Determination agents and managers in EO Rulings and Agreements identify and report organizations that may be involved in exempt organizations abusive tax avoidance transactions (ATAT), fraud, or terrorism to the TAG group. The TAG group evaluates the issue and takes one of the following actions:

If an issue involves an ATAT and fraud or terrorism, the TAG group will coordinate with the EO ATAT Program Manager and the FIU or EO Rulings and Agreements designated contacts for anti-terrorism.

The manager of the EO Determinations TAG group assigns referrals to designated coordinators.

A flow chart of the TAG case process is included as an exhibit. See Exhibit 7.20.6-1.

See IRM 4.75.35 (to be published) for EO ATAT procedures.

Cases for which there are established compliance projects are not part of the TAG program and should be returned to the submitting office for appropriate coordination with the compliance project team.

Where an EO Determinations agent uncovers a possible promoter involving a case that is part of an established compliance project, a courtesy copy of relevant information regarding the promoter should be shared with the TAG group.

The objectives of the TAG program are to:

Tax-exempt organizations are exempt from federal income tax under various provisions of the Internal Revenue Code. However, some are directly involved in abusive tax avoidance transactions. In addition, because they are tax-indifferent, tax-exempt organizations are, at times, used by for-profit entities as accommodation parties in these transactions.

The Service has observed an increase in the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur, for example, when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund, but maintains control over the assets or income, thereby obtaining a tax deduction without transferring a commensurate benefit to charity. A "contribution" of a historic facade easement to a tax-exempt conservation organization is another example where a tax-exempt organization may be used to generate inappropriate contribution deductions. In many cases, local historic preservation laws already prohibit alteration of the home’s facade, making the contributed easement superfluous. Even if the facade could be altered, the deduction claimed for the easement contribution may far exceed the easement’s impact on the value of the property.

Abusive tax avoidance transactions are listed at www.irs.gov under Charities & Nonprofits by clicking on the heading "Abusive Transactions. "

ATAT issues are sent through the TAG group as discussed in the subsection on Elevating TAG Issues. See IRM 7.20.6.4.

Within EO, an EO ATAT Committee serves as a forum to analyze potential abusive transaction referrals and to make recommendations concerning their disposition. An EO ATAT Program Manager manages the referrals on behalf of the Committee.

Multiple exemption or foundation status filings, sometimes referred to as "cookie cutter" applications, by organizations with similar tax law issues, factual descriptions, or other common features may indicate that such organizations are involved in an abusive tax avoidance transaction. The following characteristics help identify cases involving multiple filings:

Fictitious exemption letter (i.e., an exemption letter that was not issued by the Internal Revenue Service) – These letters may be presented through correspondence from contributors or inquiries from the organization itself that does not realize that it does not hold a bona fide exemption.

Misrepresentation (e.g., erroneously representing that an organization is exempt or is qualified to receive tax-deductible contributions) – A misrepresentation may appear on an organization’s web site, in its written solicitations for contributions, or in other material provided during the determination process.

References to news articles or seminars touting the benefits of obtaining tax exemption – This material may appear on an organization’s web site, in its written solicitations for contributions, or in other material provided during the determination process.

An organizational address located at a penal institution.

Unusual activity offering a tax benefit that seems "too good to be true."

Abusive transactions may be marketed through seminars, the internet, direct marketing, or other advertising media by organizers, sellers, or advisors to the organization. These persons are also referred to as promoters.

Promoter cases may be identified through information previously developed or internet research connecting a case to a particular organizer, seller, or advisor who is promoting a potentially abusive scheme. The subject area may also provide a clue that a promoter may be involved. When a TAG issue appears to involve a promoter, the specialist to whom the case is assigned will seek to develop the following information about the promoter:

Fraud cases involve potential attempts to evade federal tax laws by willfully and intentionally violating a legal duty to voluntarily file returns and pay the correct amount of income, employment, or excise taxes.

The TAG group will seek assistance from the FIU to help EO Determinations create a well documented referral to CI.

If a referral involving an ATAT issue also involves fraud issues, the TAG group should seek advice from both the EO ATAT Program Manager and the FIU.

A terrorism case involves a situation where an organization has been designated as supporting or engaging in terrorist activities or demonstrates an intention or likelihood to undertake this type of activity.

IRC 501(p) suspends the exemption and prohibits most tax-deductible contributions to designated terrorist organizations that are described in IRM 501(p)(2). Designated organizations are also prohibited from applying to the IRS for recognition of exemption. Organizations that have been suspended under IRM 501(p) are listed at www.irs.gov.

The Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury administers and enforces economic sanctions programs primarily against persons engaged in or supporting terrorism. Individuals and organizations that are identified by OFAC are listed on an accessible web site at www.treas.gov/offices/eotffc/ofac/index.html.

The TAG group will seek assistance from the EO Rulings and Agreements designated contacts for anti-terrorism.

If a referral involving an ATAT issue also involves potential terrorism issues, the TAG group should seek advice from both the EO ATAT Program Manager and the designated EO Rulings and Agreements anti-terrorism contacts.

The TAG database will contain the following categories:

The TAG group manager will ensure that information is entered onto the TAG database by an authorized person(s) within the TAG group when an issue is accepted by the TAG group as a potential EO ATAT, fraud, or terrorism issue.

Access to the TAG database will be determined by the TAG group manager based on input from the Manager, EO Determinations.

The TAG group will update the TAG database.

The TAG group will also be responsible for issuing a monthly alert via e-mail to the managers in EO Determinations, EO Determinations Quality Assurance, EO Technical Guidance and Quality Assurance, and EO Technical to advise them about newly listed EO ATAT issues. The purpose of the alert is to provide information to managers for further dissemination, as appropriate. Alerts serve to provide a "heads up" about evolving issues.

When a TAG issue is identified, a TAG referral as described below ( See IRM 7.20.6.4.7) must be completed and sent to the TAG group along with applicable documents.

Within EO Determinations, a Determinations Processing employee refers a possible TAG case to the group manager, who in turn determines whether the case will be referred to the TAG group.

Within EO Determinations, a Determinations Technical Screening Specialist refers a possible TAG case to the group manager, who in turn determines whether the case will be referred to the TAG group. Technical Screening Specialists also complete the TAG Referral Form.

Within EO Determinations Quality Assurance (EODQA), a Determinations Quality Assurance (DQA) reviewer refers a TAG issue to the TAG group. The DQA reviewer provides an informational copy of the referral to the Manager, EODQA, concurrently.

Within EO Determinations, a Determinations specialist refers a TAG issue to the group manager, who in turn determines whether the issue will be referred to the TAG group. The group manager provides an informational copy of the referral to the group’s area manager concurrently.

Before making a referral to the TAG group, the following items must be checked by the originator:

The referral of a TAG issue will include the following information:

Upon assignment by the TAG group manager, the designated coordinator will evaluate the referral to determine the presence of a TAG issue, how many cases with this issue may be in the system, and whether additional information is needed to support the referral. To accomplish these tasks, the coordinator will:

A TAG coordinator may seek informal advice from the Program Manager for the EO ATAT Committee, including the need for coordination with the FIU or the EO Rulings and Agreements anti-terrorism contacts. A coordinator may also seek informal advice from the leader of an established compliance project team concerning the handling of an issue for which the team has responsibility.

If a coordinator receives information concerning a promoter, the coordinator shall work with the Program Manager for the EO ATAT Committee to determine if the promoter is already under investigation and determine how to refer information to the appropriate office charged with investigating the promoter.

If a coordinator does not believe that a TAG issue should be referred to the EO ATAT Committee, coordinated with the FIU, or coordinated with an EO Rulings and Agreements contact for anti-terrorism, the coordinator will obtain concurrence from the TAG group manager to return the referral. The TAG issue referral will be returned through the referring employee’s group manager with an explanation as to why the referral was not accepted.

If the group manager disagrees with the coordinator’s determination not to refer or coordinate the TAG issue, the group manager will request reconsideration through the Area Manager.

A coordinator will monitor assigned TAG issues that have been referred to the EO ATAT Committee or coordinated with the FIU or an EO Rulings and Agreements contact for anti-terrorism at 30-day intervals to inquire about recommendations. If a recommendation is not sent within 45 days of a referral, the initiating coordinator will notify the TAG group manager, who will advise the Manager, EO Determinations.

Once the Program Manager of the EO ATAT Committee, the FIU, or the EO Rulings and Agreements contact for anti-terrorism receives a referral or request for assistance, he or she shall send a confirming e-mail to the initiating coordinator.

If the EO ATAT Committee determines that a TAG issue is an ATAT matter, the Program Manager will inform the initiating TAG coordinator about the status of the referral, including any recommendation.

If the EO ATAT Committee determines that a TAG issue referral is not an ATAT matter, the Program Manager will inform the initiating TAG coordinator that the referral was not accepted for EO ATAT. The Program Manager will also provide any information developed during the EO ATAT Committee consideration that would be helpful in resolving the underlying case.

The TAG coordinator will inform the referring manager that the TAG issue was not accepted as an EO ATAT matter and will provide an explanation as to why the issue was not accepted, together with any information that may be helpful in resolving the underlying case. If the initiating group manager or the TAG group manager disagrees with the decision of the EO ATAT Committee, he or she will inform the EO Determinations manager, who may decide to ask for reconsideration through the Director, Rulings and Agreements.