8.7.8  Tax Exempt and Government Entities (TE/GE) Cases

Manual Transmittal

September 04, 2012

Purpose

(1) This transmits revised IRM 8.7.8, Technical and Procedural Guidelines, Appeals Tax Exempt and Government Entities (TE/GE) Cases.

Material Changes

(1) Revised IRM to reflect new organizational titles resulting from the Appeals 2012 Realignment Project.

(2) Revised IRM 8.7.8.3.5 and 8.7.8.5.5 to update address for Chief, Appeals.

(3) Updated throughout to correct reference to Large and Mid-Size Business (LMSB) to Large Business and International (LB&I).

Effect on Other Documents

This IRM supersedes IRM 8.7.8 dated November 20, 2008.

Audience

Appeals employees

Effective Date

(10-01-2012)


Susan L. Latham
Director, Policy, Quality and Case Support

8.7.8.1  (10-01-2012)
Introduction to Appeals TE/GE Cases

  1. This section outlines procedures for Appeals offices to handle appeals from adverse actions proposed by Tax Exempt and Government Entities (TE/GE). See Exhibit 8.7.8-1. This exhibit contains a listing of TE/GE areas and their jurisdiction.

  2. Because of the specialized nature of TE/GE issues, route all TE/GE cases to the following address for assignment to Appeals Officers (AO) with expertise in these cases:

    Internal Revenue Service - Appeals
    ATTN: Account and Processing Support
    10 Causeway St.
    Suite 493
    Boston, MA 022221083

  3. Cases containing TE/GE issues may also originate from income tax examinations under the jurisdiction of Small Business/Self Employed (SB/SE) and Large Business and International (LB&I).

    For example, a pension plan deduction on Form 1120 is disallowed due to the employer's use of incorrect actuarial assumptions. The procedures contained in this section do not apply to these cases. Refer to IRM 8.20.6, Interim Actions - Remittances, Partials, Transfer and Returns, to determine whether to transfer these cases to the Baltimore Appeals Office for assignment to Appeals Officers who have expertise in Employee Plan and Exempt Organization (EP/EO) matters.

    Note:

    Pre-conference and post-conference procedures for examinations of large cases (under LB&I's jurisdiction) apply to all TE/GE Coordinated Examination Program (CEP) cases in which TE/GE requests a conference. Any references in those sections to examination personnel apply to TE/GE personnel. See IRM 8.7.11, Appeals Team Cases

  4. Refer to IRM 4.71, IRM 4.75 and IRM 4.76 for additional guidance when working cases involving issues relating to EP/EO matters.

  5. Compute Private Foundation changes in tax liability on Form 4883, Private Foundation Audit Changes.

8.7.8.1.1  (10-26-2007)
Explanation of TE/GE Operating Division

  1. TE/GE Division is an operating division with three (3) units:

    • EP - Employee Plans

    • EO - Exempt Organizations

    • GE - Government Entities

  2. EP and EO cases break down into three (3) categories:

    • Determinations

    • Revocations

    • Examinations (taxable returns)

  3. GE cases involve:

    • Federal, State and Local Governments

    • Indian Tribal Governments

    • Tax Exempt Bonds

  4. In EP and EO determination cases, taxpayers generally submit applications for two reasons:

    1. To obtain exempt organization status and determine their private foundation classification.

    2. To ensure their employee retirement plan meets the Internal Revenue Code requirements and their trust is tax exempt.

  5. After receiving the application, IRS makes a determination whether to grant the taxpayer's request.

  6. Appeals does not accept cases after certified/registered adverse determination (application denied) letters are issued. Appeals also does not accept docketed cases under Declaratory Judgment procedures, which are identified by the letter "X" for EO cases and "R" for EP cases after the docket number. These cases are under Counsel jurisdiction.

8.7.8.1.2  (10-26-2007)
Taxable Returns Related to EP/ EO Examination Cases

  1. Both EP and EO examinations involve imposing various taxes due to the plan (EP) or organization (EO) engaging in financial transactions.

    1. Examination cases are generally non-docketed, but it is possible to have excise tax and unrelated business income tax issues in docketed status.

    2. Examination cases are on AIMS; however, some accounts are Master File (MF) and others are Non-Master File (NMF). NMF is used for inventory control purposes. If assessments need to be made, MF accounts are established when the case is closed.

8.7.8.2  (10-26-2007)
Obtaining Tax Exempt and Government Entities Administrative Files

  1. Request employee plan files or exempt organization rulings or technical advice using Form 8057, (TE/GE Microfiche Request). Forward the request to the Communications and Records Unit, Office of the TE/GE Division Commissioner.

  2. TE/GE Area offices maintain files on TE/GE issued determination letters. Also request these files using a Form 8057 forwarded through the appropriate area office.

8.7.8.3  (10-26-2007)
Appeals Responsibility for Employee Plans (EP) Cases

  1. The Director, EP is responsible for the examination of employee plan returns and is also responsible for reviewing plan and trust applications for qualified status and exemption from Federal income tax.

  2. EP examiners' final decision may result in the proposal of an adverse action, such as -

    • unrelated business income tax.

    • Chapter 43 excise taxes for failure to meet minimum funding standards or for prohibited transactions.

    • revocation of determination letters concerning continued plan qualification.

    • a plan no longer qualifies under IRC 401, the trust loses its exempt status and becomes a taxable entity required to file Form 1041.

  3. Appeals is responsible for administrative appeals on cases proposing adverse actions with the exception of adverse actions resulting from a Technical Advice Memorandum issued with respect to a plan's qualified status, which do not have administrative appeal rights.

  4. Sources for handling EP cases in Appeals include:

    1. Delegation Orders No. 60 (as revised), No. 66 (as revised), and No. 112 (as revised) which set forth Appeals' authority in employee plan cases.

    2. Issues docketed under the declaratory judgment provisions of IRC 7476 are under Counsel's exclusive jurisdiction whether TE/GE or an Appeals office issues the final adverse letter being petitioned.

    3. 26 CFR 601.201(o)(6) discusses the appeal of employee plan qualification issues. Appeals general procedures are covered in 26 CFR 601.106.

    4. Rev. Proc. 2006-5, 2006-1 IRB 174, (revised annually), sets forth the procedures for requesting technical advice.

    5. Rev. Proc. 2006-6, 2006-1 IRB 204, (revised annually), provides guidance to Appeals on adverse determinations.

8.7.8.3.1  (10-01-2012)
Account and Processing Support (APS) Receipt of EP Cases

  1. As stated above there are three categories of EP cases - determination, revocation, and examinations. When acknowledging receipt of an EP case, use the same procedures used when acknowledging receipt of general cases. There are only a few procedures that differ.

  2. Employee plan cases are transmitted to Appeals using Form 3210, Document Transmittal. Once it is determined all items listed on Form 3210 are received, sign the acknowledgment copy of Form 3210 and return it to the originator. Keep a copy of the Form 3210 in the case file.

  3. The technical staff in the appropriate EP Area office or the EP Centralized Review function (relating to determination matters) screen cases transmitted to Appeals to verify completeness of the protest and the case file, and to resolve factual discrepancies between the protest and the employee plan specialist's findings.

  4. For information on statutes for EP cases, see IRM 8.21, Appeals Statute Responsibility.

  5. See Exhibit 8.7.8-4. This exhibit contains due dates of EP and related cases.

8.7.8.3.1.1  (10-26-2007)
APS Card-In of EP Determination Cases

  1. EP determination cases contain an application prepared on Form 4461, Form 6406 or Form 5300 series (5300, 5303, 5306, etc.). Follow normal card-in procedures using the following:

    1. TYPE = EPD

    2. MFT = 74 for Forms 6406 and the 5300 series (MFT = 35 for Form 4461)

    3. SOURCE = EP

    4. KEYPER = Form number with 20 in front of it (For example, the key period for application Form 5300=205300.

    5. Determination cases are not on AIMS and no return information is entered.

8.7.8.3.1.2  (10-26-2007)
APS Card-In of EP Revocation Cases

  1. EP revocations involve revoking (canceling) the plan. Revocation cases can be identified by checking the letter sent to the taxpayer offering the appeal.

  2. To establish an EP revocation case on ACDS, follow normal card-in procedures using the following:

    1. TIN - TIN with P modifier

    2. MFT - return MFT

    3. TYPE - EPR

    4. KEYPER - earliest tax period

      Note:

      On the return information screen in (2) and (3), input the AIMS indicator, tax periods and statute. There is no proposed tax or penalty.

8.7.8.3.1.3  (10-26-2007)
APS Card-In of EP Examination Cases (Taxable Returns)

  1. EP examination cases (taxable returns) have non-taxable reference returns ( Form 5500 for EP) and taxable returns with an RAR for proposed tax/penalty. Establish the taxable returns ( Form 5330, Form 1120, Form 1041, Form 940, Form 941, etc.) on ACDS following normal card-in procedures, using the following:

    • TYPE = EOE

    • STATDATE = statute of non-taxable return (Form 5500)

  2. Establish the non-taxable returns as a related reference case:

    • TYPE = REF

    • STATDATE = normal or extended statute

  3. The non-taxable reference return controls the statute on the taxable returns.

  4. If present, attach Form 5650, EP Closing Record, to the inside of the administrative folder.

  5. Include the plan number when requesting AIMS prints or transcripts for EP cases.

8.7.8.3.2  (10-26-2007)
Withdrawal of the EP Application

  1. An applicant's request for a determination letter may be withdrawn at any time prior to the issuance of a final adverse determination letter.

  2. If an applicant files an appeal to an adverse determination letter, the determination letter request may be withdrawn at any time prior to forwarding the proposed adverse action to Appeals, however it cannot be withdrawn at the Appeals level. See 26 CFR 601.201(o)(3)(xiii).

8.7.8.3.3  (10-26-2007)
APS Sends New Card-in for Assignment by ATM

  1. After carding-in the case, follow normal procedures for transmitting the case to the ATM for assignment.

  2. The Appeals Team Manager (ATM) of the receiving Appeals office determines whether or not the case belongs in that particular office. If it is determined the case belongs in another office, follow the procedures for transferring cases found in IRM 8.20.6, Interim Actions - Remittances, Partials, Transfer and Returns.

  3. The ATM assigns the case to an AO with specialized knowledge or experience in employee plan issues.

8.7.8.3.4  (10-26-2007)
Preliminary Review of EP Case by Appeals Officer

  1. When the AO receives a new case assignment, he/she does a preliminary review of the information contained in the administrative file. The requirement for an original return does not apply in employee plan determination or termination cases. The following information must be included (as applicable):

    1. Letter from EP Area Manager providing adequate development of primary and alternative issue(s) including facts, law and argument.

    2. Copies of Form 5346, Examination Information Report, or Form 5666, TE/GE Information Report, indicating the date(s) the original(s) were referred to the Chief, Employee Plans Examination Programs and Review (EP-PPR). This includes referral of the following issues: Form 1120 deduction issues, Form 1040 additional income issues, and possible conversion of Form 5500 series to Form 1041 (initial qualification of revocation).

    3. Mandatory written comment concerning the taxpayer's protest.

    4. On all potential declaratory judgment cases, the administrative record and index prepared in accordance with 26 CFR 601.201(o)(8) and any locally developed procedures. Appeals updates the administrative record and the index if a final adverse letter is issued.

    5. Where needed, an explanation concerning the statute of limitations on each tax and information return forwarded to Appeals. When the six-year statute of limitations period under IRC 6501(e) is imposed for failure to adequately disclose a prohibited transaction, the Form 5500 is included in the file. Without Form 5500, it is not possible to determine whether the three (3) year or the six (6) year statute applies.

  2. As part of the preliminary review, the AO determines whether or not the case includes a mandatory technical advice issue.

  3. Within five (5) workdays from receipt of the case, the AO verifies that Letter 4141(cg), Uniform Acknowledgment Letter (UAL), was issued to the taxpayer (and a copy to the power of attorney, if applicable). See IRM 8.2.1 and IRM 1.4.28 for procedures used to verify and document information about the UAL.

  4. When required by the IRS/DOL Agreement, the AO prepares the DOL notification letter normally within 15 workdays of the receipt of the case. See Exhibit 8.7.8-2.

8.7.8.3.5  (10-01-2012)
Technical Advice on EP Cases

  1. Appeals may request technical advice from the Headquarters Office on any technical or procedural question that develops while considering the employee plan case.

  2. Technical advice is required in cases concerning any of the following:

    1. proposed revocation of letters on collectively-bargained plans,

    2. plans where the IRS proposes to issue a revocation letter because of certain fiduciary actions that violate the exclusive benefit rule of IRC 401(a) and are subject to Part 4, subtitle B of Title I of ERISA, Pub. L. No. 93406, 19743 C.B. 43, or

    3. amendments to defined contribution plans pursuant to Rev. Proc. 2004-15, 2004-7 I.R.B. 490 in connection with a waiver of the minimum funding standards and a request for a determination letter. Generally, a case is returned to the TE/GE Area office if technical advice should have been requested but was not.

  3. The employer or sponsor may request the issue be referred to the Headquarters Office for technical advice on the grounds that a lack of uniformity exists on disposition of the issue, or the issue is so unusual or complex it warrants consideration by the Headquarters Office. This request must be made at the earliest possible stage of the proceedings, preferably in writing. See 26 CFR 601.201(n)(9)(iii)(a) and Rev. Proc. 2006-5, Rev. Proc. 2006-1 IRB 174 for the procedures to follow when the organization's request should be denied.

  4. Refer requests for discretionary relief under IRC 7805(b) from the retroactive effect of an adverse action to the Headquarters Office. The procedures in this section generally apply to those requests. Specific guidelines are set forth in Rev. Proc. 2006-4, 2006-1 IRB 132.

  5. Use Form 5565, Request for Technical Advice -TE/GE, to request technical advice on all employee plan issues. See 26 CFR 601.201(n)(9)(iii), Rev. Proc. 2006-4, 2006-1 IRB 132, Rev. Proc. 2006-5, 2006-1 IRB 174, and Rev. Proc. 2006-6, 2006-1 IRB 204 for procedures to request technical advice. Send requests for technical advice, through the Chief Appeals, ATTN: AP, 999 North Capitol Street NE, Washington, DC 20003-3903, to the TE/GE Technical Manager, ATTN: T:EP:RA. The TE/GE Technical Manager routes the technical advice back through the Chief Appeals.

  6. The conclusions reached in a technical advice memorandum concerning an employee plan's qualified status are final and must be followed by Appeals. On other issues, Appeals follows the conclusion of the technical advice memorandum when it is favorable to the taxpayer. If unfavorable to the taxpayer, Appeals may settle the issues under existing authority.

  7. If the proposed Appeals disposition of a case is contrary to the Headquarters Office technical advice or ruling concerning plan qualification issued before development of the current case, submit the proposed disposition as a request for technical advice through the Appeals Area Director to the TE/GE Division Commissioner. The decision of the TE/GE Division Commissioner must be followed by Appeals. An example of this type of situation is illustrated here.

    Example:

    A plan's qualification under IRC 401(a) is denied in 1998 as a result of the Headquarters Office technical advice. The employee plan reapplies in 2001 with essentially the same facts, and the director proposes to deny plan qualification for the same reasons. Appeals considers the case and proposes to grant qualified status. This proposed disposition must be submitted to the Headquarters Office through the Appeals Area Director as a request for technical advice.

8.7.8.3.6  (10-26-2007)
Responsibilities of Headquarters Analyst with Employee Plan Program

  1. Appeals Tax Policy and Procedure (Exam) has designated an analyst to coordinate employee plan matters.

  2. The responsibilities of the analyst are as follows:

    1. provides guidance to AOs working employee plans and actuarial cases.

    2. keeps the area offices informed of developments and provides field perspective on issues.

    3. if needed, meets with representatives from EP, Area Counsel and Examination to discuss procedural issues of mutual concern.

    4. consults with AOs working unusual employee plans issues.

    5. disseminates procedural and technical material to the area offices.

    6. maintains regular contacts with TE/GE Headquarters Office functions responsible for EP litigation, oversight of EP field operations and issuance of EP technical advice and regulations.

    7. insures issues are settled uniformly around the country.

8.7.8.3.7  (10-26-2007)
AO Procedures for EP Conferences

  1. Follow processing procedures contained in IRM 8.2.1, Pre-90-Day and 90-Day Cases, Agreed Income Tax Cases, and the general guidelines and requirements for conducting conferences and preparing Form 5402, Appeals Transmittal and Appeals Case Memo (ACM), contained in IRM 8.6, Conference and Settlement Practices, unless modified by a specific procedure in this chapter.

  2. Schedule the conference as quickly as possible after considering workload and travel commitments. Hold conferences at a mutually convenient IRS office. Conferences by telephone are permitted when agreeable to both parties and feasible in terms of the complexity of the case. If both parties agree no useful purpose is served by holding a conference, settle the disputed issues in the case based upon the protest and the rest of the administrative record.

  3. When working cases subject to the declaratory judgment provisions of IRC 7476, closely scrutinize any written submissions or representations from the employer or sponsor for statements that do not, in the Service's view, represent the facts accurately or that do not adequately assert conclusions. Ensure such statements do not go into the administrative record without rebuttal and/or qualification. Remember only written communications between the parties are part of the administrative record for declaratory judgment cases. See 26 CFR 601.201(o)(8).

  4. After considering the administrative record, conference discussion, and any technical advice memorandums, prepare an Appeals Case Memo (ACM) to reflect Appeals decision on the issues.

  5. Prepare the appropriate determination letter.

  6. Prepare Form 5402 as a cover sheet for the ACM.

8.7.8.3.8  (10-26-2007)
Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) Coordination

  1. Some TE/GE matters require coordination with the Department of Labor (DOL) or the Pension Benefit Guaranty Corporation (PBGC). Before discussing Appeals' decision with the taxpayer or signing a closing agreement, determine whether coordination with DOL or PBGC is required. Treas. Reg. 301.6103(l)(2)3 provides rules for disclosure of information to DOL and PBGC.

  2. Coordinate with DOL or PBGC on any case where the case file indicates the other agency also has a case involving the same plan or the same taxpayer.

  3. The following details the IRS/DOL Agreement concerning Appeals consideration of such cases:

    1. Upon receipt of an appeal of any employee benefit plan examination case, the Appeals office sends the appropriate letter chapter to the appropriate DOL Pension and Welfare Benefits Administration (PWBA) office. See Exhibit 8.7.8-1. This exhibit lists the DOL Pension and Welfare Benefits Administration (PWBA) offices.

    2. DOL has 60 calendar days from the date of the Appeals notification to determine whether any action pending in DOL requires further coordination of the case by Appeals. If DOL indicates an action is pending, Appeals suspends final disposition of the case until appropriate coordination activities are completed.

    3. Prior to the earlier of the date the Appeals office receives a response from DOL or 30 days after the date of the Appeals letter to DOL , Appeals takes no final action to settle the case; issue a notice of deficiency with respect to taxpayers under IRC 4971 or IRC 4975 that are not in jeopardy; or proceed with action to revoke the favorable determination or qualification letter of any plan.

    4. If the Appeals office, the Appeals Area Director and the DOL office are unable to reach agreement regarding disposition of the case, forward the matter to the IRS Headquarters Office, Chief Appeals, to coordinate final resolution with the Assistant Administrator for Enforcement, PBA.

  4. If coordination with the PBGC is required contact:

    General Counsel, Pension Benefit Guaranty Corporation
    Suite 240, 1200 K St., N.W.
    Washington, D.C. 20005-4026

    Note:

    Contact can be made by going to their web site at www.pbgc.gov.

    .

8.7.8.3.9  (10-26-2007)
Actuarial Funding and Deduction Issues

  1. Pension plans must comply with minimum funding standards under IRC 412 and contributions to these plans must meet the deduction limits of IRC 404. Guidance on actuarial issues, e.g., analyzing the actuarial funding methods and assumptions of defined benefit plans, is found in IRM 4.72, Employee Plans Technical Guidelines.

  2. Appeals Officers may informally contact an actuary for assistance when actuarial funding or deduction questions arise. Actuaries are under the Director, EP Rulings and Agreements, and are located in TE/GE Headquarters and in each TE/GE Area office. This assistance is not intended to replace existing technical advice or technical information procedures. Views exchanged pursuant to this procedure may not be cited to taxpayers as authority for resolving any specific case.

8.7.8.4  (10-26-2007)
Explanation of the Office of Exempt Organization (EO)

  1. The Office of EO, Rulings and Agreements reviews applications for recognition of exemption from Federal income tax and the Office of EO Examinations conducts examinations of exempt organizations and of returns of some taxable organizations (e.g. Form 5227, Return of Non-exempt Charitable or Split-interest Trust Treated as a Private Foundation under IRC 4947(a), and Form 1120, U.S. Corporation Income Tax Return, when filed by private foundations whose exempt status has been revoked).

  2. EO examiners final decisions may result in proposal of an adverse action, such as -

    • unrelated business income tax.

    • Chapter 41 or Chapter 42 taxes.

    • denial of exempt status.

    • classification as a private foundation.

    • revocation or modification of determination letters concerning exemption or foundation classification.

  3. Appeals is responsible for administrative appeals on cases proposing adverse actions with the exception of adverse actions resulting from a Technical Advice Memorandum issued with respect to an organization's exempt status or foundation classification which do not have administrative appeal rights.

  4. Sources for handling EP cases in Appeals include:

    1. Delegation Orders No. 60 (as revised), No. 66 (as revised), and No. 113 (as revised) which set forth Appeals' authority in exempt organization cases.

  5. If the Office of EO, Rulings and Agreements refers an exemption application or request for foundation status to their Headquarters Office for a ruling, the ruling is final, and the organization may not request Appeals consideration.

  6. Counsel has exclusive jurisdiction over issues docketed under the declaratory judgment provisions of IRC 7428 whether TE/GE, an Appeals office or the Headquarters office issues the final adverse letter being petitioned.

  7. Sections 601.201(n)(5) and (6) of the Statement of Procedural Rules discuss the appeals of adverse exemption and foundation classification issues. Appeal of exempt organization tax issues are covered in section 601.106 of the Statement of Procedural Rules.

  8. Rev. Proc. 2006-4, 2006-1 IRB 132, and Rev. Proc. 2006-6, 2006-1 IRB 204, detail the general appeal procedures for adverse determination letters and for revocation and modification of rulings and determination letters relating to exemption from Federal income taxes for organizations under IRC 501(a) and IRC 521.

8.7.8.5  (10-26-2007)
Receipt of EO Cases

  1. Procedures for acknowledging receipt of EO cases are the same as those for EP cases with the exception the requirement for an original return does not apply in exempt organization determination cases or in examination cases where the organization is not required to file a return.

    1. IRC 6033(a)(2) explains the types of organizations that do not have to file an annual return.

    2. Under the discretionary authority allowed by IRC 6033, the IRS has also determined that, for tax years ending on or after December 31, 1982, organizations (other than private foundations) do not need to file if their gross receipts are normally not more than $5,000 per taxable year.

  2. The area or EO Mandatory Review function of the Technical Staff of TE/GE, screens cases for completeness of the protest and case file and for resolution of any factual discrepancies between the protest and the exempt organization specialist's findings.

  3. The Appeals Team Manager (ATM) assigns the case to an Appeals Officer (AO) specialized or experienced in exempt organization issues.

  4. Within five (5) workdays from receipt of the case, the AO verifies Letter 4141(cg), Uniform Acknowledgment Letter (UAL) was issued to the taxpayer (and a copy to the power of attorney, if applicable). See IRM 8.2.1 and IRM 1.4.28 for procedures on verifying and documenting the UAL issued to the taxpayer.

  5. Form 5548, Exempt Organization Record (EACS), or Form 4646, Employee Plans Determination Record (EDS), is used to control determination cases on EP/EO's Application Control System (EACS). When the forms are in the administrative file leave them there in case the staff of the TE/GE office needs them when processing the final determination for the case.

8.7.8.5.1  (10-26-2007)
APS Card-In of EO Determination Cases

  1. EO determination cases contain application forms - Form 1023, Form 1024 or Form 1028. Establish an EO determination case on ACDS using -

    1. TYPE = EOD

    2. MFT = 67 for Forms 1023 and 1024 (MFT = 33 for Form 1028)

    3. Source = EO

    4. KEYPER = Form number with 20 in front of it (For example, the key period for application Form 1023 = 201023)

    5. Determination cases are not on AIMS and no return information is entered.

8.7.8.5.2  (10-26-2007)
APS Card-In of EO Revocation Cases

  1. EO revocations involve revoking (cancelling) the tax exempt status previously granted. The letter sent by TE/GE to the taxpayer offering the appeal indicates if the issue is a revocation.

  2. To establish an EO revocation case on ACDS:

    1. MFT= return MFT

    2. TYPE = EOR

    3. KEYPER = earliest tax period

  3. If present, attach Form 5599, EO Closing Record, to the inside of the administrative folder. Form 5599 is an AIMS document and is used in completing additional EO closing information required on Appeals Form 5403.

8.7.8.5.3  (10-26-2007)
When Organization Can Withdraw an EO Application

  1. An application for recognition of exempt status under IRC 501 or IRC 521 may only be withdrawn prior to the issuance of a ruling or determination letter. Therefore, since an adverse determination letter has been issued prior to receipt in Appeals, an application may not be withdrawn at the Appeals level.

8.7.8.5.4  (10-26-2007)
Considering Organization's Status Under Another Paragraph

  1. Occasionally, an organization qualifies for exemption under a paragraph of IRC 501 other than the one that was applied for and denied. If the application form used is applicable to more than IRC 501 paragraph (e.g., Form 1024), the organization agrees to have its qualification considered under more than one paragraph. If there is sufficient information, make that determination. Otherwise, issue a denial letter and close the case under the appropriate procedures. If the organization wants to reapply for the other status, they must send the appropriate exemption application to the Office of EO, Rulings and Agreements.

  2. In the case of an organization requesting a determination under IRC 501(c)(3), issue a final adverse letter, even though the organization may appear to qualify under another paragraph.

  3. If an organization applies under the paragraph of IRC 509(a) but does not qualify, or applies under the subdivision of IRC 170(b)(1)(A) ((i) through (vi) only) but does qualify, or appears to qualify under another paragraph or subdivision and sufficient information exists to support it, make the determination if the organization submits a written request. The determination letter issued is a final adverse determination letter with respect to the classification applied for, and also recognizes the organization's classification under the appropriate paragraph or subdivision.

8.7.8.5.5  (10-01-2012)
Technical Advice Available on EO Cases

  1. An Appeals office may request technical advice from the Appeals Headquarters office on any technical or procedural question that develops during the processing and consideration of an exempt organization case. See IRM 8.6.3, Appeals Rulings.

  2. An Appeals office must request technical advice if a case concerns qualification for exemption or foundation status and the issues are not covered by published precedent or are handled inconsistently between offices. Generally, this situation only occurs in Appeals when the lack of precedent or uniformity first becomes apparent to the IRS while the case is in Appeals. Otherwise, the TE/GE office should have requested technical advice or referred the case to the Headquarters office for a ruling.

  3. The organization or its representative may request an issue be referred to the Headquarters Office for technical advice on the grounds that a lack of uniformity exists on the disposition of the issue, or the issue is so unusual or complex it warrants consideration by the Headquarters Office. This request must be made at the earliest possible stage of the proceedings, preferably in writing. See 26 CFR 601.201(n)(9)(iv) and Rev. Proc. Proc. 2006-5, 2006-1 IRB 174 for procedures to follow when the Appeals Officer believes the organization's request should be denied.

  4. Requests for discretionary relief under IRC 7805(b) from the retroactive effect of an adverse action and requests for extensions of time for making elections under Treas. Reg. 1.91001 must be referred to the Appeals Headquarters office. The procedures in this section are generally applicable to those requests.

  5. Technical advice requests for all exempt organization matters, except those relating to farmers' cooperatives, are submitted to the TE/GE Division Commissioner through the Chief Appeals, using Form 5565, Request for Technical Advice TE/GE. The Associate Chief Counsel (Technical) has jurisdiction of exempt (IRC 521) and taxable farmers' cooperatives issues. Submit technical advice requests on these issues using Form 4463, Request for Technical Advice from Associate Chief Counsel (Technical and International), to the Associate Chief Counsel (Domestic) through the Chief Appeals. In all cases, mail an original and one copy to -

    Internal Revenue Service
    ATTN: AP
    999 North Capitol Street NE 20003-3903
    Washington, DC 20003-3903

  6. The TE/GE Division Commissioner or the Associate Chief Counsel (Domestic) issues the technical advice through the Chief, Appeals to the appropriate Appeals office. See 26 CFR 601.201(n)(9)(iii) and Rev. Proc. 2006-5, 2006-1 IRB 174 for procedures to use when requesting technical advice.

  7. The conclusions expressed in a technical advice memorandum concerning an organization's exemption and foundation status are final and will be followed by an Appeals office. On other issues, the Appeals office will follow the conclusion of the technical advice memorandum where it is favorable to the taxpayer; if the technical advice is unfavorable to the taxpayer, Appeals settles the issues using existing authority.

  8. If the proposed Appeals disposition on a case is contrary to a Headquarters office technical advice or ruling concerning exemption issued before development of the current case, submit the proposed disposition as a request for technical advice through the Appeals Area Director to the TE/GE Division Commissioner or, in a IRC 521, to the Associate Chief Counsel (Domestic). The decision of the TE/GE Division, Commissioner, or the Associate Chief Counsel is followed by the Appeals office. An example of this type of situation is illustrated here.

    Example:

    An exemption under IRC 501(c)(3) was denied in 1998 as a result of a TE/GE Headquarters Office ruling which stated an organization's activities were not educational. The organization reapplied in 2001 with essentially similar facts, and TE/GE proposed to deny exemption for the same reason. Appeals has considered the case and proposes to recognize exemption. This proposed disposition must be submitted to the Appeals Headquarters Office through the Appeals Area Director as a request for technical advice.

8.7.8.5.6  (10-26-2007)
AO Conference Procedures for EO Cases

  1. When conducting conferences on issues related to EO cases, follow the same conference procedures as shown in the section entitled AO Procedures for EP Conferences. See IRM 8.7.8.3.7.

8.7.8.5.7  (10-26-2007)
Failure to File, IRC 6652(c) for EO Cases

  1. Penalties are imposed on exempt organizations and certain trusts for failure to file appropriate returns unless the failure is due to reasonable cause. In some circumstances, the people responsible for failing to comply with the filing requirements may also be subject to a penalty. See IRM 20.1.8, Employee Plans and Exempt Organizations Penalties, for details.

8.7.8.5.8  (10-26-2007)
Processing Cases with Certain Chapter 42 Excise Tax Adjustments

  1. IRC 4941(a) and IRC 4941(b) impose taxes on acts of self-dealing between disqualified persons and a private foundation. IRC 4944(a)(2) and IRC 4944(b)(2) impose taxes on the foundation and foundation managers for investments that jeopardize the carrying out of a private foundations exempt purposes. IRC 4945(a)(2) and IRC 4945(b)(2) impose taxes on foundations and foundation managers for the taxable expenditures of a private foundation. IRC 4951(a) and IRC 4951(b) impose taxes on acts of self-dealing between disqualified persons and a black lung benefit trust. IRC 4952(a)(2) and IRC 4952(b)(2) impose taxes on the trust and trustees for taxable expenditures made by a black lung benefit trust. These taxes are referred to as Chapter 42 excise taxes for the rest of this text.

    1. If more than one person or organization is liable for any of these taxes, all are jointly and severally liable for the amount due. Thus, the total liability is assessed against each one individually, although payment of the total amount may be made by any one person or organization or combination of persons or organizations to satisfy the liability for all.

    2. All assessments must remain in effect for the period during which those who paid the tax are entitled to file claims for refund. This practice ensures that the Government is protected if the ones who paid the tax subsequently establish no liability for it and receive a refund. The Government can then collect from the others.

    3. Thus, Appeals procedures for closing these cases with additional liability must be consistent with procedures in Examination Support and Processing, campuses, and collection to ensure that all appropriate assessments and collections are made.

  2. These procedures apply to the Chapter 42 excise taxes asserted against individuals and organizations who are disqualified persons or foundation managers in relation to a private foundation or who are disqualified persons or trustees in relation to a black lung benefit trust. These procedures do not apply to such taxes asserted against a private foundation or a black lung benefit trust.

    1. The Appeals officer prepares appeals case memoranda (ACM) and sees that the appropriate settlement computations are prepared. Generally, a consolidated ACM would be appropriate with the private foundation or black lung benefit trust as the key case and the other parties as related cases.

    2. Assessments of these Chapter 42 taxes are Non-Master File (NMF) and are manually processed. For use as an assessment document, Appeals provides a separate Form 4881, Chapter 42 Taxes-Disqualified Person/Foundation Manager, for each person or organization for each tax period for which Chapter 42 taxes are being assessed. Form 4881 may already be in the file as prepared by TE/GE. Appeals should review these forms for accuracy and completeness and make any needed corrections or omitted entries. Forms 4881, in conjunction with a Form 5403, Appeals Closing Record, for the private foundation or the black lung benefit trust, are necessary to close the case from Appeals to Examination Support and Processing. The Form 5403 is used only to gather statistics on these cases. These forms must be completed even if advance payment has been made on the liability.

  3. Prepare Form 4881 as follows:

    1. NAME/ADDRESS/ZIP CODE OF TAXPAYER: If available, attach an address label from the temporary TIN account established on AIMS. If no label is available, enter the complete name and address of the person or organization being assessed Chapter 42 taxes. When more than one person or organization is being assessed taxes, complete a separate Form 4881 for each one involved.

    2. FORM NO.: Enter 4720 where the taxes arise from a relationship to a private foundation. Enter 990BL where the taxes arise from a relationship to a black lung benefit trust.

    3. MFT: Enter 50 where the taxes arise from a relationship to a private foundation. Enter 56 where the taxes arise from a relationship to a black lung benefit trust.

    4. TAX PERIOD: Enter the tax period (in YYMM format) for which Chapter 42 taxes are being assessed. Prepare a separate Form 4881 for each tax period in which Chapter 42 taxes are being assessed.

    5. DOCUMENT LOCATOR NO. This item will be completed by Centralized Services or the campus.

    6. TAXPAYER IDENTIFICATION NO. (TIN): Enter the taxpayer's Social Security Number or Employer Identification Number, as appropriate. Do not enter the temporary TIN assigned at the terminal when the account was established on AIMS.

    7. ASSESSMENT DATE: This item will be completed by Examination Support and Processing or the campus.

    8. INTEREST COMPUTATION DATE: This item will be completed by Centralized Services.

  4. Enter adjustments on Form 4881 if applicable. Use a separate column for each type of tax being assessed.

    1. IRC SECTION: Enter the appropriate four-digit section number. For self-dealing with a private foundation, enter 4941. For investments of a private foundation which jeopardize charitable purposes, enter 4944. For taxable expenditures of a private foundation, enter 4945. For self-dealing with a black lung benefit trust, enter 4951. For taxable expenditures of a black lung benefit trust, enter 4952.

    2. ABSTRACT CODE: Enter the appropriate three-digit code. For IRC 4941, enter 150. For IRC 4944, enter 152. For IRC 4945, enter 154. For IRC 4951, enter 185. For IRC 4952, enter 186.

    3. INITIAL TAX: Enter the appropriate tax. The amount should not exceed any limit set by the Code section involved.

    4. ADDITIONAL TAX: If applicable, enter the appropriate tax. If no additional tax is to be assessed, leave blank. Any amount should not exceed any limit set by the Code section involved.

    5. TOTAL TAX: This item will be completed as the total of initial and additional tax.

    6. INTEREST: This item will be completed by Examination Support and Processing.

    7. PENALTY TYPE: Enter the applicable type of penalty (6651 or 6684). If no penalty is being imposed, leave blank.

    8. PENALTY AMOUNT: If a penalty is being imposed, enter the amount.

    9. TOTALS: This item will be completed by Examination Support and Processing.

    10. DLN ON AIMS CLOSING FORM: This item will be completed by Examination Support and Processing.

  5. For related private foundation/organization enter the following information:

    1. NAME/ADDRESS/ZIP CODE OF TAXPAYER: Enter the complete name and address of the private foundation/organization or black lung benefit trust to which the person or organization being assessed Chapter 42 taxes is related.

    2. TAXPAYER IDENTIFICATION NO.: Enter the Employer Identification Number of the private foundation/organization or black lung benefit trust to which the person being assessed Chapter 42 taxes is related.

    3. FORM NO.: Enter the form number of the primary return filed by the private foundation/organization or black lung benefit trust related to the person being assessed Chapter 42 taxes.

    4. TAX PERIOD: Enter the tax period of the return filed by the private foundation/organization or black lung benefit trust related to the person being assessed Chapter 42 taxes.

  6. Completion of Form 4881:

    1. PREPARED BY: Enter the name and title of the person preparing the Form 4881 and the Appeals Office.

    2. AREA OFFICE: Enter the name of the area office in which the examination was conducted.

    3. DATE: Enter the date the form was prepared.

    4. OTHER INFORMATION: Use this item to list the names and social security or employer identification numbers of the other related individuals or organizations and record any additional information pertinent to the case.

  7. These cases are closed from Appeals to the Examination Support and Processing function servicing the TE/GE area that did the examination.

8.7.8.5.9  (10-26-2007)
Appeal Application of Dues by Contributors in Trade Associations, Labor Unions, and Similar Organizations

  1. Trade associations, labor unions, and similar organizations have the right to appeal a determination of TE/GE with regard to the application of Treas. Reg. 1.16220(b) or Treas. Reg. 1.162-20(c) to dues and other payments made by contributors to the organization. Notify the organization by letter of the conclusion and forward the administrative file to the Director, Exempt Organizations Division, Attention: E:EO.

  2. The agreement secured from the exempt organization reads as follows: "The (name of organization) agrees with the findings of the (Appeals office and its address) that for the (year(s)) (percentage) of dues and other payments made by its contributors are for activities specified in Treas. Regs. (1.16220(b) or 1.16220(c)). (Signature and Title of Principal Officer of Organization)."

  3. When auditing returns of contributors, Area Managers follow Appeals decision on the organization's case. However, a contributor may be granted an Appeals conference.

  4. In the absence of an overall settlement or convincing information from the contributor that the claimed deduction is allowable, the Appeals office considering the contributor's case does not deviate from the decision reached by Appeals in the organization's case or the decision of the Area Director when the organization's case is agreed.

  5. If the Area Director did not obtain an agreement from the contributee organization and Appeals has not previously considered the contribution issue for the period involved, the Appeals office considering the first case involving a contributor to the organization grants a conference on the protested contribution issue which may include participation by a representative of the contributee organization if participation is requested by the contributor.

  6. The Appeals office forwards a copy of the Form 5402, Appeals Transmittal Memorandum and Appeals Case Memo, to the Director, Exempt Organizations Division, Attention: E:EO. The Exempt Organizations Division advises the field offices concerned.

8.7.8.6  (10-26-2007)
EP and EO Agreement Forms

  1. For tax deficiencies and overassessments on Chapter 42 private foundation excise tax, see IRM 4.23.16 regarding Form 2054-AD, Excise or Employment Tax, Offer of Agreement to Assessment and Collection of Additional Tax and Offer of Acceptance of Overassessments.

  2. There is no agreement form for adverse actions such as denials, modifications, or revocations of exempt status or adverse classifications or modifications of private foundation status.

8.7.8.7  (10-26-2007)
Preparation of the EP Letter by AO and/or TCS

  1. All letters pertaining to the qualified status of employee plans (whether favorable or unfavorable) are signed by the Appeals Team Manager (ATM) per Delegation Order No. 112 (as revised).

  2. Decisions Favorable to Taxpayer in Determination Cases - When the EP area's proposed adverse action in an employee plan determination case is reversed by Appeals, Appeals sends the employer or sponsor a letter by certified or registered mail. Appeals Officers prepare the letter. See Exhibit 8.7.8-5. See Exhibit 8.7.8-6. See Exhibit 8.7.8-7.. Caveats to use in the letters are also found in an exhibit. See Exhibit 8.7.8-8.

  3. Decisions Wholly or Partially Unfavorable to Taxpayer - When a tax deficiency exists, issue a notice of deficiency by certified or registered mail unless the appropriate agreement form was previously obtained from the taxpayer. Generate a request to have the statutory notice of deficiency prepared by the Tax Computation Specialists (TCS)s following the procedures in IRM 8.17.4, Notices of Deficiency.

    1. Use Letter 894(CG) for income tax deficiencies resulting from taxes due on unrelated business income. This letter is prepared by the TCS.

    2. Use Letter 901(CG) for Chapter 43 excise taxes. This letter is prepared by the TCS.

    3. Use Letter 1363(CG) for cases involving partial claim disallowance for income and excise taxes. This letter is prepared by the AO.

    4. Use Letter 1364(CG) for cases involving full claim disallowance for income and excise taxes. This letter is prepared by the AO.

  4. Cases involving qualified or continuing qualified status are subject to the declaratory judgment provisions of IRC 7476. Appeals Officers prepare the final adverse determination, revocation, or non-qualification letter in these cases even if the taxpayer agrees with Appeals decision because it is necessary to ensure the Service's final decision is included in the case's administrative record. The administrative record consists of the following:

    • request for determination

    • all documents (including trust indenture) submitted to the Service in connection with the request or an examination of the employee plan

    • all protests and related papers

    • all correspondence between the Service and the applicant, including the notice of determination.

  5. Send the final adverse letters to Area Counsel for review prior to issuing. When sending the letter to Counsel, include the signed Form 5402, Appeals Transmittal and Case Memo, and the case file. Make sure sufficient time remains on the statute of limitations so Counsel has sufficient time to review and recommend changes. Make every effort to refer these cases to Counsel before the 270-day limit of IRC 7476(b)(3) comes into play.

  6. Counsel will try to complete its review in 45 calendar days or less. If they believe a letter should not be issued in whole or in part, the case is returned to Appeals with a memorandum explaining the reasons. If the ATM and Area Counsel cannot resolve any disagreement over the letter's content, local Area Counsel resolves it with the advice and assistance of the Appeals Area Director and the Deputy Area Counsel (tax litigation). Send these letters using certified or registered mail.

  7. Use the following letters in agreed Form 990T and Form 5330 cases:

    1. Letter 913 is generally used for a no-change, income tax (Form 990T) or excise tax (Form 5330) deficiency or overassessment cases. The AO prepares the letter and check the appropriate box(es).

    2. Letter 913, Letter 1363 (RO) or Letter 1364 (RO), as appropriate, for refund claims of income (Form 990T) or excise (Form 5330) tax. The AO prepares these letters.

8.7.8.8  (10-26-2007)
Appeals Officer Preparation of EO Letter

  1. Once a decision is made in an EO case, AOs prepare the final letter using the following table to determine which one is appropriate:

    To Notify an Organization... Use ...
    of a favorable IRC 501(c)(3) determination and that the file is being returned to the TE/GE area for foundation classification Letter 1365(RO)
    of a favorable exemption determination other than under IRC 501(c)(3) IRC 501(c)(3) and IRC 521 Letter 1366(RO)
    of a favorable IRC 521 determination Letter 1367(RO)
    (IRC 501(c)(3) only) that it is not a private foundation Form 5666

8.7.8.9  (10-26-2007)
How APS Handles EP/EO Adverse Determination Letters

  1. When denying tax exempt status (determination cases) or cancelling tax exempt status (revocation cases), a Final Adverse Determination letter is issued. See Exhibit 8.7.8-9.

  2. Handle Final Adverse letters like notices of deficiency except for the following:

    1. the time allowed to file a petition under IRC 7476, the EP declaratory judgment proceeding, is 92 days after the issuance of the final EP adverse determination letter, rather than 90 days.

    2. use certified and registered mail procedures outlined in IRM 8.20.6.6, Mail Procedures Incoming and Outgoing Certified and Registered.

    3. default final adverse letters after 120 days of issuance.

  3. Update ACDS:

    • SNTYPE = 090A

    • SNDATE = date letter is mailed

    • SND (on return level) = Y (for revocation cases there is no return level information for determination cases)

  4. Occasionally, an adverse determination requires the taxpayer to file a taxable or amended taxable return. If the taxpayer files this return with Appeals, the AO assigned the case provides instructions regarding the disposition of the return.

    1. Generally, these returns are forwarded to the appropriate Campus for processing. Before sending the return to the Campus, update the filing requirement on IDRS using Form 2363-A, Request for IDRS Input for BMF-EO Entity Change. Send this form for processing to:

      IRS
      625 Fulton St.
      Room 506
      10 Metrotech Center
      Brooklyn, NY 11201

    2. When a taxable return is required but the taxpayer does not file the return with Appeals before the case is closed, include Form 5666 or Form 5346 with the case file. Annotate Form 5402 or other transmittal - Examination follow-up. Forward Form 5666 (Form 5346) and a copy of Appeals transmittal to the appropriate Examination Group.

    3. If an adverse letter is issued for a group of related employee plans or exempt organizations, also send copies to the applicable EP/EO RP Manager (RPM).

8.7.8.10  (10-26-2007)
Closing Procedures for EP and EO Cases

  1. When closing EP and EO cases, use general closing procedures used for normal cases. There are a few specialized procedures that must be followed. Those procedures are explained in this subsection.

  2. Cases where final adverse letters pursuant to IRC 7476 or notices of deficiency were issued are closed when the earliest of the following events occurs:

    • agreement to the notice of deficiency is received.

    • a petition is filed with the appropriate court.

    • 120 days have elapsed from the date the notice or letter was issued

  3. On defaulted cases, APS takes appropriate action to close the case and mark block #11 of Form 5402 with the "Defaulted (date)" .

  4. Close all other cases when the determination or other letter is issued notifying the taxpayer of Appeals decision or an agreement to a tax change is received, whichever applies.

  5. If any issues remain on a case after Appeals consideration, close the case and transmit it to the TE/GE division using Form 5402 for a decision and issuance of an appropriate letter or report to the taxpayer on the remaining issues. If the employer or sponsor does not agree with a subsequent adverse action proposed by the TE/GE division on a remaining issue, it has the right to request Appeals consideration on the disputed issue.

    An example: When there is a failure of the deferral percentage test and TE/GE merely raise the issue as an alternative to revocation of a determination letter. If the taxpayer does not agree with this subsequent adverse action proposed by TE/GE, it has a right to request Appeals consideration on the disputed issue.

  6. Place a copy of Form 5402, Appeals Transmittal and Case Memo, and the Appeals notification or determination letter to the employer or sponsor in the permanent application file before closing the case from Appeals.

  7. Close cases with a petition filed with a court and transfer it to Area Counsel. All cases subject to declaratory judgment proceedings must include a complete index and an administrative record. The administrative record and index are prepared by TE/GE, updated by Appeals, and finalized by Counsel.

8.7.8.10.1  (10-26-2007)
Closing Certain EP and EO Cases Requiring Special Action

  1. On revocations or adverse determinations upheld by Appeals, Form 5346, Examination Information Report, or Form 5666, TE/GE Information Report, must be reviewed and revised if necessary to ensure it clearly reflects the Appeals decision. It is forwarded, along with the Form 5402, to the appropriate examination PSP (Planning and Special Programs) for necessary follow-up, such as determining tax liability (Form 5346 or Form 5666 is prepared by TE/GE personnel prior to transferring a case to Appeals).

  2. When a plan is issued a final revocation or non-qualification letter and the trust loses its tax-exempt status, request a Form 1041 from the taxpayer. If the Form 1041 is secured, forward it to the appropriate Campus. If the Form 1041 is not secured, annotate the Form 5402.

  3. Note the Form 5402 with any follow-up required by the TE/GE division. For example, in the case of a prohibited transaction, the tax due for the year in which the notice of deficiency is issued is not included on the notice of deficiency. Inform the TE/GE division, using Form 5402, that a second notice needs to be issued in a subsequent year.

8.7.8.10.2  (10-26-2007)
APS Closing of EP and EO Determination Cases

  1. Determination cases are not on AIMS and no Form 5403 is prepared. Close the case directly back to EP or EO. (It is not closed by APS.)

  2. Place the application form on top of the fastened material in the file.

  3. Update ACDS using one of the following:

    1. CLOSINGCD = 03 Appeals determines organization is exempt (EO) or plan is approved (EP)

    2. 05 Adverse determination letter is defaulted

    3. 17 Tried case

  4. Send the EP determination file to:

    550 Main St. Room 4024
    Cincinnati, OH 45201

  5. Send the EO determination file to:

    550 Main St. Room 6417
    Cincinnati, OH 45201

  6. When it is determined the taxpayer should have filed taxable returns but did not, the AO annotates on Form 5402 that the following Form (with a copy of the revocation letter) must be forwarded to Examination:

    • Form 5666, EP Information Report (EP cases)

    • Form 5349, Examination Information Report (EO cases). Examination will then initiate the appropriate deficiency procedures.

  7. Send a copy of the final adverse letter to the appropriate state official. See IRM Exhibit 7.28.1 for a list of addresses.

  8. Process final closings for a tried, dismissed, or stipulated determination case the same as above.

8.7.8.10.3  (10-26-2007)
APS Closing of Revocation Cases

  1. Close revocation cases the same way as determination cases except for -

    1. Returns are on AIMS. Prepare Form 5403 for $0 and close case to APS.

    2. If the revocation is sustained, or if there is a change in the exempt status (EO) or plan status (EP), forward a completed Form 2363-A to:

    625 Fulton St.
    Rm 506
    10 Metrotech Center
    Brooklyn, NY 11201

  2. The closing unit in Brooklyn updates the exempt status or plan status on IDRS.

    Note:

    Form 2363-A completed by EP or EO can be used if the information has not changed.

8.7.8.10.4  (10-26-2007)
Examination Cases

  1. EP and EO examination cases are closed the same way as other examination cases. The assessment is made on the taxable return:

    • Form 990-T

    • Form 5330

    • Form 4720

    • Form 1120

    • Form 1041

    • Form 940

    • Form 941

    • Form 730

    The non-taxable returns are closed on Form 5403 with $0:

    • Form 990

    • Form 990-PF

    • Form 5500

  2. All taxable returns, with the EXCEPTION of Form 5330 and Form 990-BL are assessed on the Master File (MF) account (the Non-Master File (NMF) AIMS is for inventory control purposes only it is not where the assessment is made).

  3. If NMF AIMS was established, close the case as follows:

    1. Close the taxable returns controlled on NMF AIMS by preparing a Form 5403 with TC 300 $0. Note in Item A: "Assessment to be made on master file account. AIMS closing only."

    2. Prepare a Form 5403 to make the assessment on the MF Account. Note in Item A: "TC 150 needs to be established."

      Note:

      If no assessment needs to be made, close the NMF AIMS and do not prepare a Form 5403 for the MF account.

    3. If there is sufficient time left on the statute, process Form 6469 to the Campus to establish a MF account. Once the TC 150 is established, use command code AM424A to establish AIMS on the MF account.

    4. If there is not sufficient time left on the statute, request a quick assessment on the MF account. Do not process Form 6469. The quick assessment forces the MF account to be established.

  4. Make assessment of tax for Form 990-BL and Form 5330 returns on Non-Master File (NMF). EP NMF assessments are made at the Ogden Campus. Prepare Form 5403 for the NMF account with the tax assessment.

  5. If the AIMS control for the taxable return is on the MF account, prepare Form 5403 normally, using Exhibit 8.20.7-1.

  6. Close the case following general closing instructions.

8.7.8.11  (10-01-2012)
Federal, State and Local Government (FSLG) Cases

  1. The Director of FSLG is responsible for providing Federal tax compliance assistance to four distinct customer market segments:

    • Federal agencies

    • State agencies

    • Local governments

    • Quasi-governmental entities

  2. Compliance efforts for FSLG cases are generally focused on employment taxes ( Form 940, Form 941, Form 945) and information return reporting ( Form 1099, Form W-2 and Form W-2G). Refer to IRM 4.23.16 for specific procedural guidance on employment tax issues.

  3. FSLG cases are transmitted to Appeals on Form 3210, Document Transmittal. All unagreed cases originating in FSLG are sent to the following Appeals office:

    Internal Revenue Service - Appeals
    ATTN: Account and Processing Support
    10 Causeway St.
    Suite 493
    Boston, MA 022221083

  4. The procedures in IRM 8.6, Conference and Settlement Practices, cover an AO's responsibilities for conducting conferences and preparing Appeals Case Memos in FSLG cases.

  5. Procedures regarding statutes are found in IRM 8.21, Appeals Statute Responsibility. If the case has less than 270 days left on the statute, FSLG forwards the case to Appeals using Form 1532A, Appeals Transmittal.

  6. For tax deficiencies and overassessments see IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form. See IRM 4.23.16 regarding Form 2504-AD.

8.7.8.12  (10-01-2012)
Indian Tribal Government Cases (ITG)

  1. The Director of ITG is responsible for providing federal tax compliance assistance at the tribal level only. Individual tribal member issues are worked by the Wage and Investment or Small Business/Self Employed Divisions. Compliance efforts for ITG cases generally focus on employment tax (Form 940, Form 941, Form 945), excise tax, income tax and information return reporting (Form W-2, Form W-2G, and Form 1099). Procedures for working employment and excise tax cases are in IRM 4.23.16 and IRM 8.7.5, respectively.

  2. ITG cases are transmitted to Appeals on Form 3210, Document Transmittal. The ATM determines whether the case is appropriate for Appeals consideration. All unagreed cases originating in ITG are sent to the following Appeals office:

    Internal Revenue Service - Appeals
    ATTN: Account and Processing Support
    10 Causeway St.
    Suite 493
    Boston, MA 022221083

  3. Cases transmitted to Appeals are screened by the Technical Staff in the ITG Area office or by ITG Outreach, Planning and Review (OPR) staff for completeness of the protest, the case file and for resolution of any factual discrepancies between the protest and the ITG specialist's findings.

8.7.8.13  (10-01-2012)
Tax Exempt Bond Cases (TEB)

  1. Rev. Proc. 99-35, 1999-41, IRB 501, provides administrative procedures for Bond Issuers to appeal proposed adverse determinations made by the TEB Division. The tax exempt bond examination program involves arrangements of debt obligations of states, their political subdivisions and other entities entitled to issue tax exempt debt instruments under IRC 103. These instruments include bonds, notes, installment sales, lease financing arrangements, and any other qualified arrangements. Some adverse positions taken by TEB include interest on debt obligations not excludable from gross income under IRC 103, IRC 150(b) adjustments, IRC 168(g) adjustments, and denial of a claim for recovery of arbitrage rebate payments under IRC 148.

  2. TEB cases are transmitted to Appeals on Form 3210, Document Transmittal. The ATM determines whether the case is appropriate for Appeals consideration. All unagreed cases originating in TEB are sent to the following Appeals office:

    Internal Revenue Service - Appeals
    ATTN: Account and Processing Support
    10 Causeway St.
    Suite 493
    Boston, MA 022221083

  3. Appeals may consider issues that relate to the tax liability of the beneficiary of bond proceeds in a conduit financing (Conduit Borrower) at the same time as the Issuer's appeal.

  4. The Issuer's appeal request must be in writing and include a detailed written response to the proposed adverse determination as well as their position regarding the issue in dispute. The appeal must be submitted to TEB within 30 days of the date of the notice of the proposed adverse determination.

  5. If the Issuer does not submit an appeal within the time stated, the proposed adverse determination becomes final and TEB begins taxing bondholders without further notice to the Issuer.

  6. The TEB case file will generally include copies of the following:

    1. technical advice memorandum, if any;

    2. all information received by TEB from the Issuer regarding the Bond Issue;

    3. all workpapers of TEB examining the Bond Issue;

    4. TEB's notice;

    5. Issuer's written appeal request, and

    6. TEB's response to the Issuer's position, if any.

  7. An appeal by an Issuer is assigned to a senior AO trained in tax exempt bond issues.

  8. If the Issuer provides new information not previously given to TEB, forward the information to TEB for comments. However, if it is determined the new information warrants further case development, release jurisdiction of the case to TEB.

  9. If Appeals determines the Government should concede the issue (No-Change), withdraw the proposed adverse determination and close the case to Ogden Submission Processing Center.

  10. If an intermediate agreement is reached with the Issuer, Appeals generally prepares a closing agreement, provides feedback to TEB utilizing Form 5402 along with the Appeals Case Memorandum (ACM) and closes the case to the Ogden Submission Processing Center.

  11. If an agreement is not reached with the Issuer, close the file and release jurisdiction to TEB. Appeals does not reconsider an unagreed appeal unless there has been a substantial change in the circumstances regarding the appeal issue.

Exhibit 8.7.8-1 
List of Employee Plans and Exempt Organizations Areas

EP and EO Areas
Area Areas Covered
Northeast  
Brooklyn
Maine
New Hampshire
Vermont
Massachusetts
Rhode Island
Connecticut
New York
New Jersey
Gulf Coast  
Atlanta (EO)/New Orleans (EP)
Georgia
Florida
Alabama
Mississippi
Louisiana
Arkansas
Missouri
Kansas
Oklahoma
Texas
Tennessee
Pacific Coast  
Los Angeles (EO)/Seattle (EP)
New Mexico
Colorado
Wyoming
Montana
Idaho
Utah
Arizona
Nevada
California
Oregon
Washington
Alaska
Hawaii
Great Lakes  
Chicago
Indiana
Michigan
Illinois
Wisconsin
Iowa
Minnesota
North Dakota
South Dakota
Nebraska
Kentucky
Mid-Atlantic  
New Jersey (EO)/Philadelphia (EP)
Pennsylvania
Maryland
District of Columbia
Delaware
Virginia
West Virginia
South Carolina
North Carolina
Ohio

Exhibit 8.7.8-2 
Letter Informing the Department of Labor of an Employee Benefit Plan in Appeals

DOLLetter - Employee Benefit Plan
  Address any reply to:
   
  Person to Contact:
   
  Telephone Number:
   
  Date:
   
  Employee/Sponsor:
   
  Address:
   
  Plan Name:
   
  EIN:
   
  Plan Year(s) Examined:
   
[Salutation]
Pursuant to section A of Part III of the "Procedures for Coordination of Examination and Litigation Activities" which is attached to the agreement between the Internal Revenue Service and Department of Labor for the coordination of examination and litigation activities involving employee benefit plans, area, TE/GE Division.
   
Please review your records to ascertain if there is any Department of Labor involvement in the above-referenced case and respond within 30 calendar days.
   
  Sincerely yours,
   
   
   
  [Signature and title]

Exhibit 8.7.8-3 
Directory of the Department of Labor's Pension and Welfare Benefits Administration (PWBA) Offices

DOLOffices
IRS should make referrals to PBA office at: Plan records located:
   
J.F.K. Bldg., Rm. 575

Boston, MA 02203
(617) 5659600
Connecticut, Maine, Massachusetts, New Hampshire, the 46 northwest New York counties (including Delaware, Schoharie, Albany, Rensselaer and all counties north and west thereof) Rhode Island and Vermont
   
201 Varick St.
New York, N.Y. 10014
(212) 3372228
All of New Jersey except for the eight southern counties and the 16 southeastern New York counties (including all of Long Island, New York City and the lower Hudson River area)
Curtis Center, Suite 870 West
170 S Independence Mall West
Phila., PA 191063317
(215) 8615300
Delaware, the eight southern counties of New Jersey (Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean, Salem) Pennsylvania and West Virginia
   
S 1335 East-West Highway
Suite 200
Silver Springs, MD 20910
(301) 7132000
District of Columbia, Maryland and Virginia
   
61 Forsyth St. SW, Suite 7B54
Atlanta, GA 30303
(404) 5622156
Alabama, the Canal Zone, Georgia, Mississippi, North Carolina, Puerto Rico, South Carolina, Tennessee and the Virgin Islands
   
8040 Peters Rd.
Building H, Suite 104
Plantation, FL 33324
(954) 4244022
Florida
   

1885 Dixie Hwy. Suite 210
Ft. Wright, KY 410112664
(859) 5784680
Kentucky and Ohio
   
211 West Fort St.
Suite 1310
Det., MI 482263211
(313) 2267450
Michigan
   
200 West Adams St. Suite 1600
Chicago, IL 60606
(312) 3530900
Illinois, Indiana and Wisconsin
   
1100 Main St.
Suite 1200
Kansas City, MO 641055148
(816) 4265131
Colorado, Kansas, the 35 western Missouri counties, Montana, Nebraska, North Dakota, South Dakota and Wyoming
   
815 Olive St., Rm. 338
St. Louis, MO 631011559
(314) 5392693
Iowa, Minnesota and the 80 eastern Missouri counties (Putnam, Sullivan, Linn, Chariton, Pettis, Benton, Hickory, Polk, Greene, Christian, Stone and all countries east thereof)
   
Fed. Office Bldg., Room 707
525 Griffin St.,
Dallas, TX 752025025
(214) 7676831
Arkansas, Louisiana, New Mexico, Oklahoma and Texas
   
71 Stevenson St., Suite 915
San Francisco, CA 94105
(415) 9754600
The 48 northern counties of California (Monterey, Kings, Tulare, Inyo and all counties north thereof) and Nevada
   
1111 Third Ave., Rm. 860
Seattle, WA 981013212
(206) 5534246
Alaska, Idaho, Oregon, Utah and Washington
   
1055 East Colorado Blvd. Suite 200
Pasadena, CA 911062341
(626) 2291000
Samoa (American), Arizona, the 10 southern counties of California, Guam, Hawaii and Wake

Exhibit 8.7.8-4 
Due Dates for EP and Related Returns

EP Return Due DatesRelated Returns
IRC 6501(a) provides the general rule that the assessment period expires within three years after the return is due or filed, whichever is later.
Since Schedule P may only be filed as an attachment to an annual return of the employee benefit plan, Form 5500 series return, the due dates are the same as those for the Form 5500 series returns.
The due dates for Forms 5500, 5500C, 5500K, 5500R, and 5330 can be extended by use of Form 5558, Application for Extension of Time to File Certain Employee Plan Returns. However, the extension of the due date will not change the statute requirements of 3 years from the due date of the return or the date of filing whichever is later.
 
Return Due date
5500
5500C
5500K
5500R
5500EZ
By the last day of the 7th month following the close of the plan year.
5330 Multipurpose form with various due dates.
990T On or before the 15th day of the 4th month following the close of the taxable year of the domestic trust.
1041 On or before the 15th day of the 4th month following the close of the taxable year.

Exhibit 8.7.8-5 
Favorable Determination Letter for Plan Adoption

EP CasesFavorable Determination Letter
  Address any reply to:
  Person to Contact:
  Telephone Number:
  Date:
  Plan Name:
  Employee Identification Number:
  File Number:
  Plan Number:
[Salutation]
   
Based on the information supplied, we have made a favorable determination on your application identified above. Please keep this letter in your permanent records.
   
Continued qualification of the plan will depend on its effect in operation under its present form. (See section 1.4011(b)(3) of the Income Tax Regulations.) The status of the plan in operation will be reviewed periodically.
   
The enclosed document describes some events that could occur after you receive this letter that would automatically nullify it without specific notice from us. The document also explains how operation of the plan may affect a favorable determination letter, and contains information about filing requirements.
   
This letter relates only to the status of your plan under the Internal Revenue Code. It is not a determination regarding the effect of other Federal or local statutes.
   
(Insert Caveat(s), if applicable. See Exhibit 8.7.8-8.
   
This favorable determination letter is being issued after consideration of your plan by the Appeals office. The  ________________________________________________ area Office's proposed adverse determination letter dated  ________________________________________________ is rescinded.
   
If you have any questions, please contact the person whose name and telephone number are shown above.
   
  Sincerely yours,
   
   
  [Signature and title]
   
Enclosure:
Publication 794
 
   
cc:To representative
if appropriate
 

Exhibit 8.7.8-6 
Favorable Determination Letter for Plan Termination

EP CasesPlan Termination
  Address any reply to:
  Person to Contact:
  Telephone Number:
  Date:
  Plan Name:
  Employee Identification Number:
  File Number:
  Plan Number:
[Salutation]
   
Based on the information supplied, we have determined that the termination action on your plan, identified above, will not have an adverse effect on the prior qualification of your plan. This letter relates only to the status of your plan under the Internal Revenue Code. It is not a determination regarding the effect of other Federal or local statutes.
   
(Insert Caveat(s), if applicable. See Exhibit 8.7.8-8.
   
Please keep this letter in your permanent records. You may be required to file Form W2P or Forms 1099R for amounts paid or made available to any individual or beneficiary.
   
This favorable determination letter is being issued after consideration of your plan by the Appeals office. The  ________________________________________________ Area Office's proposed adverse determination letter dated  ________________________________________________ is rescinded.
   
In addition, you must continue to file a Form 5500 series return annually until all plan assets are distributed. The last return required is the one filed for the year in which distribution is completed. Be sure to write "final return" across the top of this return.
   
If you have any questions, please contact the person whose name and telephone number are shown above.
   
  Sincerely yours,
   
   
  [Signature and title]
   
Enclosures:
Publication 794
 
   
cc:to representative
if appropriate
 

Exhibit 8.7.8-7 
No Change Examination Letter

EP CasesNo Change Examination
  Address any reply to:
  Person to Contact:
  Telephone Number:
  Date:
  Plan Name:
  Employer Identification Number:
  File Number:
  Plan Number:
[Salutation]
   
This letter is being issued after consideration of your plan by the Appeals office. The  ________________________________________________ area Office's proposed [adverse revocation or nonqualification (select one)] letter dated  ________________________________________________ is rescinded.
   
Continued qualification of the plan will depend on its effect in operation under its present form. (See section 1.4011(b)(3) of the income Tax Regulations.) The status of the plan in operation will be reviewed periodically.
   
This letter relates only to the status of your plan under the Internal Revenue Code. It is not a determination regarding the effect of other Federal or local statutes.
   
(Insert caveats if applicable.)
   
Please keep this letter in your permanent records. If you have any questions, please contact the person whose name and telephone number are shown above.
   
  Sincerely yours,
   
   
  [Signature and title]
   
Enclosure:
Publication 794
 
   
cc:To representative
if appropriate
 

Exhibit 8.7.8-8 
Caveats for Determination Letters

EP CasesDetermination LettersCaveats
I. Caveats For Determination Letters
  (a) Plans submitted on Form 5303 where plan provides for fixed contributions and stated benefits:
    "This determination does not indicate that the Internal Revenue Service is in any way passing on the actuarial soundness of the plan or on the reasonableness of the actuarial computations."
  (b) Plans submitted on Form 5303:
    "This plan applies only to employees who can retire and obtain benefits during the term for which it is drawn; no other employees are considered covered. Therefore, the provisions of Code section 404 will be applied only to covered employees."
  (c) Determination letter is issued on the basis of proposed amendment(s):
    "This determination letter is subject to your adoption of the proposed amendments submitted in your letter [your representative's letter] dated  ________________________________________________. The proposed amendments should be adopted on or before the date prescribed by the regulations under Code section 401(b)."
  (d) Foreign suits trust:
    "The trust, not having been created or organized in the United States, is not a qualified trust under Code section 401(a) and is not exempt under section 501(a). Based on the information you submitted, however, we have determined that the trust is part of a plan which meets the requirements of section 401(a) in all other aspects and that it would qualify for exemption under section 501(a) except for the fact that it is created or organized outside the United States. Therefore, distributions to beneficiaries will be taxable as though made from an exempt trust, as provided in section 402(d). Deductions for contributions made by the employer, who is a domestic corporation or resident of the United States, are allowable as provided in section 404(a)(4)."
  (e) Profit-sharing plans where the allocation formula takes into consideration years of service:
    "This determination letter does not apply beginning with any plan year in which discrimination prohibited by Code section 401(a)(4) arises because of the years of service weighing factor applied in allocating employer contributions. (See Rev. Rul. 9387, 19932 C.B. 12.)"
  (f) Amendment applications, and for restated plans (other than those requiring a complete analysis):
    "This determination expresses an opinion on whether the amendment(s), in and of itself (themselves), affect(s) the continued qualified status of the plan under Code section 401 and the exempt status of the related trust under section 501(a). This determination should not be construed as an opinion on the qualification of the plan as a whole and the exempt status of the related trust as a whole."
  (g) Integrated plans where other than total compensation is considered in computing the benefit or contribution:
    "Your plan does not consider total compensation for purposes of figuring benefits. This provision may, in operation, discriminate in favor of employees who are stockholders, officers, or highly compensated. If this discrimination occurs, your plan will not remain qualified. (See Treas. Reg. 1.401(a)(4)-(1)(a))"
  (h) The determination is effective beginning in a specific year:
    "This determination applies to plan years beginning after  ________________________________________________."
  (i) IRC section 401 type plans of educational institutions, hospitals and home health service agencies
    "This is not a determination as to the effect this plan may have on the exclusion allowance under IRC section 403(b). (See Rev. Rul. 7724, 19771 C.B. 122.)"
  (j) Extension of the remedial amendment period under IRC section 401(b):
    "Permission to amend the plan after expiration of the remedial amendment period has been granted. This determination letter is conditioned upon your adoption of the proposed amendments submitted in your letter (representative's letter) dated  ________________________________________________. The proposed amendments should be adopted on or before 92 days from the date of this letter."
  (k) ESOP plans that meet the requirements of IRC sections 401(a) and 409 (including IRC section 4975(e)(7)):
    "This plan meets the requirements of IRC sections 401(a) and 409."
  (l) Several plans, considered as a single plan, provide contributions and benefits that do not discriminate in favor of employees who are officers, shareholders, or highly compensated:
    "Based on the facts at the time of this determination, the contributions and benefits in two or more plans were compared and determined to satisfy the requirements of IRC section 401(a)(4). If those facts change materially and discrimination results, this letter will no longer apply."
  (m) Plan requires participation at end of year:
    ``Your plan requires a participant to be employed at the end of the plan year in order to receive an allocation.
    This provision may, in operation, discriminate in favor of employees who are stockholders, officers, or highly compensated. If this discrimination occurs, your plan will not remain qualified. (See Rev. Rul. 76250, 19762, C.B. 124)
  (n) Insert caveat language designed by the Appeals Officer for that particular case.
II. Caveats For Determination Letters On Plan Terminations
  (a) Change in allocation:
    ``This determination is not based on the allocation of assets submitted with your application but on the allocation of assets submitted by your representative with your letter of  ________________________________________________.
  (b) DB Plan covered by PBGC:
    ``Before actual termination of the plan, the Pension Benefit Guaranty Corporation (PBGC) must be notified according to the provisions of IRC section 4041(a) of the Employee Retirement Income Security Act of 1974 (ERISA).
    IRC 4041 requires PBGC to ensure that assets are allocated according to certain priority categories established in IRC section 4044. If the allocation of assets upon which the determination is rendered is found by PBGC not to be in agreement with those priority categories, this determination letter will no longer be valid.
    If, at such time as the allocation of assets is brought into agreement with the priority categories, you wish another determination from the Service, it will be necessary to submit a new application to this office. At that time, please attach to your application a copy of those documents which schedule the revised allocation of assets according to IRC section 4044.
  (c) Insert caveat language designed by the Appeals Officer for that particular case.
III. Caveats Common To Parts I and II Above
  (a) The power of attorney is to get a copy of the letter:
    "We have sent a copy of this letter to your representative as indicated in your power of attorney."
  (b) Terminated plans with frozen asset trusts:
    "This determination is not an indication that the Internal Revenue Service is in any way passing on the continued operation of the trust."

Exhibit 8.7.8-9 
Final Adverse Letter

EO CasesFinal Adverse Letter
  Address any reply to:
Certified or Registered Mail Person to Contact:
  Telephone Number:
  Date:
  Plan Name:
  Employer Identification Number:
  File Number:
  Plan Number:
[Salutation]
   
This is a final [adverse determination, revocation or nonqualification (select one)] letter indicating that this plan does not meet the requirements of Internal Revenue Code section 401 for the plan years ending  ________________________________________________ and subsequent (if appropriate) and your trust is no longer exempt under Code section 501(a). (In revocation cases add "Our favorable determination letter dated  ________________________________________________ is revoked and the trust is not exempt under Code section 501(a)." )
   
This determination was made because (state reason).
   
You may petition the United States Tax Court for a declaratory judgement as to the qualification of your plan.
   
If you do so, the petition must be filed before 92 days after the date this letter was mailed to you. The petition should be addressed to:
United States Tax Court
400 Second Street, NW
Washington, DC 20217
   
If you have any questions, please contact the person whose name and telephone number are shown above.
   
  Sincerely yours,
   
   
  [Signature and title]
   
   
cc: To representative
if appropriate
 

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