4.81.3  Questionnaire Compliance Check Projects

Manual Transmittal

April 10, 2012

Purpose

(1) This transmits the new IRM 4.81.3, Tax Exempt Bonds Questionnaire Compliance Check Projects

Material Changes

(1) Procedures for Tax Exempt Bonds Questionnaire Compliance Check Projects have been prepared. The procedural requirements with respect to conducting a questionnaire compliance check applicable to TEB have been incorporated.

Effect on Other Documents

None

Audience

TE/GE (Tax Exempt Bonds)

Effective Date

(04-10-2012)

Clifford J. Gannett
Director, Tax Exempt Bonds

4.81.3.1  (04-10-2012)
In General

  1. This section establishes procedures for developing and implementing questionnaire compliance check projects ("Projects" ) to gather tax compliance information relating to the various types of tax-advantaged bonds. Questionnaire compliance check projects are part of the ongoing efforts of Tax Exempt Bonds ("TEB" ) to promote voluntary compliance with federal tax requirements applicable to the various market segments.

  2. A compliance check is a taxpayer contact to gather information about how taxpayers adhere to certain federal tax requirements. A compliance check is neither an audit nor an investigation under section 7605(b) of the Internal Revenue Code ("Code" ) nor an audit under section 530 of the Revenue Act of 1978. As such, TEB does not review an entity's books and records during the course of a questionnaire compliance check.

  3. Questionnaire compliance checks are used by TEB to gather information from governmental issuers of tax-advantaged bonds about the policies, procedures, and practices generally employed to ensure the continued compliance of their bonds with all applicable federal tax requirements during the period they are outstanding. Questionnaires inquire about such policies, procedures, and practices as they apply generally to the subject type of tax-advantaged bonds issued by the issuer, not how they were applied specifically to any individual bond issue. As such, a questionnaire compliance check does not directly relate to determining the tax-advantaged status for any particular period or bond issue. Depending on the type of tax-advantaged bond relating to the questionnaire compliance check project, TEB may send te questionnaire to other parties related to the bond transaction (e.g., a conduit borrower) when appropriate.

  4. The Compliance & Program Management ("CPM" ) function of TEB is responsible for the development, administration, and oversight of questionnaire compliance check projects as part of its voluntary compliance and education initiatives.

4.81.3.2  (04-10-2012)
Project Assignments

  1. Projects to be implemented during a fiscal year are generally identified in that fiscal year's annual workplan ("Workplan" . See IRM 4.81.2 for more information about the annual workplan.

  2. The Manager, Compliance & Program Management ("CPM Manager" ) will identify and assign CPM personnel to the team responsible for implementing the Project.

  3. If the participation of TEB Field Operations personnel is identified as necessary for the successful implementation of the Project, the CPM Manager will coordinate with the Manager, Field Operations as to the assignment of such personnel.

  4. The CPM Manager will explain the project objectives to the questionnaire project team and advise the team as needed during the development, implementation and analysis of the Project.

  5. During Project development, assigned team members will review resources available on the Intranet such as sample forms, letters, process memos, and other documents relating to previous questionnaire projects.

4.81.3.2.1  (04-10-2012)
Project Team

  1. The purpose of the questionnaire project team ("Project Team" ) is to oversee the implementation of a Project. The key responsibilities of each Project Team are development, implementation, analysis and follow-up to bring the Project to a successful conclusion.

  2. The Project Team will include a team leader and several team members. The exact number of team members will depend on the particular Project and will be determined by the CPM Manager on a project-by-project basis.

  3. During the development stage, the Project Team will gather information from both internal and external sources for consideration in the development of their strategy to meet the project objectives assigned to them. Team members will prepare a process memo, perform research, and document their strategy for conducting the assigned Project.

4.81.3.2.2  (04-10-2012)
Project Team Leader

  1. The leader of the Project Team ("Team Leader" ) is the point person of the Project Team and their responsibilities include the following:

    1. Identifies any strategic or legal issues and discusses these with the CPM Manager to arrive at appropriate solutions.

    2. Secures necessary approvals at key steps in the Project process.

    3. Ensures appropriate coordination among the Project Team members.

    4. Plans and leads meetings.

    5. Ensures a process memo is prepared.

    6. Ensures that documentation needing review/approval is forwarded to the CPM Manager (or delegates of the CPM Manager).

    7. Ensures all due dates related to the Project are timely met.

    8. Coordinates the Project Team's activities, monitors applicable timeframes, and oversees the progress of Project development and implementation.

    9. In conjunction with the other team members, ensures the maintenance of historical records (paper or electronic in the Reporting Compliance Case Management System ("RCCMS" )) of Project related documentation (Returns Inventory Classification System ("RICS" ) queries, sampling data, questionnaires, letters, responses from taxpayers, other Project-related communication, etc.)

    10. Coordinates with TE/GE Research personnel to ensure that the Project Team's methodology and analysis of data are statistically valid and accurate.

    11. Provides the CPM Manager with monitoring reports and status updates as needed or requested.

    12. Works with the Project Team members to prepare and finalize the project report ("Project Report" ), which explains the Project and states its conclusions.

4.81.3.2.3  (04-10-2012)
Project Team Members

  1. Project Team member ("Team Member" ) responsibilities include the following:

    1. Provides technical input during all phases of the Project.

    2. Briefs the Team Leader on the Team Member's progress.

    3. Works with the Project Team to prepare and finalize all Project related documentation.

    4. Advises the Project Team on procedural aspects of implementation, feasibility of identifying the subject population, securing addresses and contact information for subject population, project milestones, clarification of Project goals and objectives, and coordination with various stakeholders.

    5. Secures needed information from various sources: RICS (profiling data, statistical samples, audit history, etc.), RCCMS (document and case management), and other sources of available data.

    6. In conjunction with the other team members, ensures the maintenance of historical records (paper or electronic) of project related documentation (RICS queries, sampling data, questionnaires, letters, responses from taxpayers, other project-related communication, etc.)

    7. Assists the Team Leader in preparing memorandums and providing monitoring reports or status updates as needed or requested.

    8. Works with the Team Leader and other Team Members to prepare and finalize the Project Report.

4.81.3.3  (04-10-2012)
Project Executive Phases

  1. This execution of a Project consists of the following phases: development, implementation and analysis.

4.81.3.3.1  (04-10-2012)
Development Phase

  1. The development phase begins when the Project is assigned to the Project Team and ends when the Project Team is ready to send the documentation used to collect information ("Questionnaire Pack" ) to the issuers or other entities identified in the project population ("Project Participants" ). The Questionnaire Pack contains the questionnaire developed to address the Project objectives, a cover letter explaining the Project to the Project Participant, and any enclosures required by IRS guidelines or the nature of the Project.

  2. The development phase will consist of the following steps:

    1. Preparation of a process memo ("Process Memo" ) which represents an outline of the Project and provides guidance on steps to be taken to develop and implement the Project. A Process Memo will include, among other things, a timeline reflecting the start and completion dates for:

      • Planning, gathering and analyzing available information

      • Defining subject population

      • Determining methodology and information gathering methods

      • Obtaining necessary approvals

      • Implementing methodology

      • Analyzing information obtained

      • Reporting of findings and recommendations

      The Team Leader is ultimately responsible for preparing the process memo and ensuring that the timeline is up-to-date, accurate and any delays or changes are discussed with the CPM Manager.

    2. The Project Team will gather information from available sources including, but not limited to:

      • External data or information sources

      • Historical information

      • RICS and other internal data sources

      • External publications and trade journals

      • Advisory and oversight groups

    3. The Team Leader will coordinate with the CPM Manager as to the best means to communicate progress on the Project's development, implementation, and analysis.

    4. The Project Team will identify the estimated staff time resources needed to execute the Project. The Team Leader will coordinate with CPM Manager for workload planning purposes and to determine whether specialized training is needed for any Team Member to achieve the Project's objectives.

    5. The Project Team is responsible for creating, preparing and disseminating the questionnaire and all necessary correspondence or other Project related documentation. The Project Team must ensure the questionnaire addresses the objectives of the Project.

    6. Any special procedures or instructions needed for a particular Project will be prepared by the Project Team and submitted to the CPM Manager for review and approval.

    7. The CPM Manager will review and comment on the initial draft of the questionnaire, correspondence and other Project documents. The CPM Manager will determine when the questionnaire is ready for submission to the Director, TEB for review and comment. The CPM Manager will coordinate all comments received from the Director, TEB with the Project Team.

    8. Upon the CPM Manager's direction, the questionnaire will be sent to external stakeholders. External stakeholder involvement is an important consideration in the development of any project. The level of stakeholder involvement may vary with each project. Generally, the CPM Manager will direct the Project Team to seek input from external stakeholders such as the Office of Counsel, TE/GE Research, and the ACT Committee. The Team Leader will coordinate with the CPM Manager to secure input from these parties and any other parties as directed by the CPM Manager. The CPM Manager and Project Team will consider external stakeholder input in the development of the final form of the Project questionnaire and related documentation.

      In the event the specific questionnaire to be used for the Project has previously been used in a prior Project, the CPM Manager may determine that external stakeholder comments are not necessary. The CPM Manager will consult with the Director, TEB in making this determination.

    9. The CPM Manager will review and coordinate approval of the questionnaire by the Director, TEB. Upon the CPM Manager's direction, the Team Leader will coordinate publication of the questionnaire as an official IRS product.

    10. An analyst or appropriate party in the Project Team will be designated by the CPM Manager to run any needed RICS queries and secure data for the Team Leader to share with the Project Team. The Team Leader and CPM Manager will determine when to initiate the queries necessary to create a master list for the selection of Project Participants ("Master List" ). It is advised the Project Team wait until after the submission of the documents and procedures to the CPM Manager in the event the CPM Manager's comments relate to the parameters for RICS queries.

    11. The Project Team will use RICS to define the population, determine an appropriate sample size, draw a random sample, analyze results, and ensure the findings are presented in a clear, concise manner in order to manage and complete the Project.

    12. After selection of a random sample to determine the Project Participants, the Project Team will select the Project Participants and present such selection to the CPM Manager. The Project Team will coordinate with TE/GE Research to ensure the Project Participants represent a statistically valid sample of the subject population unless otherwise directed by the CPM Manager. The CPM Manager will review the selection and in conjunction with the Team Leader verify that the number of Project Participants is adequate and that they were correctly selected (i.e. selected Project Participants are currently not part of another project, examination or audit) so that a Master List containing the Project Participants may be created. The Master List contains all the selected Project Participants and information pertinent to the Project. The Master List is used as a source of contact information and means of tracking information during the Project.

    13. All Team Members are responsible for ensuring that the data or other taxpayer information gathered during the Project is properly secured and protected as required under IRM 1.16.13, Information Protection, and kept from any unauthorized disclosure. See IRC 6103 which provides requirements for Confidentiality and Disclosure of Returns and Return Information. When the Project is finished, the documents will be properly disposed of as provided in IRM 1.15.3, Disposing of Records.

4.81.3.3.2  (04-10-2012)
Implementation Phase

  1. The implementation phase begins when the questionnaire and related Project documentation has received final approval from the CPM Manager and Director, TEB, the Project Participants have been chosen, and the Master List is created. The focus of the implementation phase is distribution of the Questionnaire Pack to the Project Participants and processing the information that is received from the Project Participants.

  2. The implementation phase will consist of the following steps:

    1. The Questionnaire Pack includes an initial cover letter, a questionnaire to be completed by the Project Participant and applicable forms as required by IRS procedures or CPM Manager/Team Leader guidance. In the event the Questionnaire Pack is provided in a web based format, an initial cover letter with directions on how to access the online materials will be mailed to the Project Participants.

    2. The CPM Manager and Team Leader will determine how to allocate the work involved in producing and distributing Questionnaire Packs among Team Members. The CPM Manager and Team Leader will also determine the return dates, extension dates and general timing relating to a particular Project so that reasonable time is allowed to complete the Project while still meeting Workplan requirements.

    3. Upon return of a completed Questionnaire Pack by a Project Participant, a designated Team Member will inspect the electronic or mailed submission to verify that all of the required information has been provided. In the event there are missing items, the designated Team Member will contact the Project Participant and inform them of such missing items in order to obtain the information for completion of the Project.

    4. Direct contact with Project Participants is very likely during the implementation phase of a Project. Project Participants may have questions related to the questionnaire or the process for returning information. A Team Member will make every effort to assist taxpayers in the process however, they are not to inspect or otherwise inquire about books and records or other documentation relating to a specific return or tax period in order to help a Project Participant to respond to the questionnaire sent to them. Team Members must verify that they are speaking with an official or authorized representative of the taxpayer. In the event a Team Member speaks with an attorney or other professional representing the taxpayer, (for example, a financial advisor), the Team Member must first receive a Form 2848 with respect to the Project.

    5. As the Questionnaire Pack information comes in, designated Team Members will organize the information to facilitate analysis of the gathered data. Additionally, all necessary documents and information will be uploaded into a case file established on RCCMS.

    6. Due to inaccurate information on IRS business systems from filing or processing errors, Project Participants on the Master List may be erroneously selected or contact information may be inaccurate. While not a common occurrence, this could happen due to human error during the processing of the Project Participants tax information or as the result of the incorrect completion of tax forms or information returns by the Project Participant. In such instances, Team Members directly responsible for the contact will do the following:

      • Immediately notify the Team Leader.

      • Have the Project Participant note on the actual questionnaire that the questionnaire does not apply to them and why, have them sign and date the penalty of perjury statement and return the questionnaire to the Team Member.

      • Review findings with the Team Leader to confirm Project Participant should be removed as a Project Participant.

    7. In the event Project Participants have not timely responded to a questionnaire (accounting for any extensions), the Project Team will send a follow up letter to request completion of the questionnaire by the Project Participant.

    8. In the event a Project Participant does not timely respond after issuance of a non-responder follow up letter, the Project Team will re-confirm that contact information is correct and attempt to contact the Project Participant via telephone. The Team Member will document in the case chronology all attempts to contact the non-responding Project Participant and provide updates to the Team Leader. The Team Leader and the CPM Manager will discuss the best course of action for non-responding Project Participants which will generally include a referral of one or more of the Project Participant’s bond issues for examination.

    9. Upon receipt and processing of a Project Participant’s response which does not require any additional contact, the Project Team will send the Project Participant a closing letter thanking them for participating in the Project.

4.81.3.3.3  (04-10-2012)
Analysis Phase

  1. The analysis phase begins when all data and other gathered information has been collected and organized for analysis. The ending date is when the analysis of all the data and information is complete and the Project Report is written.

  2. The analysis phase will consist of the following steps:

    1. The Project Team is responsible for analyzing data and other information gathered during the implementation phase of the Project. This analysis can include the creation of data summary charts, statistical analysis, identification of trends, and formulation of recommendations for enhancements to enforcement, voluntary compliance, and education programs to improve tax compliance within the subject market segment. The Team Leader will consult with the CPM Manager on the appropriateness of scheduling travel for Project Team meetings for this purpose.

    2. The Project Team is responsible for developing the Project closure strategy. A project closure strategy includes the following:

      • Formulate a plan and timeline for drafting the Project Report.

      • Proceed with closure of compliance activities established on RCCMS to ensure proper record storage.

    3. The CPM Manager will provide the Project Team with guidance on the type of Project Report that is needed during the development stage of the Project.

4.81.3.4  (04-10-2012)
Requests for Voluntary Closing Agreements

  1. In the process of participating in a Project, a Project Participant may find issues that affect the tax-advantaged status of one or more of its bond issues and may request relief through a closing agreement under the TEB Voluntary Closing Agreement Program (see Notice 2008-31 and IRM 7.2.3).

  2. The Team Member coordinating the Project Participant’s documentation will forward the Project Participant’s request to the VCAP Coordinator with notice to the Team Leader.

4.81.3.5  (04-10-2012)
RCCMS File Management

  1. RCCMS will be used by the Project Team as a means of organizing, storing and safeguarding all documents and other records related to the Project which require retention following completion of the Project.

  2. All returned Project Participant responses will be uploaded into compliance activities established on RCCMS for the Project ("Project Cases" ). The Team Leader and Team Members will need to review the roles and permissions they each have in RCCMS to assure they are able to complete Project Case record retention.

  3. A Project Case file established on RCCMS will contain the following:

    1. Initial cover letter explaining the Project together with applicable attachments

    2. Questionnaire to be filled out by the Project Participant

    3. Attachments to questionnaire or documentation submitted in support of questionnaire

    4. Returned initial cover letter if it has any information to be filled in by the Project Participant

    5. Team Member case chronology

    6. Follow up letter (in case questionnaire not returned by initial due date)

    7. Closing letter

    8. Other correspondence (if applicable)

  4. Closure of Project Cases on RCCMS may occur prior to completion of the Project and Project Report. The Team Leader and Team Members will evaluate and decide on the timing for closing Project Cases on RCCMS. The Project Team will obtain CPM Manager approval of the RCCMS closing process during the analysis phase of the Project.

4.81.3.6  (04-10-2012)
Project Closure and Project Report

  1. The CPM Manager and Team Leader will coordinate with the Director, TEB to confirm the scope of the Project Report. The Team Leader and all other Team Members are responsible for analyzing the results and preparing the Project Report.

  2. The Project Report will be submitted to the CPM Manager upon completion of the analysis of the data and other gathered information collected during the Project in accordance with timeframes established by the CPM Manager. Specific taxpayer information will not be included in the Project Report. The Project Report will address each of the following:

    1. The Project's objectives

    2. Data gathering methods

    3. Data analysis

    4. Findings

    5. Impact on resources

    6. Project critique (what worked well, what didn't work)

    7. Recommendations (may address improvements or future projects relating to TEB's enforcement, voluntary compliance, and educational programs).

  3. The Project Team will submit the Project Report to the CPM Manager for review and comment.

  4. Upon completion and final approval of the Project Report by the CPM Manager, the CPM Manager will coordinate review and comments by the Director, TEB. Upon final approval of the Project Report by the Director, TEB, the CPM Manager and Team Leader will confirm all matters associated with the Project are complete and the Project Report is distributed as per the CPM Manager’s instructions.


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