41 & 42 Taxes-Other  
26Z EP-UBI-IRC 511-514  
  EO-Misc Excise Taxes/EP-Taxable Distributions Excise Tax Issues
27A Misc. Excise Tax-No Change  
27B Misc. Excise Tax-Gaming  
27C Misc. Excise Taxes-Federal Highway Use(F2290)  
27D Misc. Excise Tax-Fuel Tax  
27E Misc. Excise Tax-Communications Tax  
27F Misc. Excise Taxes-Vaccine Floor Tax  
27G Misc. Excise Taxes-Sporting Goods  
27H Misc. Excise Taxes-Fire Arms  
27I Misc. Excise Taxes-Foreign Ins. Prem.  
27J Misc. Excise Tax-Luxury Taxes  
27K Misc. Excise Taxes-Manufacturers Tax  
27X EP-Taxable Distrib. Adj.-IRC 72  
27Y EP-Deemed Distrib.-IRC 72(p)  
27Z EP-Other Taxable Distribution  
  Abatement of Chapter 42 Taxes Excise Tax Issues
28A Abatement of Chap. 42 Tax-No Change  
28B Abatement of Chap. 42 Tax-Disallow.  
28C Abatement of Second Tier Tax-Disallow.  
28D Abatement of First Tier Tax-Dissallow.  
28E Abatement-Other  
  Fraudulent Failure to File Penalty (6651(f)) Other Issues
29A Fraud. Fail. to File Pnlty (6651(f))-No Change  
29B Fraud. Fail. to File Pnlty (6651(f))-Other  
  Public Inspection Penalty (6652(c)(1)) Other Issues
30A Public Insp. Pnlty (6652(c)(1))-No Change  
30B Public Insp. Pnlty (6652(c)(1))-990/990-EZ  
30C Public Insp. Pnlty (6652(c)(1))-990-T (501(c)(3) only)  
30D Public Insp. Pnlty (6652(c)(1))-990-PF  
30E Public Insp. Pnlty (6652(c)(1))-990-BL  
30F Public Insp. Pnlty (6652(c)(1))-1065 (501(d) Orgs.)  
30G Public Insp. Pnlty (6652(c)(1))-Other  
  EO-Disclosure Penalty (6652(c)(3)) Other Issues
31A Discl. Pnlty (6652(c)(3))-No Change  
31B Discl. Pnlty (6652(c)(3))-Other  
  EO-Accuracy Related Penalties-(6662(c))/EP-Excess IRA Contributions Other Issues
32A Accur. Rel. Pnlty (6662(c))-No Change  
32B Accur. Rel. Pnlty (6662(c))-990-PF  
32C Accur. Rel. Pnlty (6662(c))-990-T  
32D Accur. Rel. Pnlty (6662(c))-4720  
32E Accur. Rel. Pnlty (6662(c))-1120-POL  
32F Accur. Rel. Pnlty (6662(c))-Other  
32Z EP-Excess IRA Contributions  
  Accuracy Related Penalties - Subs. Understated (6662(d)) Other Issues
33A Accur. Rel. Pnlty (6662(d))-No Change  
33B Accur. Rel. Pnlty (6662(d))-990-PF  
33C Accur. Rel. Pnlty (6662(d))-990-T  
33D Accur. Rel. Pnlty (6662(d))-4720  
33E Accur. Rel. Pnlty (6662(d))-1120-POL  
33F Accur. Rel. Pnlty (6662(d))-Other  
  Fraud Penalty-IRC 6663 Other Issues
34A Fraud Pnlty-IRC 6663-No Change  
34B Fraud Pnlty-IRC 6663-990-PF  
34C Fraud Pnlty-IRC 6663-990-T  
34D Fraud Pnlty-IRC 6663-4720  
34E Fraud Pnlty-IRC 6663-1120-POL  
34F Fraud Pnlty-IRC 6663-Other  
  Penalty-Willful Failure to Furnish Statement to EE Other Issues
35A Pnlty-Will. Fail. to Furn. Stmnt to EE-IRC 6674-No Change  
35B Pnlty-Will. Fail. to Furn. Stmnt to EE-IRC 6674  
  EO-Penalties-IRC 6684/EP-Other Issues Other Issues
36A Pnlty-IRC 6684-No Change  
36B Pnlty-IRC 6684-4720  
36C Pnlty-IRC 6684-Other  
36Z EP-Other Issues  
  EO-Penalties-Public Inspection Reqs.-IRC 6685/EP-No Issues Other Issues
37A Pnlty-Pub. Inspec. Reqs.-IRC 6685-No Change  
37B Pnlty-Pub. Inspec. Reqs.-IRC 6685  
37C Pnlty-Pub. Inspec. Reqs.-IRC 6685-Other  
37Z EP-No Issues  
  Return Preparer Penalties (6694 and 6695) - All Forms Other Issues
38A Rtrn. Preparer Pnlty-No Change  
38B Rtrn. Preparer Pnlty 6694(a)  
38C Rtrn. Preparer Pnlty 6694(b)  
38D Rtrn. Preparer Pnlty 6695(a)  
38E Rtrn. Preparer Pnlty 6695(b)  
38F Rtrn. Preparer Pnlty 6695(c)  
38G Rtrn. Preparer Pnlty 6695(d)  
38H Rtrn. Preparer Pnlty 6695(e)  
38I Rtrn. Preparer Pnlty 6695(f)  
38J Rtrn. Preparer Pnlty 6695(g)  
38K Rtrn. Preparer Pnlty (6694)-Other  
38L Rtrn. Preparer Pnlty (6695)-Other  
  Aiding & Abetting Penalty IRC 6701 Other Issues
39A Aid. & Abett. Pnlty-IRC 6701-No Change  
39B Aid. & Abett. Pnlty-IRC 6701-Other  
  Penalty for Failure to Disclose Non-Deduct. Contrib. IRC 6710 Other Issues
40A Pnlty for Fail. to Discl. Non-Deduct. Contrib.-IRC 6710-No Change  
40B Pnlty for Fail. to Discl. Non-Deduct. Contrib.-IRC 6710-Other  
  Penalty - Failure to Disclose Info Avail. from Govt.-IRC 6711 Other Issues
41A Pnlty-Fail. to Discl. Info Avail. from Govt-IRC 6711-No Change  
41B Pnlty-Fail. to Discl. Info Avail. from Govt-IRC 6711-Other  
  Penalty-Failure to Meet Disclosure Req. IRC 6714 Other Issues
42A Pnlty-Fail. to Meet Disclos. Req.-IRC 6714-No Change  
42B Pnlty-Fail. to Meet Disclos. Req.-IRC 6714-Other  
  Penalty-Failure to File Correct Info Rtns. (6721(a)) Other Issues
43A Fail. to File Corr. Info Rtns.(6721(a))-No Change  
43B Fail. to File Corr. Info Rtns.(6721(a))-Other  
  Intentional Disregard Penalty (6721(e)) Other Issues
44A Intent. Disregard Pnlty(6721(e))-No Change  
44B Intent. Disregard Pnlty(6721(e))-Other  
  Tax Exempt Bonds-Qualification Other Issues
45A TEB-Qualif.-No Change  
45B TEB-Qualif.-Prvt. Bus. Use Test  
45C TEB-Qualif.-Prvt. Security Pmnt. Test  
45D TEB-Qualif.-Prvt. Loan Fin. Test  
45E TEB-Qualif.-Ownership of Bond-Financed Prop.  
45F TEB-Qualif.-Change in Use  
45G TEB-Qualif.-$10 Million Limit  
45H TEB-Qualif.-$40 Million Limit  
45I TEB-Qualif.-Issuance Costs  
45J TEB-Qualif.-120% of Econ. Life Maturity  
45K TEB-Qualif.-Allocation and Acct. Rules  
45L TEB-Qualif.-De Minimus Prem.  
45M TEB-Qualif.-DPBs Impermissable Uses  
45N TEB-Qualif.-Public Approval Req.  
45O TEB-Qualif.-Fed. Guaranteed  
45P TEB-Qualif.-Impermissable Adv. Refunding  
45Q TEB-Qualif.-Res. Rental, Low-Income Set Asides  
45R TEB-Qualif.-Mortgage Elig. Req.  
45S TEB-Qualif.-Non-Mortgage Elig. Req.  
45T TEB-Qualif.-Volume Cap  
45U TEB-Qualif.-Hedge Bond Req.  
45V TEB-Qualif.-Pool Financing Req.  
45W TEB-Qualif.-Taxable Bonds  
45X TEB-Qualif.-Other  
  Tax Exempt Bonds - Arbitrage Other Issues
46A TEB-Arbitrage-No Change  
46B TEB-Arbitrage-Yield Restriction  
46C TEB-Arbitrage-Arbitrage Rebate  
46D TEB-Arbitrage-Claim for Refund  
46E TEB-Arbitrage-Yield Burning  
46F TEB-Arbitrage-Taxable Bonds  
46G TEB-Arbitrage-Other  
  Tax Exempt Bonds - Other Other Issues
47A TEB-Other-No Change  
47B TEB-Inadequate Records  
47C TEB-Incomplete Rtrn  
47D TEB-Del. Filing of Rtrn  
47E TEB-Del. Filing of Rtrn(Other)  
47F TEB-Discrepancy  
47G TEB-Taxable Bonds  
47H TEB-Other  

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