4.81.11  Referral Program

Manual Transmittal

September 10, 2012

Purpose

(1) This transmits the new IRM 4.81.11, Tax Exempt Bonds Referral Program.

Material Changes

(1) Procedures for the Tax Exempt Bonds Referral Program have been prepared. The procedural requirements with respect to processing both internal and external referrals applicable to TEB have been incorporated.

Effect on Other Documents

None

Audience

TE/GE

Effective Date

(09-10-2012)

Clifford J. Gannett
Director, Tax Exempt Bonds

4.81.11.1  (09-10-2012)
In General

  1. This section sets forth procedures for the TEB Referral Program for Tax Exempt Bonds. It provides guidance for handling information items and referrals received or developed by TEB that relate specifically to compliance issues.

  2. References to "tax-advantaged bonds" in this section 4.81.11 are references to tax-exempt bonds, tax credit bonds, and direct pay bonds.

4.81.11.1.1  (09-10-2012)
Purpose

  1. The primary purpose of the TEB Referral Program is to administer the initiation, review, evaluation and tracking of referrals concerning tax-advantaged bond issuances.

  2. The TEB Referral Program is a means of focusing the resources of TEB to identify and correct noncompliance with fairness and the highest level of integrity and to resolve all violations of federal tax law applicable to tax-advantaged bonds at the transaction level instead of the bondholder level.

4.81.11.1.2  (09-10-2012)
Organizational References

  1. The following references defined below will be applicable throughout IRM section 4.81.11.

    1. TEGE will refer to the Tax Exempt and Government Entities division of the Internal Revenue Service.

    2. TEB will refer to the Tax Exempt Bonds function of TEGE.

    3. CPM will refer to the Compliance & Program Management program within TEB. CPM has primary responsibility for the classification and selection of returns for examination. CPM also conducts the examination of returns. CPM is comprised of multiple CPM groups.

    4. FO will refer to the Field Operations program within TEB. FO has primary responsibility for conducting the examination of returns, including those selected based upon the classification of referral information. FO is comprised of multiple Groups.

    5. TEB Referral Coordinator will refer to the senior tax law specialist assigned by the Manager of CPM to coordinate the TEB Referral Program.

    6. Analyst will refer to a CPM tax analyst or systems analyst responsible for IDRS, DINS and other research of internal and external databases required for the evaluation of referral information.

    7. Classifier will refer to a CPM revenue agent, tax law specialist, or tax analyst responsible for the evaluation of referral information.

    8. Examiner will refer to an FO or CPM revenue agent or tax law specialist responsible for the examination of returns.

    9. WBO will refer to the IRS Whistleblower Office.

    10. Informant, Claimant and Whistleblower will be used synonymously throughout this IRM and will refer to persons who submit information under IRC section 7623 to the IRS. However, no legal significance should be inferred based solely on the use of these terms in this IRM.

    11. Issuer is a state, local government, municipality, authority or an entity that can legally issue bonds on behalf of a state or local government.

  2. CPM is responsible for the administration and oversight of the TEB Referral Program. The TEB Referral Coordinator will review and conduct the operations of the program and report to the Manager, CPM. Classifiers will support the Referral Coordinator as necessary.

4.81.11.1.3  (09-10-2012)
General Referrals versus Whistleblower Referrals

  1. A general referral is a document prepared by a TEB or other IRS employee which identifies a current or potential area of noncompliance pertaining to a tax-advantaged bond issuance. These referrals may be the result of an in process examination, news media item (i.e. Bond Buyer articles, newspaper articles) or from any other internal or external source. These referrals are submitted to the TEB Referral Coordinator on Form 5666, TE/GE Referral Information Report.

  2. The Form 5666 will be used to identify areas of noncompliance that is likely to occur at a future date. These referrals will be assigned a tracking number and placed on the tracking spreadsheet. The referral will be annotated with the future date for commencement of an examination. Also, the referral will be placed in a separate folder on the share drive. The Referral Coordinator will monitor the future year referrals on a monthly basis and place them in the referral examination stream as they reach their future dates.

  3. A Whistleblower Referral is a document or other communication (e.g. telephone call, e-mail) from a source outside of the IRS which alleges potential noncompliance with the federal tax laws applicable to tax-advantaged bonds. These referrals are submitted to the IRS Whistleblower Office on Form 3949, Information Report Referral, and a Form 211, Application for Award for Original Information, may accompany the request. A TEB employee who receives an Informant's telephone call or e-mail should follow the procedures for handling Informant Referrals outlined in IRM 25.2.1 and IRM 25.2.2.

4.81.11.2  (09-10-2012)
TEB Referral Committee

  1. This section describes the purpose, composition and responsibilities of the TEB Referral Committee.

4.81.11.2.1  (09-10-2012)
Purpose

  1. The purpose of the TEB Referral Committee is to evaluate the examination or other compliance potential of each referral forwarded to the Committee by the TEB Referral Coordinator.

4.81.11.2.2  (09-10-2012)
Composition

  1. The TEB Referral Committee is a panel comprised of the Manager, CPM and the Manager, FO. In the absence of either the CPM or FO Managers, the acting manager will assume their position and responsibilities for the Committee.

4.81.11.2.3  (09-10-2012)
Responsibilities

  1. The TEB Referral Committee is responsible for the fair and impartial evaluation of TEB referrals in an unbiased and appropriate manner.

  2. The Committee will receive the referral in an electronic format which will be comprised of the Referral Memo containing the details of the referred information and associated attachments and the TEB Referral Control Sheet. The committee members will generally evaluate and recommend an action within 60 days from receipt. The members may meet to discuss the referral or may act independently to evaluate and recommend their course of action for the referral.

  3. The committee members will document their recommended actions on the TEB Referral Control Sheet. The Committee may recommend a full or limited scope examination of the bond issuance, taxpayer education contact, or may recommend that no further action be taken based on the facts and circumstances of each individual referral. While the examination of a referred bond issuance will generally be conducted by FO and any taxpayer education contacts will generally be conducted by CPM, the Committee will at their discretion decide which program will conduct the recommended action. The completed TEB Referral Control sheet will be returned to the Referral Coordinator.

4.81.11.3  (09-10-2012)
Case Classification Procedures

  1. This section describes the responsibilities of the TEB Referral Coordinator, Classifiers and Analysts, general flow of a referral case, establishment of a referral case on RCCMS, and AIMS establishment.

4.81.11.3.1  (09-10-2012)
Referral Coordinator

  1. The TEB Referral Coordinator’s responsibilities and duties include but are not limited to the following:

    1. Preparation of the Referral Tracking Sheet, assignment of a tracking number and logging the referral into the referral tracking spreadsheet. The tracking number is comprised of the year and month the referral was received and followed by 001 for the first referral for that month (YYYY-MM-NNN). Ensuing numbers are 002, 003, etc. An example of a tracking number is 2011-06-001. This denotes the first referral received in June 2011. A copy of the Referral Tracking Sheet is located on the TEB intranet.

    2. Performing an initial review of the referral to determine if additional research is required.

    3. Coordinating with the Analyst for conducting additional research, the Classifiers for the evaluation of the referral information, and the TEB Referral Committee on concurrence of recommended actions.

    4. Directing the establishment of the referral case on RCCMS and AIMS.

    5. Conducting periodic reviews of the referral tracking spreadsheet and updating information on the disposition of the cases.

4.81.11.3.2  (09-10-2012)
Analyst

  1. The Analyst(s) will have the primary responsibility of conducting any additional research needed to clarify or augment the referral information received. The additional research may include the retrieval of the DINS return for the issuance, locating the official statement, and performing IDRS research on the Issuer of the bonds.

  2. The Analysts may also be required to establish the referral cases on RCCMS and AIMS.

4.81.11.3.3  (09-10-2012)
Classifiers

  1. The Classifier(s) will receive the referral case from the TEB Referral Coordinator and will review and evaluate the information to determine whether any audit potential exists. Standard classification procedures and parameters will be used in their evaluation.

  2. Once the evaluation is completed, the Classifier(s) will annotate their recommendation on the Referral Control Sheet. They will provide their reasoning for recommending the particular type of action or disposition for the referral. The Classifier(s) can recommend that the referral be subject to a full scope examination, limited scope examination, taxpayer education contact, or recommend that no action be taken.

  3. The Classifier(s) will then forward the Referral Control Sheet back to the Coordinator.

4.81.11.3.4  (09-10-2012)
Referral Case Flow

  1. This section will cover the flow of a referral as it goes through the TEB referral process. There are certain procedures that are relative to Whistleblower Referrals and those particular items will be addressed in Section 4.81.11.5, Whistleblower Procedures. The basic flow of a referral case is as follows:

    1. Referral information from both internal and external sources is received in CPM by the TEB Referral Coordinator.

    2. The Coordinator will conduct an initial review of the information, prepare a Referral Tracking Sheet, and assign a tracking number to the referral.

    3. The case will then be forwarded to an available Analyst for research.

    4. When the research has been conducted, the Coordinator will either make an evaluation and recommendation of the case or will forward the case to the Classifier for evaluation and recommendation.

    5. The Coordinator will review the recommendation of the Classifier and prepare a memo for submission to the TEB Referral Committee.

    6. The case will be forwarded to the Referral Committee for review and concurrence or nonconcurrence with the Coordinator or Classifier(s) recommendation.

    7. The Referral Coordinator will coordinate with the Classification Coordinator to ensure that all cases recommended for examination by the Referral Committee are established on RCCMS and AIMS.

    8. Once established, cases will be transferred to the RCCMS unassigned inventory folder for CPM Group 7211 in status 08 for subsequent assignment to a FO or CPM group in accordance with TEB’s classification process.

    9. The Coordinator will update the referral database with the actions taken on the referral case.

4.81.11.3.5  (09-10-2012)
Form 5666

  1. The Form 5666, TEGE Referral Information Report, can be used by TEB employees and employees of the other operating divisions within the IRS to refer a potential noncompliant bond issuance to TEB. Detailed instructions for completing the form are located in Exhibit 4.5.1-14 of the TEGE AIMS Processing IRM.

  2. The originator of the Form 5666 should complete the form with all information that is available about the issuer of the bonds and the nature and size of the potential noncompliance issue. The originator should include information pertaining to the source of the referral and attach any news articles, correspondence or other documentation concerning the potential noncompliance issue with the Form 5666. The originator may (but is not required to) research IDRS, the internet and other sources to gather additional information regarding the issuer and entity involved. The referral package should be as complete as possible and provide objective information to facilitate the Classifier in making their recommendations of compliance actions.

4.81.11.3.6  (09-10-2012)
AIMS Source Codes

  1. It is important to properly code each referral in order to document its origin. The following guidance will assist the originator in determining the proper source code for referrals and the preparation of the Form 5666 or the Specialist Referral System. The Coordinator will verify the accuracy of the source code and make any corrections prior to the establishment of the case on AIMS and RCCMS.

  2. Generally the types of referral items covered by this IRM would use one of the following source codes identified in the GE Computer Systems Codes Book.

    • Source Code 60 Information Report

    • Source Code 62 Director/CPM Referral

    • Source Code 63 Appeals Referral

    • Source Code 64 Pick-up Related to Other

    • Source Code 67 Other Referral (W&I, SBSE or LB&I)

    • Source Code 68 Congressional Referral

    • Source Code 69 Taxpayer Service Referral

    • Source Code 72 Informants Report

    • Source Code 74 Media Lead (News Media, i.e., Newspaper, TV, News Magazine, is the actual source of the lead)

    • Source Code 77 State Attorney General or other State/Local Government Agency Referral

  3. For any other referral that does not fit into the above categories, please refer to the GE Computer Systems Codes Book, Document 11308.

4.81.11.3.7  (09-10-2012)
Referral Tracking

  1. The TEB referral recordkeeping system, consisting of the referral database (excel spreadsheet) and the TEB Referral Control Sheet will allow the TEB Referral Coordinator and TEB management to track all referrals currently in process. The system will document the receipt of the referral information and its movement through the referral process, including:

    1. the date and source of the referral;

    2. the evaluation of the referral;

    3. the decision and rationale for the decision regarding any audit potential;

    4. the implementation of the course of action recommended;

    5. the current location and status of the referral; and

    6. the final disposition of the referral.

  2. The referral database maintained by the Coordinator will include the following information on each referral received into the process:

    1. the assigned tracking number;

    2. the receipt date of the referral;

    3. for internal referrals, the name and office symbols of the individual making the referral on Form 5666 or the Specialist Referral System, or for external sources, the name and address of the individual if provided;

    4. name and address of the issuer or entity involved;

    5. the source code;

    6. the recommendation of the Classifier and date;

    7. the date the referral is forwarded to the Referral Committee;

    8. the recommendation of the Referral Committee and date;

    9. the date assigned to a Group for examination and group number; and

    10. the final disposition of the referral and date.

  3. The Referral Control Sheet will be attached to the referral file and will document the actions taken and progress of the referral. The Sheet will include the following information:

    1. referral tracking number and date received;

    2. a Coordinator section for dates and action taken;

    3. the Return Identification Coordinator section for research action taken and dates (note: this will be completed by the Analyst performing the referral research);

    4. Classifier section for the recommended course of action for the referral;

    5. The TEB Referral Committee section for their concurrence or non-concurrence of recommended action and signature boxes; and

    6. The Group section for documentation of the examination results and disposition of the referral case.

  4. Referrals received that identify noncompliance that is likely to occur at a future date will be tracked in the same manner as outlined above except there will be a separate folder on the referral database titled "Future Year Exam Referrals" . The referral spreadsheet will also be annotated with the future year examination date.

  5. The Referral Coordinator will retain copies of all information items and source documents for those referral cases not selected for an examination. The information will be retained in a secure manner for a period of six years from the date the information was received and evaluated for audit potential.

4.81.11.4  (09-10-2012)
Referral Examination Group Procedures

  1. This section describes the actions and the procedures that will be used to close the referral cases that have been selected for examination.

4.81.11.4.1  (09-10-2012)
Group Actions

  1. Upon receipt of a referral case, the FO/CPM Group Manager will assign the case to an Examiner for examination. After reviewing the case file, if the Group Manager and Examiner determine the case does not warrant an examination, a request to survey the case may be made. The Group will prepare a memo explaining the reason for surveying the referral case. The memo will be forwarded to the Manager, FO and Manager, CPM for concurrence prior to surveying the referral case on RCCMS and AIMS. A copy of the memo and concurrence action will be included in the case file and attached to the Referral Tracking Sheet.

  2. Upon completion of the examination or the decision to survey the referral case, the Group will use the general case closing procedures found in IRM 4.81.5 to complete the closing of the referral case. The Group will request closure of the case with the applicable disposal code for the type of compliance action taken in the examination. The Group will also update the Referral Control Sheet with the action taken and results of the examination. A copy of the Referral Control Sheet will be attached to the RCCMS case file and the original electronic document will be transmitted directly to the TEB Referral Coordinator via secure messaging.

4.81.11.5  (09-10-2012)
Whistleblower Procedures

  1. This section will describe procedures to include GE issued procedures used for processing Whistleblower Referral cases received from the Whistleblowers Office as well as what action a TEB employee should take when contacted by an Informant.

  2. There are two categories of Whistleblower informant claim cases, discretionary award IRC §7623(a) cases often referred to as Category A cases and mandatory award IRC §7623(b) cases often referred to as Category B cases. The Category B cases are the result of the Tax Relief and Health Care Act of 2006 and require the mandatory payment of an award to a Whistleblower where the amount recovered by the Service is over $2 million or in the case of an individual, that individual has income of $200,000 or more.

4.81.11.5.1  (09-10-2012)
In General

  1. This section explains the procedures used by TEB in acting upon information received concerning an alleged violation of federal tax laws. The IRS and TEB always welcome the receipt of information that indicates a taxpayer has or is violating the federal tax laws.

  2. TEB plays a limited but vital role in the whistleblower program. An Informant’s information can be received by TEB in two ways. First, an Informant may call, write or e-mail an employee with information alleging a violation of the tax laws. Secondly, the information may be received in a case file from the WBO via the TEB Whistleblower Subject Matter Expert (TEB SME). The ensuing sections will describe the procedures to be used by TEB in processing an informant’s information and cases received from the TEB SME.

4.81.11.5.2  (09-10-2012)
TEB Employee Receipt of Information

  1. When information is received from a source outside of the IRS by telephone, correspondence or e-mail that alleges fraud, and the Whistleblower is not requesting an award for the information, the employee receiving the information should advise the Whistleblower to obtain Form 3949A, Information Referral, and submit the form to the address listed in the instructions for completing the form. If the alleged violation does not concern fraud, the employee should obtain all available information from the Informant and complete Form 3949, Information Referral Report. The information obtained should include the taxpayer, issuer or conduit borrower name, address, SSN/EIN if known, tax period involved and the specific nature of the violation. If the Whistleblower does not have this information, document what is available and ask him or her to contact the TEB Referral Coordinator when he or she can provide sufficient information for completing the Form 3949. Forward the Form 3949, whether or not complete, to the Coordinator for processing in accordance with the guidelines set forth in IRM section 25.2.1.6 or to await further contact from the Whistleblower. If the Coordinator has not heard from the Whistleblower within 30 days, a follow-up call will be made to attempt to collect any required additional information.

  2. If the Whistleblower states that he or she wants an award for their information, the employee should take the following action:

    1. For telephone inquiries, advise the Whistleblower he or she can get Form 211, Application for Award for Original Information, and Notice 2008-4, which provides instructions on how to complete Form 211 and where to send it, at http://www.irs.gov.

    2. For correspondence inquiries, provide Form 211 to the Whistleblower. Advise the Whistleblower to return the completed Form 211 and include any additional information to: Internal Revenue Service, Whistleblower Office, SE: WO 1111 Constitution Ave., NW, Washington, DC 20224.

    3. Advise the Whistleblower that all claims must be submitted under penalty of perjury.

4.81.11.5.3  (09-10-2012)
WBO Cases Received in TEB

  1. Procedures pertaining to the flow of WBO Category A cases are as follows:

    • Category A cases received and accepted by the Whistleblower Office are routed to the Ogden Informant Claim Examiner (ICE).

    • Ogden case builds and classifies the Form 211 claim. It is classified as to the value of the claim. Case building refers to IDRS printouts that are added to the claim file. An actual return is not classified.

    • If Ogden selects the Form 211 claim, the case will be sent to the TEB SME. Ogden will place the ICE indicator “1” on the AIMS module.

    • The TEB SME will review the file and forward the case to the TEB Referral Coordinator. Regular referral procedures will be followed and if selected for examination by a group, the Referral Coordinator will have the case established on RCCMS.

    • The case will be assigned to a group for completion of the examination.

    • Case closing procedures are covered in section 4.81.11.5.4.

  2. Procedures pertaining to the flow of WBO Category B cases coming into TEB are described in GE Memorandum, GE-2009-01. The memorandum will not be recited in its entirety but those sections pertinent to TEB are summarized in the following paragraphs. The memorandum is available on the intranet.

  3. The WBO cases received from the WBO will come via the GE WBO Coordinator. The cases will be assigned to the TEB SME who will perform an initial intake analysis and screening to ensure the case pertains to TEB matters.

  4. After the initial screening of the case is completed, the case will be assigned for taint analysis and recommendation as to examination potential.

  5. Cases that are recommended for examination are then sent to the TEB Referral Coordinator for inclusion into the TEB referral process.

4.81.11.5.4  (09-10-2012)
WBO Examination Procedures

  1. The memo from the GE Director titled "Category "B" Whistleblower Form 211 Claim Procedures" has as an attachment a document titled "Attachment B" , "Form 211 Whistleblower Category "B" Claim Target Case Examination Instructions" . This document provides basic procedures and guidance for a Group with respect to the Whistleblower aspects of the examination. There are a number of important aspects of WB Category "B" cases that are addressed in Attachment B and are highlighted below.

    • The Whistleblower file and all references to a whistleblower (informant) must be kept separate from the examination file and the existence of a whistleblower should not be revealed to the taxpayer.

    • The Whistleblower file requires special protection and should be kept in a locked cabinet.

    • Form 11369 must be completed and sent along with the Category “B” claim case file to the Functional Division WB SME, (" TEB SME" ), at the time of final disposition of the issues that arose out of the whistleblowers information, this may or may not be when the case is ready to close but must be accomplished prior to closure. The Functional Division WB SME, (" TEB SME" ), will provide the completed Form 11369 to the GE WBO Coordinator.

    • A type of Freeze Code called an ICE Indicator Code "1" has been placed on the primary return that has been assigned. The return can not be closed, examined or non-examined, off AIMS until the Form 11369 has been submitted, reviewed by the WBO and the ICE unit removes the indicator.

  2. No whistleblower information, whistleblower files, or any references to an informant should be included or associated with the target examination case files when sent for closing or to Appeals. The whistleblower Category "B" claim case file should be returned to the Functional Division WB SME, (" TEB SME" ), with the completed final Form 11369.

4.81.11.5.5  (09-10-2012)
WBO Case Closing

  1. The WBO exam case file will contain an attachment that outlines the case procedures to be followed and will also have Form 11369, Confidential Evaluation Report on Claim for Award. Additional case closing procedures can be found in IRM 25.2.2.6. The case procedures must be adhered to and Form 11369 must be completed by the Examiner and included in the case file.

  2. The regular case file and the award claim file will be forwarded to CPM when the case has been closed by the Group. The award claim file contains the following:

    • Form 11369 for each taxpayer (for jointly filed returns one joint form should be completed. The Form 11369 must be approved by the manager and digital electronic signatures are acceptable.

    • Narratives to fully explain the contributions of the whistleblower in the case and fully document the actions taken in regard to the issues.

    • Form 211 filed by the whistleblower and any and all information supplied by the whistleblower either as part of the original submission or obtained during any further contacts with the whistleblower.

    • Copies of any debriefing notes, recorded interviews, etc. held with the whistleblower and/or their representative.

    • Copies of any memorandums prepared by Counsel in regards to information submitted by the informant. All tainted material should be immediately returned to the analyst or Ogden Informant Claims Unit as soon as a decision is made that the material will not be used. Do not wait until the case is resolved to send the material.

    • Full Revenue Agents Report/ Special Agent’s Report including explanation of all adjusted items.

    • Signed copy of the Agreement Form (i.e. Form 4549, 870, 870-ad or 906.)

    • Any opinions from Counsel/subject matter experts on issues attributable to the whistleblower information.

    • Copies of first four pages of each tax return and any schedules impacted by the whistleblower’s information.

    • Full copy of the initial examination plan and mid-cycle revisions.

    • Copy of activity record for examination/collection case.

    • Copies of any 6103(n) contracts entered into with the whistleblower and/or explanation of extraordinary cooperation by whistleblower.

    • Any information that reflects any negative actions by the whistleblower taken during the examination.

    • Any other information that may assist the Whistleblower Office in making an award determination.

  3. CPM will send the award claim file to the TEB SME for closure off his records. The TEB SME will review the claim case file for completeness. The file will then be forwarded to the GE WBO Coordinator, who will record the closure and forward the case file to the WBO. The WBO will advise the ICE Unit to remove the ICE indicator. The CPM Analyst assigned to do the case closings will pull IDRS on the entity involved to ensure the indicator has been removed prior to closing the case off RCCMS and AIMS. The case cannot be closed from AIMS with this indicator.

4.81.11.6  (09-10-2012)
Fraud and Section 6700 Cases

  1. This section will address how referrals of bond issuances related to fraud cases and or IRC section 6700 cases are handled.

  2. Fraud and/or Section 6700 cases affect a particular issue, underwriter or other individual related to the bond deal. These types of actions are predominantly brought against individuals and not against the actual bond issuance. These actions may have resulted from information developed in a particular bond issuance but may not have any effect on related issuances from the same issuer. There may be instances where the Department of Justice or Criminal Investigation may decide that there should be no contact with certain entities, issuers or individuals which may preclude the opening of a related bond referral. In these special instances, related bond referrals would be held in abeyance until the fraud or Section 6700 case has been resolved.

  3. When referrals are received by the TEB Referral Coordinator, IDRS research should be conducted to determine whether the issuance or related issuances are under examination and to see if there are any AIMS indicators place on the AIMS file for the subject issuance. Additionally, the Coordinator will maintain liaison with the TEB Fraud Coordinator and periodically obtain an updated listing of Fraud and Section 6700 cases in process.

  4. The presence of a related Fraud or Section 6700 case will not always preclude the opening of a bond referral. The facts and circumstances relative to the issuances and outstanding actions in process will be the determining factors.


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