21.7.7 Exempt Organizations and Tax Exempt Bonds

Manual Transmittal

November 12, 2020

Purpose

(1) This transmits revised IRM 21.7.7, Business Tax Returns and Non-Master File Accounts, Exempt Organizations and Tax Exempt Bonds.

Material Changes

(1) All subsection dates changed to reflect January 01, 2021.

(2) Various grammatical and editorial changes made throughout the IRM.

(3) 21.7.7.5.7.1 - Added Form 1023-EZ to the list of forms available for public inspection.

(4) 21.7.7.5.9 - Removed information related to well established tax law changes.

(5) 21.7.7.5.9.1 - Removed information related to well established tax law changes and updated electronic filing requirements for Form 8872.

(6) 21.7.7.5.9.1.1.2 - Updated electronic filing requirements for Form 8872.

(7) 21.7.7.5.9.1.1.4 - Removed information related to well established tax law changes.

(8) 21.7.7.5.12.1 - Removed information related to well established tax law changes.

(9) 21.7.7.5.13 - Added a reminder about Notice 2020-23 extending the due date to file and pay to July 15, 2020 due to COVID-19.

(10) 21.7.7.5.14 - Updated to reflect current information.

(11) 21.7.7.5.14.1 - Updated to reflect current waiver process.

(12) 21.7.7.6.1.1 - Removed the subsection because it was outdated.

(13) 21.7.7.6.1.1.1 - Removed the subsection because it was outdated.

(14) 21.7.7.6.1.1.2 - Removed the subsection because it was outdated.

(15) 21.7.7.6.1.5 - Removed outdated information for years prior to 2010.

(16) 21.7.7.6.2.1 - Removed information related to well established tax law changes.

(17) 21.7.7.6.2.2 - Revised the definition of Exempt Operation Foundation to refer to the IRC.

(18) 21.7.7.6.2.3 - Updated tax rate from 2% to 1.39% and clarified IRC 4940(e) was repealed with Pub.L. 116-94 but is still relevant for tax return periods on or before 12/20/2019.

(19) 21.7.7.6.2.5 - Removed because these notices were used for returns filed prior to 2004.

(20) 21.7.7.6.3.3 - Removed outdated tax rate tables, 201012 and prior.

(21) 21.7.7.3.3.1 - Updated line numbers to 2020 form revision.

(22) 21.7.7.6.3.5 - Updated line numbers to 2020 form revision.

(23) 21.7.7.6.3.7 - Added a note to confirm filers can still take the nonrefundable portion of the Form 8827 credit for tax years 2020 and beyond.

(24) 21.7.7.6.3.9 - Updated line numbers to 2020 form revision.

(25) 21.7.7.6.5.1 - Updated tax rate from 35% to 21%.

(26) 21.7.7.6.5.3 - Removed the reference to a $20 a day penalty because it no longer applies.

(27) 21.7.7.6.6 - Revised (1) by removing outdated references.

(28) 21.7.7.6.7 - Revised (1) by removing outdated references and include electronic filing requirement.

(29) 21.7.7.6.7.2 - Updated tax rate.

(30) 21.7.7.6.8 - Removed information no longer needed and clarified Ogden campus response to receipt of form.

(31) 21.7.7.6.9 - Removed references to PPA and the amendments that were effective 01/01/2007. Clarification of this is no longer needed.

(32) 21.7.7.6.9.1 - Removed this section because it is no longer needed.

(33) 21.7.7.6.10 - Updated to reflect current information.

(34) 21.7.7.6.11 - Updated to 2020 form revision.

(35) 21.7.7.6.11.3 - Added a note indicating we will no longer have a Form 4720-A process for tax years beginning after 12/31/2019.

(36) 21.7.7.6.22.1 - Added a reminder about Notice 2020-23 extending the due date to file and pay to July 15, 2020 due to COVID-19. Corrected the due dates for Form 1120-POL.

(37) 21.7.7.6.22.2 - Added a reminder about Notice 2020-23 extending the due date to file and pay to July 15, 2020 due to COVID-19.

(38) 21.7.7.6.23.1 - Updated penalty amounts.

(39) 21.7.7.6.23.2.5 - Added a reminder about Notice 2020-23 extending the due date to file and pay to July 15, 2020 due to COVID-19.

(40) 21.7.7.7.4.5.3 - Clarified TC 767 is input with a negative amount to reduce the credit payment. Added a paragraph to explain the actions required to adjust the credit payment.

(41) 21.7.7.7.4.5.4 - Added a link to IRM 21.7.12-1, Contact Information, for NMF.

(42) Revised tables throughout to unmerge cells, create proper header rows, and improve readability. In particular, see IRM 21.7.7.6.19.3, IRM 21.7.7.6.24.1, IRM 21.7.7.6.25, IRM 21.7.7.7.1, IRM 21.7.7.7.4.5.4.3 and IRM 21.7.7.7.4.5.4.4.

(43) Converted both exhibits to tables.

Effect on Other Documents

This supersedes IRM 21.7.7 dated December 02, 2019. This IRM also incorporates the following IRM Procedural Updates (IPU), 20U0060, 20U0115, 20U0122, 20U0349, 20U0381, 20U0401, 20U0457, 20U0631, 20U0641, 20U0682, 20U0845, 20U0853, 20U0856, 20U0882, 20U0896, 20U0903, 20U0915, 20U0949, 20U0958 and 20U0971.

Audience

Wage and Investment (W&I) and Small Business/Self-Employed (SB/SE) located in the Ogden Accounts Management Campus, Customer Account Service, EO Accounts units.

Effective Date

(01-01-2021)

Deborah D. Holloman
Director, Shared Services
Tax Exempt and Government Entities

Scope and Purpose

  1. Purpose: This section provides guidelines for resolving Exempt Organization (EO) and Tax Exempt Bond (TEB) inquiries received in the Ogden Accounts Management Campus (OAMC), EO Accounts units.

  2. Audience: Exempt Organization Account Management Tax Examiners Employees, Ogden Campus.

  3. Policy Owner: Business Systems Planning (BSP) Director.

  4. Project Owner: Process and Program Management (PPM), Accounts Management, Wage and Investment.

  5. Stakeholders: Exempt Organization Headquarters who rely on correct entity information for processing of exempt organization returns.

Background

  1. Accounts Management (AM) employees respond to taxpayer correspondence and phone calls as well as process claims, certain applications and other internal adjustment requests.

  2. IRM 21.7.7 provides guidance to employees assigned to AM, BMF, EO Accounts and TE/GE Customer Service Representatives (CSR) located in the OAMC. The following subjects are covered in this IRM:

    • EO correspondence inquiries

    • EO tax adjustments

    • EO penalty abatements

    • Routing of EO related correspondence

    • Tax Exempt Bonds (TEB) correspondence inquiries

    • EO, EP (Form 990-T) and TEB claims

    • Allowable credits

    • Extension reconsiderations

    • EO and TEB amended return processing

Authority

  1. Refer to IRM 1.2.1.13, Servicewide Policies and Authorities, Policy Statements for Customer Account Service Activities, for information.

Responsibilities

  1. The Director, Tax Exempt/Government Entities, Business Systems Planning (BSP) is the executive responsible for the EO and TEB programs.

  2. Additional information is found in IRM 1.1.13.7.3, Accounts Management and IRM 21.1.1, Accounts Management and Compliance Overview.

  3. All EO and TEB account related issues and correspondence are worked in the EO Accounts units or by TE/GE Customer Service Representatives (CSR) located in the OAMC. Other than stated in the Exception below, CSR and Tax Examiners (TE) located in other call sites or campuses are not authorized to resolve EO or TEB account related issues. IRM 21.7.7.6.23 for guidelines relating to EO penalty abatements.

    Exception:

    Penalty abatement requests assigned to the Exempt Organization Compliance Area (EOCA).

  4. Areas that are not authorized to work EO penalties or account related issues must follow case referral procedures as outlined in IRM 21.3.5, Taxpayers Inquiry Referrals Form 4442.

Program Management and Review

  1. IRM 1.4.16, Accounts Management Guide for Managers, provides guidance for program management and review of programs assigned to Accounts Management.

Program Controls

  1. Goals, measures, and operating guidelines are listed in the annual Program Letter.

  2. Quality data and guidelines for measurement is referenced in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS) and Electronic Products and Services Support.

Terms/Definitions/Acronyms

  1. The ReferenceNet Legal and Tax Research Services page provides an Acronym Database to research acronyms found within this IRM.

Related Resources

  1. In addition to IRM 21.7.7, EO tax examiners and CSRs will refer to resources available to them, including but not limited to:

    • IRM 21, (e.g., IRM 21.1, Accounts Management and Compliance; IRM 21.3, Taxpayer Contact; IRM 21.5, Account Resolution; IRM 21.7.1, Business Tax Returns and Non-Master File Accounts, BMF/NMF Miscellaneous Information, IRM 21.7.9, BMF Duplicate Filed Returns; etc.) as needed for case resolution

    • IRM 2.3, IDRS Terminal Responses

    • IRM 2.4, IDRS Terminal Input

    • IRM 13.1, Taxpayer Advocate Case Procedures

    • IRM 20.2, Interest

    • IRM 20.1, Penalty Handbook

    • IRM 25.6, Statute of Limitations

    • IRM 25.23, (e.g., IRM 25.23.11, Business Master File (BMF) Identity Theft Procedures for Accounts Management; IRM 25.23.11.7.6, BMF Identity Theft Referrals; IRM 25.23.9.4, BMF Identity Theft Research (Inquiry received via paper or phones); IRM 25.23.9-7, BMF Identity Theft Research Requirement)

    • Document 6209, IRS Processing Codes and Information

    • SERP, Servicewide Electronic Research Program, to view SERP Alerts, IPUs, Correspondex Letters and IRM Supplements among others

    • Publishing + Distribution website to research forms, instructions and publications, other Internal Revenue Manuals, revenue procedures and IRS announcements

    • irs.gov

    • Charities and Nonprofits page found on irs.gov

    • Tax Exempt Organization Search (formerly Select Check) also known as TEOS. TEOS helps users find information about a tax-exempt organization’s federal tax status and filings. TEOS is available on the Charities and Nonprofits page found on irs.gov.

Taxpayer Advocate Service (TAS)

  1. Accounts Management (AM) assistors must be familiar with Taxpayer Advocate Service (TAS) criteria and the Taxpayer Bill of Rights (TBOR). TBOR was adopted by the IRS in June 2014 and provides taxpayers with ten rights. For more information about TBOR, refer to Pub 1, Your Rights as a Taxpayer. Also see Pub 5170, Taxpayer Bill of Rights, and TBOR link, Taxpayer Bill of Rights.

  2. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and the taxpayer’s issue can’t be resolved the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases that can be completely resolved in 24 hours, as well as cases in which steps have been taken within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS in accordance with local procedures.

    Note:

    Taxpayers have the right to quality service. Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.

Congressional Correspondence

  1. Generally, congressional inquiries are worked by TAS. When a congressional inquiry is received via telephone or correspondence, follow the procedures in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, to determine whether the congressional inquiry should be referred to TAS.

Exempt Organization Identity Theft

  1. Exempt Organization Identity Theft (EO IDT) claims are worked following BMF IDT procedures found in IRM 25.23.11, Business Master File (BMF) Identity Theft Procedures for Accounts Management.

  2. BMF IDT is defined as creating, using, or attempting to use a business’s identifying information to obtain a tax benefit without authority. BMF IDT can involve the use of a business’s information to file fraudulent returns to support Individual Master File (IMF) IDT or to obtain refunds from BMF accounts. An individual’s stolen personal information can also be used to obtain an Employer Identification Number (EIN) which is used to file false BMF tax returns and income documents. BMF accounts include the following entity types; sole proprietorship, corporation, partnership, estate, trust, exempt organization, or government entity.

  3. BMF IDT inquiries are complex and require extensive research. BMF taxpayers are often not aware their identities have been compromised until a notice is received from the IRS. The taxpayer may contact the IRS after receiving an unexpected notice regarding an inactive EIN, a recently-established EIN they have no knowledge about, or an IRS notice showing the business name was changed.

  4. If you suspect BMF IDT on a case, refer to IRM 25.23.11.5, Business Master File (BMF) ID Theft Research and IRM 25.23.11.7, Business Master File (BMF) Identity Theft Inquiries.

Exempt Organizations Overview

  1. Certain non-profit organizations or trusts that meet specific standards under IRC 501 don't have to pay federal income tax and may be exempt from other types of tax as well. These organizations are classified and referred to as Exempt Organizations.

  2. The range of exempt organizations is extensive and includes charitable, religious, scientific and educational groups.

  3. Only organizations claiming exemption under IRC 501(c)(3),IRC 501(c)(9),IRC 501(c)(17) or IRC 501(c)(29) must apply in writing to the TE/GE Determinations. Certain organizations such as churches, their integrated auxiliaries, conventions of churches, and small organizations are excepted from this requirement under IRC 508(c).

    Note:

    The written application requirement is for initial applications for exemptions. If an organization already tax-exempt is revoked as a result of an examination or auto-revoked for failing to file the annual Form 990 (series) or the Form 990-N e-Postcard for three consecutive tax years, the organization must (re-) apply with the appropriate user fee to determine whether it’s qualified for tax-exempt status.

  4. Exempt organizations are groups, societies, unions, libraries, museums, corporations, etc., which are granted an exemption from some type of federal tax by the IRS. An example of an exempt organization would be one who is operating and organized for charitable, religious, scientific, and educational purposes:

  5. The various forms that Exempt Organizations and Government Entities file are:

    • Form 990, Return of Organization Exempt From Income Tax

    • Form 990-EZ, Short Form Return of Organization Exempt From Income Tax

    • Form 990-T, Exempt Organization Business Income Tax Return

    • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation

    • Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts & Certain Related Person

    • Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ

    • Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts

    • Form 1041, U.S. Income Tax Return for Estates and Trusts (For Nonexempt Charitable Trusts Under Section 4947(a)(1) with Taxable Income)

    • Form 1065, U.S. Return of Partnership Income

    • Form 1098-C, Contributions of Motor Vehicles, Boats and Airplanes

    • Form 1098-E, Student Loan Interest Statement

    • Form 1098-T, Tuition Statement

    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

    • Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC

    • Form 5227, Split-Interest Trust Information Return

    • Form 5578, Annual Certificate of Racial Nondiscrimination for a Private School Exempt from Federal Income Tax

    • Form 5768, Election/Revocation of Election by an Eligible Sec. 501(c)(3) Organization to Make Expenditures to Influence Legislation

    • Form 6069, Return of Excise Tax on Excessive Contributions of Black Lung Benefit Trust

    • Form 7004, Application for Automatic 6 month Extension of Time to File Certain Business Income Tax, Information and Other Returns (for extending Form 1120-POL and Form 1065 in the case of 501(d) organizations)

    • Form 8282, Donee Information Return

    • Form 8453-X, Political Organization Declaration for Electronic Filing of Notice 527 Status

    • Form 8453-EO, Exempt Organization Declaration and Signature for Electronic Filing

    • Form 8871, Political Organization Notice of Section 527 Status

    • Form 8872, Political Organization Report of Contributions and Expenditures

    • Form 8868, Application for Extension of Time To File an Exempt Organization Return

    • Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction

    • Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts

    • Form 8879-EO, IRS e-file Signature Authorization for an Exempt Organization

    • Form 8899, Notice of Income from Donated Intellectual Property

    • Form 8921, Applicable Insurance Contract Information Return (obsolete)

    • Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues

    • Form 8038-B, Information Return for Qualified Build America Bonds and Qualified Recovery Zone Economic Development Bonds

    • Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds

    • Form 8038-G, Information Return for Government Purpose Tax-Exempt Bond Issues

    • Form 8038-GC, Consolidated Information Return for Small Tax-Exempt Government Bond Issues

    • Form 8038-TC, Information Return for Tax Credit Bonds

    • Form 8038-T, Arbitrage Rebate and Penalty in Lieu of Arbitrage Rebate

    • Form 8038-R, Request for Recovery of Overpayment Under Arbitrage Rebate Provisions

    • Form 8703, Annual Certification of a Residential Rental Project

    • Form 8328, Carry forward Election of Unused Private Activity Bond Volume Cap

    • Form 8940, Request for Miscellaneous Determination

Exempt Application Process

  1. An EO must be organized and operated for one or more of the purposes specifically designated in the IRC. The type of exemption granted is determined by the information submitted on the application. IRM 21.7.7.5.1 table for the IRC section, subsection (SS), and description of the organization.

  2. Organizations file an application for exempt status generally on one of the four forms below:

    • Form 1023, Application for Recognition of Exemption Under IRC Section 501(c)(3)

    • Form 1023-EZ, Streamlined Application for Recognition of Exemption Under IRC 501(c)(3) of the Internal Revenue Code

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

    • Form 1028, Application for Recognition of Exemption Under IRC Section 521

    If no form is prescribed, a letter application is filed. Revenue Procedure 2016-5 provides guidelines as to what must be included in a letter application. See also Form 8940 and instructions.

  3. Organizations must mail requests for exempt status with the appropriate user fee at the addresses below. See IRM 3.45.1, Processing Employee Plan and Exempt Organization Determination Applications and User Fees, for additional information.

    Regular Mail:
    Internal Revenue Service
    P.O. Box 12192
    Covington, KY 41012–0192

    Express Mail:
    Internal Revenue Service
    7940 Kentucky Dr
    Attn: Mail Stop 31A Team 105
    Florence, KY 41042

  4. TE/GE Determinations reviews the application and does one of these actions:

    • Issue a letter recognizing exemption

    • Deny the request

    • Close the application as a fail to establish

  5. Refer telephone inquiries from taxpayers for EO/EP determinations and foundation status issues to the TE/GE Customer Account Service (CAS) Telephone Operations toll free number 877-829-5500.

  6. Once an organization is granted exemption, it must continue to conform to IRS regulations which govern the exemption. The organization must either:

    1. Electronically file the e-postcard if its annual gross receipts are normally $50,000 or less.

    2. File an information return if its annual gross receipts are normally over $50,000.

Internal Revenue Code (IRC) Subsections

  1. The table below lists the IRC, SS, a description of the organization, and the classification code. Refer to Document 6209 for the filing requirement codes.

    Internal Revenue Code Subsection Code Type of Exempt Organization Classification Code
    IRC 501(c)(1) 01 Governmental Instrumentality 1
    IRC 501(c)(2) 02 Title holding corporation 1
    IRC 501(c)(3) 03 Charitable organization 1
    IRC 501(c)(3) 03 Educational organization 2
    IRC 501(c)(3) 03 Literary organization 3
    IRC 501(c)(3) 03 Organization to prevent cruelty to animals 4
    IRC 501(c)(3) 03 Organization to prevent cruelty to children 5
    IRC 501(c)(3) 03 Organization for public safety testing 6
    IRC 501(c)(3) 03 Religious organization 7
    IRC 501(c)(3) 03 Scientific organization 8
    IRC 501(c)(4) 04 Civic league 1
    IRC 501(c)(4) 04 Local association of employees 2
    IRC 501(c)(4) 04 Social welfare organization 3
    IRC 501(c)(5) 05 Agricultural organization 1
    IRC 501(c)(5) 05 Horticultural organization 2
    IRC 501(c)(5) 05 Labor organization 3
    IRC 501(c)(6) 06 Board of trade 1
    IRC 501(c)(6) 06 Business league 2
    IRC 501(c)(6) 06 Chambers of Commerce 3
    IRC 501(c)(6) 06 Real estate board 4
    IRC 501(c)(7) 07 Pleasure, social and recreation club 1
    IRC 501(c)(8) 08 Fraternal beneficiary society or association 1
    IRC 501(c)(9) 09 Voluntary employees' beneficiary association Non Governmental 1
    IRC 501(c)(9) 09 Voluntary employees' beneficiary association Governmental 2
    IRC 501(c)(10) 10 Domestic fraternal society and association 1
    IRC 501(c)(11) 11 Teachers retirement fund association 1
    IRC 501(c)(12) 12 Benevolent life insurance association 1
    IRC 501(c)(12) 12 Mutual ditch or irrigation company 2
    IRC 501(c)(12) 12 Mutual or cooperative telephone company 3
    IRC 501(c)(12) 12 Organization like those on three preceding lines 4
    IRC 501(c)(13) 13 Burial association 1
    IRC 501(c)(13) 13 Cemetery company 2
    IRC 501(c)(14) 14 State chartered credit union 1
    IRC 501(c)(14) 14 Other mutual corporation or association 2
    IRC 501(c)(15) 15 Mutual insurance company or association other than life/marine 1
    IRC 501(c)(16) 16 Corporation financing operation 1
    IRC 501(c)(17) 17 Supplemental Unemployment Compensation Trust 1
    IRC 501(c)(18) 18 Employee funded pension trust created before June 25, 1959. 1
    IRC 501(c)(19) 19 Post or organization of war veterans 1
    IRC 501(c)(20) 20 Legal service 1
    IRC 501(c)(21) 21 Black lung benefit trust 1
    IRC 501(c)(22) 22 Multi-employer pension plan 1
    IRC 501(c)(23) 23 Veterans association founded before 1880. 1
    IRC 501(c)(24) 24 Trust described in IRC 4049 of ERISA 1
    IRC 501(c)(25) 25 Title holding company for pensions, etc. 1
    IRC 501(c)(26) 26 State sponsored high risk health insurance organization 1
    IRC 501(c)(27) 27 State sponsored workers' compensation insurance 1
    IRC 501(c)(28) 28 National Railroad Retirement Investment Trust 1
    IRC 501(c)(29) 29 State Health Insurance (Health care) 1
    IRC 501(d) 40 Apostolic and religious organization 1
    IRC 501(e) 50 Cooperative hospital service organization 1
    IRC 501(f) 60 Cooperative service organization of operating education organization 1
    IRC 501(k) 70 Child care organization 1
    IRC 501(n) 71 Charitable risk pool 1
    IRC 521 80 Exempt farmer cooperative 1
    IRC 529 81 Qualified State Tuition Program 1
    IRC 527 82 Political Organizations 1
    IRC 4947(a)(2) 90 Nonexempt charitable trust 4947(a)(2) (split interest) 1
    IRC 4947(a)(1) 91 Nonexempt charitable trust (public charity) 1
    IRC 4947(a)(1) 92 Nonexempt charitable trust (private foundation) 1
    IRC 1381(a)(2) 93 Taxable farmers' cooperative 1

EO Entity Section

  1. When an EO MFT (34, 36, 37, 44, 50, or 67) transaction attempts to create a tax module on BMF, the entity module must contain an EO section. The EO section provides information about the exempt organization. The codes in the subsection field (SUB) provide specific information about the organization when used in connection with the subsection chart provided above.

  2. The EO section is created by TE/GE Determinations or the Ogden EO Entity unit.

  3. If an EO section isn't present on ENMOD, forward the case to EO Entity Control.

  4. Both BMF and EO codes are present on ENMOD (FR codes, employment codes, subsection codes, status codes, etc.)

  5. The organization files returns based on the type of exemption determined by the IRC section and is identified by subsection (SUB) on ENMOD.

  6. The following definitions apply to various codes relating to an exempt organization.

    EO Section Definitions
    Term Definition
    EO STAT Exempt Organization Status Code (year & month) – Indicates the status of the organization. The code identifies whether or not the organization was granted an exemption or if it was applied for, revoked or terminated. The status code is normally established by TE/GE Determinations during the determination process.
    RUL Ruling Year and Month – The date TE/GE Determinations issued a determination/ruling letter to the organization. This date is normally not changed except by TE/GE Determinations.
    CLASS Classification Code – This code identifies the type of organization. One to four different codes may be present. The classification code can be changed by TE/GE Determinations and EO Examinations.
    AFF Affiliation Code – This code indicates if the organization received an individual ruling or is part of a group ruling. It normally isn't changed unless the entity is changing from a group to an individual ruling, or from an individual to a group ruling. Values are 1, 2, 3, 6, 7, 8, or 9.
    INC Income Code – Yearly receipts for EO/BMF return.
    FOUN Foundation Code – All organizations that are exempt under IRC 501(c)(3) must have a Foundation Code. This code identifies the organization's classification as a non-private foundation, or private foundation and if a private foundation, the type of foundation. Changes to the Foundation Code are normally approved by TE/GE Determinations and can only be updated by the service center from a determination.
    GEN NO Group Exemption Number – Issued to a central organization and its subordinate chapters under a blanket group ruling.
    ORG Organization Code – This code indicates whether the organization is a trust, a corporation, or an unincorporated association. The code is assigned by EO Determinations when the exemption is granted and is normally changed by them.
    ASSET Asset Code – Amount of assets shown on most recent return.
    SUB Subsection Code – Identifies the IRC section under which the organization is exempt. It also determines the type of return the organization will file. The Subsection code is assigned when the organization's request for exemption is approved or when an initial Form 990 is filed by a non 501(c)(3), 501(c)(9), 501(c)(17) or 501(c)(29). Changes to the subsection must be approved by EO Determinations and can only be updated by the service center from a determination letter. Occasionally the TE/GE Correspondence Unit will need to update/correct the subsection code based on research.
    FFN File Folder Number – Identifies the Administrative Case File folder number located in EO Determinations. The file folder number is assigned by the TE/GE Determinations when an application for exemption is received and will normally not be changed.
    FR Filing Requirements – This identifies the type of return an organization must file.
    PRIOR
    EO STAT
    Prior EO Status– Organization's status code immediately preceding the current status.
    ARED Advance Ruling Expiration Date– At this time a final ruling of an organization's public support test is computed after the TP completes Schedule A, Support Schedule. 999999 is a deletion of an advance ruling date.

Status Codes
  1. When an organization is granted an exemption, EO Rulings and Agreements will input the information on Master File to create the EO account or add the exemption data to an already existing account. When status codes 01 or 02 are present on the EO account, they indicate that an exemption was granted to the organization. Most IRC 501(c)(3) and all IRC 501(c)(9)IRC 501(c)(17) and 501(c)(29) organizations are required to notify the Service that they are seeking tax exempt status; therefore, they must file a Form 1023, 1023 - EZ , Form 1024 or 1024 - A application.

  2. IRC 501(c) organizations other than IRC 501(c)(3),IRC 501(c)(9),IRC 501(c)(17) or 501(c)(29) organizations are not required to file an application for exemption, though they may do so. They may be considered exempt even though they don't apply for a formal exemption as long as they satisfy the requirements of the particular paragraph of IRC 501(c) they claim exemption under. Also, if they don't establish exempt status by application to Cincinnati, they are at risk of retroactive revocation and taxation if they are found not to be engaged in activities described by the subsection under which they filed.

  3. The EO status (EO-STAT) on ENMOD (see Document 6209 or Document 6379 for a complete list of EO Status Codes) identifies the account as:

    • Active

    • Inactive (revoked, out of business)

    • Has never received an exemption

  4. Refer to the table below for a list of EO statuses and their definitions:

    Note:

    Status code 32, Non-responder to CP 140/141 (applicable to tax periods 200612 & prior) was obsolete January 1, 2008.

    Status Codes and Definitions
    Code Definition Code Definition
    00 or Blank EO Section established without a status 01 Unconditional Exemption
    02 Conditional Exemption 06 State university filing Form 990-T
    07 Church Filing a Form 990-T 10 Pre-Examination of a church
    11 School Certification 12 A Formal Exemption Not Granted - Filing an EO Return Form 990 Under IRC 4947(a)(1);Form 990-PF
    Under IRC 4947(a)(1);Form 5227 Non-Exempt Charitable Trust;
    18 Temporary Revocation of Pvt. Fdn. (Trust) (Required to File Form 990-PF & Form 1041) 19 Revocation of Pvt. Fdn. (Corporation) Required to File Form 990-PF & Form 1120
    20 Termination - Inactive (Out of Business, etc.) 21 Unable to Locate
    22 Revocation 23 Organization terminated under IRC 507(a)
    24 IRC 507(b)(1)(A) termination 25 IRC 507(b)(1)(B)Termination
    26 Termination merger 27 Group ruling dissolved. Parent in Status 97.
    28 No longer a member of a group ruling
    29 A group ruling was dissolved 30 Churches voluntarily filing Form 990 though not required to file returns or to apply for exemption
    31 Small organizations, other than churches and PFs, with annual gross receipts less than $5,000 and which voluntarily file Form 990 series though not required to file returns or apply for exemptions 33 Foreign PFs described in IRC 4948(b) that are not required to apply for exemption but are required to file Form 990-PF
    34 IRC 527 Political Organizations 35 Foreign entities exempt by treaty with the United States
    36 Non IRC 501(c)(3),IRC 501(c)(9),IRC 501(c)(17) or 501(c)(29) filers — No official exemption 40 Application Pending - No exemption
    41 No reply to solicitation - No exemption 42 Extension of time filed - No exemption
    - Payment posted prior to first return
    70 Denied - No exemption 71 Incomplete Form 1023 orForm 1024 - No exemption
    72 Refusal to Rule - No exemption 97 Revocation due to failure to file Form 990-N, 990, 990-EZ, or 990-PF for three consecutive years.
    98 Terrorist Organization - No exemption 99 Dump code - No exemption (prior EO status codes 22, 41 or 70-72)

  5. If necessary, the EO Entity unit at the Ogden Campus should be contacted to update the status prior to any adjustment action taken on the account.

  6. A review of ENMOD, INOLES, or BMFOLI must be made prior to inputting a return or extension to an EO account to ensure the account isn't in one of the following statuses:

    • Status 18

    • Status 19

    • Status 20

    • Status 21

    • Status 22

    • Status 26

    • Status 28

    • Status 29

    • Status 41

    • Status 42

    • Status 70

    • Status 71

    • Status 72

    • Status 97

    • Status 98

    • Status 99

    Note:

    EO filing requirements must be established prior to processing an EO return or inputting a TC 460 on an EO MFT. Refer to IRM 3.13.12 to establish filing requirements or send to EO Entity M/S 6273.

Status Code 40 Procedures
  1. Exempt Organizations are placed in status 40 when the organization has filed a return , but hasn’t been granted an exemption at the time the return was filed. Each month (except January) "Status 40" information is downloaded from the Master File to the EO Entity system in Ogden. A CP 120 is sent to each organization whose account is in Status 40.

  2. When cases in Status 40 are received in the EO Accounts units, the following procedures should be followed:

    1. Use CC BMFOLI to review the organization's past filing record (e.g., have Form 990, Form 990-PF or Form 1120 been filed in the past).

    2. If the account shows no change or update on ENMOD or BMFOLO, give the case to the lead, with instructions to check the EDS system.

    3. If EDS shows action was taken on the account, address all EO Accounts related issues. Don’t correspond with the organization unless it specifically requests a reply. If a taxpayer requests information regarding its determination status, refer them to the TE/GE CAS Telephone Operations toll free number 877-829-5500.

    4. If EO Entity has an open control on ENMOD or taxpayer is responding to an EO Entity letter, route case to Entity.

    5. Address all EO related issues.

    6. Close control base.

    Note:

    All EO Account related issues must be addressed before forwarding case to Entity (i.e., remove penalties, release A-freeze, credit transfers, etc.).

Status Code 41, 70 – 72 Procedures
  1. When processing Status 40 cases, EO Entity contacts the organization and solicits an application for exemption. An organization has up to 9 months to reply. At the end of the 9 months, if the organization doesn’t respond, the account is updated to status 41 if the Sub Section (SS) is 03/09/17/29 or status 36 if the SS is other than 03/09/17/29. When inputting status 41, a filing requirement for either a Form 1120, Form 1041 or Form 1065 is established and all EO filing requirement codes (FRC) are deleted. When Status 36 is entered, Form 990 filing requirements are established. If the filing requirement is missing, but can be determined, the appropriate FR should be added to the account by Entity. Status Code 70-72 is updated by Cincinnati Rulings and Agreements only.

  2. The following is a list of status codes and their definitions that are used in EO Entity.

    • Status 36 - Non IRC 501(c)(3), IRC 501(c)(9), IRC 501(c)(17), or 501(c)(29) Filers is used by EO Entity when it is determined that the organization does not have to request a formal exemption.

    • Status 41 - Failed to Reply to Solicitation for Application is used by Entity. When processing the "Status 40" listing, a CP 120 is sent to the organization and solicits an application for exemption. If the organization does not respond, the account will be systemically updated to Status Code 41. When inputting this status, a filing requirement for Form 1041,Form 1065, or Form 1120 must be input. At the same time, all the EO FRCs are deleted.

    • Status 70 - Exemption Denied is input by Cincinnati when, on the merits of the application, an exemption cannot be granted. This status will generate a Form 1120 filing requirement of 01.

    • Status 71 - Failed to Establish/Incomplete Form 1023 or Form 1024 is input by Cincinnati when the application is incomplete and no response to request for information was received. This status will generate a Form 1120 filing requirement of 01.

    • Status 72 - Refusal to Rule is input by Cincinnati when the applicant fails to furnish a detailed description of its planned activities. This status will generate a Form 1120 filing requirement of 01.

  3. When a Status 41, 70-72 case is received in EO Accounts, the following action must be taken by the tax examiner in order to resolve the case:

    1. Check ENMOD for current filing requirements and EO status.

    2. Give the case to the lead requesting EDS/TEDS research in order to check for possible determination follow-up.

    3. If no change, take the necessary action required to resolve all account related issues (e.g., abate penalty, credit transfer, tax decrease, etc.).

    4. Correspond with the organization explaining that IRS records show it does not have exempt status because it failed to reply to a solicitation for application (41), the exemption was denied (70), the application was incomplete (71), or the organization failed to provide a sufficient description of its activities (72).

    5. Inform the organization of its specific filing requirements (Form 1120).

    6. Send an original unprocessed return if received with the correspondence to R&C to be processed.

    7. If the return was processed, but has a cancelled DLN, forward return to EO Entity to be associated with the other Status 41, 70 - 72 documents.

    8. If Form 1120 filing requirements are not shown on Master File, fax a request to EO Entity instructing them to establish Form 1120 filing requirements to the account.

Status 97 Procedures
  1. Tax Exempt Organizations are required to file Form 990, 990-EZ, 990-N or 990-PF regardless of their gross receipts with few exceptions. If an organization fails to file a return for three consecutive years, they lose their tax exempt status and will be placed into Status 97.

  2. EO Accounts may receive correspondence from filers or referrals from the Call Site.

  3. When updating an account to a good status, refer to IRM 3.13.12, Exempt Organizations Account Numbers. Instructions to update will vary depending on the entity. If unable to determine the correct procedure to update an account, send to EO Entity, M/S 6273.

  4. Before an organization is determined to have been erroneously revoked and updated to a good status, thorough research must be completed. The following should be considered:

    • Revocation is an ongoing process. The previous 3 years should be considered for review. For example in 2017, tax periods 2014, 2015 and 2016 are being reviewed for revocation. In addition, beginning May 2018 tax periods 2017 will be included in the revocation process.

    • When updating an account to a good status due to a consolidation or if a TC 590 is required, reference should be made to the Status 97 cycle chart below to ensure all input occurs before the next round of revocation. Failure to post all transactions will result in the account being updated to Status 97.

    • Proof of electronically filed returns should be carefully reviewed. TE's should not rely on printed acceptance notices from filers but should research through the EUP to verify acceptance and timely filing of electronically filed returns.

    • Filing under another EIN not belonging to the organization. Errors related to service errors should be considered erroneously revoked.

    • Extensions are not valid for Form 990-N (e-postcard).

    • Use the chart below to determine when accounts should be input or a TC 590 input.

    Status 97 Chart
    Extract Cycle/Date Status 97 Date Tax Years 2015 2016 2017 FYMS Checked Status 97 Date 2015 2016 2017 Status 97 Date Tax Years 2016 2017 2018
    FYMS Checked
    TC 016 Date to Prevent Revocation TC 590 Input Date to Prevent Revocation
    04
    01-26-2020
    201901
    08-11
    201901
    12,01-07
    NA 11/20/2019-1/16/2020 11/20/2019-1/16/2020
    08
    02-23-2020
    201902
    09-11
    201902
    12, 01-08
    NA 1/23/2020-2/13/2020 1/23/2020-2/13/2020
    13
    3-22-2020
    201903
    10-11
    201903
    12, 01-09
    NA 2/13/2020-3/12/2020 2/13/2020-3/12/2020
    17
    04-19-2020
    201904
    11
    201904
    12, 01-10
    NA 3/12/2020-4/09/2020 3/12/2020-4/09/2020
    21
    5-24-2020
    NA 201905
    12, 01-11
    NA 4/09/2020-5/21/2020 4/09/2020-5/21/2020
    26
    6-21-2020
    NA 201906
    01-11
    201906
    12
    5/14/2020-6/18/2020 5/14/2020-6/18/2020
    30
    7-19-2020
    NA 201907
    02-07
    201907
    12, 01
    6/18/2020-7/16/2020 6/18/2020-7/16/2020
    34
    8/23/2020
    NA 201908
    03-07
    201908
    12, 01-02
    7/16/2020-8/20/2020 7/16/2020-8/20/2020
    39
    09-20/2020
    NA 201909
    04-07
    201909
    12, 01-03
    8/20/2020 - 9/17/2020 8/20/2020 - 9/17/2020
    43
    10-25-2020
    NA 201910
    05-07
    201910
    12, 01-04
    9/17/2020 - 10/22/2020 9/17/2020- 10/22/2020
    47
    11-22-2020
    NA 201911
    06-07
    201911
    12, 01-05
    10/22/2020 - 11/19/2020 10/22/2020 - 11/19/2020
    53 NA NA NA NA NA

  5. EO Accounts may receive correspondence from filers or referrals from the Call Site. The following actions should be taken when working Status 97 cases:

    If Then
    The organization is a subordinate in a group ruling and indicates they filed as part of a group return,
    1. Research for a group return.

    2. If a group return was filed, check the group code or list of subordinates to determine if the subordinate was included. (Group code 7 indicates all of the subordinates were included). Lists are attached to the return and can be viewed on SEIN.

    3. If the subordinate was included in the group return, update the account. To update the account it may be necessary to input a TC 022 to remove the subsection and then re-establish it in a good status to avoid unpostables. When the account is in a good status, input a TC 590/014 to indicate subordinate was included in the group return. Once account is in a good status, send a letter to the filer. Include the EIN and name on the weekly list to have the EIN removed from the Revocation list.

      Note:

      If the group return contains all zero, it isn't a valid return. Send a letter stating the subordinate must re-apply for tax exempt status.

    If the organization states they filed the return but under a different EIN,
    1. Research for the correct EIN.

    2. If a different EIN is found, and it clearly indicates it was filed using the organization’s name, update the account, move returns if possible to the correct EIN and notify the filer of the correct EIN.

    3. If a different EIN isn't found and there is no indication the returns were filed, research SEIN to determine if the returns were received.

    4. If SEIN research indicates the returns were received prior to the due date of the return but did not post to Master File, make a copy of the return. Input a TC 590/094 on the account and send the return through for processing. Update the status to 01.

      Note:

      The received date on the SEIN copy must be prior to the due date of the 3rd year return. If the received date is later than the due date, notify the filer their return was received after the due date of the third consecutive year and they must submit a Form 1023 or 1024 and apply for a new determination. Don’t update the status.

    5. If unable to locate a copy of the return, request copies of the returns and proof of timely filing from the filer. (i.e. an IRS letter, postmark or notice referring to the return) Instruct the filer if they cannot supply proof of timely filing they must submit Form 1023, 1023 - EZ or 1024 and apply for a new determination. Don’t update the filing or exemption status.

    If the filer submits copies of returns and proof of filing,
    Proof of filing is a copy of a postmark or receipt. Acceptance of electronic filing must be confirmed by checking the IRS EUP web site. Rejected returns ordinarily don't constitute timely filings.
    1. Ensure the received date is prior to the due date. Edit the original due date if necessary.

    2. Update the account to status 01.

    3. Input a TC 590/020 on the 3rd year if no timely return has posted.

    4. Once account is in a good status, send a letter to the filer. Include the EIN and name on the weekly list to have the EIN removed from the Revocation list.

    If returns are received (either copies or originals) and proof of timely filing isn't included,
    1. Update any entity information.

    2. Don’t update status 97 or input a TC 599 or 594. Don’t correspond with filer unless the filer requests specific information concerning their status.

    3. Return will post in status 97.

    If And Then
    The filer states the organization should not have been revoked because they have a letter stating they are not required to file an EO return EDS/TEDS research shows that the organization was given a 990-06, 990-13, or 990-14 filing requirement
    1. Update the account to status 01 and input the correct filing requirement.

    2. Once account is in a good status, send a letter to the filer. Include the EIN and name on the weekly list to have the EIN removed from the Revocation list.

    The filer states the organization should not have been revoked because they have a letter stating they are not required to file an EO return EDS/TEDS research does not show that the organization was given a 990-06, 990-13, or 990-14 filing requirement Don’t update the account. Instruct the filer they must send a copy of the letter to:
    TE/GE Correspondence Unit
    550 Main St Room 4024
    Cincinnati, OH 45202
    The information may also be faxed to EEFax 855-204-6184.
    The filer states the organization should not have been revoked because they filed at least one return in all three year period which began after December 31, 2006 IDRS research shows at least one return was filed for the appropriate period and, if it was for the third year, that the return was timely filed
    1. Ensure the returns were timely filed.

    2. Update the account to status 01.

    3. Once account is in a good status, send a letter to the filer. Include the EIN and name on the weekly list to have the EIN removed from the Revocation list.

    The filer states the organization should not have been revoked because they filed at least one return in the three year period that began after December 31, 2006 IDRS research does not show at least one return was filed for the appropriate period or, if it was for the third year, the return was not timely filed Refer to IRM 21.5.1.4.2.4(3) to determine timely filed returns. If research shows a return was filed for the appropriate period, correspond with the filer requesting proof of a timely filed return. If no proof is received, instruct the filer they must reapply.
    The correspondence indicates the recipient of CP 120A isn't connected to the organization and does not have a new address   Input a TC 593/032 via FRM 49.
    The filer states they should not have been revoked because they were not established for three years IDRS research shows they were not established for at least three years

    Note:

    For example, organization established in June 2010 would be required to file a return for period ending 201006.

    1. Research BMFOLE for the TC 016 which updated the account to Status 97. Identifiers will be TC 016 with Definer Code B, date matching status update on INOLES. If the DLN of the TC 016 contains all 9s ending in 2, 3, 4 etc., update the account to status 01. If the DLN does not contain 9s as stated above, don't update. TC 016 to input Status 97 was input manually by CSC.

    2. Once account is in a good status, send a letter to the filer. Include the EIN and name on the weekly list to have the EIN removed from the Revocation list.

    Filer states they have not been organized for 3 years IDRS research indicates the organization was established for at least 3 years Route the case to TE/GE adjustment unit.
    TEGE Correspondence Unit
    550 Main St Rm 4024
    Cincinnati, OH 45202
    Filer provides a new or recently received (within last 3 years) determination letter   Route the case to TE/GE adjustment unit.
    TEGE Adjustment Unit
    550 Main St Rm 4024
    Cincinnati, OH 45202
    The account is in Status 97 the filer indicates the organization is no longer in business Zero out the Form 1120 filing requirements. Don’t input a TC 591 or update the status.
    The organization indicates their FYM is other than what is indicated on Master File  
    1. Research EDS to determine the FYM used to establish the organizations determination.

    2. If FYM requested by organization matches EDS update status, send letter and include on weekly list.

    3. If EDS does not match FYM of organization, research Master File and SEIN to determine previous filings. Update FYM if necessary. If organization has filed at least one timely return within the 3 year period in question, update the account to status 01. Send a letter to the filer and include in the weekly list.

    4. If unable to determine correct FYM, notify the filer they must submit an application to obtain tax exempt status. Don’t update account or change FYM.

    Organization states they attempted to file a 990-N prior to the return due date and were unable to do so  
    1. Research the EUP to determine date and cause of the rejection.

    2. Research BMFOLE to determine if a TC 016 was input prior to the 3rd year return due date.

    3. If a TC 016 prior to the 3rd year return due date is present and the filer indicates the organization requested the Service submit the 990-N on their behalf, update the account to status 01. Once the account is in a good status, send the organization a letter and include EIN and name on the weekly list.

      Note:

      Check AMS history for any additional information which supports the organizations information.

    4. If necessary request a copy of the reject notice which was sent to the organization.

    The organization requests to change their ruling to a church   Route the case to TE/GE adjustment unit.
    If organization submits a $100 user fee and requests reinstatement per Notice 2011-43 but does not include the application  
    1. Send Letter 0086c using the information in IRM 21.7.7.6.15.1 .

    2. Print the CIS case and close the control.

    3. Give the prints to the Lead or Manager.

    4. The case will be forwarded to the TE/GE Adj Unit.

    The organization is a presumptive 990-PF filer (advance ruling period ended prior to June 2008 and the organization did not submit a Form 8734) foundation code is 04
    1. Check advance ruling date on INOLES. If all "0" research EDS.

    2. Research the second page in EDS to determine advance ruling ends date. If the date is prior to June 2008 the organization did not file a Form 8734.

    3. If the advance ruling date is all "9" then the organization was not required to file a Form 8734.

    4. This information should be used to determine what form the organization was liable for in the 3 year time frame prior to revocation.

      Note:

      All 990-PF returns were required to be filed by the due date of the third year to avoid revocation. No relief was offered for private foundations filing form 990-PF.

    Organization states they timely filed with the Virgin Islands  
    1. Check the received date on the return. If received date is prior to due date of third year and is a valid IRS received date (Virgin Island received date isn't considered valid), update the status 01, send a letter to the filer and add the EIN and name to the weekly list.

    2. If a valid received date prior to the return due date isn't present, instruct the filer they must reapply. Don’t update the account.

    The organization is a Single Member LLC or Disregarded Entity   Route to EO Determinations in CSC at the address below.
    Internal Revenue Service
    550 Main St Room 4024
    Cincinnati, OH 45202
    The organization is a government entity   Print the correspondence and give to Lead or Manager who will fax to Cincinnati. Close your control base with "Fax2CSC " and Misc. The fax number is EEFax 855-204-6184.
    The organization states it filed as part of a group return  
    1. Research to determine if a group return was filed. A group return can be identified by presence of a GEN (Group Exemption Number) and 990-03 filing requirements.

      Note:

      Parent organizations (identified by affiliation code 6 or 8) cannot file as part of the group but must file a separate return.

      Note:

      A group return isn't considered valid if the group return is filed with all zeroes.

    2. If the subordinate does not have the same GEN as the group return, they cannot be included as part of the group return. Notify the organization they must reapply.

    3. If the subordinate was not included in the group return, notify the organization they must reapply for tax exempt status.

    4. The FYM of the subordinate must match the FYM of the group return. The FYM does not have to match if the organization files a separate return.

    5. If the subordinate was included on the group return, and the group return was filed timely, update the account to status 01. Input a TC 590/014 following update. Once the account is updated , send a letter to the organization and include EIN and name on weekly list.

    The organization was a subordinate in a group ruling the parent is revoked but the subordinate isn't in status 97
    1. Determine if the organization is a 501(c)(3), (9) or (17). If so the organization must apply for an individual ruling.

    2. Correspond with the organization and provide information on applying for tax exempt status. Route the case to Entity and instruct them to update the account to Status 40.

    3. If the organizations is other than a 501(c)(3), (09) (17) or (29) route the case to Entity and instruct them to update the account to Status 36.

    Organization states they are a homeowners association   Route the case to Entity and request they change the 1120–01 to 1120-10 filing requirements. Send a letter to the filer to disregard the notice.
    Organization states they are a state credit union The credit union is stating they were revoked in error, State chartered credit unions are required to file a return. If a return has not been filed for 3 consecutive years, send a letter stating they must re-apply. If they have filed and just the parent is revoked, route to Entity and request they remove the GEN and update the account to subsection 14, classification 1 and status 36.
    Organization states they are a federal credit union   Route the case to
    CSC Correspondence Unit
    550 Main St Room 4010
    Cincinnati, OH, 45202
    Filer indicates they filed using a different EIN the EIN entity information matches the revoked EIN Route to Entity and request the EINs be consolidated.
    Filer indicates they filed using a different EIN the EIN belongs to another filer, Route the correspondence to M/S 1110 for elevation and determination to be made by EO Division.
    Filer indicates they have not been organized for 3 years or ruling date is 3 years old or less the established date on IDRS is older than 3 years Route the case to
    CSC Correspondence Unit
    550 Main St Room 4010
    Cincinnati, OH, 45202
    If a timely filed but rejected e-filed Form 8868 for the third year of non-filing can be confirmed on EUP, or if Form 8868 was mailed and there is supporting documentation showing it was mailed on time the exempt status was revoked before the extension approval could be input, the extension reconsideration procedure in IRM 21.7.7.6.22.3.1(3) should be followed. The exempt status should then be reinstated if the extended RDD has not passed or the posted TC150 is now timely with the approved extension.

  6. If an organization is updated to Status 01, a letter must be sent to the filer notifying them of the correction.

  7. If an organization isn't updated, send a letter providing information for re-application.

  8. The following should be considered before requesting an account be updated from status 97 to status 01.

    • The applicable years began after December 31, 2006. For example a calendar year filer key years are 201214, 201512, and 201612. If the organization is a fiscal filer with a period ending in March, then its key years are 201403, 201503, and 201603.

      Note:

      The revocation of tax exempt status is an ongoing process. The organization must file at least 1 return in any 3 year period. If an organization fails to file for three consecutive years their tax exempt status will be revoked.

    • If the DLN of the extension (TC 460) is exactly the same as the DLN of the TC 150 for a 2009 tax period only, then the extension was not one filed by the organization (i.e., it isn't valid) and any return/notice filed after the normal due date is considered delinquent.

  9. If the taxpayer asks about the periods for which the organization is required to file a taxable return, correspond and explain the requirement begins with the effective date of revocation.

    Example:

    If an organization that is a calendar year filer is revoked effective May 17, 2010, then, unless it applies for and receives exemption retroactive to the date of revocation, it should file a taxable return for the period from May 17, 2010, through December 31, 2010, and continue filing taxable returns until it terminates or it applies for and receives exemption.

  10. If an account is updated but the TC 150 is past the due date a TC 590/020 must be input on the tax module for the third year return to stop revocation. For example, Master File indicates the return is past due but the organization provides proof of timely submission (certified mail receipt etc). Programming will only research for a timely filed return.

  11. If an account is revoked correctly, correspond with the organization and provide information necessary to reapply for tax exempt status.

  12. A list of organizations updated to status 01 from status 97 should be compiled and sent to the SPP Analyst weekly.

Foundation, Affiliation and Organization Codes
  1. There are other fields in the EO section, such as the Foundation, Affiliation, and Organization codes, which are useful when researching and resolving EO account related issues. See tables below for specific codes and explanations.

    Foundation Codes (FOUN)
    (These codes are present with SS 03 accounts only)
    Code Definition
    00 IRC 4947(a)(1)
    02 Exempt operating foundation described in IRC 4940(d)(2)
    03 Private operating foundation
    04 Private non-operating foundation
    09 Suspense (a specific type not identified)
    10 Church (IRC 170(b)(1)(A)(i))
    11 School (IRC 170(b)(1)(A)(ii))
    12 Hospital (IRC 170(b)(1)(A)(iii))
    13 Organizations operated for the benefit of a college or university ( IRC 170(b)(1)(A)(iv))
    14 Federal, state or local government unit (IRC 170(b)(1)(A)(v))
    15 Organization receiving support from governmental unit or general public ( IRC 170(b)(1)(A)(vi))
    16 General, public charity (IRC 509(a)(2))
    17 Public charity supporting (FC 09-15) (IRC 509(a)(3))
    18 Public safety (IRC 509(a)(4))
    21 509(a)(3) Type I IRC 509(a)(3)
    22 509(a)(3) Type II IRC 509(a)(3)
    23 509(a)(3) Type III functionally integrated IRC 509(a)(3)
    24 509(a)(3) Type III not functionally integrated IRC 509(a)(3)
    Affiliation Codes (AFF)
    Code Definition
    1 Central organization (individual ruling)
    2 Intermediate organization (individual ruling)
    3 Independent organization (individual ruling)
    6 Central organization in a group ruling (not a church)
    7 Intermediate parent (subordinate by state)
    8 Central organization in a church group ruling
    9 Subordinate of a group ruling
    Type of Organization (ORG)
    Code Definition
    1 Corporation
    2 Trust
    3 Cooperative
    4 Partnership
    5 Association
    6 Non-Exempt Charitable Trust (NECT)

Gross Receipts Test

  1. To determine whether an organization's gross receipts are normally to be $50,000 or less, apply the following test. An organization's gross receipts are considered normally to be $50,000 or less if the organization is:

    • Up to a year old and has received, or donors have pledged to give, $75,000 or less during its first tax year.

    • Between one and three years old and averaged $60,000 or less in gross receipts during each of its first two tax years.

    • Three years old or more and averaged $50,000 or less in gross receipts for the immediately preceding three tax years (including the year for which the return would be filed).

Extensions of Time to File (EO)

  1. Form 8868, Application for Extension of Time to File an Exempt Organization Return, is used to request an automatic three month extension of time to file Form 990, Form 990-EZ, Form 990-PF, Form 990-BL, Form 990-T, Form 1041-A, Form 1041 (for NECTs) , Form 1065 (for 501(d) organizations), Form 4720, Form 5227, Form 6069 and Form 8870 if filed for period prior to December 31, 2015. If necessary, an additional three month (not automatic) extension can also be requested for periods prior to December 31, 2015.

  2. For periods which begin after December 31, 2015, Form 8868 will be used to request an automatic six month extension for all forms listed above.

  3. Form 7004 is used to request an automatic six month extension of time to file for Form 1120-POL.

  4. Refer to IRM 21.7.7.6.22 for additional information regarding extensions.

EO Estimated Tax Payments

  1. Most EOs are required to make ES payments on their unrelated business income tax as if they were corporations.

    Note:

    Form 990-PF filers don't need to make their first payment until the fifteenth day of the fifth month of their tax year. This would be May 15 for calendar year filers.

  2. Tax exempt organizations use Form 990-W to compute their estimated tax. Estimated tax must be paid with EFTPS, if required.

  3. Refer to IRM 21.7.7.6.23.2 for additional information.

Disclosure

  1. Returns and return information of a tax-exempt organization which are publicly available under IRC 6104 may be disclosed to any requester making a proper request. However, returns and return information which are not publicly available under IRC 6104 are protected by IRC 6103 and may not be disclosed unless authorized by a section of 6103 of the Internal Revenue Code.

  2. Most items on Form 990-PF are disclosable. Almost everything on Form 990 and Form 990-EZ except for the names and addresses of contributors and identifying contributions amounts and everything included on tax exempt Political Organization returns (Form 990 with IRC 527 box checked, Form 8871, Form 8872 and Form 8453-X) can be disclosed.

  3. The Tax Technical Corrections Act of 2007, Pub. L. 110-172, H.R. 4839, provides that the Internal Revenue Service is required to make Forms 990-T that are filed by a section 501(c)(3) organization publicly available for inspection and copying pursuant to section 6104(b). This provision is effective for returns filed after August 17, 2006, the date of enactment of the Pension Protection Act of 2006, Pub. L. 109-280 (PPA). It applies only to Forms 990-T filed to report UBIT. If the return was filed only to claim erroneous back-up withholding, for example, it isn't open under IRC 6104.

  4. Form 5227, with the exception of Schedule A, is also open for public disclosure.

  5. Form 1120-POL isn't open for public inspection as a result of legislation enacted on November 2, 2002. See IRM 11.3.9 for more information regarding disclosure. If there is a question as to whether information can be disclosed or not, contact the local Disclosure manager.

  6. Requests for approved applications and for returns or DVDs must be made in writing on Form 4506-A. All inquiries or Forms 4506-A received in EO Accounts must be routed to the RAIVS Unit (MS: 6716). Refer to IRM 11.3.9, Exempt Organizations, for additional disclosure information.

Public Inspection

  1. Internal Revenue Code (IRC) 6104(a)(1)(A) requires the Internal Revenue Service (IRS) to make available for public inspection:

    • The approved application for exemption of any organization or trust described in IRC 501(c) or IRC 501(d) determined by the IRS to be exempt from taxation under IRC 501(a) for any taxable year;

    • The approved notice of status of an organization under IRC 527(i);

    • Any documents filed in support of such application or notice; and

    • Any letter or other document issued by the IRS pertaining to the application or notice, if the application or notice was filed November 1, 1976 or thereafter.

    • Public Law 106-230 requires IRS to make Forms 8871, Political Organization Notice of Section 527 Status, and Forms 8872, Political Organization Report of Contributions and Expenditures, (forms created as a result of the Law) available for public inspection.

  2. In addition, the IRS must furnish, upon request, a statement indicating the subsection and paragraph of IRC 501 which describes the exempt organization or trust. However, the disclosure of certain information relating to trade secrets, patents, processes, style of work or apparatus of an organization, or national defense information may be restricted. Refer to IRM 11.3.9, for a description of the documents available for disclosure and further explanation of disclosure limitations.

  3. IRC 6104(d) requires that certain annual returns, reports, applications for exemption, and notices of status be available for public inspection. Generally, the exempt organization is responsible for making these documents available for public inspection at its principal office and local or field offices having three (3) or more employees.

  4. The organization need not disclose any portion of an application relating to trade secrets, national defense, etc., which also would not be disclosed by the IRS. Withholding of this information is made upon determination by the IRS based on request by the organization.

  5. The public disclosure rules apply both to information submitted that is required by the forms and to information submitted voluntarily.

    Note:

    If identity theft is suspected or reported, refer to IRM 25.23.11.

  6. Correspondence from persons unable to obtain a copy of a return from the organization should be routed to the appropriate Exam Classification Site. Refer to IRM 21.7.7.6.15 for the address.

    Note:

    A redacted copy of the return can also be obtained from Tax Exempt Organization Search (formerly Select Check) also known as TEOS. TEOS helps users find information about a tax-exempt organization’s federal tax status and filings. TEOS is available on the Charities and Nonprofits page found on .irs.gov.

Commonly Requested Documents
  1. The most commonly requested documents which are made available for public inspection in accordance with IRC 6104(a)(1)(A) and IRC 6104(b) are:

    • Form 990, Return of Organization Exempt from Income Tax and all related schedules

    • Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, and attachments required to be filed with the Service. For organizations (other than a Section 527 with periods beginning after 6-30-2000).

    • Schedule A, Organization Exempt Under 501(c)(3)

    • Schedule B, Schedule of Contributors

      Note:

      Names and addresses of contributors must not be disclosed. Amounts of contributions may be disclosed but only if amount could not reasonably be expected to identify a contributor.

    • Form 990-PF, Return of Private Foundation

    • Form 990-T, Exempt Organizations Business Income Tax Return, (501(c) (3) organizations filed after August 17, 2006)

    • Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of IRC, and supporting documents.

    • Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.

    • Form 1024, Application for Recognition of Exemption Under Section 501(a) and supporting documents

    • Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) and supporting documents.

      Note:

      Denied applications are available, in redacted form, pursuant to section 6110.

    • Form 1041-A, U.S. Information Return-Trust Accumulation of Charitable Amounts

    • Form 5227, Split Interest Trust (for tax years beginning on or after January 01, 2007)

    • Form 1065, if filed by an organization described in IRC Section 501(d) (EO submodule-Subsection 40)

      Note:

      If Schedule K-1 is attached to a Form 1065, redact everything except the title of the schedule.

    • Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of IRC, if filed by a private foundation. (Form 4720 filed by individuals are not subject to disclosure provisions of IRC 6104)

    • Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt from Federal Income Tax

    • Form 8871, Political Organization Notice of Section 527 Status

    • Form 8872, Political Organization Report of Contributions and Expenditures

    • Form 8453-X, Declaration of Electronic Filing of Notice of Section 527 Status

  2. Certain information in returns otherwise open to public inspection must be withheld by IRS from public inspection (and need not be disclosed by the exempt organization):

    • Schedule B, except for contributors to private foundations and 527 political organizations

    • Schedules K-1 filed by 501(d) organizations

    • Schedule A of Form 990-BL

    • For returns for tax years beginning on or after Jan. 1, 2007, information regarding non-charitable beneficiaries in Form 5227.

Public Inspection of Form 990-PF
  1. Private Foundations must provide copies of the approved applications for exemption and their three (3) most recent Form 990-PF returns to anyone who requests them:

    • Immediately, if the request is made in person.

    • Within 30 days if the request is made in writing.

    • By making the document widely available via the Internet.

    Note:

    The organization must comply with requests for inspection made in person, even if the documents are made widely available.

  2. Organizations may apply to be excused from fulfilling the requirements if they can prove that requests for their materials are part of a harassment campaign.

Penalty for Failure to Comply with the Public Inspection
  1. If an organization fails to comply with the public inspection requirement by the date and in the manner prescribed under IRC 6104(d) , a penalty of $20 a day may be imposed on any person with a duty to comply for each day the failure continues.

  2. The maximum penalty on all persons for any one return is $10,000.

Requests for Copies of Returns and Exemption Applications
  1. To request a copy of an exempt or political organization return, report, notice or approved exemption application from the IRS, the requestor may submit a complete Form 4506-A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form.

  2. Use the following chart to determine where to submit the written request or Form 4506-A.

    If Taxpayer wants Then submit Form 4506-A with the
    a copy of an exemption application, Internal Revenue Service
    TE/GE Adjustments Unit
    P.O. Box 2508, Room 4024
    Cincinnati, OH 45201
    EEFax 855-204-6185
    a copy of a return, report or notice, Internal Revenue Service
    MS: 6716
    Ogden, UT 84201
    EEFax 855-653-9144

  3. The request should indicate the type of return and the year(s) involved, if applicable. Charges for copies can be found in IRM 3.20.13, Exempt Organization Photocopy Procedures.

  4. If an exempt organization requests an "unredacted" copy of its own return under IRC 6103, then a Form 4506, Request for Copy of Tax Return, must be completed and submitted to the address shown below. The fee shown on Form 4506 must be pre-paid.

    Internal Revenue Service
    P.O. Box 9941
    RAIVS Team
    MS: 6734
    Ogden, UT 84409

  5. Route all Form 4506-A requests received in EO Accounts to OSPC, EO Photocopy Unit, MS: 6716.

  6. Requests for copies of exemption applications only are sent to the address shown below or faxed to 855-204-6185.

    TE/GE Adjustments Unit
    P.O. Box 2508 Room: 4024
    Cincinnati, OH 45201

DVD Requests
  1. Electronic copies (images) of certain exempt organization returns filed with the Internal Revenue Service are available. Depending on the type of return, the type of filer, and the year the return was filed, these images may be available in DVD formats.

  2. Currently, Form 5227 isn't available on DVD.

  3. DVDs are available at no cost to members of the media and other government agencies.

  4. Refer to IRM 3.20.13 for a complete listing of what returns are available, formats and the related charge for other customers.

  5. Requests for DVDs must be submitted on a Form 4506-A, Request for Public Inspection or Copy of Exempt Organization IRS Form, and pre-paid. The form can be faxed to the EO Photocopy unit at 855-653-9144 or mailed to the address shown below.

    Internal Revenue Service
    EO Photocopy MS: 6716
    Ogden, UT, 84201

  6. Additional information regarding DVDs can be found at www.irs.gov/charities.

Imaging Background

  1. The Ogden Submission Processing Campus (OSPC) began the Imaging process in July 1998. It replaced the aperture card (microfiche) process for Form 990-PF. The Imaging process scans returns and attachments on high-speed scanners to produce images for Online SEIN and the public. The Internal Revenue Service sells USBs with images of all Form 990-PF, Form 990 and Form 990-EZ returns to various watch dog groups including The Foundation Center, The Urban Institute and other entities throughout the country. These various groups provide comprehensive information on a foundation's grant making interests, limitations, application procedures and funding patterns. Additionally, many grant seekers use this information for research.

  2. The following is a list of forms that are currently imaged:

    • Form 990

    • Form 990-EZ

    • Form 990-PF

    • Form 990-T

    • Form 5227

    • Form 4720

    • Form 8872

  3. All EO returns and related schedules referenced above are imaged "as filed." In January 2018 the Imaging process was moved to the end of the pipeline process. The Imaging Unit scans the returns after they are processed through ISRP and ERS. All returns processed through the imaging system will have a "filmed" or "scanned" stamp and date in the left-hand margin on the first page of the return. If the return or related schedules aren’t stamped and dated, they need to be identified for scanning using the procedures in following section.

Imaging Refilm Procedures
  1. When additional information is received from an organization (i.e., missing forms, schedules, missing signature.) the tax examiner must determine what information needs to be scanned. Refer to the following procedures when additional items need to be scanned.

    Note:

    These procedures are for paper filed or CIS returns.

    1. Photocopy the document(s) to be imaged. Don’t write on the documents to be imaged.

    2. Attach a modified print of BRTVU to the front of the information to be scanned. The BRTVU print must be thoroughly edited and contain only the EIN, tax period, subsection code, form type (F990, 990-EZ, etc., not just the MFT) and entity information of the original filed return.

      Reminder:

      The subsection code is located in the EO section on BMFOLO, ENMOD or INOLES and must be manually entered on the print.

    3. Place the refilm items in a separate folder behind the brown gusset folder containing the current day's closures.

    Caution:

    Don’t write or include a CIS stamp on the documents to be imaged.

  2. The photocopied information is treated as classified waste and destroyed after the Imaging unit has scanned the photocopied item(s).

    Note:

    Re-scan documents must be routed to the Imaging unit on a daily basis regardless of the volume.

  3. The following is a list of items that may require scanning:

    • The entire original return if the lower left-hand margin of the first page of the return has not been stamped "SCANNED" by the Imaging Unit.

    • The entire amended return, if the left-hand margin of the first page on the return has not been stamped " SCANNED" by the Imaging Unit.

    • All forms/attachments submitted by the organization in response to IRS correspondence for FORM(S)/ATTACHMENT(S) LEFT OFF the return as it was originally filed.

  4. If Then Route to
    The original or amended return has not been processed (No DLN on return), Attach Form 12634 (green routing slip) and annotate in the remarks area "Process as original return" Batching -
    MS: 6054
    The original or amended return was processed (A DLN is on the return and the return or amended return is on IDRS. Having a DLN on the return, doesn’t always indicate it’s been processed), but the return has not been stamped "scanned ," , 1) Take the appropriate adjustment action on the module and close the control base.
    2) Attach Form 12634 (green routing slip) and annotate in the remarks area "Original/amended return not scanned. Route to Files after imaged."
    Imaging Unit -
    MS: 6058
    A copy of an original or amended return is received with additional missing information (i.e., forms, schedules, signature, etc.), Follow procedures outlined above for original or amended returns. Imaging Unit
    MS: 6058

    Reminder:

    When additional information (missing schedules/forms, signature) is attached to a copy of the original or amended return, only the missing information is to be scanned.

  5. MeF returns are extracted and imaged by SOI and no longer require special handling. MeF returns are available for viewing on either the Employee User Portal (EUP) or the On Line Statistics of Income Exempt Organizations Return Image Net (OL-SEIN). OL-SEIN is a system that allows viewing of an unredacted image of an EO return.

Section 527 Political Organizations

  1. A political organization subject to IRC 527 is a party, committee, association, fund (including a separate segregated fund described in IRC 527(f)(3)) or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures (or both) for an exempt function.

  2. The exempt function of a political organization is influencing or attempting to influence the selection, nomination, election or appointment of an individual to any public office or office in a political organization, or the election of the Presidential or Vice Presidential electors.

  3. A political organization must be organized for the primary purpose of carrying on exempt function activities. A political organization does not need to be formally chartered or established as a corporation, trust, or association. A separate bank account in which political campaign funds are deposited and disbursed only for political campaign expenses can qualify as a political organization. When there are no formal organizational documents, consideration is given to statements of the members of the organization at the time of its formation that they intend to operate the organization primarily to carry on exempt function activities. A political organization may engage in activities that are not exempt function activities, but these may not be its primary activities.

  4. Political organizations include principal campaign committees, newsletter funds, and certain separate segregated funds maintained by tax-exempt organizations.

  5. A principal campaign committee is the political committee designated by a candidate for U.S. Congress as his or her principal campaign committee for purposes of IRC 302(e) of the Federal Election Campaign Act of 1971 and IRC 527(h).

  6. Political organizations that have tax-exempt status under IRC 527 of the Internal Revenue Code (unless exempted from filing) must file some or all of the forms listed as a condition of tax-exempt status:

    • Form 8871, Political Organization Notice of Section 527 Status,

    • Form 8872, Political Organization Report of Contributions and Expenditures,

    • Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status,

    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations,

    • Form 990, Return of Organization Exempt from Income Tax or

    • Form 990-EZ, Short Form Return of Organization Exempt from Income Tax.

  7. A state or local organization may be considered a Qualified State or Local Political Organization (QSLPO) , if it meets the following criteria:

    • All of its political activities relate solely to state or local public office (or office in a state or local political organization);

    • It is subject to state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS;

    • The state agency and the organization make the reports publicly available;

    • No federal candidate or office holder controls it or materially participates in its direction, solicits contributions for it, or directs any of its disbursements.

    For additional information, refer to IRC 527(e)(5) and Rev. Rul. 2003-49, 2003-20 I.R.B. 903.

  8. Federal tax law divides political organizations into several different categories, and provides different filing requirements for each category as shown in the table below:

    Filing Categories
    Category Organization Type
    Federal Organizations
    • FEC political committee - A political organization (including federal candidate committees, political party committees and PACs) required to report as a political committee under the Federal Election Campaign Act.

    • Other federal political organizations - A political organization that attempts to influence federal elections and isn't required to report as a political committee under the Federal Election Campaign Act.

    State and Local Organizations
    • Candidate Committee - A campaign committee of a state or local candidate.

    • Party Committee - A state or local committee of a political party.

    • Qualified State or Local Political Organization (QSLPO) – (See list of criteria above).

Filing Requirements
General Information
  1. A political organization must have its own employer identification number (EIN), even if it does not have any employees. To get an EIN, an organization must file Form SS-4, Application for Employer Identification Number. See Form SS-4 instructions for more information.

  2. Additionally, many political organizations must electronically file their periodic reports. In order to electronically file these reports, an organization needs the user name and password issued to it after filing its initial notice. If the user name and password are forgotten or misplaced, the political organization can fax or send a letter requesting a new user name and password to:

    Internal Revenue Service
    Attn: Request for 8872 Password
    M/S: 6273
    Ogden, UT 84201
    EEFax 855-214-7520

  3. The filing requirements in the table below apply to those political organizations that wish to be a tax-exempt political organization and that receive or expect to receive $25,000 or more in gross receipts in any taxable year.

    If the Organization
    is a
    It May Be Required
    to File
    FEC political committee,
    State or local candidate committee or
    State or local committee of a political party,
    Form 1120-POL
    Qualified state or local political organization (QSLPO)*, Form 8871;
    Form 1120-POL; and
    Form 990
    Caucus or association of state or local officials*, Form 8871;
    Form 8872; and
    Form 1120-POL
    Any other political organization, including other state or local political organizations, Form 8871;
    Form 8872;
    Form 1120-POL;
    Form 990 or
    Form 990-EZ

    * An organization may be both a QSLPO and a caucus or association of state or local officials. If so, it isn't required to file Form 8872 and Form 990.

  4. If the organization is:

    • A political organization that isn't tax-exempt, or

    • A tax-exempt political organization that does not have gross receipts of at least $25,000,

    Form 1120-POL must be filed if there is taxable income (after taking the $100 specific deduction) for any taxable year.

  5. To be tax-exempt, certain political organizations must file Form 8871 within 24 hours of establishment and within 30 days of any material change. Form 8871 must be filed electronically. Form 8872 must be filed electronically for periods after 2019. Prior to this, an organization was required to file Form 8872 electronically if it had, or expected to have, contributions or expenditures of more than $50,000 during the calendar year.

Initial Notice, Periodic Reports, Annual Income Tax and
Information Returns
  1. Political parties, campaign committees for candidates for federal, state or local office, and political action committees (PACs) are all political organizations subject to tax under IRC 527. IRC 527 organizations, unless excepted, are generally required to file one or more of the following:

    • An Initial Notice

    • Periodic reports on contributions and expenditures

    • Annual income tax returns and

    • Annual information returns

Initial Notice
  1. To be tax-exempt, a political organization is required to notify the IRS electronically that the organization is to be treated as a IRC 527 organization. It must also notify the IRS within 30 days of any material change, including termination, to maintain its tax-exempt status.

  2. To notify the IRS, the organization must file Form 8871. To complete the electronic filing, the political organization must print the electronically submitted Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status, sign it, and mail the "Declaration of Electronic Filing" to:

    Internal Revenue Service Center
    Ogden, UT 84201

  3. The following political organizations are not required to report Form 8871:

    • Any person required to report to the FEC;

    • Any political committees of a state or local candidate;

    • Any state or local committee of a political party;

    • Any organization reasonably anticipating that its gross receipts will always be less than $25,000 for any taxable year; and

    • Any organization described in IRC 501(c) that is subject to IRC 527(f)(1) because it has made an "exempt function" expenditure.

Periodic Reports
  1. Unless excepted, tax-exempt political organizations are required to file periodic reports with the IRS. Political organizations are excepted from filing these periodic reports (Form 8872) if they are not required to file Form 8871 (including organizations required to report as political committees with the FEC) or are qualified state and local political organizations.

  2. All other political organizations are required to file Form 8872 to report the names, addresses, and (if an individual) the occupation and employer of any person to whom expenditures are made that aggregate $500 or more in a calendar year and the amount, date and purpose of each expenditure. The report must also include the name, address, and (if an individual) the occupation and employer of any person who contributes a total of $200 or more in a calendar year, and the amount and date of each contribution. Expenditures made or contributions received after July 1, 2000, must be reported, except for those made or received pursuant to binding contracts entered into before July 2, 2000.

  3. Form 8872, must be filed electronically for periods after 2019. Prior to this, an organization was required to file Form 8872 electronically if it had, or expected to have, contributions or expenditures of more than $50,000 during the calendar year.

Annual Income Tax Returns
  1. Political organizations with taxable income, after taking the $100 specific deduction, must file Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations.

Annual Information Returns
  1. Tax-exempt political organizations with gross receipts of $25,000 or more, are required to file Form 990. Certain small political organizations may file Form 990-EZ instead. Political organizations that receive contributions of $5,000 or more from any one contributor will be required to include Form 990, Schedule B with their return.

  2. Qualified state and local political organizations are only required to file Form 990 if they have gross receipts of $100,000.

  3. A tax-exempt political organization isn't required to file Form 990 if it is:

    • Not required to file Form 8871 (including an organization required to file as a political committee with the FEC) or

    • A caucus or association of state or local officials.

  4. All of these notices, reports, and returns (except for Form 1120-POL) are to be made publicly available by the IRS and by the organization. Penalties are provided for failure to comply with these requirements.

  5. The filing requirements in the table below apply to those political organizations that:

    • Wish to be exempt from federal income tax provisions, and

    • Receive or expect to receive $25,000 or more in gross receipts in any taxable year.

    Form When Filed Exceptions to Filing Requirement
    Form 8871 Within 24 hours of establishment or within 30 days of any material change, including termination
    • Organization that does not seek tax-exempt status;

    • IRC 527 Political committee required to report to the FEC;

    • Campaign committee of state and local candidates;

    • State or local committee of political parties; and

    • Organization that reasonably expects annual gross receipts to always be less than $25,000.

    Form 8872 At organization's option, quarterly/semiannually or monthly, on same basis for entire calendar year (see form instructions for detailed information)
    • Any organization excepted from Form 8871 filing requirement (see above); and

    • Qualified state or local political organization (QSLPO).

    Form 1120-POL Due the 15th day of the 3rd month after the close of the taxable year
    • Organization with no political organization taxable income after taking the $100 specific deduction.

    Form 990 or Form 990-EZ Due the 15th day of the 5th month after the close of the taxable year
    • Any organization excepted from Form 8871 (see above); and

    • Caucus or association of state or local officials

Section 527 Disclosure Requirements
  1. Tax exempt IRC 527 organizations must make their forms (other than Form 1120-POL) publicly available for inspection and copying at their principal place of business. The IRS also posts Form 8871 and Form 8872 on its web site at: https://www.irs.gov/charities-and-nonprofits, Charities and Nonprofits.

EO Command Codes

  1. CC BMFOL with definer "O" displays the Exempt Organization data for a specific EIN. Available information includes Group Exemption Number (GEN), Area Office (AO), current and prior status, and filing requirements.

  2. Use CC EOGEN to locate the EIN of a central, group, or subordinate organization. EOGEN does not provide full entity information for subordinates. CC EOGEN requests group ruling information for an exempt organization - both central organizations and subordinates. The GEN is a four digit number located in the EO Entity section of an account which can be accessed by using CC ENMOD, INOLES, or BMFOLO. CC EOGEN with definers "P" and "S" are explained below:

    • Definer "P" provides the central organization information.

    • Definer "S" provides the subordinates listing. This is limited to 30 pages, with 20 subordinates per page. To narrow the search for subordinates, enter the two character state abbreviation code.

    • IRM 2.3.47, contains the format for input of CC EOGEN.

Undeliverable CP 120A, 152 or 299

  1. If undeliverable CP 120A, 152 or 299 are received in Accounts Management, destroy the notices per local procedures without conducting any research for another address.

List of EO and GE Forms

  1. The following is a list of EO and GE forms:

    • Form 990, Return of Organization Exempt From Income Tax Under Section 501(c) of the Internal Revenue Code (except black lung benefit trust or private foundation) or Section 4947(a)(1) Nonexempt Charitable Trust

    • Form 990-EZ, Short Form Return of Organization Exempt From Income Tax Under Section 501(c) of the Internal Revenue Code (except black lung benefit trust) or Section 4947(a)(1) Nonexempt Charitable Trust

    • Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under Section 6033(e))

    • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation

    • Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons

    • Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ

    • Form 990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations (and on Investment Income for Private Foundations)

    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

    • Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts

    • Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code

    • Form 5227, Split-Interest Trust Information Return

    • Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax

    • Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation (Under Section 501(h) of the Internal Revenue Code)

    • Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction

    • Form 7004, Application for Automatic 6 month Extension of Time to File Certain Business Income Tax, Information and Other Returns (for extending Form 1120-POL and Form 1065 in the case of 501(d) organizations)

    • Form 8282, Donee Information Return ( Sale, Exchange, or Other Disposition of Donated Property)

    • Form 8453-EO, Exempt Organization Declaration and Signature for Electronic Filing

    • Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status

    • Form 8868, Application for Extension of Time To File an Exempt Organization Return

    • Form 8886-T, Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction

    • Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts (Under section 170(f)(10))

    • Form 8871, Political Organization Notice of Section 527 Status

    • Form 8872, Political Organization Report of Contributions and Expenditures

    • Form 8879-EO, IRS e-file Signature Authorization for an Exempt Organization

    • Form 8899, Notice of Income from Donated Intellectual Property

    • Form 8038 series, Tax Exempt Bonds (Refer to IRM 21.7.7.7 for detailed information regarding TEBs.)

    • Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap

    Note:

    All references to Form 990 (unless otherwise noted) also apply to Form 990-EZ. Form 990-EZ is designed for use by smaller tax exempt organizations and nonexempt charitable trusts having gross receipts of less than $200,000 during the year and total assets at the end of the year less than $500,000. See IRM 21.7.7.6.1 for additional information.

Due Dates

  1. The table below shows the form type, MFT, taxability, and due dates for various EO returns.

    Form, MFT, Taxability and
    Due Date
    Form MFT Taxable or Non-taxable Due Date
    Form 990 or Form 990-EZ 67 NON 15th day of 5th month.
    Form 990-PF 44 TAX 15th day of 5th month.
    Form 990-T 34 TAX * See note below
    Form 5227 37 NON 15th day of 4th month.
    Form 4720 50 TAX *See note below
    Form 1041-A 36 NON 15th day of 4th month.
    Form 1120-POL 02 TAX 15th day of 4th month.
    Form 8453-X 00 NON *See note below
    Form 8871 47 NON Due within 24 hours of the date on which the organization was established
    Form 8872 49 NON * See Note below

    Note:

    Form 990-T – Type of Org. Code 3: Due 15th day of 4th month. (IRC 401(a), IRC 408(a), and IRC 220(d) Trusts)
    Type of Org. Codes 1, 2, 4 and 5: Due 15th day of the 5th month (Corporations & Exempt Trusts).

    The computer uses the type of organization code shown on BRTVU to determine the return due date. Don’t use the organization code shown on ENMOD or BMFOLO when determining the return due date for Form 990-T.

    Note:

    Form 4720, if filed with a Form 990, Form 990-EZ, Form 990-PF or Form 5227 filer, has the same due date as the related Form 990, Form 990-EZ, Form 990-PF or Form 5227.

    Note:

    Form 8872, the due dates vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election was held or any other calendar year. During an election year, the reports may be filed on either a quarterly or a monthly basis. They are also due shortly before and after the primary and general elections. During a non election year, the reports may be filed on either a semiannual or monthly basis; but in either case, they must be filed on the same basis for the entire calendar year.

    Note:

    Form 8453-X

    automatically appears on the filer's computer screen once Form 8871 is submitted electronically for the new political organization to complete. The organization must print the form, sign it, and mail it to the Ogden Campus. In doing so, the electronic filing of Form 8871 is authenticated.

    Reminder:

    Notice 2020-23 extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020.

  2. The table below shows the due dates for both fiscal and calendar year filers:

    EO Fiscal and Calendar Year
    Due Dates
    FY Form 4720 & Form 990-T
    DUE DATE
    Form 990-T, Form 990-PF, Form 4720, Form 990, Form 990-EZ or Form 990–N DUE DATE Form 1041-A & Form 5227
    DUE DATE

    (See "Note" below)
    Form 1120-POL DUE DATE
    01 05/15 06/15 * 05/15
    02 06/15 07/15 * 06/15
    03 07/15 08/15 * 07/15
    04 08/15 09/15 * 08/15
    05 09/15 10/15 * 09/15
    06 10/15 11/15 * 09/15
    07 11/15 12/15 * 11/15
    08 12/15 01/15 * 12/15
    09 01/15 02/15 * 01/15
    10 02/15 03/15 * 02/15
    11 03/15 04/15 * 03/15
    12 04/15 05/15 04/15 04/15

    Note:

    Form 5227 and Form 1041-A are due on or before April 15 following the close of the calendar year.

    Reminder:

    Notice 2020-23 extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020.

Modernized Electronic Filing

  1. The following exempt organization returns can be filed electronically through an approved IRS 990 e-file provider:

    • Form 990, Return of Organization Exempt From Income Tax

    • Form 990-EZ, Short Form Return of Organization Exempt From Income Tax

    • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation

    • Form 990-T, Exempt Organization Business Income Tax Return

    • Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

    • Form 8868, Application for Automatic Extension of Time to File an Exempt Organization Return

    • Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

    • Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns

      Note:

      Many states also allow exempt organizations to file their returns with them through this program.

    Exception:

    Organizations may submit their Form 990-N directly via the IRS website and do not need to go through an e-file provider unless they are submitting the form for a previous period.

  2. The Taxpayer First Act (TFA), enacted July 1, 2019, requires tax exempt organizations to file information returns and related forms electronically. The new law affects tax exempt organizations in tax years beginning after July 1, 2019.
    The following IRS forms are included in the mandate:

    • Form 990

    • Form 990-PF

    • Form 1065, U.S. Return of Partnership Income (if filed by an IRC 501(d) apostolic organization)

    Note:

    The TFA also requires Form 8872, Political Organization Report of Contributions and Expenditures, to be filed electronically for periods after 2019.

  3. For small exempt organizations, the TFA specifically allowed a postponement of the requirement to file electronically ("transitional relief" ). For tax years ending before July 31, 2021, the IRS will accept either paper or electronic filing of Form 990-EZ. For tax years ending July 31, 2021, and later, Form 990-EZ must be filed electronically.

  4. In 2020, the IRS will continue to accept paper forms that are pending conversion into an electronic format. These include Form 990-T and Form 4720. The IRS plans to have these returns ready for e-filing in 2021 (reporting on tax year 2020).

  5. Updated information about which forms, tax years, attachments, and schedules are acceptable for (and those excluded from) e-filing can be found in Publication 4164, Modernized e-File (MeF) Guide for Software Developers and Transmitters, and on the IRS website under the "General Information" heading on the page titled Modernized e-File (MeF) User Guides and Publications.

    Note:

    This publication is only available online.

  6. Current approved IRS e-file providers are listed on www.irs.gov. Advise callers to search for "exempt organization MeF providers."

  7. A Web page on irs.gov provides transmitters with updated operational status information for MeF users. The page provides updates when there is a change that impacts transmitters for more than an hour during peak. Information on the normal maintenance window is also available on this page. Transmitters who encounter problems can check the Web status by typing "e-file status" in the search window.

MeF Waivers
  1. While all charities and non-profits were encouraged to take advantage of the many benefits of electronic filing before the enactment of the TFA, certain exempt organizations were already required to file their annual information return electronically. For tax years ending on or after December 31, 2006, exempt organizations with $10 million or more in total assets were required to file their return electronically if they also filed at least 250 returns in a calendar year, including income, excise, employment tax, and information returns, e.g., Form 941, Form W-2, Form 1098.

    Note:

    For any fiscal period for which an organization is required to file its return electronically, the filing requirement is not satisfied by the posting of a paper return, which is not considered a valid return for that period. Electronically-filed EO returns can be identified by DLNs that begin with 93/92/88. Be sure to check the DLN of posted returns before telling an organization with an electronic filing requirement that its filing requirement has been satisfied. See paragraph 14 below if the caller indicates his/her organization received a letter informing it that it was required to file its return electronically.

  2. Prior to the enactment of the TFA, private foundations and nonexempt charitable trusts that are treated as private foundations were required to file the Form 990-PF electronically, regardless of their assets, if they filed at least 250 returns annually.

    Note:

    For any fiscal period for which an organization is required to file its return electronically, the filing requirement is not satisfied by the posting of a paper return, which is not considered a valid return for that period. Electronically-filed EO returns can be identified by DLNs that begin with 93/92/88. Be sure to check the DLN of posted returns before telling an organization with an electronic filing requirement that its filing requirement has been satisfied. See paragraph 14 below if the caller indicates his/her organization received a letter informing it that it was required to file its return electronically.

  3. Notice 2010-13 established criteria under which exempt organizations can request a waiver from the electronic filing requirement:

    • Where the exempt organization cannot meet electronic filing requirements due to technology constraints; or

    • Where compliance with the requirements would result in undue financial burden on the filer.

  4. Waiver requests are processed by the Ogden Campus:

    Internal Revenue Service
    Ogden Submission Processing Center
    Attn: Forms 1120 and 990 e-file Waiver Request, Stop 1057
    Ogden, UT 84201

    Fax number 877-477-0575

    Private Delivery Service

    Internal Revenue Service
    Ogden Submission Processing Center
    Attn: Forms 1120 and 990 e-file Waiver Request, Stop 1057
    1973 N. Rulon White Blvd
    Ogden, UT 84404

    Organizations that request a waiver of the requirement to file their returns electronically will receive Letter 4069C from the e-Help Desk informing them whether their request was granted or not. If the request is denied, the letter will explain why. If the request is granted, the approval applies only to the tax period requested in the waiver.

  5. A TC 971 Action Code indicates whether the waiver request was approved (AC 322) or denied (AC 323). The code will be displayed on CC TXMOD and CC BMFOLT for the period for which the waiver was requested.

MeF Rejected Returns
  1. If an organization attempts to file a return electronically and is unable to do so, the electronic return originator (ERO) will receive notification from the Service that the return was not accepted for processing. The ERO is required to inform the filer of the reject within 24 hours, provide the filer with an explanation of why the return was not accepted through the electronic system, and inform him/her a paper return must be filed.

  2. A paper return received after the return due date will be considered timely filed if the filer indicates on the return or an attachment that an unsuccessful attempt was made to file timely electronically and received date is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of being notified of rejection.

  3. Notice 2012-4 was issued providing an extension to organizations attempting to file their exempt organization return electronically from January 1, 2012 through March 1. 2012. If an organization is assessed a penalty and requests reasonable cause stating they were unable to file electronically and filed their return by March 30. 2012, abate the penalty if the return due date or extended due date fell between January 1, 2012 through March 1, 2012. Reason code 045 should be used. Send a Letter 0168C to the filer. A signature isn't required on the request; however the penalty should only be removed upon request from the organization or a representative.

Exempt Organization Procedures

  1. Refer to the following procedures for resolving exempt organization account related inquiries, claims, amended returns or correspondence issues.

  2. If a former officer or other third party informs us they are no longer part of or authorized to act for the organization, but continues to receive correspondence:

    • Follow the instructions in IRM 3.13.2.4.6 (11).

      Exception:

      If a third party supplies a new address but is not authorized to act for the taxpayer, input TC 593/closing 082 and send correspondence to the taxpayer (using the address provided by the third party), requesting completion of Form 8822-B.

    • Send Letter 0096c if a response to the Letter 2645c is required.

Form 990, Return of Organization Exempt From Income Tax,
Form 990-EZ, Short Form Return of Organization Exempt From Income Tax and
Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required To File Form 990 or 990-EZ

  1. Form 990 and Form 990-EZ are used by tax-exempt organizations, nonexempt charitable trusts, and IRC 527 political organizations to provide the IRS with the information required by IRC 6033.

  2. The MFT for Form 990 and Form 990-EZ is 67, tax class "4" and the return is due the 15th day of the 5th month after the tax year end. Form 990 Doc Code is 90 and Form 990-EZ Doc Code is 09.

  3. The Doc Code for Form 990 is "93 " and the Form 990-EZ Doc Code is "92" .

  4. All Forms 990 and Forms 990-EZ, are imaged or scanned.

  5. Form 990 must be filed by an organization exempt from income tax under section 501(a) (including an organization that hasn’t applied for recognition of exemption) if it has either:

    1. Gross receipts greater than or equal to $200,000 or

    2. Total assets greater than or equal to $500,000 at the end of the tax year (with exceptions described in the instructions for Form 990 under "Who Must File" and "Section B. Organizations Not Required to File Form 990 or 990-EZ ."

  6. An organization can choose to file Form 990-EZ instead of Form 990 if their gross receipts are less than $200,000 and total assets at the end of the tax year less than $500,000. See the instructions for Form 990 for more information, including special rules regarding controlling organizations under section 512(b)(13) and sponsoring organizations of donor advised funds.

  7. If an organization normally has gross receipts of $50,000 or less, it must submit Form 990-N, if it chooses not to file Form 990 or Form 990-EZ (exceptions to filing Form 990-N are described in the instructions for Form 990 and Form 990-EZ for certain section 509(a)(3) supporting organizations and for certain organizations described in Section B. Organizations Not Required To File Form 990 or 990-EZ of the instructions for Form 990 and the General Instruction B for Form 990-EZ.

  8. Unless excepted (see table in IRM 21.7.7.5.9.1.1.4 ), a tax-exempt political organization must file an exempt organization annual information return if it has gross receipts of $25,000 or more for the taxable year ($100,000 for QSLPOs). A tax-exempt political organization with gross receipts of less than $100,000 and assets of less than $250,000 at the end of the year may file a Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. Otherwise, it files a Form 990, Return of Organization Exempt from Income Tax.

Form 990 with a Group Exemption Number (GEN)
  1. Some organizations that file Form 990 receive a group ruling. This type of ruling is identified by a Group Exemption Number (GEN). The central organization of the group ruling is identified by an Affiliation Code (AC) "6" or "8" on CC ENMOD.

  2. A group return entity has its own EIN, which is a dummy entity used to file the group return. The group return entity is identified by a Form 990 filing requirement of "3" and words "Group Return" added to the organization's name.

  3. The central organization of the group receives the ruling and members or subordinates of the group are added as the central organization determines their eligibility. Normally subordinate entities and the central organization have the same name, identified by the presence of a chapter name or local number. The subordinate is identified by an Affiliation Code of "7" or "9" on CC ENMOD.

Central Organization
  1. An organization that has one or more subordinates under its general supervision or control is referred to as a central organization.

  2. The central organization has a separate EIN and is identified by an Affiliation Code "6" (central organization of a group ruling - not a church) or "8" (central organization of a church).

  3. A central organization files one Form 990 for itself based on the income and expenses of only the central organization. It may also file a group return that includes all of the income and expenses for its affiliates who elect to be included on a group return.

Subordinate (Affiliate) Organization
  1. A chapter, local, post, or unit of a central organization is referred to as a subordinate organization.

  2. A subordinate is identified by an Affiliation Code "7" (intermediate parent - subordinate by state) or "9" (subordinate of a group ruling or group return).

  3. A subordinate may choose to file as part of a group return or may file a separate return.

  4. Every year, each subordinate must authorize the central organization in writing to include it in the group return. The group return is filed under the group return's EIN. Any subordinate not filing as part of the group must file a separate return using its own EIN. A group code 8 (entered on the edit sheet) means that only some of the affiliates are included in the group return. A group code 7 means that all of the affiliates are included.

  5. A TC 590 CC014 is input on each of the affiliate's EIN that is included on the group return to prevent a delinquency notice from being issued.

Gross Receipt Calculation
  1. Gross receipts are figured as outline below:

    • Form 990, Part VIII, Column A - Gross receipts are the total of lines 6b (both columns, 7b (both columns), 8b, 9b, 10b and 12.

    • Form 990-EZ, Part I, lines 5b, 6c, and 7b to line 9.

U.S. Virgin Islands Exempt Organization Penalty Abatement and Form 990 Processing Procedures
  1. Virgin Islands EOs must file a timely Form 990 with the Bureau of Internal Revenue (BIR) in the Virgin Islands and the U.S. IRS. In the past, some organizations have sent copies of their return to the Ogden Submission Processing Campus for information purposes only. If the Form 990 was received after the return due date, the organization was assessed a Daily Delinquency Penalty for late filing and a balance due notice was generated to the organization.

  2. In response to the notice, the OAMC EO Accounts units receive correspondence from the organizations requesting abatement of the penalty. Their request is based on the fact that the organization filed their return timely with the VIBIR and, therefore, are not required to file a return with the United States IRS.

  3. The VIBIR and IRSA implemented a Memorandum of Understanding (MOU) establishing procedures for processing applications for recognition of exemption from federal income tax under IRC 501 . It also gives guidance on filing returns by tax-exempt organizations chartered in the US Virgin Islands (USVI). Under this agreement, organizations have a choice:

    If organization Action
    wants actual exemption recognition by the IRS, it can either file its exemption application with:
    • IRS

    • BIR

    For applications filed with the IRS, send all written correspondence to the organization.
    If exempted,
    • Send a copy of the exemption determination to the BIR for information.

    • The organization is responsible for filing the Form 990 with the OSPC and for following all other tax laws applicable to organizations that have been recognized as exempt under IRC 501 of the IRC.

      For applications filed with the BIR, the BIR sends the :
    • exemption application to the IRS (and user fee) for processing as a request for recognition by the IRS with the Form 8821, Tax Information Authorization, completed by the organization authorizing the BIR to receive tax return information related to the exemption application.

      Note:

      For applications filed by the BIR with the IRS, the IRS contacts and sends all written correspondence to both the organization and the BIR.

    only needs BIR exemption, not IRS exemption The BIR sends the appropriate exemption application to the IRS for processing as a request for an information letter about whether the organization is described under a particular tax-exemption section of the IRC.
    The IRS:
    1. Corresponds with the BIR if they need additional information.

    2. Issues an information letter to the BIR, not the organization, that the organization is described in the applicable Code section.


    If the organization is described as a tax-exempt organization, it won’t:
    • Receive an exemption determination.

    • Be listed as an exempt organization in any IRS publication or record.

    • Have any IRS filing requirements.

  4. Before you abate the delinquency penalty, follow these procedures:

    1. Research command code BMFOLO and ENMOD to determine the current exempt status of the organization. If the account is in Status 97, see IRM 21.7.7.6.24 (11).

    2. If the current status is favorable and the organization states in response to the penalty notice that it is chartered in the USVI and files its 990 returns with the BIR, request the organization to provide the BIR certification of the organization's Form 990 filings. The certification provides a record of the filing history and should include the tax year, type of form filed and date it was filed. The certification must be stamped and signed by a representative of the VIBIR. In addition, the organization is required to submit copies of the Forms 990 filed for the three most recent tax years.

    3. Suspend the case for 45 days pending reply from the organization. Contact them either telephone or in writing.

    4. If the organization provides the certification and copies of the prior year returns, process the returns as normal. Edit the returns in red and restrict penalty assessment on the prior years by using computer condition codes "R" and "V" .

    5. Abate the DDP on the current account and issue correspondence for penalty abatement.

      Note:

      If statute periods are involved, follow statute guidelines.

    6. If the organization doesn’t submit the information, correspond with them and explain that we won’t adjust the penalty at his time because they didn’t provide the requested information.

    7. Give a current balance due and release the STAUP.

    8. If the BMFOLO research in step a) above shows that the organization doesn’t have favorable exempt status, contact the Cincinnati TE/GE office at 513-263-3758. They secure a copy of the record and send it to a determination specialist for review. The specialist researches the account and determines if the exemption is still valid. If the organization is determined to be exempt, the specialist updates the EO section of the account to reflect a good status and notifies the EO Accounts tax examiner.

    9. Proceed as described in steps b) & c) above.

    10. If a record isn't available, Cincinnati TE/GE calls the EO Accounts tax examiner.

    11. Refer the case to the Field.

  5. If you determine that the organization meets any of the criteria below, send the case to the Field for review.

    • Does not qualify for tax exempt status.

    • Exempt, but fails to provide the certification or file the prior year returns with the US IRS.

    • Uncooperative in any way in resolving the delinquency penalty issue.

  6. The above procedures apply to all forms required to be filed by the organization.

American Samoa
  1. A foreign organization that has U.S. exemption is required to file an annual information return, unless there is a treaty, MOU or a Revenue Procedure (e.g., Revenue Procedure. 94-17 or Revenue Procedure 2003-21) that applies. Since US doesn’t have any of these treaties with the American Samoa, refer the case to the Field for resolution.

Form 990-PF, Return of Private Foundation or
IRC 4947(a)(1) Nonexempt Charitable Trust Treated as A Private Foundation

  1. Form 990-PF is an annual information return that must be filed by:

    • Exempt private foundations (IRC 6033(a) and(c))

    • Taxable private foundations (IRC 6033(d))

    • Organizations that agree to private foundation status and whose application for exempt status are pending on the due date for filing Form 990-PF

    • Organizations that made an election under IRC 41(e)(6)

    • Organizations that are making an IRC 507 termination prior to the end of the 60 month termination period

    • IRC 4947(a)(1) nonexempt charitable trusts that are treated as private foundations (IRC 6033(d) )

  2. The MFT is 44 and the tax class is "4" . The return is due the 15th day of the 5th month after the tax year end. Form 990-PF filers should have a SS 03 with Foundation Code (FC) 02 - 04, or Status Code (SC) 92.

  3. Form 990-PF is used to:

    • Figure the tax based on investment income;

    • Report charitable distributions and activities;

    • Serve as a substitute for the IRC 4947(a)(1) nonexempt charitable trust's income tax return, Form 1041, U.S. Income Tax Return for Estates and Trusts, when the trust has no taxable income.

  4. Private foundations are required to file Form 990-PF regardless of their amount of gross receipts.

  5. A private foundation that has disposed of all of its assets and does not terminate its private foundation status must file a Form 990-PF for the taxable year of the disposition.

    1. They must comply with any expenditure responsibility reporting obligations on that return, but don't have to file returns in the following taxable years they don’t have assets or engage in any activities.

    2. If, in later taxable years, they receive additional assets or resume activities, they must resume filing a Form 990-PF for those taxable years in which it has assets or activities. See Rev. Rul. 2002-28.

  6. All Forms 990-PF are imaged or scanned after initial processing of the return.

Definitions
  1. A Private Foundation is a domestic or foreign organization exempt from income tax under IRC 501(a) ; described in IRC 501(c)(3); and is other than an organization described in IRC 509(a)(1) , IRC 509(a)(2), IRC 509(a)(3), or IRC 509(a)(4). In general, churches, hospitals, schools, and broadly public supported organizations are excluded from private foundation status by these sections.

  2. A Non Operating Private Foundation is a private foundation that isn't a private operating foundation.

  3. A Nonexempt Charitable Trust is treated as a private foundation. It is a trust that isn't exempt from tax under IRC 501(a), that has all its unexpired interests devoted to religious, charitable, or other purposes described in IRC 170(c)(2)(B) and that may take a deduction under IRC 4947(a)(1).

  4. A Taxable Private Foundation is an organization that is no longer exempt under IRC 501(a) as an organization described in IRC 501(c)(3). Though it may operate as a taxable entity, it will continue to be treated as a private foundation until that status is terminated under IRC 507.

  5. A Private Operating Foundation is an organization that is described under IRC 4942(j)(3) or IRC 4942(j)(5). It is a private foundation that meets the income test, which means spending at least 85% of its adjusted net income or its minimum investment return, whichever is less, directly on the operations of its exempt activities. Additionally, the foundation must also meet one of the following tests:

    • Assets test

    • Endowment test

    • Support test

    Some private foundations qualify as private operating foundations. These are types of private foundations that, although lacking general public support, make qualifying distributions directly for the active conduct of their educational, charitable, or religious purposes, as distinct from merely making grants to other organizations for these purposes. Most of the restrictions and requirements that apply to private foundations also apply to private operating foundations.

  6. Exempt Operating Foundation is an operating foundation described under IRC 4940(d)(2) . The foundation must obtain a letter ruling from the IRS recognizing special status, may not owe any tax and isn’t liable for any tax on net investment income on Form 990-PF .

Tax Rates
  1. A private foundation is subject to different taxes on its investment income under IRC 4940 or 4948 depending on various factors.

    1. Most private foundations are subject to a 1.39% tax on their investment income under IRC 4940(a) for tax years beginning after December 20, 2019.

    2. For tax years beginning on or before December 20, 2019, the excise tax is 2% of net investment income, but can be reduced to 1% in certain cases that meet the requirements of IRC 4940(e).

      Note:

      IRC 4940(e) was repealed December 20, 2019 with Pub.L. 116-94 [HR 1865]. The instructions from (1)(b) through (4) below that relate to the requirements of IRC 4940(e) are valid for tax years beginning on or before December 20, 2019 only.

    3. Different rules apply to private foundations that meet certain distribution requirements (IRC 4940(e)), taxable private foundations and 4947(a)(1) nonexempt charitable trusts (IRC 4940(b)), exempt operating foundations (IRC 4940(d)), and foreign private foundations (IRC 4948(a)).

    4. In addition, private operating foundations are not subject to tax under IRC 4942 for failure to distribute income.

  2. Domestic Exempt Private Foundations are subject to a 1.39% (2% for tax years beginning on or before December 20, 2019) tax on net investment income under IRC 4940(a). However, certain private foundations that meet the requirements of IRC 4940(e) may qualify for a reduced tax of 1% (see Form 990-PF, Part V instructions). To qualify for the 1% tax rate, the private foundation must:

    • Be subsection 03

    • Be Foundation Code 03 or 04

    • Not be in its first year of existence

    • Have the box on Part VI, line 1b checked

    • Have Part V completed: Line 8 must be greater than or equal to line 7 in order to qualify for the 1% tax rate

    • Be a U.S. domestic organization

      The foundation must make a separate computation for each year it wants to qualify for the reduced tax rate of 1%. A private foundation can’t qualify under IRC 4940(e) for its first year of existence, nor can a former public charity qualify for the first year it’s treated as a private foundation. This is an annual election and the taxpayer must meet the above criteria each year to qualify for the reduced tax rate.

    Note:

    No tax on net investment income is imposed by IRC 4940 on any exempt operating foundations described in IRC 4940(d)(2) for the taxable year.

  3. Domestic Taxable Private Foundations and IRC 4947(a)(1) Nonexempt Charitable Trusts are subject to a modified 1.39% (2% for tax years beginning on or before December 20, 2019) tax rate on net investment income under IRC 4940(b). If they meet the requirements of IRC 4940(e), they may qualify to use a modified 1% tax on net investment income (see Form 990-PF, Part V instructions). Qualifications for the 1.39% (2% for tax years beginning on or before December 20, 2019) tax rate:

    • Subsection 03 or 92

    • Foundation Code 03 or 04

    • Must be a U.S. domestic organization

  4. POF – A private foundation may qualify for treatment as a Private Operating Foundation (POF). These foundations generally are still subject to the tax on net investment income and to the other requirements and restrictions that generally apply to private foundation activity. However, operating foundations are not subject to the excise tax on failure to distribute income. POF as described in IRC 4942(j)(3) refers to any private foundation that spends at least 85% of its adjusted net income or its minimum investment return, whichever is less, directly for the active conduct of its exempt activities (the income test), and also meets one of the following tests:

    • Assets test

    • Endowment test

    • Support test

    Income Test - To qualify as an operating foundation, the organization must make qualifying distributions directly for the active conduct of its exempt activities equal to at least 85% of the lesser of its adjusted net income or minimum investment return.

    Certain private foundations that provide long-term care facilities are treated as operating foundations only for the purposes of the excise tax on failure to distribute income.

    Private Operating Foundations are taxed at either 1.39% (2% for tax years beginning on or before December 20, 2019) or 1% if they qualify for a reduced rate under IRC 4940(e). Qualifications for these tax rates are the same as for Domestic Taxable Private Foundations as shown above.

  5. Exempt Operating Foundations described in IRC 4940(d)(2) that have a determination letter from IRS establishing its exempt operating foundation status have a 0% tax. These letters, issued by the Cincinnati ruling group, specifically refer to the organization as an "exempt operating foundation." If the organization doesn’t have this letter, they don’t qualify for the 0% rate. The organization must also meet these additional qualifications:

    • Subsection 03

    • Foundation Code 02

    • Check the box on Line 1a in Part VI and enter the ruling date

    • It is an operating foundation described in IRC 4942(j)(3)

    • It was publicly supported for at least 10 years

    • Its governing body during the tax year consists of individuals fewer than 25% of whom are disqualified individuals and it is broadly representative of the general public

    • It has no officer who was a disqualified individual at any time during the tax year

    Note:

    If the organization is claiming IRC 4940(d)(2) status and the Foundation Code (FC) is other than 02, request a copy of the determination letter from the organization. The determination letter provides specific information for determining whether to update the FC. If the FC needs to be updated, route a copy of the determination letter to the EO Entity Unit, requesting them to correct the FC.

    If an organization enters into a 60-month termination, it does not lose its tax exempt operating foundation status if it continues to meet all the requirements described above.

  6. Foreign Organizations are exempt foreign private foundations that have been granted tax-exempt status under U.S. tax law. They are required to pay an excise tax equal to 4% of their gross investment income received from sources in the United States, any territory, any political subdivision of a territory, or the District of Columbia. An exception to this rule is made when a tax treaty between the U.S. and the foreign country of which the private foundation is a resident specifically exempts income received by these organizations from any tax and the organization meets a limitations on benefits test in the treaty. Qualification for the 4% tax rate:

    • Subsection 03 or 92

    • Foundation Code 03 or 04

    • Box D1 on page 1 must be checked to indicate the organization is a foreign organization.

      Note:

      Foreign private foundations receiving at least 85% of their support (excluding gross investment income) from sources outside the U.S. are not subject to the excise taxes on self-dealing, failure to distribute income, excess business holdings, investments that jeopardize charitable purposes, and taxable expenditures. Such foundations are also not subject to IRC 507, relating to termination of private foundation status, and IRC 508, regarding special rules for giving notice when they are applying for recognition of exempt status.

      Some other unique requirements for foreign organizations are:

      • Foreign organizations don't have to have a foreign address.

      • Foreign organizations don't have to complete Parts XI, XIII, or XV and also don't have to complete Part X if they are not private operating foundations (SC 03 with FC 02 or FC 03).

      • If they say they are a domestic organization and should be taxed at a lower tax rate, the organizations need to provide us with a copy of their determination letter and complete all parts of the return.

      • A Canadian foundation may or may not be treated as a foreign organization depending on what treaty it falls under. They will usually reference the treaty on the return. A foreign organization cannot claim expenses against its income.

Section 511 Tax
  1. In order to determine its 4940 tax, a domestic IRC 4947(a)(1) nonexempt charitable trust or taxable private foundation (SC 92) must compute its unrelated business income tax if it has UBIT (unrelated business taxable income).

  2. They:

    1. Must attach the tax computation to the Form 990-PF and report it on line 2 in Part VI.

    2. May use Form 990-T as the attachment.

Subtitle A Tax
  1. Domestic IRC 4947(a)(1) nonexempt charitable trusts and taxable private foundations must enter the amount of subtitle A (income) tax reported on Form 1120 or Form 1041.

  2. They should attach a copy of the tax computation.

  3. This is a non refundable credit against tax. Before the credit is allowed, verify that the taxpayer has filed either a Form 1041 or Form 1120 reporting the tax amount. The credit is allowed with a TC 291.

Credit/Payment for U.S. Tax Withheld at Source
  1. A foreign organization claiming U.S. tax withheld at source may claim a credit on Form 990-PF, Part VI, line 6b. In order for an organization to receive a credit for "tax withheld at source" on line 6b, box D1 on the front of the return must be checked.

  2. If the organization is a domestic organization (box D1 isn't checked) and is trying to claim a credit for business conducted in a foreign country, the credit cannot be allowed on Part VI, line 6b. However, it can claim the amount as an expense against its unrelated business taxable income (UBIT) in order to reduce its liability.

  3. If the credit claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡, secure Form 1042-S, or a written statement with similar information, from the organization before allowing the credit.

  4. If the organization states the credit for U.S. tax withheld at source was claimed on the original return, but was not allowed, request the original return from Files or get a copy from OL-SEIN before you send it to the Field. TXMOD and BRTVU prints alone aren’t acceptable.

Calculating Gross Receipts
  1. Calculate gross receipts reported on Form 990-PF as follows:

    • Total Part I, Line 12, column (a), then add to it lines 6b and 10 b, then subtract line 6a from that amount.

Methods of Terminating PF Status
  1. Once an organization is determined to be a private foundation, its status may be terminated only under the provisions of IRC 507.

    1. An organization's status as a private foundation may be terminated voluntarily or involuntarily.

    2. IRC 507 lists four methods of changing or terminating an organization's status as a private foundation.

  2. If the organization's status is terminated either voluntarily or involuntarily under IRC 507(a), the organization becomes liable for tax under IRC 507(c)

    • IRC 507(a)(1) - Voluntary Termination

    • IRC 507(a)(2) - Involuntary Termination

    • IRC 507(b)(1)(A) - Transfer of Assets to a Public Charity

    • IRC 507(b)(1)(B) - Operation as a Public Charity

IRC 507(a)(1) Terminations - EO Status 23
  1. In order for a private foundation to terminate under IRC 507(a)(1), it must:

    • Submit a statement to Cincinnati that it intends to terminate its private foundation status under IRC 507(a)(1).

    • Detail in the statement the computation of termination tax imposed by IRC 507(c). The tax is the lesser of the "aggregate tax benefit" or the net fair market value of its assets.

  2. Unless the foundation requests abatement of tax under IRC 507(g) , they must pay the tax in full at the time the statement is filed.

IRC 507(a)(2) Terminations - EO Status 23
  1. An involuntary termination under IRC 507(a)(2) occurs when the IRS notifies an organization that its private foundation status is being terminated because it has willfully committed repeated acts or violations of Chapter 42 provisions. IRS must attach a computation of the termination tax.

IRC 507(b)(1)(A) Terminations - EO Status 24
  1. A private foundation terminating under IRC 507(b)(1)(A) must distribute all of its net assets to one or more public charities described in IRC 509(a)(1) and these charities must have been in existence for a period of at least 60 months immediately preceding the distribution.

  2. The private foundation:

    1. Isn't required to submit notice to the IRS of its intent to terminate

    2. Doesn’t incur a termination tax under IRC 507(c).

      Note:

      It is required to file a complete Form 990-PF.

IRC 507(b)(1)(B) Terminations - EO Status 25
  1. An organization may voluntarily terminate its status under IRC 507(b)(1)(B) either by transferring all its net assets to one or more public charities or by meeting the requirements below. In order for a private foundation to terminate under IRC 507(b)(1)(B), it must meet the following conditions - the foundation:

    • Notifies TE/GE Determinations of its intention to operate as a public charity in advance of the 60-month termination period.

    • Conducts its operations over a continuous 60-month period meeting the requirement of IRC 509(a)(1), IRC 509(a)(2), or IRC 509(a)(3) according to its notice.

    • Furnishes TE/GE Determinations sufficient information to allow a determination that it met the requirements of IRC 509(a)(1), IRC 509(a)(2), or IRC 509(a)(3) within 90 days after the 60-month period.

      Note:

      Although an organization terminating its private foundation status under IRC 507(b)(1)(B) may be regarded as a public charity for certain purposes, it’s still considered a private foundation for purposes of the filing requirements and must file an annual return on Form 990-PF. It must file the return for each year if the 60-month termination period has not expired before the due date of the return. If the organization is in the last year of the 60-month termination, it may file Form 990 instead of Form 990-PF.

  2. During the 60-month termination period, the private foundation may file Form 990-PF without paying the tax on net investment income if it filed a consent (Form 872-B) to extend the statute under IRC 6501(c)(4) with TE/GE Determinations and received an approval. Upon approving the consent, TE/GE Determination places the private foundation in status 25, indicating a termination under IRC 507(b), and an Advance Ruling Expiration Date (ARED) is entered. The status code date is also updated to reflect the beginning of the 60-month period.

  3. If the private foundation did not file a consent, the tax must be paid and a claim for refund filed after completing a successful termination.

  4. A private foundation may also obtain an advance ruling under 26 CFR 1.507-2(d) that it can be expected to satisfy the 507(b)(1)(B) requirements during the 60-month termination period. The effect of this ruling is that contributors may generally treat the organization as a public charity, and the organization will not be assessed penalties under section 6651 for failure to pay 4940 tax during the 60 months. The advance ruling on IRC 507(b)(1)(B) termination doesn’t mean that the organization necessarily will qualify as a public charity during the advance ruling period (except for purposes of contributor reliance and penalties).

  5. When Form 990-PF is received with Box "F" in the entity section checked, Part VI is zero or blank (no tax), and an approved consent is attached, Code & Edit edits a Termination Code "1" on the Form 5800 (EO edit sheet). The Termination Code "1" suppresses the generation of tax until the end of the 60-month termination period.

  6. Any foundation not paying the tax when it filed Form 990-PF must attach a copy of the signed consent to the return. If the foundation didn’t file the consent, it must pay the tax in the normal manner and file a claim for refund after completing the 60-month termination. The claim for refund must be filed on time and the organization must supply information establishing that it qualified as a public charity for the period for which it paid the tax.

  7. Effective January 01, 2005, programming was established that prevents the tax from being assessed to a module during the five year advance-ruling period. As such, it is no longer necessary to manually monitor status 25 modules. If an organization does not meet the requirements to become a public charity, the EO status code is updated (reverts back to Status 01 from Status 25) and Form 990-PF filing requirements remain in place. Any tax (if applicable) previously reported on the Form 990-PF for the past five years is assessed to the module and balance due notices are issued. If the organization does become a public charity, the filing requirements are updated to "990" and the EO status code is changed to "01" .

  8. At the end of the 60-month termination, if the organization has met the requirements to terminate their PF status, the EO Status is updated to 01 and the filing requirements changed to Form 990.

  9. If a paper case is received requesting termination of private foundation status, send the correspondence to:
    Internal Revenue Service
    Exempt Organizations Determinations
    550 Main St Rm 4024
    Cincinnati, OH, 45202

Form 990-T, Exempt Organization Business Income Tax Return
(and proxy tax under section 6033(e))

  1. Form 990-T is used to:

    • Report "Unrelated Business Income" (UBI);

    • Figure and report "Unrelated Business Income Tax" (UBIT) liability;

    • Report proxy tax liability; or

    • Claim a refund of income tax paid by a regulated investment company (RIC) or a real estate investment trust (REIT) on undistributed long-term capital gain.

  2. Any domestic or foreign organization exempt under IRC 501(a) or IRC 529(a) (except an organization described in IRC 501(c)(1)) must file Form 990-T if it has gross income from an unrelated trade or business of $1,000 or more or is liable for proxy tax on lobbying and political expenditures. Any college or university of a state or other governmental unit as well as any subsidiary corporation wholly owned by such college or university, must file Form 990-T if it has gross income from an unrelated trade or business of $1,000 or more.

  3. Form 990-T is MFT 34 and the tax class is 4. Form 990-T has two possible due dates:

    1. An employee plan's trust defined in IRC 401(a), an IRA (including SEP) and (SIMPLE), a Roth IRA, and an Education IRA, and a MSA must file Form 990-T by the 15th day of the 4th month after the end of the tax year.

      Note:

      An Employee Plan trust under 401(a) must attain and use a separate EIN for Form 990-T. They can’t use EINs for corporate returns Form 1120, Form 940, Form 941, Form 5500 and Form 990 for trusts defined in IRC 401(a)

    2. All other organizations must file Form 990-T by the 15th day of the 5th month after the end of the tax year.

    The computer uses the "Type of Org" code shown on BRTVU to determine the return due date.

Unrelated Trade or Business Income
  1. Unrelated trade or business income is the gross income derived from any trade or business that is regularly carried on and not substantially related (other than through the production of funds) to the organization's exempt purpose or function except that the organization uses the profits derived from this activity. Refer to Publication 598, Tax on Unrelated Business Income of Exempt Organizations, for additional information.

  2. Fiduciaries for the following trusts that have $1,000 or more of unrelated trade or business gross income must file Form 990-T :

    • Individual Retirement Accounts (IRAs) - IRC 408(a)

    • Simplified Employee Pensions (SEPs) - IRC 408(k)

    • Simple Retirement Accounts (SIMPLEs) - IRC 408(p)

    • Roth IRAs - IRC 408A(b)

    • Education IRAs - IRC 530(b)

    • Medical Savings Accounts (MSAs) - IRC 220(d)

    • Qualified tuition programs - section 529.

Form 990-T IRC 511(a)(1) Filers
  1. Every IRC 511(a)(2) organization’s UBTI is taxed at the corporate rate (IRC 511(a)(1)). Individual IRAs are exempt from taxation under IRC 408(e) . An IRA that has UBTI is taxable under IRC 511(a)(1) and is taxed at the corporate rate. Identify these accounts by researching ENMOD to verify that the entity has the word IRA in the name line (i.e., John Smith IRA) and the FR is 2.

  2. If correspondence is received from a taxpayer indicating their Form 990-T is an IRA filed under IRC 511(a)(1), but was assessed tax at the trust rate, adjust the tax:

    1. Verify taxpayer is a IRC 511(a)(1) filer (see paragraph one above).

    2. Recompute tax based on applicable corporate tax rate (see IRM 21.7.7.6.3.3 ).

    3. Input TC 291 for appropriate dollar amount.

Tax Rates
  1. The tax rate charged on Form 990-T varies according to the type of organization.

    1. IRC 501(c) corporations, associations and state colleges and universities are taxed using corporate tax rates (Form 1120).

    2. IRC 501(c) trusts, IRC 401(a) trusts and IRC 408(a) trusts are taxed using trust tax rates (Form 1041).

    3. Form 990-T returns filed for the Proxy tax under IRC 6033(d)(2) on nondeductible lobbying and political expenditures should have a copy of the tax computation attached.

    Refer to the following tables for applicable tax rates:
    Tax Rate Schedule for Corporations
    Tax Periods 201812 to Present
    IRC 11
    If taxable income on Page 2, Line 38 is over: But not over: Tax is:
    $0 or greater 21%

    Note:

    If the taxpayer filed a fiscal return (tax year ending 201801 through 201811)

    and they used the Corporate Tax Rate, compute the Gross Income Tax using the following computation:
    Step Action Amount
    Step 1 Figure the corporate tax for entire tax year using the corporate tax rate schedule below. Line 1 amount
    Step 2 Figure the corporate tax for entire tax year using the 21% flat tax. Line 2 amount
    Step 3 Multiply Line 1 by the number of days in the filer’s tax year before January 1, 2018. Line 3 amount
    Step 4 Multiply Line 2 by the number of days in the filer’s tax year after December 31, 2017. Line 4 amount
    Step 5 Divide Line 3 by the total number of days in the filer’s tax year. Line 5 amount
    Step 6 Divide Line 4 by the total number of days in the filer’s tax year. Line 6 amount
    Step 7 Add Lines 5 and 6. This is the filer’s total tax for the fiscal year. Total tax amount
    Tax Rate Schedule for Corporations
    Tax Period 201811 and prior
    IRC 11
    If taxable income on Page 1, Line 34 is over: But not over: Tax is:
    $0 $50,000 15%
    $50,000 $75,000 $7,500 + 25%
    $75,000 $100,000 $13,750 + 34%
    $100,000 $335,000 $22,250 + 39%
    $335,000 $10,000,000 $113, 900 + 34%
    $10,000,000 $15,000,000 3,400,000 + 35%
    $15,000,000 $18,333,333 5,150,000 + 38%
    $18,333,333 or greater 35%

  2. Trusts exempt under IRC 501(a) which otherwise would be subject to subchapter J (estates, trusts, etc.) are taxed at trust rates. This rule also applies to employees' trusts that qualify under IRC 401(a). Most trusts figure the tax on the amount on line 38 using the Tax Rate Schedule for Trusts below:

    Tax Rate Schedule for Trusts
    Tax Periods
    201812 - present
    If the amount on Page 2, Line 38 is But not over The tax is Of the amount over
    $0 $2,550 10% $0
    $2,550 $9,150 $255.00 + 24% $2,550
    $9,150 $12,500 $1839.00 + 35% $9,150
    $12,500 and greater $3,011.50 + 37% $12,500
    Tax Rate Schedule for Trusts
    Tax Periods
    201712 - 201811
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,550 15% $0
    $2,550 $5,950 $382.50 + 25% $2,550
    $5,950 $9,050 $1,245.00 + 28% $6,000
    $9,050 $12,400 $2,127.00 + 33% $9,150
    $12,400 and greater $3,232.50 +39.6% $12,500
    Tax Rate Schedule for Trusts
    Tax Periods
    201612 - 201711
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,550 15% $0
    $2,550 $5,950 $382.50 + 25% $2,550
    $5,950 $9,050 $1,232.50 + 28% $5,950
    $9,050 $12,400 $2,100.50 + 33% $9,050
    $12,400 and greater $3,206 + 39.6% $12,400
    Tax Rate Schedule for Trusts
    Tax Periods
    201512 - 201611
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,500 15% $0
    $2,500 $5,900 $375 + 25% $2,500
    $5,900 $9,050 $1,225 + 28% $5,900
    $9,050 $12,300 $2,107 + 33% $9,050
    $12,300 and greater $3,179.50 + 39.6% $12,300
    Tax Rate Schedule for Trusts
    Tax Periods
    201412 - 201511
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,500 15% $0
    $2,500 $5,800 $375 + 25% $2,500
    $5,800 $8,900 $1,200 + 28% $5,800
    $8,900 $12,150 $2,068 + 33% $8,900
    $12,150 and greater $3,140.50 + 39.6% $12,150
    Tax Rate Schedule for Trusts
    Tax Periods
    201312 - 201411
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,450 15% $0
    $2,450 $5,700 $367.50 + 25% $2,450
    $5,700 $8,700 $1,180 + 28% $5,700
    $8,700 $11,950 $2,034 + 33% $8,750
    $11,950 and greater $3,090 + 39.6% $11,950
    Tax Rate Schedule for Trusts
    Tax Periods
    201212 - 201311
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,400 15% $0
    $2,400 $5,600 $360 + 25% $2,400
    $5,600 $8,500 $1,160 + 28% $5,600
    $8,500 $11,650 $1,972.50 + 33% $8,500
    $11,650 and greater $3,011.50 + 35% $11,650
    Tax Rate Schedule for Trusts
    Tax Periods
    201112 - 201211
    If the amount on Page 1, Line 34 is But not over The tax is Of the amount over
    $0 $2,300 15% $0
    $2,300 $5,450 $345 + 25% $2,300
    $5,450 $8,300 $1,132.50 + 28% $5,450
    $8,300 $11,350 $1,930.50 + 33% $8,300
    $11,350 and greater $2,937 + 35% $11,350

Proxy Tax
  1. EOs, except IRC 501(c)(3) and certain other organizations, must include certain information about lobbying expenditures on Form 990. In addition, they may have to provide notices to members about their share of dues to which the expenditures are allocated.

  2. The EO calculates proxy tax by multiplying the aggregate amount not included in the notices by 21% (35% for 2017 and prior). No deductions are allowed. They enter this amount on Form 990-T, Part II, line 3 (line 42 for 2019, line 41 for 2018, and line 37 for 2017 and prior) and must attach a schedule showing the computation.

  3. Proxy tax is figured by multiplying the aggregate amount not included in the notices by 21% (35% for 2017 and prior). No deductions are allowed. This amount is entered on Form 990-T, Part II, line 3 (line 42 for 2019, line 41 for 2018, and (line 37 for 2017 and prior) and a schedule showing the computation must be attached.

Alternative Minimum Tax
  1. Organizations liable for tax on unrelated business taxable income may be liable for alternative minimum tax on certain adjustments and tax preference items.

  2. Trusts attach Schedule I, Alternative Minimum Tax, of Form 1041 and enter any tax from Schedule I to Form 990-T, Part II, line 5 (line 43 for 2019, line 42 for 2018 and line 38 for 2017 and prior).

  3. For tax years 2017 and prior, a corporation, unless it is treated as a small corporation exempt from the alternative minimum tax, may have to attach Form 4626 and enter any tax from Form 4626 on Form 990-T, line 38.

    Note:

    The Tax Cuts and Jobs Act of 2017 (TCJA) Section 12001 and 12002 repealed the corporate AMT for tax years beginning after 2017. See IRM 21.7.4.4.4.7.2, Form 4626, Alternative Minimum Tax (Corporations) for more information.

Taxable Income Reference Number
  1. When adjusting tax on a Form 990-T , you may need to adjust taxable income. Use TC 886 as the reference number.

Backup Withholding
  1. Recipients of dividend or interest payments must generally certify their tax identification number to the payer on Form W-9 , Request for Taxpayer Identification Number and Certification. If the payer does not get this information, it must withhold part of the payments as Backup Withholding (BUWH).

  2. If an organization was subject to erroneous backup withholding because the payer did not realize it was an exempt organization and not subject to this withholding, the organization may claim the amount withheld as a credit on Form 990-T or Form 990-PF.

  3. When BUWH is claimed on Form 990-T, the erroneously withheld amount is reported in Part III, line 6e (Part V, line 51e for 2019, line 50e for 2018 and line 45e for 2017 and prior). If claimed on Form 990-PF , the credit is claimed on Part VI, line 6d.

  4. EOs claiming backup withholding of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by either Form 1099 or confirmed using CC IRPTR. Allow amounts of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ without supporting documentation. See IRM 21.7.4.4.10 , Federal Income Tax Withheld (FITW)/Backup Withholding (BUWH) on Income Tax Returns, for instructions on how to process erroneous backup withholding claims.

  5. Refunds for backup withholding are not issued as manual refunds from Form 941 or Form 945.

  6. If Form 843 is filed, reject the claim and explain to the organization that they must file an income tax return ( Form 990-PF or Form 990-T ) to claim the credit.

  7. If the organization isn't required to file Form 990-PF, instruct them to report it on Form 990-T.

Form 2439 - Regulated Investment Company Shareholders' Refunds
  1. IRAs or other tax-exempt shareholders that have invested in a Regulated Investment Company (RIC) or a Real Estate Investment Trust (REIT) file Form 990-T in order to obtain a refund of income tax paid on undistributed long-term capital gains.

  2. Most claims for refund of taxes paid by a RIC on amounts reported on Form 2439 are claimed on a Composite Form 990-T, citing Notice 90–18. A trustee can file a composite Form 990-T to claim one refund of tax paid on undistributed long term capital gains flowing through from a RIC to two or more IRA accounts managed by the trustee. The top of the Form 990-T should be annotated "Composite " , "Notice 90–18" or "IRC 852(b)" .

  3. Refunds of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Form 2439 and reviewed by the Field. You can allow refunds of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ without supporting documentation.

  4. Action required:

    1. Input TC 290 $.00 and TC 766 with a positive amount to allow the credit.

    2. Input TC 290 $.00 and TC 767 with a negative amount to reduce the credit.

    Refer to IRM 21.7.4.4.9.2.1 for additional information.

  5. Loose Forms 2439, copies A and B, are filed by the nominee if they are not the actual owner of the shares for which the form is issued. Follow IRM 21.7.4.4.9.2.2 procedures for processing loose Forms 2439 received for IRA trusts.

Form 8827 - Credit for Prior Year Minimum Tax - Corporations - Treating Prior Year Minimum Tax Credit Carryover as Refundable
  1. The Tax Cuts and Jobs Act of 2017 (TCJA), Section 12001, repealed the alternative minimum tax for corporations for taxable years beginning after December 31, 2017.

  2. TCJA Section 12002 amended IRC Section 53 to allow corporations to treat a portion of their prior year minimum tax credit carryover as refundable. The amount of the refundable credit is equal to 50% for taxable years beginning in 2018, 2019, or 2020 (100% in taxable years beginning in 2021) of the excess (if any) of the minimum tax credit carryover to the taxable year over the amount of the otherwise allowable credit against regular tax liability.

  3. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Section 2305 modifies the credit for prior-year minimum tax liability of corporations as previously allowed by TCJA Section 12002 referenced in paragraph (2) above. Corporate filers can now accelerate the recovery of remaining minimum tax credits for its 2019 taxable year from its 2021 taxable year and elect instead to recover 100% of any of its remaining minimum tax credits in its 2018 taxable year.

    Note:

    A corporation filing a Form 990-T that reflects a refundable prior year minimum tax credit should report the amount on the "Other credits, adjustments, and payments" line (50g in 2018; 51g in 2019) of the Form 990-T, check the "Other" box, and write "Form 8827" or some other entry indicating the amount is for the refundable prior year alternative minimum tax credit on the corresponding line. Form 8827 must be included with the original with amounts reported on lines (6 and 8c in 2018; 3 and 5c in 2019).

  4. Use the following table to resolve:

    If And Then
    An amended Form 990-T or taxpayer inquiry is received claiming the credit the credit was previously allowed, input a TC 290 for zero to attach the documentation to the original return.
    An amended Form 990-T with Form 8827 (may also include Form 1139) attached meets the criteria in IRM 21.7.7.6.16.2, Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, route to EO Classification following the instruction in IRM 21.7.7.6.16, EO Claim Procedures.
    An amended Form 990-T without Form 8827 attached meets the criteria in IRM 21.7.7.6.16.2, Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, send correspondence requesting missing information and close case.
    An amended Form 990-T with Form 8827 (may also include Form 1139) meets the criteria in IRM 21.7.7.6.16.1, Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡,
    • Input TC 290 $.00 and TC 766 with a positive amount to allow/increase the credit, or

    • Input a TC 290 $.00 and TC 767 with a negative amount to decrease the credit.

    An amended Form 990-T with Form 8827 (may also include Form 1139) meets the criteria in IRM 21.7.7.6.16.1, Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the refundable credit is reported on line (45d in 2018; 46d in 2019) instead of line (50g in 2018; 51g in 2019),
    • Input TC 290 $.00 and TC 766 with a positive amount to allow/increase the credit, or

    • Input a TC 290 $.00 and TC 767 with a negative amount to decrease the credit.

    A Form 843 to claim the credit an amended Form 990-T and Form 8827 aren’t attached, return the Form 843 to the filer and instruct them to complete a Form 990-T and Form 8827 to claim the credit.
    If taxpayer correspondence is received the taxpayer claims they didn’t receive a refund for credit reported on their original return and the circumstances are similar to the examples described below:

    Example:

    A credit was reported on line (45d in 2018; 46d in 2019) of Form 990-T as a non-refundable credit; Form 8827 was included with the original return with amounts on lines (50g in 2018; 51g in 2019), and the taxpayer claims their intent was to receive a refund.

    Example:

    Taxpayer corresponds stating they didn’t receive the refundable credit and you can determine it was reported properly on line (50g in 2018; 51g in 2019); the "other" box was checked; "Form 8827" or some other entry indicating the amount is for the refundable prior year minimum tax credit was written in the corresponding space; and Form 8827 was included with the return.

    • Input TC 290 $.00 and TC 766 with a positive amount to allow/increase the credit, or

    • Input a TC 290 $.00 and TC 767 with a negative amount to decrease the credit.

    A situation other than those identified above you can’t determine what action(s) to take, refer the case to your team lead for guidance.

    Note:

    Filers are still able to take the nonrefundable portion of the Form 8827 credit for tax years 2020 and beyond. The nonrefundable credit can be claimed in Part III, line 1d.

Section 199(A) - Qualified Business Income Deduction (QBID)
  1. The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, created IRC section 199A, Qualified Business Income Deduction (QBID), which allows eligible taxpayers (other than corporations) a deduction for income earned in a qualified trade or business conducted as a sole proprietorship or through a partnership, S corporation, estate, or trust, subject to certain limitations. Wages earned as an employee are not eligible for the deduction

  2. The QBID includes a deduction of up to 20% of Qualified Business Income (QBI) from a qualified trade or business operated as a sole proprietorship or through a partnership, S corporation, trust, or estate. QBI includes income from a qualified domestic trade or business. Amounts received as wages, capital gain, interest, and dividend income are not considered QBI, and are excluded from the calculation.

  3. The QBID also includes a deduction of up to 20% of eligible taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.

  4. The QBID is limited to the lesser of (a) the sum of the amounts described in the paragraphs (2) and (3) above, or (b) an amount equal to 20% of the excess (if any) of taxable income of the taxpayer for the taxable year over the net capital gain of the taxpayer for the taxable year.

  5. Qualified business income includes domestic income from a qualified trade or business. Employee wages, capital gain, interest and dividend income other than REIT dividends are not considered qualified business income and are excluded from the calculation. See Tax Cuts and Jobs Act, Provision 11011 Section 199A - Qualified Business Income Deduction FAQs for additional information.

  6. The QBID is available for tax years ending after December 31, 2017. For more information, see the Form 1040 Instructions or Publication 535, Business Expenses.

  7. The Form 1041, 5227 and Form 990-T Instructions will direct taxpayers to refer to the Form 1040 Instructions for the appropriate tax year.

  8. The Tax Cuts and Jobs Acts of 2017 (TCJA), Section 13823, allows a taxpayer to elect to defer capital gains timely invested in a Qualified Opportunity Fund (QO Fund).

    Note:

    Exempt Organizations are not eligible to defer capital gains through an investment or invest in a QO Fund.

Amended Returns claiming Section 199(A) - Qualified Business Income Deduction (QBID)
  1. The QBID can be claimed on Form 1041, Form 1041-N, Form 1041-QFT, Form 5227 and 990-T. See the table below for the lines the QBID can be reported:

    Form Line
    Form 5227 Line 21
    Form 990-T Part I, Line 9 (Line 28 for 2019)

  2. QBID is subject to CAT-A criteria. See IRM 21.5.3-2, Examination Criteria (CAT-A) - General for more information. If CATA criteria is met, forward to CATA. See IRM 21.7.7.6.16.2, for more information.

Composite Form 990-T
  1. Notice 90–18 provided a method under which trustees of IRAs that have invested in regulated investment companies file a composite return for such IRAs to claim a refund under IRC 852(b).

  2. An IRA that has invested in a regulated investment company that elected to retain a long term capital gain must file a Form 990-T to claim a refund of its share of tax paid by the RIC under IRC 852(b). In lieu of filing a separate Form 990-T for each IRA, a common trustee of more than one IRA entitled to refunds under IRC 852(b) may now file a single composite Form 990-T for all IRAs.

    Reminder:

    Before this notice, a single entity that served as a common trustee for several such IRAs was required to prepare a separate Form 990-T for each IRA.

  3. This composite filing is done as follows:

    • The trustee must apply to the IRS for a special EIN on Form SS-4, Application for Employer Identification Number. The trustee must indicate that the application is for a special EIN by writing " Notice 90–18" on the top of the Form SS-4. The special EIN is effective only for making a composite claim for refund of tax under IRC 852(b) on behalf of the IRAs administered by the trustee. The trustee shouldn’t apply for a separate specialized EIN for each year it makes a claim for refund.

    • The trustee files one composite return on Form 990-T for each year it makes a claim. It must attach a list of the IRAs for which the claim is being made showing the names and social security numbers of the persons who established the IRAs and the allocated shares of tax paid by the RICs. The IRAs must be grouped according to the RIC in which it has made an investment. Form 2439 must be attached for each RIC according to such grouping.

    • The trustee must write on the top of the Form 990-T"Composite Return per Notice 90–18" . It must enter the special EIN assigned for the composite return (and only the EIN) in the block provided for EINs.

    • The IRS issues a refund check to the IRA trustee. The trustee must allocate the refund to the IRA trusts according to the amounts due as shown on the composite return.

  4. A composite return isn't available for:

    • A person acting merely as a nominee (owner of record) of RIC shares owned by an IRA. A composite return may only be filed by a common trustee on more than one IRA.

    • An IRA that has Unrelated Business Taxable Income (UBTI). The trustee of that IRA must file a separate Form 990-T for the IRA reporting the income on that return and claiming credit under IRC 852(b) as an offset against the IRA's UBTI tax liability.

Forms Associated with Form 990-T
  1. The forms below are associated with Form 990-T.

    Code Schedule Code Schedule
    29 Form 1118 46 Form 8801
    30 Form 1116 47 Form 8826
    31 Form 3468 50 Form 8835
    33 Form 4255 53 Form 8827
    34 Form 4626 57 Form 8874
    37 Form 5735 58 Form 8881
    39 Form 6478 59 Form 8882
    40 Form 6765 61 Form 8864
    42 Form 8820 62 Form 8896
    43 Form 3800 63 Form 8900
    44 Form 8586 65 Form 8906
    45 Form 8611 66 Form 8907

Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trust and Certain Related Persons

  1. Form 990-BL is generally used by black lung benefit trusts to meet the reporting requirements of Form 6033. If initial taxes are imposed on the trust or certain related parties, the trust must also file Schedule A ( Form 990-BL).

  2. The MFT is 56 and the tax class is "6" . The return is due the 15th day of the 5th month following the close of the tax year and is processed to the Non Master File (NMF).

  3. Form 990-BL is processed at the KCSPC to NMF. Route cases involving Form 990-BL to KCSPC, to.

    Internal Revenue Service
    NMF Unit
    333 W. Pershing Road
    Kansas City, MO 64108

Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction
  1. Form 6069 is primarily a worksheet (Schedule A) used to determine the maximum allowable income tax deduction (under IRC 192) for contributions made by coal mine operators to tax-exempt black lung benefit trusts. The form is also used to determine the amount of excise tax imposed under IRC 4953 for contributions that are more than the maximum allowable deduction (see Schedule B).

  2. The MFT is 57 and the tax class is "6" (NMF). Form 6069 is due by the 15th day of the 5th month after the end of the tax year.

  3. Form 6069 is processed at the KCSPC to NMF. Route cases involving Form 6069 to .

    Internal Revenue Service
    NMF Unit
    333 W. Pershing Road
    Kansas City, MO 64108

Form 1120-POL, U.S. Income Tax Return For Certain Political Organizations

  1. Political organizations and certain exempt organizations file Form 1120-POL to report their political organization taxable income and income tax liability under IRC 527.

  2. The MFT is 02 and the tax class is "3" . The due date for Form 1120-POL is the 15th day of the 4th month after the end of the tax year unless the tax period ending is June. If the tax period ends in June. Tax period June 1120-POL returns are due the 15th day of the 3rd month. The filing requirements are 1120-09. Political organizations may request a six-month extension of time to file by submitting a Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. The organization must file the extension by the Form 1120-POL due date.

  3. A political organization must file Form 1120-POL if it has any political organization taxable income. An exempt organization that isn't a political organization must file Form 1120-POL if it is treated as having political organization taxable income under IRC 527(f)(1).

  4. An organization that files Form 1120-POL may also be required to file the following forms:

    • Form 8871, Political Organization Notice of Section 527 Status.

    • Form 8872, Political Organization Report of Contributions and Expenditures

    • Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status

    • Form 990, Return of Organization Exempt from Income Tax

    • Form 990-EZ, Short Form Return of Organization Exempt from Income Tax.

  5. EO Accounts works all Form 1120-POL account related issues regardless of the EO status.

Taxable Income
  1. A political organization is subject to tax on its political organization taxable income. Generally, the tax is calculated:

    1. By multiplying the political organization taxable income by the highest rate of tax 21% for tax years beginning after December 31, 2017.

    2. Using the graduated rates shown in IRM 21.7.7.6.5.2 below, if the organization is the principal campaign committee of a candidate for U.S. Congress.

  2. The exempt function income is the part of a political organization's income that it sets aside to use for its exempt function. The organization may receive it as any one of the following four types of income:

    • A contribution of money or other property.

    • Membership dues, fees, or assessments from a member of the political organization.

    • Proceeds from a political fund-raising or entertainment event or from the sale of political campaign materials, which are not received in the ordinary course of any trade or business.

    • Proceeds from conducting bingo games that are defined in IRC 513(f)(2).

      Taxable income includes exempt function income (such as contributions) for any period of time that a political organization doesn’t file a Form 8871 as required.

  3. The exempt function income is the portion of a political organization's income that the organization sets aside for use for its exempt function. It may be received as any one of the following four types of income:

    • A contribution of money or other property;

    • Membership dues, fees, or assessments from a member of the political organization;

    • Proceeds from a political fund-raising or entertainment event or from the sale of political campaign materials, which are not received in the ordinary course of any trade or business; or

    • Proceeds from conducting bingo games that are defined in IRC 513(f)(2)

      Taxable income includes exempt function income (such as contributions) for any period of time that a political organization does not file a Form 8871 as required.

  4. Taxable income is figured with the following adjustments:

    • A specific deduction of $100 is allowed (but not for Newsletter funds);

    • The net operating loss deduction isn't allowed;

    • The dividends-received deduction and other special deductions for corporations are not allowed. See IRC 527(c)(2)(C).

Tax Rate
  1. The rate of tax imposed depends on whether the political organization is a principal campaign committee as defined in IRC 527(h). The tax rate is lower for a principal campaign committee.

  2. An organization that isn't a principal campaign committee is taxed as follows:

    Tax periods 201812 to present
    If taxable income on Line 19 is over: But not over: Tax is:
    $0 or greater 21%

    Note:

    If the taxpayer filed a fiscal return (tax year ending 201801 through 201811) and used the Corporate Tax Rate, compute the tax using the following computation:

    Step Action Amount
    Step 1 Figure the corporate tax for entire tax year using the corporate tax rate schedule below. Line 1 amount
    Step 2 Figure the corporate tax for entire tax year using the 21% flat tax. Line 2 amount
    Step 3 Multiply Line 1 by the number of days in the filer’s tax year before January 1, 2018. Line 3 amount
    Step 4 Multiply Line 2 by the number of days in the filer’s tax year after December 31, 2017. Line 4 amount
    Step 5 Divide Line 3 by the total number of days in the filer’s tax year. Line 5 amount
    Step 6 Divide Line 4 by the total number of days in the filer’s tax year. Line 6 amount
    Step 7 Add Lines 5 and 6. This is the filer’s total tax for the fiscal year. Total tax amount

    • 201712 and prior compute by multiplying line 19 by 35%

  3. A political organization that is a principal campaign committee of a candidate for U.S. Congress computes its tax in the same manner as provided in IRC 11(b) for corporations. The tax is computed as follows:

    Tax periods 201812 to present
    If taxable income on Line 19 is over: But not over: Tax is:
    $0 or greater 21%
  4. For tax periods beginning prior to 201812, compute as listed below:

    Line Action
    1. Enter taxable income (line 19, Form 1120-POL)
    2. Enter line 1 or $50,000 whichever is less
    3. Subtract line 2 from line 1
    4. Enter line 3 or $25,000 whichever is less
    5. Subtract line 4 from line 3
    6. Enter line 5 or $9,925,000 whichever is less
    7. Subtract line 6 from line 5
    8. Multiply line 2 by 15%
    9. Multiply line 4 by 25%
    10. Multiply line 6 by 34%
    11. Multiply line 7 by 35%
    12. If line 1 is greater than $100,000 enter the smaller
    of: 5% of the taxable income in excess of $100,000
    or $11,750
    13. If line 1 is greater than $15,000,000 enter the smaller
    of 3% of the taxable income in excess of $15,000,000
    or $100,000
    14. Add lines 8 through 13. Enter here and on line 20,
    Form 1120-POL
  5. Estimated tax and alternative minimum tax don't apply to political organizations.

Penalties
  1. Penalties may be imposed if the organization is required to file Form 1120-POL and it fails to:

    • File the form by the due date;

    • Pay the tax by the due date;

    • Report all the information required or it reports incorrect information.

  2. See IRM 20.1.8.2, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties, for additional information.

Form 8871, Political Organization Notice of Section 527 Status

  1. Form 8871posts to Master File with a TC 150. The MFT is 47 and the Doc Code is 61. Amended returns post as a TC 976 (Form 8453-X will post to Master File as a TC 971 AC351 on ENMOD).

  2. If a political organization:

    1. Seeks tax exempt status, it must file Form 8871 within 24 hours after the date on which the organization was established.

    2. Has a material change in any of the information reported on Form 8871, it must file an amended Form 8871 within 30 days of the material change to maintain its tax-exempt status.

    3. Terminates its existence, it must file a final Form 8871 within 30 days of termination.

  3. The organization must file the return electronically at the IRS Internet web site at www.irs.gov/polorgsper IRC 527(i)(1)(A). The IRS TE/GE:BSP national office programmers maintain a stored database of the information the organization inputs. To file Form 8871, the political organization must have its own EIN even if it has no employees. To obtain an EIN, an organization must file Form SS-4, Application for Employer Identification Number, with the IRS. See the Form SS-4 Instructions for information on how to obtain an EIN via the telephone.

  4. New political organizations must submit to the Ogden campus a Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status, containing the signature for the electronic Form 8871.

  5. Form 8453-X isn't required to be filed on an amended Form 8871.

  6. Every political organization that is to be treated as a tax exempt political organization under the rules of IRC 527 must file Form 8871, except for:

    • An organization that reasonably expects its annual gross receipts to always be $25,000 or less;

    • A political committee required to report to the FEC;

    • Any political committee of a state or local candidate;

    • Any state or local committee of a political party;

    • Organization that does not seek tax-exempt status

    • Any organization in IRC 501(c) that is subject to IRC 527(f)(1) because it has made an "exempt function expenditure."

Public Inspection of Form 8871 and Related Materials
  1. Form 8871 (including any supporting papers) and any letter or other document the IRS issues about Form 8871 is open to public inspection at the IRS in Washington, D.C. The forms may be viewed and downloaded from a searchable database.

  2. In addition, the organization is required to make a copy of these materials available for public inspection during regular business hours at the organization's principal office and at each of its regional or district offices having at least three paid employees.

  3. A penalty of $20 per day is imposed on any person with a duty to comply with the public inspection requirement for each day a failure to comply continues.

  4. See IRM, 20.1.8.2, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties, for additional information.

Correspondence Relating to Form 8871 or Form 8872
  1. Route correspondence issues involving either Form 8871 or Form 8872 as follows:

    • Route any entity related changes or questions on Form 8871 or Form 8872 to OSPC EO Entity for resolution. This includes amended returns.

    • Refer technical questions on Form 8871 or Form 8872 to the CAS toll free number: 877-829-5500.

    • Route correspondence addressing reasonable cause requests for late filing to OAMC EO Accounts.

  2. Correspondence issues received in EO Accounts generally have to do with extension requests or determining whether an organization is required to file Form 8871. For extension requests, inform the organization that there is no extension of time to file Form 8871.

Form 8872, Political Organization Report of Contributions and Expenditures

  1. The IRS will no longer accept paper Form 8872 reporting on periods after 2019. Form 8872 reporting information for periods starting on or after January 2020, will be due electronically by IRC 527 organizations. These include political parties, political action committees and campaign committees of candidates for federal, state or local office.

  2. Most tax-exempt political organizations have a requirement to file semiannual, quarterly or monthly reports on Form 8872 To file electronically, the organization must have the username and password it received from the IRS after electronically filing its initial notice (Form 8871). Organizations can file electronically using the IRS website at IRS.gov/polorgs. To replace a password, taxpayers must contact:
    IRS
    Attn: Request for 8872 Password
    Mail Stop 6273
    Ogden, UT 84201 Fax (855) 214-7520

  3. Form 8872 posts to Master File as a TC 150. The MFT is 49 and the Doc Code is 61.

  4. Every IRC 527 tax exempt political organization that accepts a contribution or makes an expenditure for an exempt function during the calendar year must file Form 8872 except:

    • A political organization that isn't required to file Form 8871

    • A qualified state or local political organization (QSLPOs)

  5. An organization must file Form 8871 before it can file Form 8872. If the organization has not filed Form 8871, it may be subject to taxation under IRC 527(i)(4) and the requirements for filing Form 8872 are not applicable.

  6. All other political organizations are required to file Form 8872 to report the names, addresses and, if an individual, the occupation and employer, of any person to whom expenditures are made that aggregate $500 or more in a calendar year and the amount, date and purpose of each expenditure.

    1. The report must also include the name, address, and, if an individual, the occupation and employer of any person who contributes $200 or more in a calendar year and the amount and date of each contribution.

  7. Due dates for Form 8872 vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election is held or any other calendar year.

    1. During an election year, the organization may opt to file its reports on either quarterly or monthly, but it must file on the same basis for the entire calendar year.

    2. During a non-election year, the organization may choose to file its reports on either a semiannually or monthly, but it must file on the same basis for the entire calendar year.

  8. Refer to the following table to determine the filing requirements for Form 8872:

    Form 8872 Filing Requirements Filing Frequency Due Date
    A non-election year
    (odd- numbered)
    Monthly basis No later than the 20th day after the end of the month, which must include the figures for the entire month.
    A non-election year
    (odd- numbered)
    Semi-Annual No later than July 31st for the first half of the year, and
    No later than January 31st for the second half of the year.
    An election year
    (even- numbered)
    Monthly basis No later than the 20th day after the end of the month, which must include the figures for the entire month.
    An election year
    (even numbered)
    Quarterly basis Due by the 15th day after the last day of each calendar quarter, except the year-end report, which is due by January 31st.
    An election year (even numbered) Pre-election report for any election for federal office for which the organization makes a contribution or expenditure Must be filed 12 days before the election (15 days before the election if posted by registered or certified mail) and must contain information through the 20th day before the election.
    An election year
    (even numbered)
    Post-general election report Must be filed no later than 30 days after the general election that contains information through the 20th day after the election.
  9. A political organization that does not disclose this information must pay an amount equal to the highest corporate tax rate (21% for tax years beginning after December 31, 2017 and 35% for prior tax years) multiplied by the amount of contributions and expenditures not disclosed and report it on the Form 1120-POL. If a political organization doesn’t file Form 8871 and is subject to tax on its income, it isn't required to file Form 8872.

  10. A political organization isn't required to file Form 8872 for any period of time that it is subject to tax on its income because it did not file or amend a Form 8871.

Section 527 Organization Notices
  1. When an organization files an SS-4 and indicates that it is a political organization, the entity is coded with a "1" in the "527 Indicator" field located on INOLES (527-POL-ORG-CD). If certain filing requirements are not met, the IRS issues one of the following notices.

    • CP 249A - Requests that the organization file a Form 8871.

    • CP 249B - Informs the organization that it filed the Form 8872 late and that there is a penalty for late filing. The CP notice requests a reason for the late filing.

    • CP 249C - Notifies an organization that it filed a Form 8871 and that it is required to file the Form 8872 (unless the organization is a QSLPO). The CP 249 requests the organization to file a Form 8872 or to amend its Form 8871 to identify itself as a QSLPO.

  2. If any of the above notices is received in EO Accounts, route to EO Entity MS: 6273. For additional information, refer to IRM 21.3.8.10.2.12.

Public Inspection of Form 8872
  1. The IRS will make Form 8872 (including Schedules A and B) open to public inspection on the IRS web site at https://www.irs.gov/charities-non-profits/political-organizations/political-organization-filing-and-disclosure, Political Organization Filing and Disclosure. In addition, the organization must make available for public inspection a copy of this report during regular business hours at the organization's principal office and at each of its regional or district offices having at least three paid employees.

  2. A penalty of $20 per day will be imposed on any person under a duty to comply with the public inspection requirement for each day a failure to comply continues. The maximum penalty imposed on all persons for failures relating to one report is $10,000.

  3. A penalty will be imposed if the organization is required to file Form 8872 and it:

    • Fails to file the form by the due date or

    • Files the form but fails to report all of the information required or it reports incorrect information.

    The penalty is 21% for tax years beginning after December 31, 2017 (35% for tax years beginning before December 31, 2017) of the total amount of contributions and expenditures to which a failure relates.

  4. See IRM 20.1.8.2, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties, for additional information.

Summary of Form Filing Requirements
  1. The table below provides a summary of forms required to be filed by political organizations:

    Form When Filed Exceptions to Filing Requirement
    Form 8871 Within 24 hours of establishment or within 30 days of any material change, including termination
    • Organization that does not seek tax-exempt status;

    • Political committee required to report to the FEC;

    • Campaign committee of state and local candidates;

    • State or local committee of political parties; and

    • Organization that reasonably expects annual gross receipts to always be less than $25,000.

    Form 8872 At organization's option, quarterly/semiannually or monthly, on same basis for entire calendar year (see form instructions for detailed information)
    • Any organization excepted from Form 8871 filing requirement (see above); and

    • Qualified state or local political organization (QSLPO).

    Form 1120-POL Due the 15th day of the 4th month after the close of the taxable year. Exception: June tax period 1120-POL are due the 15th day of the third month.
    • Political organization with no taxable income after taking the $100 specific deduction

    Form 990 or Form 990-EZ Due the 15th day of the 5th month after the close of the taxable year
    • Any organization excepted from Form 8871 (see above); and

    • Caucus or association of state or local officials

Form 8453-X, Political Organization Declaration for Electronic Filing
of Notice of Section 527 Status

  1. Form 8453-X is automatically generated for a new political organization to complete when a Form 8871 is submitted electronically. The organization must print the form, sign it, and mail it to the Ogden campus. In doing so, the electronic filing of Form 8871 is authenticated.

  2. When Form 8453-X isn't submitted to the Ogden campus within 60 days of the filing, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872.

  3. If Form 8453-X is submitted without a signature, the signature page of the form will be returned to the organization requesting a signature.

  4. A TC 971 AC 351 is entered by EO Entity when a Form 8453-X is received.

  5. Send misrouted Forms 8453-X received in EO Accounts to EO Entity.

Form 5227, Split-Interest Trust Information Return

  1. Form 5227 is used to report the financial activities of a split-interest trust described in IRC 4947(a)(2) and to determine whether the trust is treated as a private foundation and is subject to the excise taxes under Chapter 42.

  2. The MFT is 37 and the tax class is 4. Form 5227 is due the 15th day of the fourth month after the calendar year ends.

  3. Split interest trusts are required to file annually regardless of whether or not their income is distributed.

  4. Section 6652(c)(2)(C) allows for a Daily Delinquency Penalty to be charged on split interest trusts for not filing a timely return. A penalty is imposed on the trustee if he/she knowingly fails to file. Refer to IRM 21.7.7.6.23. for additional penalty information.

  5. Form 5227 is publicly available under IRC 6104(b) except for the non 170(c) beneficiaries which are exempt from disclosure. Schedule A, Distributions, Assets, and Donor Information (page 7) isn't open for inspection.

  6. Form 5227 is detached by C&E and processed separately from the return to which it was originally attached.

  7. Form 5227 is processed as a Form 990-PF if:

    1. There’s an indication that the organization is now a private foundation or an IRC 4947(a)(1) trust treated as a private foundation.

    2. Filer attempts to compute and/or pay excise tax on investment income.

    3. An IRS label is present indicating type of foundation code 02, 03, or 04.

  8. Income flows from Form 5227 or Form 1041-A to Form 1041 and Form 1040. If any amount on one return is amended, all returns must be amended. Interest, dividends, capital gains, etc. on Form 1040 should be at least the amounts reported on Form 5227 or Form 1041-A. Capital gains, however, can be rolled into trust principal or corpus and not be distributed. If it is distributed, per Part II Form 5227, the amounts should match.

Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts

  1. The Tax Cuts and Jobs Act of 2017 (P.L. 115-97 amended section 641(c)(2). As a result, electing small business trusts (ESBTs) are no longer subject to the charitable information reporting requirements under IRC 6034 and don’t file Form 1041-A.

  2. Trustees must file Form 1041-A for a trust that claims a charitable or other deduction under section 642(c) unless an exception applies.

    Exception:

    The trustee doesn’t file Form 1041-A for:

    • A trust that is required to distribute currently to the beneficiaries all the income for the tax year determined under section 643(b) and related regulations;

    • A charitable trust described in section 4947(a)(1);

    • For tax years beginning after 2006, a split-interest trust described in section 4947(a)(2); or

    • Electing small business trusts (ESBTs) described in section 641(c).

  3. The MFT is 36 and the tax class is 4. The return is due the 15th day of the fourth month after the calendar year ends.

  4. To receive an automatic extension, the trustee must file Form 8868 on or before the original due date of Form 1041-A.

  5. A trust that files Form 1041-A must report on the calendar year. A trust exempt from tax under IRC 501(a) or described in IRC 4947(a)(1) does not file Form 1041-A and may use a non-calendar year.

  6. A decedent’s estate isn't required to file Form 1041-A. Section A (Type of entity) on page 1 of Form 1041 will indicate if the entity is a decedent’s estate.

  7. A copy of Form 1041-A may be attached to Form 5227. R&C separates the returns for processing.

  8. IRC 6652(c)(2) permits separate penalties of $10 a day, up to a maximum of $5,000, against both the trust and the trustee for not filing Form 1041-A on time, unless there is reasonable cause. The law also provides penalties for filing a false or fraudulent return.

  9. When a DDP is assessed on the Form 1041-A due to late filing and the taxpayer isn't required to file a Form 1041-A, the penalty can be removed without a reasonable cause statement.

Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code

  1. Form 4720 is filed by:

    • Private foundations and IRC 4947(a) trusts

    • Donor advised funds and certain supporting organizations with excess business holdings.

    • Public Charities making excess lobbying expenditures

    • Organizations making political expenditures

    • Charitable organizations that make certain premium payments on personal benefit contracts

    • Self-dealers, disqualified persons, foundation managers, organization managers, donors, donor advisors, and related persons

    • Tax-exempt entities that are party to prohibited tax shelter transactions

    Refer to Form 4720 instructions for detailed information regarding who must file.

  2. Form 4720 is used to figure and pay:

    • The initial taxes on private foundations, foundation managers, and self-dealer under IRC 4941,IRC 4942, IRC 4943, IRC 4944, and IRC 4945 for self-dealing, failure to distribute income, excess business holdings, investments that jeopardize charitable purpose, and taxable expenditures.

    • The initial taxes on certain supporting organizations and donor advised funds for excess business holdings under IRC 4943.

    • IRC 4911 tax on excess lobbying expenditures by public charities that have elected to be subject to IRC 501(h) regarding expenditures to influence legislation. (Private foundations and IRC 4947(a) trusts are not eligible to make this election).

    • IRC 4912 tax on excess lobbying expenditures that result in loss of IRC 501(c)(3) tax-exempt status.

    • IRC 4955 tax imposed on any amount paid or incurred by a IRC 501(c)(3) organization that participates or intervenes in any political campaign on behalf of or in opposition to any candidate for public office.

    • IRC 4958 initial taxes on disqualified persons and organization managers of IRC 501(c)(3) (except private foundations) organizations, donor advised funds and IRC 501(c)(4) organizations that engage in excess benefit transactions

    • IRC 4965 tax on a tax-exempt entity and foundation manager pertaining to prohibited tax shelter transactions.

    • IRC 4966 tax on sponsoring organizations of donor advised funds and fund managers for taxable distributions.

    • IRC 4967 tax on donors, donor advisors, related persons and fund managers for prohibited benefits from donor advised funds.

    • IRC 170(f)(10) tax on any premiums paid on a personal benefit contract in connection with a transfer to an organization or charitable remainder trust for which a charitable deduction isn't allowed to the transferrer.

    • IRC 664(c)(2) excise tax on the unrelated business taxable income of a charitable remainder trust.

  3. Form 4720 provides for the assessment of tax:

    1. Against an organization as well as an individual.

    2. On excess lobbying expenditures for a public charity.

      Note:

      therefore, there may be EINs and SSNs on the return.

  4. Return generally has the same due date as Form 990-PF, Form 5227, Form 990 or Form 990-EZ. The MFT is 50.

  5. Form 4720 is divided into the following sections:

    • Part I — Taxes on organizations

    • Part II - Taxes on a Manager, Self-Dealer, Disqualified Person, Donor, Donor Advisor, or Related Person

    • Part Il-A (for tax years ending on or before December 31, 2019) — Taxes on Managers, Self-Dealers, Disqualified Persons, Donors, Donor Advisors, and Related Persons

    • Part Il-B (for tax years ending on or before December 31, 2019) — Summary of Taxes

    • Part III - Tax Payments

    • Schedule A - Initial Taxes on Self-Dealing (Section 4941)

    • Schedule B - Initial Tax on Undistributed Income (Section 4942)

    • Schedule C - Initial Tax on Excess Business Holdings (Section 4943)

    • Schedule D - Initial Taxes on Investments That Jeopardize Charitable Purpose (Section 4944)

    • Schedule E - Initial Taxes on Taxable Expenditures (Section 4945)

    • Schedule F - Initial Taxes on Political Expenditures (Section 4955)

    • Schedule G - Tax on Excess Lobbying Expenditures (Section 4911)

    • Schedule H - Taxes on Disqualifying Lobbying Expenditures (Section 4912)

    • Schedule I - Initial Taxes on Excess Benefit Transactions (Section 4958)

    • Schedule J - Taxes on Being a Party to Prohibited Tax Shelter Transactions (Section 4965)

    • Schedule K - Taxes on Taxable Distributions of Sponsoring Organizations Maintaining Donor Advised Funds (Section 4966)

    • Schedule L - Taxes on Prohibited Benefits Distributed From Donor Advised Funds (Section 4967)

    • Schedule M - Tax on Hospital Organization for Failure to Meet the Community Health Needs Assessment Requirements (Section 4959 and 501(r)(3))

    • Schedule N - Tax on Excess Executive Compensation Section 4960)

    • Schedule O - ExciseTtax on Net Investment Income of Private Colleges and Universities (Section 4968)

  6. Interest is computed as established under IRC 6621.

Form 4720 Correspondence
  1. Correspondence issues relating to Form 4720 may include any of the following:

    • Balance due notices;

    • Missing payments;

    • Requests for penalty abatement;

    • Abatement of First Tier Tax;

    • Missing required attachments;

    • Erroneous refunds.

Penalties Applicable to Form 4720
  1. The following penalties apply to public charities, private foundations, foundation managers, and self-dealers required to file Form 4720.

    • Failure to file;

    • Willful failure to file;

    • Failure to pay tax due.

    • Willful failure to pay tax due;

    • Filing fraudulent returns or statements

  2. EO Accounts TEs may abate penalties related to Form 4720. However, if both a tax decrease and penalty abatement are requested, refer the case to the Field. Don't adjust the penalties.

  3. See IRM 20.1.8.2, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties, for additional information.

Form 4720-A
  1. Form 4720-A (MFT 66) is used to assess initial taxes on managers, self-dealers, disqualified persons, donors, donor advisors, and related persons.

  2. It isn't a standard form and is created by converting and/or photocopying Form 4720 and inserting a printed "A" in red ink to the right of the form number 4720.

  3. Form 4720, Part Il-A:

    1. Is used as the source of information to create Form 4720-A.

    2. Consists of all persons who owe tax in connection with the foundation or organization, whether as managers, self-dealers, disqualified persons, donors or related persons.

    3. Is prepared for each name entered in Part Il-A of Form 4720

    4. Is posted to Non- Master File.

      Note:

      If NMF research or assistance is needed, contact Cincinnati NMF (CAMC) using the E-eFax number found in Exhibit 21.7.12-1, Contact Information. CAMC doesn’t work Form 4720-A issues, but can complete research and provide necessary transcripts.

      Note:

      Form 4720 was revised for tax years beginning on or after January 01, 2020. There will no longer be a Form 4720-A process for tax years ending after December 31, 2019.

Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt from Federal Income Tax

  1. Every IRC 501(c)(3) organization which operates, supervises, or controls a private school must file a certification of racial nondiscrimination.

  2. If an organization is:

    1. Required to file Form 990 or Form 990-EZ, either as a separate return or part of a group return, the certification must be made on Schedule E (Form 990).

    2. Not required to file Form 990 or Form 990-EZ, the EO uses Form 5578 to make the certification.

  3. The certification must be filed annually by the 15th day of the 5th month following the end of the organization's calendar year or fiscal period.

Form 5768, Election/Revocation of Election by an Eligible IRC 501(c)(3) Organization to Make Expenditures to Influence Legislation

  1. Form 5768 is a numbered return but does not have a specific MFT. The transaction posts to the entity module with the year the election is effective (TC 024) or revoked (TC 023). The Doc Code is "77" and information can be accessed using CC BMFOLE, INOLE, or MFTRD. The volume is minimal.

  2. IRC 501(h), however, permits certain eligible IRC 501(c)(3) organizations to make limited expenditures of specified amounts to influence legislation. An organization making the election will, however, be subject to an excise tax under IRC 4911 if it spends more than the amounts permitted by that section.

  3. To make or revoke the election, the EO enters the ending date of the tax year to which the election or revocation applies on Form 5768 in item 1 or 2, as applicable. If Form 5768 is received in processing attached to another return, detach it and process separately. The election is:

    1. Effective beginning with the tax year in which it is signed and postmarked.

    2. No longer in effect after the tax year in which the revocation is signed and postmarked.

  4. Form 5768 is filed by an organization that is exempt under IRC 501(c)(3) and files Form 990. IRC 501(c)(3) states that an organization exempt under that section will lose its tax-exempt status and its qualification to receive deductible charitable contributions if a substantial part of its activities is attempting to influence legislation.

Amended Form 5768 Procedures
  1. If an amended, corrected, or supplemental Form 5768 is received, follow the procedures outlined below:

    1. Verify fact of filing for the tax period in question by researching CC BMFOLE for a posted Transaction Code (TC) 023 or 024. If a TC 024 is present on the module and the amended return shows no change (i.e., EIN, tax period, name, etc.), attach the amended return to the DLN of the original TC 024 document.

    2. Send a letter to the organization explaining that a Form 5768 was previously filed for that tax period and no additional filings are necessary unless the organization chooses to revoke the election.

    3. If no TC 024 or 023 is present, edit the amended return and process as an original.

    4. If the last transaction on the account is a TC 023 (revocation) and the amended return is indicating an election, edit the amended return and process as original.

    Note:

    Any subsequent returns that are sent to be processed after the initial TC 023 or 024 has posted to Master File will unpost.

Form 990-N, Annual Electronic Notice Filing Requirement

  1. Form 990-N, Electronic Notice (e-Postcard) for Tax - Exempt Organizations not Required to File Form 990 or 990-EZ is filed by organizations who normally have gross receipts of $50,000 or less.

    Exception:

    A section 509(a)(3) supporting organization must file Form 990 or Form 990-EZ, even if it’s gross receipts are normally $50,000.

    Exception:

    Certain organizations described in General Instruction B of the instructions for Form 990-EZ and Section B of the instructions for Form 990 aren’t required to file Form 990-N. Refer to these instructions for more information.

    Note:

    If an organization chooses to file Form 990 or Form 990-EZ instead of Form 990-N, they must file a complete return.

  2. With the exception of a duplicate filed condition (e.g., E-filed & paper return both post to a module), don’t attempt to resolve any issues associated with Form 990-N. Route any and all correspondence, inquiries, or CP notices (except CP 193) about Form 990-N to Entity MS: 6273 for resolution. Refer to the table below to determine which area will resolve the duplicate or amended return issue.

    If And Then
    TC 976 is for another tax period or EIN, return is for the current year, 1) Route to EO Entity for resolution. Form 990-N is processed through the irs.gov website.
      return is for a prior year, 1) Input a TC 290.00 & close control base.

    Note:

    The Service can only process the current year 990-N.

    TC 976 is a true duplicate return,   1) Input a TC 290.00 & close control base.
    TC 976 is a true amended return, return is for the current year, 1) Adjust the applicable fields (i.e, gross receipts, EOY assets) following established guidelines.

  3. A CP 299 generates every time a Form 990 filing requirement changes from 01 to 02. It’s an information notice only and doesn’t require a response. The notice informs the filer they need to file a yearly electronic Form 990-N through the IRS web site because their gross receipts are normally $50,000 or less. Failure to file this yearly electronic notification results in loss of their exempt status.

  4. The annual electronic notice is due by the 15th day of the fifth month after the close of the tax period. The notice includes the following information:

    • Organization’s name

    • Any other names the organization uses

    • Organization’s address

    • Organization’s web site address (if applicable)

    • Organization’s employer identification number (EIN,

    • Name and address of a principal officer of the organization

    • Organization’s annual tax period

    • Verification that the organization’s annual gross receipts are still $50,000 or less.

  5. A CP 259A delinquency notice will generate 120 days after the due date of the Form 990-N if there is no TC 150, 59X or TC 460 on the tax module. The organization must respond to this notice and the responses are worked in EO Entity MS: 6273. Also, there are no penalties assessed against the organization for late filing or extensions granted.

  6. Failure to file the annual electronic notice or Form 990 or Form 990-EZ for three consecutive years, will result in revocation of the organization's tax-exempt status as of the filing due date of the third year. The EO can be reinstated by (re)applying and paying the appropriate user fee. Reinstatement of tax-exempt status may be retroactive to the date of revocation, if the EO can show that there was reasonable cause for not filing.

  7. The Following organizations are exempted from the annual notification requirement:

    • A church, an interchurch organization of local units of a church, a convention or association of churches, or an integrated auxiliary of a church (as defined in Treas. Reg. §1.6033-2(h))

    • An exclusively religious activity of any religious order

    • A mission society sponsored by or affiliated with one or more churches or church denominations, more than one-half of the activities of which society are conducted in, or directed at persons in, foreign countries

    • An educational organization (below college level) that is described in IRC 170(b)(1)(A)(ii), that has a program of a general academic nature, and that is affiliated (within the meaning of Treas. Reg. §1.6033-2(h)(2)) with a church or operated by a religious order

    • A subordinate organization whose financial information is included in a group return

    • A State institution, the income of which is excluded from gross income under IRC 115(a)

    • An organization described in IRC 501(c)(1); or

    • An organization that is a governmental unit or an affiliate of a governmental unit exempt from federal income tax under IRC 501(a).

Routing Exempt Organization Correspondence Issues

  1. Except for the items in IRM 21.7.7.1, all EO account related issues and inquiries are resolved in the EO Accounts units at OAMC. Route any account related issues received at other locations, to OAMC, EO Accounts, MS: 6710. Route inquiries and information EO Accounts is unable to address (check with the lead first) to one of the following locations for resolution:

    • TE/GE Exam Classification Site

    • Cincinnati Submission Processing Campus

    • TE/GE Adjustment Unit in Cincinnati

    • EO Entity control (inquiries received at OAMC only)

  2. Mail Form 3115, Application for Change in Accounting Method, with all attachments filed by EO to:

    Internal Revenue Service
    Tax Exempt and Government Entities
    P.O. Box 2508
    Cincinnati, OH 45201

EO Issues Routed to TE/GE Adjustment Unit
  1. Route all written inquiries or correspondence relating to the following issues to the TE/GE Adjustment unit at the address below. Refer telephone inquiries on the issues listed below to the TE/GE CAS telephone operations toll free number 877-829-5500

    • Request for a copy of an exemption letter or application form (Form 1023, Form 1023-EZ or Form 1024);

    • Inquiries concerning foundation status;

    • Questions concerning determination of an organization's exempt status;

    • Organization questioning why it is no longer exempt;

    • Requests for change in filing requirements not supported by a determination letter ruling;

    • Form 8871 or Form 8872 technical related issues;

    • Inquiries/issues referencing tax exempt government instrumentalities;

    • Organization sending in copy of by-laws or by-law changes;

    • Requests to be added to Publication 78.

  2. The mailing address for TE/GE Adjustment unit is:

    Internal Revenue Service
    TE/GE Adjustment Unit
    P.O. Box 2508, Rm: 4010
    Cincinnati, OH 45201
    Phone Number: 877-829-5500 (toll-free number)

EO Issues Routed to Cincinnati Submission Processing Campus
  1. Route the following issues to the Cincinnati Submission Processing Campus (CSPC):

    • Form 1023 or Form 1024 applications (initial requests). If an EIN needs to be established, send to EO Entity first.

    • Form 8718 - User Fee

  2. CSPC addresses for mailing applications or user fees are shown below:

    Internal Revenue Service
    P.O. Box 12192
    Covington, KY 41012–0192
    Street Address:
    Internal Revenue Service
    Mail Stop 31A Team 105
    7940 Kentucky Dr
    Florence, KY 41042
    Phone Number: 877-829-5500

  3. For internal routing of application issues (i.e., copies or a response to a letter that was generated by an EO agent), send to:

    Internal Revenue Service
    7940 Kentucky Dr
    Attn: Mail Stop 31A Team 105
    Florence, KY 41042

  4. The CSPC, Excise Tax Unit works Form 8849 or claims for refund of communications excise tax by exempt users Route all Forms 8849, attachments and claims to :

    Internal Revenue Service
    MS: 5701G
    Cincinnati, OH 45999

EO Issues Routed to EO Entity Control (OSPC)
  1. Route the following issues to OSPC's EO Entity Control at MS: 6273:

    • Mismatch of Subsection Code, Foundation Code, type of return filed, or IRC section;

    • EO section not on ENMOD;

    • Name changes (Proof of name change must be provided. This can be in such forms as articles of incorporation or by-law changes, articles of amendment, formal notification to the Secretary of the resident state, or formal minutes of meetings.) This includes organizations without a formal exemption (including subordinates included in a group ruling and government entities/instrumentalities).

      Note:

      If the entity has a formal exemption (either with an individual ruling or as a central organization in a group ruling) or the filer is requesting an affirmation letter, route the documentation to:
      Internal Revenue Service
      TE/GE Correspondence Unit
      550 Main St Room 4024
      Cincinnati, OH 45202
      EEFax: 855-204-6184

    • Inquiries requesting a change in filing requirement;

    • EO Form 1128, Application to Adopt, Change, or Retain a Tax Year;

    • All correspondence stating the following -
      "We are not required to file"
      "We are not an exempt organization"
      "We are no longer a charter credit union"
      "Out of business"
      "No longer a group (no longer an affiliate of this group)."

    • Inquiries stating the exempt organization is "out of business," "terminated" or "dissolved" ;

    • Organization stating it files as part of a group

      Note:

      Complete basic research before routing.

    • Requests for copies of the SGRI listing or to be added to the SGRI listing.

    Note:

    If the account is in status 97, follow procedures IRM 21.7.7.5.2.1.3 before routing to Entity.

  2. When MF indicates a different accounting period than the one indicated in correspondence from the organization, inform the organization to elect the change by timely filing the applicable information return (for example, Form 990, Form 990-EZ, Form 990-PF, Form 990-T, Form 990-BL, or Form 1065) for the short period for which the return is required. Indicate on the return that a change in accounting period is being made ( Revenue Procedure 85–58). If the organization has already changed its FYM within the last 10 years, it must submit a Form 1128.

    Note:

    These procedures don't apply to farmer's cooperatives exempt from Federal income tax under IRC 521 or to organizations described in IRC 526, IRC 527, or IRC 528. These organizations file their change in accounting period applications on Form 1128 , Application to Adopt, Change, or Retain a Tax Year Period.

EO Informant Letters, Information Items, and Referrals
  1. Route third-party correspondence or any IRS prepared document which alleges potential noncompliance with a tax law on the part of an exempt organization (e.g., taxpayer informant letters, information items, referrals) to the address shown below. Use Form 13909, TE/GE Referral Information Report, for referrals.

    Internal Revenue Service
    1100 Commerce St
    Attn: EO Group 7993 MC 4910 DAL
    Dallas, TX 75242
    Fax - 214-413-5534

  2. Don’t establish an AIMS account. If an examination is warranted, EO Classification establishes it.

EO Claim Procedures

  1. Send all EO claims and amended returns to OAMC , EO Accounts units. On site classification is available for claims/amended 990-T returns with an attached Form 8941 or amount on line 44f.

  2. All claims and/or amended returns for a Form 990-T with an attached Form 8941 or amount on line 44f of the 990-T (even if there is other unrelated business income on the return) will require additional review before approval of the claim.

  3. Payments made after March 1, 2013 for the 45R credit (line 44f) are subject to a reduction of 5.7% due to sequestration.

  4. Regulated Investment Company (RIC) or Real Estate Investment Company (REIT) refunds of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Form 2439 and reviewed by the Field. See IRM 21.7.7.6.3.6 for more information.

  5. All claims must be complete. If there is missing information, the claim should be returned with no consideration using a Letter 0916c.

  6. When a request for a manual refund is received:

    • Research to ensure the organization's EIN is correct.

    • Ensure the amount of credit on line 44f is reduced by 5.7%.

    • Prepare Form 5792 (or Form 3753 for 990-T), 45R direct deposit refunds or refunds in excess of $10,000,000 to issue manual refund. Include remarks which state the "credit in excess of tax, penalties and interest is reduced 5.7% prior to offset, credit elect or refund due to sequestration."

    • Issue a Letter 3064c to the filer using the approved sequestration language.

  7. EO claims meeting CATA criteria will be emailed to EO Classification or referred to an EO Exam Area Office.

  8. The following claims or amended returns will be emailed to the unit lead as directed in IRM 21.7.7.6.16.2. The unit lead will review, electronically sign Form 5597 or Form 5588 (AIMS card), and email package to *TE/GE CPC Case Assignment (tege.cpc.case.assignment@irs.gov) with a cc to the unit manager:

    Exception:

    If the case shows an open AIMS control in status 09 or above, forward the case directly to the applicable EO Exam Area Office. Instructions are available in (9) below.

    • Amended Form 990-T reporting a tax liability decrease greater than tolerance (with the exception of a Form 990-T with a Form 8941 attached or an amount on line 44f) IRM 21.7.7.6.16.2.

    • Amended Form 990-PF reporting an IRC 4940 (tax on net investment income) tax decrease greater than tolerance. IRM 21.7.7.6.16.2.

    • Form 4720 requesting abatement of Chapter 42 excise taxes greater than tolerance.

    • Form 4720-A requesting abatement of 2nd Tier Chapter 42 (Section 4962 abatement) excise taxes greater than ≡ ≡ ≡ ≡ ≡ tolerance. Form 4720-A requests for abatement of Section 4962 excise tax are referred to the unit Subject Matter Expert who will refer the request to the field if over ≡ ≡ ≡ ≡ tolerance.

    • Requests for penalty reconsiderations which were previously denied by the field.

    • Cases/returns with issues related to prior field examinations.

    • Claims from credit unions regardless of dollar amount.

  9. If the case shows an open AIMS control in status 09 or above, forward the case directly to the applicable EO Exam Area Office. Cases with status 08 or below are worked in EO Accounts Management. Conduct initial research via CC AMDISA to determine the Employee Group Code (EGC). Find the EGC address on SERP under the Who/Where tab, EXAM Employee Group Code (EGC) Contacts bullet. Before referring a case directly to an EO Exam Area Office, compile a complete claim package consisting of the following information:

    1. A copy of the original return from OL-SEIN. If the return isn't available via OL-SEIN, request the original return from Files (make two attempts to secure the original return). If the original return isn't available, include a complete print of BRTVU.

      Reminder:

      Don’t send the original return to the Field.

    2. Complete print of TXMODA.

    3. If the claim involves a NMF account (Form 4720-A) a NMF transcript.

    4. Print of AMDISA if the account has an open TC 420/424 on the module.

    5. Complete either Form 3499 or Form 12839 routing slip. In the "Remarks" field (on Form 3499) or the "Note to Exam" field (on Form 12839), provide a detailed explanation as to why the claim is being referred to the Field.

    6. Clearly stamped case with the tax examiner's name or IDRS number, telephone number and date.

    7. Completed Form 5597 or 5588 (AIMS card).

  10. If the EGC is 772X, prepare a Form 3210 and route the case to the Exempt Organization Compliance Unit (EOCU), MS: 1112, located in Ogden, UT. Annotate "CLtoEOCU" in the Activity field on TXMODA.

  11. If the group code is other than 772X, continue compiling the claim package as outlined below and send the case to the related EGC. Find the EGC address on SERP under the Who/Where tab, EXAM Employee Group Code (EGC) Contacts bullet.

  12. Once you compile the claim package :

    1. Update the Activity field to "EO CATA" ,

    2. Send Letter 0086c to organization ( allow 90 days for response), and

    3. Place the complete claim package in the team tub for review by the unit lead.

    All claims must be reviewed and initialed by the unit lead before you route to the Field.

  13. For EP Form 990-T claim procedures, refer to IRM 21.7.7.6.16.11.

  14. Refer to the table below in determining when and where you should route other amended returns or penalty abatement cases.

    Reminder:

    All EGC 772X are routed to EOCU.

    If And Then
    amended return or
    penalty abatement request is received, (case is other than a 990–T claiming 45R credit)
    no AIMS control (i.e., TC 42X) is present on the module or does not meet CATA criteria, 1. Don’t route to the field.
    2. Resolve case issue using established procedures.
    amended return is a 990–T claiming 45R credit or claiming the credit and reporting tax no AIMS control and the following criteria is met:
    • Account has a F941/943 or 944 filing requirement.

    • Medicare wages are greater than zero and not more than $1.5 million.

    • Average number of employees is 25 or less.

    • The credit claimed on the return isn't greater than the amount calculated using the 45R worksheet.

    • Credit isn't greater than $24,742.

    • Employment code "F" , "G" ," T" or "A" isn't present.

    • EO Status Code 01, 02, 07, 10, 11, 21, 24 or 25

    1. Process the return.

    2. Allow the credit.

    3. Credit should be applied to tax, penalties, offsets or interest if before reduction due to sequestration.

    4. If actions result in a refund, ensure the amount is reduced by 5.7% (current sequestration rate.)

    amended return is a 990–T claiming 45R credit or claiming the credit and reporting tax no AIMS control but the criteria listed above isn't met
    1. Route the case to the P&A Analyst responsible for EO/EP at M/S 2100.

    2. Don’t close the CIS case.

    3. The analyst will discuss with GE Technical advisor.

    4. The analyst will provide specific instructions for closing the case.

    amended return or
    penalty abatement request is received,
    an open TC 420/424 is present on the module, 1. Research AMDISA in order to determine the related Primary Business Code (PBC) and Employee Group Code (EGC).
    2. Make two attempts by phone or email to contact the RA assigned to the AIMS case to see if he/she wants the penalty abatement request or amended return associated with their case. If they determine the case should be forwarded to them, attach the AMDISA print to case file and route the amended return/abatement request to the corresponding address associated with the specific EGC. If unable to contact the RA after two attempts, notate in case notes all contact attempts, attach email or any other documentation and forward the case to the specific EGC. EGC address' can be found on SERP under the "Who/Where" tab, "EXAM Employee Group Code (EGC) Contacts" bullet.

    Note:

    Managerial or Lead approval is required prior to sending to the RA to ensure two attempts were made to contact the RA.


    3. Send CRX Letter 0086c to taxpayer informing them the case was referred to the Field for resolution.

    Note:

    Enter the EGC manager's name and telephone number as the contact person in Letter 0086c.

    amended return is received, or
    penalty abatement request is received,
    a TC 421 is on the module, 1. Resolve the case issue based on existing guidelines.
    2. Attach the amended return to the original return with a TC 290.00, in block 18.

Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ or Less
  1. OAMC EO Accounts unit tax examiners may allow or disallow claim/reconsideration requests ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ (excluding EP Form 990-T) except for the following:

    • An open TC 420/424 is present on the module

    • Non-Master File (NMF) accounts (i.e., Form 990-BL , Form 4720-A )

    • EO Protective Claims (see IRM 21.5.3.4.7.3)

    • Former closing agreements

    • Requests for an immediate examination of the claim

    • Resubmitted claims previously disallowed by the EO Accounts unit based on instruction from the EO classifier with no additional information provided

    • Tax decreases if organization did not successfully accomplish a 60-month IRC 507(b)(1)(B) termination

    • Case is assigned to group code 772X (EOCA)

    • Virgin Islands tax abatements

    • Form 990-T with credit claimed on line 44f or a Form 8941 attached.

    • Amended Form 990-T, filed by an organization exempt under IRC 501(c)(3), with “Amended Return - Section 512(a)(7) Repeal” (Parking Tax Fringe, Qualified Transportation Fringe or similar wording may be used when referencing this repeal) written at the top of Form 990-T to claim a refund, credit, or adjust information due to the repeal of IRC 512(a)(7) and, the address on the amended return is different from that on the original Form 990-T.

      Note:

      If the addresses on the amended and original return are the same, the above tolerance applies and the amended return will be worked by OAMC.

    • Regulated Investment Company (RIC) or Real Estate Investment Company (REIT) refunds of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ must be supported by Form 2439 and reviewed by the Field. See IRM 21.7.7.6.3.6 for more information.

  2. OAMC EO Account unit leads may call the EO Exam Classifier about any claim for refund, reconsideration requests or technical issues if they’re unsure whether to allow or disallow the issue. The EO Classifier offers technical guidance as to whether the case should be routed to the Field for further action or resolved in EO Accounts.

    Note:

    Per the Taxpayer Bill of Rights (TBOR #5), taxpayers have the right to Appeal an IRS Decision in an Independent Forum; therefore, If OAMC EO Accounts unit tax examiners are disallowing a claim a formal disallowance letter should be issued and appeal rights provided.

Claim for Refund/Reconsideration ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  1. Claims or reconsiderations ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are forwarded directly to the Field by the unit lead or designee. Create a Zip file claim package including the following items:

    • An electronic copy of the original and amended return from OL-SEIN. If either return isn't available via OL-SEIN, request the return from Files. (Make two attempts to secure each return). If either return is unavailable, include a complete print of BRTVU.

      Exception:

      When working Form 990-T with “Amended Return - Section 512(a)(7) Repeal” (Parking Tax Fringe, Qualified Transportation Fringe or similar wording may be used when referencing this repeal) written at the top of Form 990-T to claim a refund, credit or adjust information due to the repeal of IRC 512(a)(7) and the return isn’t available via OL-SEIN, include a complete print of BRTVU. Make no attempts to order the original return from Files.

      Exception:

      If the claim package is extremely large, include the first 100 pages when creating the electronic copy. Make a note in the referral package email to explain the electronic claim package is incomplete due to the size.

      Reminder:

      Don’t send the original return to the Field.

    • If the claim involves a NMF account a NMF transcript must also be included.

    • Complete Form 5597 or Form 5588 (AIMS card) for AIMS establishment. Refer to Exhibits 21.7.7–1 and 21.7.7–2.

      Note:

      The PBC is 410 and EGC is 7693 for EP 990-T claims.

      Note:

      For Carrybacks, an AIMS control is established on the year(s) the loss is being carried back to.

    • Update the activity field to identify the appropriate function "EO/EP CATA" on TXMODA and close the control base.

    • If a balance due is present and no -A freeze on the account, input a STAUP for 6 cycles.

    • Send Letter 0086c to the organization. Allow 90 days for response.

      Note:

      To identify where the claim is being referred, include the following address in Letter 0086c:
      Internal Revenue Service
      Mail Code 4910DAL
      1100 Commerce St
      Dallas, TX 75242-1198

      Reminder:

      A complete EO claim package includes, an electronic copy of the original return, an electronic copy of the amended return and a completed AIMS Card for AIMS establishment.

    • Send encrypted email with the complete claim package to the unit lead for review. The email subject line must include the last four digits of the EIN, Name Control, the function and the form number.

      Example:

      1234 SMIT EO Form 990-T Claim, 1234 SMIT EP Form 990-T Claim, 1234 SMIT EO Credit Union Claim, or 1234 SMIT EO Protective Claim to identify the appropriate function.

      Note:

      Complete spreadsheet and list each amended Form 990-T due to the repeal of IRC 512(a)(7), transportation/parking tax. The spreadsheet must be emailed to the unit lead (with manager cc’d) at the end of each business day.

    • The unit lead will review, electronically sign AIMS card, and email package to EO Accounts clerk who will establish AIMS control on IDRS utilizing CC AM424. The unit lead will also email the complete claim package to *TE/GE CPC Case Assignment (tege.cpc.case.assignment@irs.gov), with a cc to the unit manager. The email must include both a delivery and read receipt.

      Caution:

      If the claim package is incorrect or incomplete, it will be returned by the unit lead to the originating employee to perfect.

      Reminder:

      If the claim package is extremely large, include the first 100 pages when creating the electronic copy. Make a note in the referral package email to explain the electronic claim package is incomplete due to the size.

  2. Refer to the routing procedures in IRM 21.7.7.6.16 above.

EO Protective Claims
  1. Claims or amended returns based on expected changes in any of the following areas are considered protective claims:

    • A current IRC or regulation;

    • Pending legislation; or

    • Current litigation.

  2. Refer all protective claims to the Field following IRM 21.7.7.6.16.2.

  3. If there is an open AIMS control on the account in status 09 or above. See IRM 21.7.7.6.16(9).

EO Forms 4136
  1. Form 4136 (or a statement showing the computation of tax) is used by state and local governments or nonprofit educational organizations that are not liable for excise tax on gasoline or special fuels. Form 4136 can be filed with Form 990-T and Form 1120-POL.

  2. Government or tax exempt organizations cannot file a claim for payment or refund if it is known another person is entitled to file a claim for the same fuel.

  3. Verify and compute the amount to be refunded. Follow the table below:

    If Then
    the claim can’t be processed due to lack of information or you’re using "no consideration procedures" , Send the taxpayer a Letter 0916c.
    the claim is disallowed, 1. Input TC 290.00 in Blocking Series (BS) 98/99.
    2. Send the taxpayer Letter 0105c.
  4. See IRM 21.5.3-3 for more information on BMF claims.

EO Windfall Profit Tax
  1. If a claim or amended return is received requesting credit or refund of Windfall Profit Tax, route to Austin Compliance Center. Send Letter 0086c to taxpayer. Allow 90 days for response.

IRC 4958 and IRC 4962 Abatement Request Procedures
  1. IRC 4958 and IRC 4962 establishes excise taxes as an intermediate sanction where applicable EOs engage in excess benefit transactions with disqualified persons. These excise taxes are imposed on:

    1. Disqualified persons who benefit from excess benefit transactions.

    2. Organization managers who participate in these transactions knowing that they are excess benefit transactions.

  2. A disqualified person is any person who was in a position to exercise substantial influence over the affairs of the applicable tax-exempt organization at any time during the five year look back period.

  3. The "Initial Tax" or "First Tier Tax" is an excise tax equal to 25% of the excess benefit from each excess benefit transaction between an applicable tax-exempt organization and a disqualified person. When this occurs, Form 4720, Part I is completed.

  4. When the 25% tax is imposed on an excess benefit transaction between an applicable tax-exempt organization and a disqualified person, and the excess benefit transaction isn't corrected within the taxable period, an additional excise tax equal to 200% of the excess benefit is imposed on the excess benefit transaction.

    1. This tax is referred to as the "Additional Tax" or "Second Tier Tax" .

    2. Part II of Form 4720 is completed. During processing, if Part II information is present, a Form 4720-A is prepared. IRM 21.7.7.6.11.3

  5. Delegation Order No. 237 (Rev. 2), dated November 14, 1997, does not authorize Directors, Submission Processing or Accounts Management Campuses to abate qualified First or Second Tier excise tax amounts imposed by Chapter 42 of the IRC.

    Note:

    Delegation Order No. 7-11 (Rev. 1), dated July 2, 2018, authorizes Directors, Submission Processing or Accounts Management Campuses to abate qualified First Tier excise tax amounts, IRC 4962 claims for abatement of First Tier Chapter 42 taxes or IRC 4958 Second Tier Chapter 42 tax claims for abatement ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ imposed by Chapter 42 of the IRC.

  6. A request for abatement under IRC 4962 must have a statement attached, from the filer. This statement must include an assurance that the event occurred due to a reasonable cause and not willful neglect and it was corrected within the correction period. If the request for abatement includes both tax and penalties, see IRM 21.7.7.6.11.2.

  7. If a statement is attached and includes the items identified in (6) above, input a TC 291 with the appropriate IRNs. See IRM 21.7.7.6.19.8.5 for the appropriate IRNs. If the statement is not included, the claim should be returned with no consideration using the Letter 0916c.

  8. IRC 4958 Second Tier Chapter 42 tax claims for abatement under tolerance of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡should have Form 1331-B completed requesting the decrease.

  9. Before routing the case to the field, post a TC 150 to Master File and attach the following items to the claim or correspondence request.

    • A copy of Form 4720 from OL-SEIN. If return isn't available via OL-SEIN, request the original return from Files (make two attempts.) If unable to secure the original Form 4720 from Files, attach Form 4125 (charge-out document) to the case file. If the initial charge out indicates the original return is in SOI, don't submit a second request.

    • Taxpayer’s letter of explanation.

    • NMF transcript, if claim is requesting abatement for Second Tier tax over tolerance.

    • Complete prints of TXMODA & BRTVU.

    • Completed Form 5597 (See Exhibit 21.7.7–1 or 21.7.7–-2).

    • Send an Letter 0086c (allow 90 days for response) to the taxpayer and prepare applicable routing slips.

    • Unit lead’s review, approval and initial of case.

  10. For IRC 4958 and IRC 4962 abatement requests of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, follow IRM 21.7.7.6.16.11.

Form 8941 Claims
  1. The Patient Protection and Affordable Care Act (ACA) created a tax credit to encourage small employers to provide health care coverage to their employees. The form is filed by entities exempt from tax under the provisions of IRC 501(c), the credit is refundable and is only claimable by filing a Form 8941 with a Form 990-T.

  2. Returns filed normally are filtered for compliance purposes prior to processing. In some instances, amended or superseding returns may be filed that will bypass the compliance review process.

  3. Detached Form(s) 8941 or Form(s) 8941 filed separately to claim the credit, amended returns and claims are sent to EO Accounts Management for processing.

  4. In order to qualify for the credit, the small employer must have met the following conditions:

    1. Have fewer than 25 full time equivalent (FTE) employees for the taxable year.

    2. Employees must have an average annual wage of less than $55,000 per FTE (for details and annual wage amounts for specific tax years, see instruction to Form 8941 for the appropriate tax year).

    3. Beginning in 2010, the employer must pay a uniform percentage (not less than 50%) of the premiums for each employee enrolled in single (employee-only) coverage and no less than an equivalent amount for each employee enrolled in family coverage.

    4. Beginning in 2014, the employer must have participated in the Small Business Health Options Program (SHOP), unless they qualify for transition relief as indicated on Form 8941.

      Note:

      Find more information about the SHOP at HealthCare.gov.

  5. For tax years 2014 and subsequent, the credit is limited to 2 consecutive taxable years. Command Code (CC) ENMOD displays a 45R year indicator (in a 45R YR1 > YYYY / 45R YR2 > YYYY format). For example, an organization filed for the credit in 2014, they would only be entitled to the credit for 2014 and 2015 even if they fail to file a return for 2015. See IRM 21.7.4.4.8.3.41

  6. Update the 45R indicator as appropriate via CC ENREQ/BNCHG. If the 45R year indicator was input in error, remove it by input of all 9's in the 45 year indicator field.

    Note:

    Updates to the 45R year cannot be done in the same input as an address change or name change.

  7. Use the following table to resolve:

    If Then
    A Form 990-T was filed claiming the credit and the credit was previously allowed, input a TC 290 for zero to attach the Form 8941 to the posted Form 990-T.
    A Form 990-T was filed but the credit was previously disallowed or the filer is amending to increase the credit,
    1. Apply the criteria IRM 21.7.7.6.16 (14).

    2. If a previous disallowance is due to an exam, route the case to the P&A Analyst at M/S 2100.

    3. If the claim passes the criteria requirements, and was not previously disallowed by exam, input the adjustment TC 290. Use BS 46 to indicate an adjustment to a sequestered account.

    A Form 990–T is filed and the amount on Line 51f (or appropriate line number for the tax year) is the same amount or less than the amount on the return previously filed, work the case following normal amended return procedures.
    A Form 8941 is filed but a Form 990-T filing cannot be found, return the Form 8941 to the filer instructing them to complete a Form 990-T and attach.
    A filer files a Form 843 to claim the credit, return the Form 843 to the filer and instruct them they must complete Form 990-T and Form 8941 to claim the credit.
    A filer files a Form 990-T but Form 8941 is not included and the Form 990-T has not posted Send the Form 990-T through for processing. Correspondence will be issued requesting the missing information during pipeline processing and close case.
    A filer files a Form 990-T but Form 8941 is not included and the Form 990-T has posted Send correspondence requesting missing information and close case.
    A filer indicates they are not entitled to the credit and returns the refund Input a TC 290 with reference number 291 (-) to remove the credit.
    A -L freeze is present on the account Send to EOCA M/S 1112.
    The claim is for a tax period prior to 2010 Deny the claim. Input a TC 290 for zero with blocking series 98. Send Letter 0105C .

  8. When classification is complete, take the following actions based on the information the EOCA Technical Advisor and AM P&A Analyst give you.

    Note:

    EOCA sends an email documenting the appropriate actions and attaches the email to the case when they return it to you.

    If Then
    The increase in credit is approved Input a TC 290 CRN 291 using BS 46 to allow the credit. If the 45 day interest is in jeopardy, consideration should be given to issuing a manual refund when the overpayment to be refunded is $5,000 or more. Refer to manual refund guidelines found in IRM 21.4.4, Manual Refunds. When issuing any refund, the refund portion related to the 45R credit must be reduced (sequestered) by 5.7%.
    Selected for audit Establish the account on AIMS and route the entire case to EOCA M/S 1112. The following information should be included on the Form 5597:
    • Source Code - 79

    • Primary Bus. Code - 406

    • Secondary Bus. Code - 00000

    • Status Code - 10

    • Project code - 1073

    • Emp. Grp. Cd - 7720

    • Activity Code - 394

    • All other information should be completed as outlined in 21.7.7 - 2.

    Correspondence is received in EO Account providing requested incomplete or missing information, forward the case to the AM P&A Analyst responsible for EO/EP.
    Input the adjustment via TC 290 with credit reference number 291 with BS 46.

  9. Ensure a TC 971/356 is input with the original credit payment amount prior to sequestration decrease and again with any subsequent adjustment to the credit payment amount.

Amended Form 990-T “Amended Return - Section 512(a)(7) Repeal” - (Parking Tax Fringe, Qualified Transportation Fringe or similar wording may be used when referencing this repeal)
  1. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 retroactively repealed IRC 512(a)(7), which increased unrelated business taxable income by amounts paid or incurred for qualified transportation fringes. Congress enacted this provision for amounts paid or incurred after December 31, 2017.

  2. Taxpayers can claim a refund or credit of the UBIT reported on their Form 990-T for 2017 or 2018 under IRC 512(a)(7) by filing an amended Form 990-T as described in the form’s instructions or by following the guidance provided in the following article How To Claim a Refund or Credit of Unrelated Business Income Tax (UBIT) or adjust Form 990-T for Qualified Transportation Fringe Amounts.

  3. Taxpayers may request a previous credit elect be reversed/revoked. However, once the taxpayer makes the election to have the overpayment applied to their next year’s estimated taxes (credit elect), it cannot be revoked. For more information see, IRM 21.7.4.4.5 Estimated Tax Overpayment, Credit Elect - General (1). If the amended return reflects a refund which includes an amount applied to their next year’s estimated taxes, send Letter 0247c , advising the taxpayer the credit elect is binding but can be claimed on their next return to receive a refund.

  4. Follow the procedures in IRM 21.7.7.6.16.1 and IRM 21.7.7.6.16.2 to work these claims, with the following exception:

    Exception:

    For organizations exempt under IRC 501(c)(3), if the address shown on the amended return is different from the address on the original return, all claims referencing this repeal will be referred to EO Classification following the routing procedures in IRM 21.7.7.6.16, regardless of tolerances.

  5. If there is also a CP234 CIS case, take the following action(s):

    If And Then
    The amended return reduces the tax to zero due to the repeal of IRC 512(a)(7) the claim request meets the criteria in IRM 21.7.7.6.16.1, Input a TC 291 to reduce the tax to zero and include a TC 170 $.00 to resolve the CP 234.
    The amended return reduces the tax to zero due to the repeal of IRC 512(a)(7) the claim request meets the criteria in IRM 21.7.7.6.16.2, Input a TC 170 $.00 to resolve the CP 234 and refer the case following IRM 21.7.7.6.16.2.
    The amended return doesn’t reduce the tax to zero the claim request meets the criteria in IRM 21.7.7.6.16.1,
    • Follow IRM 20.1.3.4, Corporations and Others Not Covered by IRC 6654. Calculate the estimated tax penalty using the tax shown on the amended return rather than the original.

    • Input a TC 291 to reduce the tax and the appropriate TC 17X per IRM 21.7.11.4.8, CP 234 - Processing Potential ES Penalty Notices.

    • If a TC 171 is required, the penalty can be reduced by following the instructions in IRM 20.1.3.4.2.1, Evaluating Claims for Abatement or Waiver of Estimated Tax Penalties (the taxpayer is providing evidence the ES penalty was computed incorrectly due to the repeal of IRC 512(a)(7). Use the appropriate PRC in IRM 20.1.3.2.2(8), Manual Penalty Adjustments.

    The amended return doesn’t reduce the tax to zero The claim request meets the criteria in IRM 21.7.7.6.16.2, Input a TC 170 $.00 to resolve the CP234 and refer the case following IRM 21.7.7.6.16.2. The amended return and ES penalty will be addressed by EO Examination.

Sequestered 990-T Returns With 45R Credit, Offsets, Credit Elect and Tax
  1. Current programming sequesters 5.7% of all 45R refundable credits. If a 990-T with 45R credit owes tax the 45R credit should not be reduced.

  2. The sequestration rate is based on the obligation date. The obligation date is the date all administrative actions are completed. Generally, the obligation date for systemically generated refunds (TC 846) will be Thursday for the posted cycle. Per Document 6209, Calendars/2020 Posting Cycle, transactions input by 9/24/2020 and released timely (not DQ’d or unposted) will post in cycle 202039 and will be sequestered at the 5.9% rate. Transactions not released on or before 9/24/2020 or are input on 9/25/2020 and subsequent will be sequestered at the 5.7% rate and will post in cycle 202040. The obligation date when a manual refund is issued is the date the manual refund is prepared and sent to Accounting. Refundable credits are reduced by the applicable sequestration rate according to the date the credit is processed for refund, regardless of when the IRS received the original or amended return. There are exceptions to the general rule as follows:

    • If a freeze is applied to a credit or refund due to sequestration activities, or development of sequestration policy and procedure, then the obligation date is the date the account was frozen.

      Example:

      A TC 570 “-R” freeze was applied to taxpayer’s module due to sequestration programming in cycle 202032. The freeze stayed on the module until cycle 202050 because Counsel needed to make a determination on the sequestration rate. Since all administrative actions were completed when the freeze was applied, the obligation date was 08/06/2020 (cycle 202032), even though the TC 846 posted in cycle 202050.

    • If a taxpayer’s return isn’t processed timely due to an IRS error, then the obligation date is when normal processing of the return would have been completed. A Memorandum with an explanation of the untimely processing will be prepared by the area that caused the delay and will be submitted to their senior management and CFO for approval of the obligation date and rate.

      Example:

      A return was received on April 1, 2020, but the TC 846 didn’t post until cycle 202048 due to a handling error of the return (TC 150). The return and refund should have posted to Masterfile in cycle 202017 if the return wasn’t improperly handled. Therefore, the sequestration rate changed from 5.9% (FY 2020) to 5.7% (FY 2021) and the account was sequestered at an incorrect amount.

    • If a taxpayer is sent a refund where the bank account and/or address is incorrect, the refund is sent back to IRS and we resubmit a new refund, the obligation date is the posting cycle of the first TC 846.

      Example:

      A taxpayer’s first TC 846 posted in cycle 202033 but was undelivered due to an incorrect address. A subsequent refund posted in cycle 202048. Since all administrative actions were complete when the first refund was posted, the obligation date is 08/13/2020 (cycle 202033). Therefore, the account should be sequestered at the FY 2020 rate of 5.9%.

    When considering some of the exceptions above or to determine if the correct sequestration rate was used, the prior and current sequestration rates are shown in the table below:
    The sequestration rate beginning for systemic refunds in cycle is and is effective in cycle
    10-01-2013 FY 2014 7.2% 201340
    10-01-2014 FY 2015 7.3% 201440
    10-01-2015 FY 2016 6.8% 201539
    10-01-2016 FY 2017 6.9% 201640
    10-01-2017 FY 2018 6.6% 201740
    10-01-2018 FY 2019 6.2% 201840
    10-01-2019 FY 2020 5.9% 201940
    10-01-2020 FY 2021 5.7% 202040

  3. If manually allowing credit, reduce the credit by 5.7% prior to:

    1. Offsets

    2. Credit elect

  4. If the account isn’t routed per IRM 21.7.7.6.16 (15) table :

    1. Assess any tax due on the account.

    2. Input a TC 290 CRN 291 for any credit due. Credit should be allowed in full if offset by tax. For example, if tax is $1,000 and credit is for $500, the total credit should be allowed. However if tax is $500 and credit is $1,000; $500 of the credit should be applied to tax and $500 should be reduced by 5.7% and the reduced amount input on the TC 290 CRN 291.

  5. If the credit isn’t allowed, see IRM 21.7.7.6.16.7 (5) table for resolution.

    Note:

    If credit isn't approved, EO Accounts is required to assess the tax or other credits to the account.

American Recovery and Reinvestment Act of 2009
  1. The American Recovery and Reinvestment Act (ARRA) of 2009 was signed into law on February 17, 2009. Section 1211 provides an extended carryback period for "eligible small businesses" sustaining a net operating loss in tax year 2008. The provision allows taxpayers that are eligible small businesses to elect a 3, 4, or 5-year carryback period for a 2008 Net Operating Loss (NOL).

  2. The provision applies to net operating losses arising in taxable years ending after December 31, 2007. The new provision, enacted as part of ARRA, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years.

  3. Revenue Procedure 2009-26, published on April 24, 2009, (supersedes Revenue Procedure 2009-19) provides modified guidance to taxpayers on how to make the election.

  4. Refer to IRM 21.5.9 for detailed procedures in regards to processing carrybacks.

Form 990-T Employee Plan (EP) Claim Procedures
  1. An Employee Plans Trust is a trust opened to hold the money from a retirement plan. The money in the trust is put into various accounts such as:

    • Savings accounts

    • Certificate of deposits

    • Stocks

    • Limited partnerships

  2. The money is invested in hopes of receiving interest, dividends or a return of the partnership's income. When a trust invests in a partnership that generates income from a trade or business that isn't substantially related to the exempt organization's purpose, it’s considered Unrelated Business Income (UBI). The trust pays and reports UBI on Form 990-T .

  3. Identify Form 990-T EP accounts by researching the entity portion of the module. EP Form 990-T filers are required to apply and enter an EIN assigned to the 401(a) Trust. EP Form 990-T has a filing requirement code 02 and no EO subsection. Form 990-T is required to be filed by the 15th day of the fourth month following the end of the tax period.

  4. The local tolerance level for Form 990-T EP claims was increased to ≡ ≡ ≡ ≡ ≡ ≡. This tolerance amount allows the OAMC EO Accounts to resolve all Form 990-T EP claims/reconsiderations, NOLs, RINTs, TENTs and amended returns of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

  5. Refer to IRM 21.7.7.6.16.2 for EP Form 990-T EP claims/reconsideration, NOLs, RINTs and amended returns, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or any claim/reconsideration you’re unsure whether to allow or disallow the issue.

    Reminder:

    When sending encrypted email with complete package to the lead for review, email subject line must include the last four digits of the EIN, Name Control, the function and the form number.

    Example:

    1234 SMIT EP Form 990-T Claim.

  6. OAMC EO Accounts unit tax examiners may allow or disallow Form 990-T EP claim/reconsideration requests ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ except for:

    • TC 42X is present on the module

    • Former closing agreements

    • Requests for an immediate examination of the claim

    • Resubmitted claims previously disallowed by the EO Accounts unit based on instruction from the EP classifier with no additional information provided

  7. Below are the three different types of claims/reconsiderations we may receive:

    • Amended returns

    • Carryovers

    • Carrybacks (worked by designated tax examiners)

    Note:

    Supporting documentation (i.e., Sch. K-1) isn't required for adjustments resulting in a tax decrease of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

EP Form 990-T Amended Return Procedures
  1. EP Exam agents secure a Form 990-T during the exam of a Form 5500 return when they discover the trust assets have produced income that is taxable under IRC section 511 as Unrelated Business Income (UBI).

  2. The EP agent or taxpayer may submit delinquent, dummy or SFR returns. Occasionally, we may receive an amended return after the filing of the original return.

  3. When we receive an amended return after the filing of a delinquent, SFR or dummy return from either the taxpayer or an EP agent, adjust the account based on the information provided on the amended return. Since the tax module already contains a TC 42X, enter the adjustment with the applicable TC 29X amount, Hold Code and Priority Code 01.

  4. If you have any questions or concerns about the amended return adjustment, contact the EP Exam agent/manger listed on the documents attached to the return. If no contact information is available, refer to your lead or manager who can contact the EO/EP P&A analyst for assistance.

Exempt Organization Carrybacks
Overview

  1. EOs may claim a Net Operating Loss (NOL) deduction. A NOL is used to lower taxes in an earlier year, allowing a refund for taxes that have already been paid.

  2. EOs may file a carryback claim for refund of tax. These Restricted Interest claims for refunds are referred to as "RINTs" . They must be filed before the statute expires on the loss year return.

  3. EOs may claim a NOL carryback by filing an amended Form 990-T, Exempt Organization Business Income Tax Return.

  4. Taxpayers can no longer carry net operating losses back to previous tax periods, unless their NOLs are incurred in the trade or business of farming or unless they are non-life insurance companies. All taxpayers can carry their NOLs forward indefinitely, with the exception of non-life insurance companies, which are limited to a 20-year NOL carryfoward period. Public Law No: 115-97 (Sec. 13302) Modifies the net operating loss deduction to: (1) limit the deduction to 80% of taxable income with an exception for property and casualty insurance companies, (2) repeal the two-year and other specified carryback provisions, (3) allow an indefinite carryforward of net operating losses, and (4) allow a two-year carryback for certain losses incurred in the trade or business of farming. See IRM 21.5.9.5.14.11 for additional information.

  5. Refer all RINTs filed by exempt organizations ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to the Field.

  6. Secure all research and returns (if necessary) prior to referral.

  7. If a claim/reconsideration was generated from a NOL carryback, then include both the original and amended return(s) of the loss year. Explain why there are any missing return(s).

Restricted Interest Claims (RINTs)
  1. If TC 150 is processed at the OSPC, request a copy of the loss year return (or any other year the tax examiner deems necessary) from OL-SEIN to verify the adjustment. If the return isn't available on OL-SEIN, request the original return from Files (make two attempts).

  2. If the original loss year return is unavailable, attach a complete TXMODA and BRTVU prints, along with Form 4251 (charge out document) if the original return is unavailable.

  3. Apply claims dollar threshold criteria:

    • RINTs ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are worked by the tax examiners.

    • RINTs ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are forwarded directly to the Field.

  4. Follow IRM 21.7.7.6.16.2 when referring amended gain year returns or claims over ≡ ≡ ≡ ≡ ≡ to the Field.

    Note:

    The complete claim package must include the original gain year return, amended gain year return or BRTVU print and charge out document(s) (if necessary), and the loss year return or BRTVU prints and charge out document(s).

  5. Refer to IRM 21.5.9 for detailed information regarding the processing of BMF Restricted Interest Claims.

EO Credits

  1. As with income tax returns, EO credits can either be refundable or non-refundable. A non-refundable credit is a statutory credit claimed to reduce tax liability. These credits, subtracted from the tax amount, are limited to the amount of tax liability. Any excess is non-refundable, but generally, still available if the tax liability increases at a later date or can be applied against tax liabilities in other periods (carryback/carryforward –- see IRM 21.5.9 for more information on carrybacks). Also, see information on the specific credit to determine if it is available for carryback/carryforward. The following non-refundable credits are applicable to Form 990-T (unless otherwise annotated):

    • Form 1116 (trusts) or Form 1118 (corporations) — Foreign Tax Credit

    • Form 3468 — Investment Credit

    • Form 3800 — General Business Credit

    • Form 4255 — Recapture of Investment Credit

    • Form 5735 — American Samoa Economic Development Credit

    • Form 6478 — Credit for Alcohol Used as Fuel

    • Form 6765 — Credit for Increasing Research Activities

    • Form 8820 — Orphan Drug Credit

    • Form 8586 — Low-Income Housing Credit

    • Form 8611 — Recapture of Low-Income Housing Credit

    • Form 8801 (trusts) or Form 8827 (corporations) — Credit for Prior Year Minimum Tax

    • Form 8826 — Disabled Access Credit

    • Form 8834 — Qualified Electric Vehicle Credit

    • Form 8835 — Renewable Electricity, Refined Coal, and Indian Coal Production Credit

    • Form 8847 — Credit for Contributions to Selected Community Development Corporations

    • Trans-Alaska Pipeline Liability Fund Credit (no form)

    • Section 29 computation sheet - Credit for Producing Fuel From a Nonconventional Source

    • Form 8864 — Biodiesel and Renewable Diesel Fuels Credit

    • Form 8874 — New Markets Credit

    • Form 8881 — Credit for Small Employer Pension Plan Start Up Costs

    • Form 8882 — Credit for Employer Provided Child Care Facilities and Services

    • Form 8896 — Low Sulfur Diesel Fuel Production Credit

    • Form 8900 — Qualified Railroad Track Maintenance Credit

    • Form 8906 — Distilled Spirits Credit

    • Form 8907 — Nonconventional Source Fuel Credit

    • Form 8908 — Energy Efficient Home Credit

    • Form 8910 — Alternative Motor Vehicle Credit

    • Form 8911 — Alternative Fuel Vehicle Refueling Property Credit

  2. Refer to IRM 21.7.4.4.8.3, for additional information on specific non-refundable credits.

EO Refundable Credits
  1. A refundable credit is a credit to reduce a tax liability. If the tax is reduced to zero (or reported as zero) and the credit remains, it is refundable.

  2. Refundable credits can be claimed on Form 990-T or certain Form 1120 series returns. The taxpayer is required to submit various forms or schedules to substantiate credits applicable to the return. Refer to Document 6209 for the appropriate CRNs to adjust refundable credits.

  3. The following refundable credits are applicable to Form 990-T (unless otherwise annotated):

    • Form 2439 - Credit For Regulated Investment Companies (Form 990-T only)

    • Form 4136 - Credit for Federal Tax Paid on Fuels (see IRM 21.6.3.4.2.6 and IRM 21.7.4.4.9.1.)

    • Form 8827 - Credit for Prior Year Minimum Tax - Corporations (Form 990-T only) for taxable year of a corporation beginning in 2018 or 2019.

    • Credit for Ozone Depleting Chemicals (Form 990-T only)

    • Tax paid or withheld at source (Form 990-T and Form 990-PF only)

    • Estimated tax payments

    • Tax paid with Form 7004 ( Form 1120 series only)

    • Tax paid with Form 8868 ( Form 990-T and 990-PF only)

    • BUWH (see IRM 21.7.4.4.10, for more information on BUWH)

    • Tax credit for health care (45R) credit claimed on Form 8941 for certain exempt organizations.

  4. HR 4520, the American Jobs Creation Act of 2004, created five new excise credits that can be claimed on Form 4136, effective for tax years ending after December 31, 2004. Fiscal year taxpayers may claim these credits for tax periods ending January 31, 2005 (200501). The new credit reference numbers and description is shown below. Refer to IRM 21.7.4.4.9, for additional information on refundable credits.

    CRN Description
    388 Qualified Bio-diesel Mixture
    390 Qualified Biodiesel
    393 Alcohol Mixture Containing Ethanol
    394 Alcohol Mixture Containing Alcohol other than Ethanol
    395 Other Non-Taxable Use

EO Duplicate Filing Conditions

  1. In addition to specific procedures below for TE/GE returns, also refer to IRM 21.7.9 , BMF Duplicate Filing Conditions, when resolving EO amended/duplicate returns.

  2. A duplicate filing condition occurs when a return (TC 976) posts to a module already containing a return (TC 150). IDRS generates an -A freeze. This prevents any refund or offset from the module until an adjustment (TC 29X) is made. IDRS also generates a CP 193 or CP 293 (when there is an open (unreversed) TC 420) which is associated with return and forwarded to EO Accounts.

  3. Since CP 190s, 193s, and 293s are generated at the site which processes the TC 976 return, the vast majority of EO DUPF cases are generated in Ogden. EO DUPF returns received in other campuses should be routed to OSPC for processing.

  4. If an EO amended return is received, and no TC 150 has posted to MF, suspense the amended return pending the posting of the original return. Allow six weeks suspense time from the return due date or extended due date. If no TC 150 posts to MF by the end of the suspense period, edit the amended return and process as an original.

  5. If an amended return is received, address any missing information and don’t consider it a true dup if the information was also missing on the original. IRM 21.7.7.6.23.1.3.1.

  6. All duplicate filing conditions age in 45 days and are not considered to be correspondence. If correspondence is attached to the duplicate return, re-control the case as EXOR. The case then needs to be acknowledged. In this instance, the received date of the case must be changed to the original received date on the return. If additional correspondence is received after the date of the duplicate return, don't change the received date. However, change the Category Code to EXOR.

Duplicate Filing Conditions Research
  1. Use CFOL, EUP, OL-SEIN or secure the original return (when absolutely necessary) from Files.

  2. Determine correct entity on original and duplicate returns.

    Caution:

    If the return isn’t marked "amended" , "corrected" or "supplemental" and the correct entity can’t be determined, attempt to contact the taxpayer two times to verify the correct account information. If you’re unable to determine the correct entity and/or a new EIN is needed, forward a scanned copy of the front page of the return (entity portion) including available research, and a scanned copy of any other document in the case file that may help determine the correct entity, to EO Entity Control.

    Example:

    Organizations filing Form 990-T (IRC 401(a) and 408 IRA Trust) can have multiple accounts using the same name but with different account numbers. See IRM 3.13.12.9.13.4, For 990-T (IRC 401(a) and 408 IRA Trust) for more information. Accounts numbers may be stamped/written somewhere on the return other than the entity section.

  3. Examine both returns for following similarities and differences:

    • Tax amounts

    • Tax periods

    • Received dates

    • Julian dates

    • Signature dates

    • Signatures and titles

    • Dates of deposits

    • GEN

  4. When a return is filed marked "amended " , "corrected" , "supplemental" , or "superseding" (an amended return filed on or before return due date is a superseding return), etc., Code and Edit (C&E) inputs CCC "G" . IDRS does not record any information except the amount paid with return. It does not math verify "G" coded returns. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

  5. When working CP 193s involving income tax, particularly Form 990-T, Form 990-PF and Form 1120-POL, be sure to check for possible credit adjustments. Even though no tax change may be indicated, the amended return could be filed to claim a refund. If an adjustment is required, refer to IRM 21.6.3.4.2.6. and IRM 21.7.4.4.9.1.

  6. All duplicate filing cases must be controlled on IDRS and not closed until action is taken to resolve the -A freeze or the case is referred to another appropriate area.

  7. If the filer doesn’t include a letter of explanation stating why the amended return is being filed, research to determine what is being amended. Do this by accessing CC BRTVU and viewing a copy of the original return via OL-SEIN. If the original return isn't available on OL-SEIN, you may need to secure the original return from Files.

Duplicate Filing Conditions Procedures
  1. EO returns marked "amended" or "corrected" are sorted by Receipt and Control (R&C), batched, and sent through processing. Code and Edit edits a CCC "G" on these returns which initiates a duplicate filing condition. After the returns complete ERS processing, all Forms Form 990, Form 990-EZ, Form 990-PF, Form 990-T, Form 4720, Form 5227, Form 8872 and related schedules are scanned through the imaging process.

  2. Duplicate EO returns must be controlled on IDRS with category code "EDUP" .

  3. Follow table below to make adjustments.

    If Then
    an increase in tax, 1. Input TC 290 in the appropriate BS and money amount.
    2. Send letter of explanation if necessary.
    return indicates a tax decrease, 1. Refer to Claim procedures in IRM 21.7.7.6.16
    return is a true duplicate, 1. Input TC 290.00 in the appropriate BS.
    2. If there is a credit on the account not indicated on the returns, perform research or contact taxpayer to ascertain the appropriate disposition of credit before releasing the "-A" freeze.
    one of the returns belongs on another period/TIN,
    1. Reprocess the return to the correct TIN or tax period. (Refer to IRM 21.7.9.4.9)

    2. If Form 5800 or Form 5800-A (edit sheet) is attached, make the necessary changes before reprocessing return.

    3. Adjust or assess any penalty if necessary.

      Note:

      If return belongs on another tax period, penalties should be increased or decreased. Check due date of tax period and compare to received date of the return. Make any adjustments to the penalties necessary.

Adjusting Total Gross Receipts and
End of Year (EOY) Assets
  1. Amended Form 990 or Form 990-EZ returns requesting an adjustment to the "Total Gross Receipts" or "End of Year Assets" fields can be corrected by entering the corresponding Reference Code for each item. The applicable Reference Codes are:

    • 888 — Total Gross Receipts

    • 889 — End of Year (EOY) Assets

    Adjust 888/889 amounts to $0 if an original return is being re-processed, and there is no other return intended for this account.

  2. In order to compute the total gross receipts on Form 990 or Form 990-EZ refer to the guidelines below.

    Tax Year... Form... Total of lines...
    2007 and prior 990, Part I 1e, 2, 3, 4, 5, 6a, 7, 8a (both columns) 9a, 10a, and 11 of Part I.
      990-EZ, Part I 1, 2, 3, 4, 5a, 6a, 7a, and 8.
    2008 and 2009 990, Part VIII, Column A 6b (both columns), 7b (both columns), 8b, 9b, 10b, and 12.
      990-EZ, Part I 5b, 6b, 7b, and 9.
    2010 and subsequent 990, Part VIII, Column A 6b (both columns), 7b (both columns), 8b, 9b, 10b, and 12.
      990–EZ, Part I 5b, 6c, 7b and 9.

  3. Reference Code 889 is used to adjust the End Of Year Assets field. Refer to the table below for the specific line number of the EOY assets on the return.

    Tax Year Line Number
    2007 and prior Form 990 - Part IV, line 59 (B)
    Form 990-EZ - Part II, line 25 (B)
    2008 and subsequent Form 990 - Part I, line 20 (B)
    Form 990-EZ - Part II, line 25 (B)

  4. Input a TC 290.00, with the applicable Reference Code to adjust the account based on the information provided on the amended return. Either one or both Reference Codes may be input.

  5. You may need to manually re-compute or adjust the DDP if the penalty was calculated on the original gross receipts amount.

CP 193 Received Without Duplicate Return
  1. When a CP 193 is received without the duplicate return, attempt to determine if it is a true duplicate using CC BRTVU.

    If Then
    the return proves to be a true duplicate, 1. Input TC 290.00 in BS 10/15.
    2. Annotate in the remarks portion of the adjustment document "NSD - True DUPF per BRTVU" (unless original return is attached).
    TC 976 proves to be a true duplicate for another period, and there are no open TDI's for this MFT, 1. Input a TC 290.00 in BS 10/15 and follow procedures outlined in IRM 21.7.9.4.1.2.
    2. Secure a copy of the duplicate return from OL-SEIN or use a print of BRTVU if return isn't on OL-SEIN.
    3. If the return was filed electronically, obtain a copy of the return from the EUP.
  2. When unable to secure a return from OL-SEIN or Files (after two attempts or within 40 days):

    1. Send a Letter 0418c to the organization requesting a copy of the return. You may also contact the organization by phone to obtain a copy in order to expedite case closure.

    2. Suspend case for 40 days.

  3. If there is no reply and:

    If Then
    a payment was received with duplicate return, 1. Assess tax equal to payment amount.
    2. If module credit balance is in excess of payment submitted with return, determine reason for additional excess credit.
    3. Resolve any misapplied payments or other module freeze conditions before making assessment.
    information isn't available to determine adjustment needed and no payment was received with duplicate return, 1. Input TC 290.00 to release the "-A" freeze.
  4. If a reply is received (fax or mail) and the document must be processed to another account, edit the DLN of the TC 976 on the form, and follow local reprocessing procedures.

Multiple Employer Identification Numbers (EIN)
  1. On cases involving multiple EINs, determine if any account needs to be deleted.

  2. If necessary, contact the organization and/or Entity Control for purpose of deleting accounts, filing requirements, and/or input of appropriate TC 59X.

Amended Statute Period EO Returns
  1. In May 2007, the Ogden Submission Processing and Account Management teams agreed to the following process to by-pass the Unpostable 350 condition associated with EO statute period amended returns. The new process allows all amended statute period EO returns to be identified, statute cleared, imaged and routed to EO Accounts for resolution in the least amount of time.

    Note:

    Statute period EO amended returns are the only returns that are sent directly to EO Accounts and are not "G" coded during initial processing.

  2. The following is a list of EO returns that are imaged.

    • Form 990

    • Form 990-EZ

    • Form 990-PF

    • Form 990-T

    • Form 4720

    • Form 5227

    • Form 8872

  3. R&C routes all statute period amended returns to the Statute unit (MS: 6741) to be cleared. After the document is cleared, Statutes inputs a TC 971–010 on the applicable module(s) to generate a TC 976. If Statute fails to input a TC 971-010, Accounts Management needs to input the TC 971-010. This action is necessary to provide an audit trail for the Field. After the return(s) have been cleared, Statutes also attaches Form 12547 and routes the cases to the Imaging unit (MS: 6058) to be scanned. Form 12547 must included the following information:

    • EIN

    • Tax Period

    • MFT

    • Name Control

  4. After the Imaging unit has scanned the documents, they will route them (via Form 12547) to EO Accounts (MS: 6710) for resolution.

  5. EO Accounts resolves the amended return condition based on existing amended/duplicate return procedures.

CP 193s Involving Reprocessing Returns
  1. When a return must be reprocessed (via Form 13596 ), refer to IRM 21.5.2.4.23, for procedures.

  2. When a dummy return is reprocessed in place of original or duplicate return, use the same received date as original or duplicate, respectively.

  3. Adjust 888/889 amounts to $0 if an original return is being re-processed, and there is no other return intended for this account.

  4. If the module is in MF Status 02/03, input a TC 599 CC 094 (taxable return) or 096 (non-taxable return) via CC FRM49 on the module to which the return is being processed.

    Note:

    Input the TC 599 with the appropriate closing code for your function, if specified in Document 6209, IRS Processing Codes and Information, under the TDI Closing Codes section. Only one TC 599 is required.

  5. Input TC 971 with the appropriate action code on the incorrect module (to identify a cross reference TIN/tax period data) whenever an original or amended/duplicate return posts to an incorrect TIN/tax period and is being reprocessed to the correct module. Input TC 971 AC 017 on the module to which you are reprocessing the return to regardless of MF status. When inputting TC 971 use the correct TRANS-DT on REQ77:

    • 971-001 indicates reprocessing TC 150. Use the return received date on TXMOD for the TRANS-DT.

    • 971-002 indicates reprocessing TC 976. Use the posted TC 976 date on TXMOD for the TRANS-DT.

    • 971-017 indicates a reprocessed return is being reprocessed to this period. Date depends on whether return was original TC 150 being reprocessed or TC 976. Follow instructions as shown above for TRANS-DT. However, if the return posted to an earlier tax period with an incorrect date or before the due date of the tax period, use the actual received date of the return as the transaction date of the TC 971 AC 017.

    Exception:

    A TC 971 AC 17 cannot be entered on a period with a fiscal year month that differs from the one shown on ENMOD.

  6. If a TC 971 with one of the action codes listed in paragraph (5) above is incorrectly input on an account, reverse it with a TC 972 using the same action code.

  7. Don’t input TC 290.00 to release an -A freeze if other unresolved freeze conditions would be incorrectly released simultaneously. (See IRM 21.7.1.4.6.2 for conditions under which an excess credit ("Q-" freeze) is released. A TC 290.00 only does not release the "Q-" freeze).

  8. A return must be complete with no missing information before it can be sent for reprocessing. See IRM 21.5.1.5.5(2) and 21.5.2.4.23.7(1) for more information.

Resolving CP 193s
  1. Determine and resolve duplicate filing conditions by examining and comparing information on the CP 193. Use CP 193, duplicate return, CFOL command codes, and OL-SEIN (or secure original return if absolutely necessary) to resolve case. Compare the items listed below:

    • Difference in entities (names, addresses, TINs, etc.)

    • Tax periods

    • DLNs

    • Correct form used

    • Received dates

    • Signature, title, and signature date

    • TCs

    • Deposits (compare dates and amounts)

    • Payment received with return(s)

    • Module balance

  2. Check CCs ENMOD, NAMEE, EOGEN, and INOLE when the EIN is circled out and a new EIN is written in.

  3. Some of the most common reasons for filing duplicate or amended returns include:

    • Organization received a delinquency notice due to a delay in processing return;

    • Organization sent a duplicate return and indicated it was a final return;

    • Organization filed a second return to correct erroneous information on first return;

    • Organization filed a paper return after filing electronically;

    • Organization filed a second return attaching missing information requested by the IRS;

    • Organization received a penalty notice and a second return was filed to provide missing information;

    • Organization filed an original return but underpaid the tax liability and the second return included a payment of the remaining tax liability;

True Duplicate
  1. A true duplicate condition occurs when an organization files two returns for the same tax period with the same information on both returns and no tax change is required.

  2. Do the following:

    1. Analyze account data and both returns (if original was needed to resolve case) to verify they are true duplicates.

    2. Input TC 290.00 in BS 10/15 (unless original return is attached) to release -A freeze. Use duplicate return for source document.

      Caution:

      If module balance is in credit status, use appropriate HC to prevent an adjustment notice from generating.

    3. Staple CP 193 to duplicate return.

    Note:

    If original return was secured, staple duplicate return behind original and use blocking series 00.

Amended/Supplemental Return–Increase or Decrease
  1. Refer to the procedures in IRM 21.7.9.4.1 for resolution of amended/supplemental returns involving a tax increase or decrease.

  2. Use the applicable Blocking Series associated with the specific EO returns.

    Caution:

    If the return isn’t marked "amended" , "corrected" or "supplemental" and the correct entity can’t be determined, attempt to contact the taxpayer two times to verify the correct account information. If you’re unable to determine the correct entity and/or a new EIN is needed, forward a scanned copy of the front page of the return (entity portion) including available research, and a scanned copy of any other document in the case file that may help determine the correct entity, to EO Entity Control.

    Example:

    Organizations filing Form 990-T (IRC 401(a) and 408 IRA Trust) can have multiple accounts using the same name but with different account numbers. See IRM 3.13.12.9.13.4, For 990-T (IRC 401(a) and 408 IRA Trust) for more information. Accounts numbers may be stamped/written somewhere on the return other than the entity section.

Various TC 976 Conditions
  1. If any of the following conditions applies to the TC 976 account, refer to the procedures in IRM 21.7.9.4.

    • Two returns posted to same account. Correct return posted first. TC 976 belongs on different period or EIN;

    • Reprocessing TC 976 return to module with no TC 150;

    • Reprocessing TC 976 return to module with TC 150;

    • Two returns posted to same account. Incorrect return posted first. TC 976 return is correct return;

    • Reprocessing TC 150 return to module with no TC 150;

    • Reprocessing TC 150 return to module with TC 150;

Form 8872 Subsequent/Duplicate Return Resolution
  1. The organization may opt to file its reports on either a quarterly or monthly basis, but it must file on the same basis for the entire calendar year. Due dates for Form 8872 vary depending on whether the form is due for a reporting period that occurs during:

    • A calendar year in which a regularly scheduled election is held (quarterly or monthly basis) or

    • Any other calendar year (semiannually or monthly basis).

  2. Form 8872 may be filed either electronically or by mail. If the organization has reason to expect that contributions or expenditures will exceed $50,000 in the calendar year, they must file electronically. Identify an electronically filed return by the Location Code (first two digits) of the DLN. Location codes 93 (primary) or 92 (overflow) indicate the return was filed electronically. View these returns on the Intranet website, http://www.irs.gov/Charities-&-Non-Profits/Political-Organizations/Political-Organization-Filing-and-Disclosure. Go to Search Political Organization Disclosures and query by EIN.

    Reminder:

    Don’t attempt to order an electronically filed return from Files.

  3. The majority of subsequent or duplicate filed Forms 8872 is the result of the filer submitting additional returns based on their filing requirement. For example:

    • Filing both a year end and a December monthly return or

    • Filing both pre-election return and a monthly return.

  4. Refer to the procedures outlined below to resolve the duplicate filed condition.

  5. If there is an EIN discrepancy, release the "-A" freeze and route the case to EO Entity for resolution.

    If And Then
    the TC 976 document is a true duplicate, there is no discrepancy with the tax period, 1. Release the "-A" freeze by entering a TC 290.00, block 15 (unless original return is attached).
    2. Use the duplicate return as the source document.
    3. Staple the CP 193 to the duplicate return.
    the duplicate filed return is for a different tax period,   1. Edit the return and reprocess it to the correct tax period following existing procedures in IRM 21.5.2.4.23 and IRM 21.7.9.4.1.1.

Form 4720 Adjustments
  1. If there is a tax on an individual, there is usually also a tax on the organization. Schedule G relates to Form 990 or Form 990-EZ Schedule A.

  2. IRNs must be used to adjust tax on Form 4720. Net amount for TC 29X transactions must equal sum of IRNs.

  3. Below are applicable IRNs:

    • 150 — Self Dealing (Form 4720-A only), Schedule A

    • 151 — Failure to Distribute Income, Schedule B

    • 152 — Excess Business Holdings, Schedule C

    • 153 — Investments Which Jeopardize Charitable Purposes, Schedule D

    • 154 — Taxable Expenditures, Schedule E

    • 182 — Excess Grass Roots,

    • 183 — Excess Lobbying, Schedule G

    • 199 --- Tax on failure to meet the requirements of section 501(r)(3), Schedule M

    • 213 — Tax on Political Expenditures, Schedule F

    • 214 — Tax on Disqualifying Lobby Expenditure, Schedule H

    • 215 - Tax on Excess Executive Compensation, Schedule N

    • 216 - Tax on Net Investment Income of Private Colleges and Universities, Schedule O

    • 234 — Split Dollar Insurance

    • 237 — Prohibited Tax Shelter Transaction

    • 238 — Tax on Taxable Distributions

    • 239 — Tax on Prohibited Benefits

    • 240 --- Unrelated Business Taxable Income

Form 4720 Duplicate Filing Procedures
  1. To resolve a duplicate filing condition on a Form 4720 module, do one of the following

    • True DUPF - Input a 290.00.

    • Amended return (increase) - Input TC 290 with the applicable money amount and reference number. "Pend to post" the adjustment to ensure it posts.

    • Amended return (decrease) or request for abatement of First or Second Tier Tax (IRC 4958 or 4962). Refer to IRM 21.7.7.6.16.6 for procedures.

  2. A TC 29X or 30X will unpost as UPC 390 RC 9 on Form 4720 if the following apply:

    • IRN is 18X and the organization code on the tax module isn't "2" .

    • IRN is 15X and the organization code on the tax module isn't "1" .

  3. If any of the conditions apply as shown above in (2), you may need to transfer the account to Non-Master File for correction. To transfer the account to NMF take the following actions:

    • If additional tax should be assessed, complete Form 2859. Enter the following:

    • Check the box at the top for "Quick" assessment.

    • Part A
      TIN (with an "N" behind it)
      Name Control
      Name
      Address
      23C date - Usually "Next Available" unless the statute requires a specific date

    • Part B
      Statute Expiration Date
      DLN
      Requester information
      approval signature.

    • Part C
      Form no
      Period ended
      PLN/Rpt no (if applicable)
      3a - Tax - Original Return
      3b - Return Received Date
      4a - Tax - Adjustment

  4. Complete Part D to adjust an account.

  5. Complete the following lines if completing Part D:

    • 21a - Abstract number

    • 21b - Amount

  6. Remarks should instruct Kansas City Submission Processing NMF to post to MFT 50 and not MFT 66.

  7. Fax the completed Form 2859 to 888-981-6483. The Form 2859 must be signed by a manager authorized to sign for NMF.

  8. Monitor the account on NMF to ensure the Quick Assessment posts.

  9. If request is a 4962 abatement request, complete an AIMS card and send to the field after the tax is assessed on NMF.

CP 293 Duplicate Return With TC 42X Present
  1. A CP 293 is generated when a duplicate return posts to an account with open TC 420 present.

  2. Be sure to consider the open TC 42X when adjusting account. Refer to the EO CATA guidelines in IRM 21.7.7.6.16 prior to adjusting accounts.

CP 190 Amended Return–No Original Posted
  1. CP 190 is generated within four cycles after a "G" coded TC 976 return posts to a module which does not contain an original return (TC 150).

  2. CP 190 is associated with TC 976 return and forwarded to EO Accounts for resolution.

  3. "E-" freeze is generated along with CP 193. The "E-" freeze must be released before CP 190 case is closed by either posting:

    • TC 971 action code 002

    • TC 150

  4. Follow procedures outlined in IRM 21.7.9.4.10 for resolution of CP 190 accounts.

  5. A return must be complete with no missing information before it can be sent for reprocessing. See IRM 21.5.1.5.5(2) and 21.5.2.4.23.7(1) for more information.

IRN 886 on Form 990-T

  1. IRN 886 is used for unrelated business taxable income on Form 990-T. It can be determined by using CC BRTVU (line 34).

  2. Adjust IRN 886 by computing the difference between the amount on CC BRTVU (plus/minus any other IRN 886 adjustments on the module) and amount reflected on the second return.

FUTA Tax and Exempt Organizations

  1. Employment Code (EC) "W " is assigned to non-profit organizations of the type described in IRC 501(c)(3), IRC 501(e), IRC 501(f), IRC 501(k), and IRC 501(n). These organizations are operated exclusively for religious, educational, charitable, scientific, literary or humane purposes, or for the purpose of testing for public safety among other purposes.

  2. These organizations are exempt from tax under IRC 501(a) and are not subject to Federal Unemployment (FUTA) tax. Identify them on the entity module by EC W. In addition, they aren’t subject to FUTA tax during the application period for exempt status.

    Note:

    Employment Codes C, F, G, I and T also indicate the filer isn’t required to file Form 940. For a list of employment codes and type of employer they represent, see IRM 3.13.2.6, BMF Employment Codes (ECs).

  3. If an organization submits correspondence or an amended return stating it is exempt from filing Form 940 under IRC 501, the following conditions must be present on the entity module:

    1. Exempt Organization Status Field (EO-Stat) is 01 or 02 (indicates exemption granted by TE/GE Determinations)

    2. Ruling Date Field (RUL) contains a date which is prior to, or within the tax period, for which taxpayer is claiming exempt status. The Ruling date is the date the organization was granted an exemption.

    3. The SS code field (SUB>) is 03, 50, 60, 70, 71 or 91.

  4. A church has a 501(c)(3) status but doesn’t officially have to file an application for exemption. An EC "W " may be appropriate if the name of the organization contains any of the following word(s) in relationship to a religious organization:

    • Assembly or Assembly of God

    • Chapel

    • Church

    • Fellowship

    • Jehovah's Witness

    • Monastery

    • Seventh Day Adventist

    • Synagogue

    • Temple

    • Worship Center

    • Iglesia

    • Mosque

  5. Form 940 Employment Code (EC) "W" abatement requests are worked by OAMC, BMF Accounts who will follow IRM 21.7.3.4.8.3. If a case is received in an area outside of OAMC, BMF Accounts or EO Accounts, do the following:

    • For CIS cases, reassign case to 0430455002

    • For paper cases route to OAMC, BMF Adjustments, MS: 6552

    Note:

    If the case is received in EO Accounts, determine if an EC "W" is on the account prior to reassigning. If the EC isn’t on the account, contact the appropriate AM P&A analyst who will determine if the EC is needed and contact EO Entity to add the code if necessary. If the EC is on the account, reassign as shown above.

    Note:

    Disputes or questions regarding the church status or taxes owed by an organization claiming to be a church (e.g. if the organization’s name lacks the normal indicia of being a church) will be sent to EO Classification if the conditions in (4) above aren’t present.

EO Extensions

  1. An organization wanting an extension of time for filing a return must submit either a Form 8868, Application for Extension of Time To File an Exempt Organization Return or Form 7004, Application for Automatic Extension of Time to File Corporation Income Tax Return. The form should be sent to the service center where the return is to be filed.

  2. Form 8868 and Form 7004 may be filed electronically via the Modernized electronic Filing (MeF) System. Identify electronically filed

    • Forms 8868 by File Location Code 93 or 92 (first two digits of the DLN).

    • Forms 7004 by File Location Code 88, 93 or 92 (first two digits of the DLN) , for domestic filers, and 66 or 98 for foreign filers.

    Refer to IRM 3.42.4, IRS e-file for Business Income Tax Returns for viewing forms filed via MeF.

    Note:

    Beginning January 2011, both parts I and II of Form 8868 can be filed electronically via MeF.

  3. Organizations that submit Form 8868 via MeF receive a/an:

    1. "Acknowledgement of Receipt" when they file Form 8868 through the authorized e-File provider.

    2. CP 211-A when the extension is timely filed.

    3. "Rejection Notification" if unable to file an extension via MeF.

      Note:

      If there is an indication on the extension or an attachment that the taxpayer attempted to file the extension electronically and it was rejected, they must file the paper request by the later of the due date or 5 calendar days after the date the taxpayer was notified of the last rejection. For more information, see Publication 4163, Modernized e-file (MeF) Information for Authorized IRS e-file Providers for Business Returns.

  4. Under normal circumstances, an extension of time to file can legally be granted for no longer than a total of 6 months from the due date of the return. An extension of time to file generally "shall not be granted for more than 6 months" from the due date of the return required to be filed (IRC 6081(a) and 26 CFR 1.6081–1 (a)).

    Exception:

    In some cases, organizations that are abroad may receive more than 6 months. If a foreign corporation files an extension request asking for more than six months, the IRS has to analyze the facts presented to make a determination in a "rational, non-arbitrary and regular fashion" . A foreign corporation isn't entitled to an extension of more than six months; it must justify its entitlement based upon the facts. However, the extension cannot be entered into the system. If deemed allowable, the penalty may be removed once assessed. There is no systemic way to avoid assessment of the penalty.

  5. For periods which begin after December 31, 2015, Form 8868 will grant an automatic 6 month extension. Any short period returns filed in 2016 with a beginning period date after December 31, 2015 and requesting an extension should be granted an automatic six month extension. Due to programming limitations, the filer may have filed the extension and only been granted three months. If this occurs and the return is filed timely based on a six month extension, abate any penalties which may be charged for late filing.

  6. Occasionally, an organization wanting an extension of time to file a return may submit a letter request to the Submission Processing Campus where the return is to be filed. Normal approval/denial criteria is followed. Correspondence is sent to the organization indicating the status of their request and the correct form to use in the future.

  7. All information required by a form is also required if the request is made via a letter. Process a letter application in one of two ways:

    1. Input the extension information as a TC 460 directly into IDRS.

    2. Prepare a "dummy" IRS extension form from the information in the letter and process it as a paper extension.

Form 7004, Application for Automatic Extension of Time to
File Corporation Income Tax Return
  1. Form 7004, Application for Automatic Extension of Time to File Corporation Income Tax Return, is used to request an automatic 6-month extension for Form 1120-POL. The form must be filed on or before the due date of the applicable tax return. The extension posts as a TC 620 and TC 460.

  2. The IRS no longer sends notifications when the extension is approved. However, the organization is notified when the extension is disallowed.

  3. Penalty abatement requests relating to extension issues may be considered based on the reasonable cause explanation provided by the organization. Refer to IRM 20.1.1 for reasonable cause criteria.

  4. Refer to the table below for return due date and applicable extended due date.

    Reminder:

    Notice 2020-23 extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020.

    Original and Extended Due Dates for Form 1120-POL
    Tax
    Period
    Ending
    Due
    Date
    (41/1
    Months)

    ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡
    Form 7004
    Automatic
    6 Month
    Extended Due Date
    01 05-15 ≡ ≡ ≡ ≡ ≡ 11-15
    02 06-15 ≡ ≡ ≡ ≡ ≡ 12-15
    03 07-15 ≡ ≡ ≡ ≡ 01-15
    04 08-15 ≡ ≡ ≡ ≡ 02-15
    05 09-15 ≡ ≡ ≡ ≡ ≡ ≡ 03-15
    06 09-15 ≡ ≡ ≡ ≡ 03-15
    07 11-15 ≡ ≡ ≡ ≡ ≡ 05-15
    08 12-15 ≡ ≡ ≡ ≡ ≡ 06-15
    09 01-15 ≡ ≡ ≡ ≡ 07-15
    10 02-15 ≡ ≡ ≡ ≡ ≡ ≡ 08-15
    11 03-15 ≡ ≡ ≡ ≡ 09-15
    12 04-15 ≡ ≡ ≡ ≡ ≡ 10-15
Form 8868, Application for Extension of Time To File an Exempt Organization Return
General Information
  1. Form 8868, Application for Extension of Time to File an Exempt Organization Return, is used by exempt organizations to request an automatic 6-month extension of time to file its return. .

  2. Form 8868 is used by exempt organizations to request an extension of time to file the following forms:

    • Form 990

    • Form 990-EZ

    • Form 990-BL

    • Form 990-PF

    • Form 990-T (corporation)

    • Form 990-T (trust)

    • Form 1041-A

    • Form 4720

    • Form 5227

    • Form 6069

    • Form 8870

  3. Form 8868, must be completed to request an initial automatic 6-month extension. The extension will be approved if the Form 8868 is received on or before the return due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. During processing, a Notice Code 1 is entered and a CP 211-A generates stating the extension was granted. If the Form 8868 isn't timely filed, Notice Code 2 is entered and a CP 211-C is generated stating the request for extension of time to file was denied. Before January 1, 2007, organizations did not receive acknowledgment from IRS indicating the automatic extension was granted.

  4. For periods which begin after December 31, 2015, Form 8868 will grant an automatic 6 month extension. Any short period returns filed in 2016 with a beginning period date after December 31, 2015 and requesting an extension should be granted an automatic six month extension. Due to programming limitations, the filer may have filed the extension and only been granted three months. If this occurs and the return is filed timely based on a six month extension, abate any penalties which may be charged for late filing.

  5. If any of the above criteria isn't met, the extension is denied, the applicable Notice Code is entered and a CP 211 B or C notice is generated informing the organization why the extension was denied. Refer to the table below for Notice Code definitions and related CP 211 notice.

    Note:

    Notice Code 1 generates a 6 month extension.

  6. Extension Notice Codes are located on BMFOLT.

    Notice Code Definition CP Notice
    1 Approved extension CP 211-A
    2 Disapproved extension — Not timely filed CP 211-C

Extension Due Dates
  1. The computer uses the " Type of Org" code shown on BRTVU to determine the return due date. Form 990-T has two possible due dates:

    • An employee plan's trust defined in IRC 401(a), an IRA (including SEP) and (SIMPLE), a Roth IRA, and Education IRA, and an MSA must file Form 990-T by the 15th day of the 4th month after the end of the tax year.

    • All other organizations must file Form 990-T by the 15th day of the 5th month after the end of the tax year.

    Note:

    An Employee Plan trust under 401(a) must attain and use a separate EIN for Form 990-T. Trusts defined in IRC 401(a) can’t use EINs for corporate returns Form 1120, Form 940, Form 941, Form 5500 and Form 990.

  2. Refer to the tables below for the type of form, return due date and applicable extended due dates for EO returns.

    Reminder:

    Notice 2020-23 extended the due date for filing 2019 tax returns and payments, as well as the first two 2020 estimated tax payments to Wednesday, July 15, 2020.

    Original and Extended Due Dates for Forms: 990, 990-EZ, 990-PF, 990-BL, 990-T (Org 1, 2, 4 & 5),
    4720 (Org 1 & 2), 8870 and 6069
    Tax
    Period
    Ending
    Due
    Date
    (41/1
    Months)
    ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡
    Form 8868
    6-Months
    Extended Due Date
    01 06-15 ≡ ≡ ≡ ≡ 12-15
    02 07-15 ≡ ≡ ≡ ≡ 01-15
    03 08-15 ≡ ≡ ≡ ≡ ≡ 02-15
    04 09-15 ≡ ≡ ≡ ≡ ≡ 03-15
    05 10-15 ≡ ≡ ≡ 04-15
    06 11-15 ≡ ≡ ≡ ≡ ≡ 05-15
    07 12-15 ≡ ≡ ≡ ≡ 06-15
    08 01-15 ≡ ≡ ≡ ≡ ≡ 07-15
    09 02-15 ≡ ≡ ≡ 08-15
    10 03-15 ≡ ≡ ≡ ≡ 09-15
    11 04-15 ≡ ≡ ≡ ≡ ≡ 10-15
    12 05-15 ≡ ≡ ≡ ≡ ≡ 11-15
    Original and Extended Due Dates for Form 990-T Trust (Org. 3), Form 4720 (Org 3), Form 5227 and Form 1041-A

    Note:

    Form 5227 and 1041-A is due on or before April 15 following the close of the calendar year.

    Tax
    Period
    Ending
    Due
    Date
    (31/1
    Months)
    DELINQUENT
    DATE
    Form 8868 (
    6-Months
    Extended Due Date
    01 05-15 ≡ ≡ ≡ ≡ 11-15
    02 06-15 ≡ ≡ ≡ ≡ 12-15
    03 07-15 ≡ ≡ ≡ ≡ ≡ 01-15
    04 08-15 ≡ ≡ ≡ 02-15
    05 09-15 ≡ ≡ ≡ ≡ ≡ 03-15
    06 10-15 ≡ ≡ ≡ ≡ 04-15
    07 11-15 ≡ ≡ ≡ ≡ ≡ 05-15
    08 12-15 ≡ ≡ ≡ ≡ 06-15
    09 01-15 ≡ ≡ ≡ ≡ 07-15
    10 02-15 ≡ ≡ ≡ ≡ ≡ 08-15
    11 03-15 ≡ ≡ ≡ ≡ ≡ ≡ 09-15
    12 04-15 ≡ ≡ ≡ 10-15
Extension Reconsideration Procedures
General Information
  1. Evaluate each case based on the information provided by the organization. Once you determine why the penalty was assessed (IRS or TP error), take the appropriate action (e.g., input extension or request reasonable cause statement) to resolve the account issue.

  2. If the organization cannot provide a copy of their approved extension (CP 211-A) or proof of timely filing, then a signed reasonable cause statement is required.

  3. When the IRS recognizes a failure to timely input a TC 460 either before or after the return posts and before or after the DDP or FTF penalty is assessed, input a TC 460 with the proper extension date. The TC 460 systemically reverses/recomputes the late filing portion of the DDP (TC 238). However, if CC 22, 23 or 24 is present on the module, enter a manual adjustment. Use Penalty Reason Code (PRC) 045 for this correction (see IRM 20.1.2.1.3.1, Extension of Time to File).

  4. When reviewing the account, if you determine that the penalty was assessed as a result of something IRS failed to do (e.g., not processing initial extension), send an apology letter to the organization. Refer to IRM 21.3.3.4.17.1 for additional information.

  5. When inputting a TC 460 on Form 1120-POL (MFT 02) or Form 990-T (MFT 34), enter a DLN Code

    • 20 (approved)

    • 25 (disapproved)

    • All other MFTs leave the DLN blank for approval or

    • Enter 000 (3 zeros) in the DLN for denial

    Note:

    When entering two TC 460s within the same cycle, post delay the second TC 460.

  6. Due to current programming restraints on Command Code REQ 77 and Form 990-T extension requests, we developed the following work-around procedures. To enter the correct extension date, enter ULC 98 on the REQ 77 screen. This allows the correct extended due date to be entered on Form 990-T modules. It’s a temporary measure until the REQ 77 program is corrected.

Abatement Procedures for Extension Requests
  1. Extensions are either granted or denied. If the extension was denied because the TP did not complete the Form 8868 properly or filed late, adhere to reasonable cause criteria to consider penalty abatement.

  2. If the extension was denied because of something the Service failed to do (e.g., input TC 460, erroneous received date) input a TC 460 with the correct extended due date. Penalties will recompute unless the module is restricted due to a previous manual adjustment.

  3. If correspondence is received about the denial of the initial 6-month extension period refer to the procedures outlined below.

    Reminder:

    The only criteria for granting the initial (automatic) 6-month extension is a timely filed Form 8868.

    If And Then
    the organization can provide:
    ~ A copy of the CP 211-A, or
    ~ A copy of Form 8868 and Proof of timely filing (e.g., certified mail receipts or postmark),
    a TC 460 isn't present or was previously denied, 1) Allow the extension by inputting a TC 460 via REQ 77 to the valid extension due date.
    2) Send the applicable CRX letter informing the organization the extension was granted, provide the new extended due date and apology for the error.
    the organization can't provide proof of timely filing,   1)Inform the organization they must submit a reasonable cause statement prior to abating the penalty.
    2) If a penalty has not been assessed, instruct the organization to resubmit their reasonable cause explanation after the penalty notice was received.
    the organization notifies the Campus that an error was made on the Form 8868 (e.g., incorrect EIN or tax period), a TC 150 has not posted to MF and
    it isn't past the RDD, and
    the initial Form 8868 was filed timely,
    1) Allow the extension by inputting a TC 460 via REQ 77 to the valid extension due date.
    2) Send the applicable CRX letter informing the organization the extension was granted and provide the new extended due date.
    the organization notifies the Campus that an error was made on the Form 8868 (e.g., incorrect EIN or tax period), a TC 150 has posted to MF and a penalty was assessed Request reasonable cause from the filer.
    the organization attempted to file an extension via MeF, the extension was rejected, 1) Research the EUP to determine if the extension was filed by the RDD or request a copy of the rejection notice from the organization.
    2) If the EUP or the rejection notice indicate it was filed by the RDD, input a TC 460.
    3) Send the applicable CRX letter informing the organization the extension was granted and provide the new extended due date.
    the Form 8868 appears to be the original, a TC 150 has not posted to MF and extension is prior to the RDD, 1) Route Form 8868 to C&E to be processed as the original (MS: 6110).
      a TC 150 has posted to MF or the RDD has passed, 1) Verify the Form 8868 was timely filed based on the IRS stamped received date.
    2) If a determination is made that the extension was timely filed, enter a TC 460 via REQ 77 to the valid extension due date.
    2) Send the applicable CRX letter informing the organization the extension was granted and provide the new extended due date.
Extension Application Due Dates
  1. Extension requests are due by the return due date (or extended due date for second requests) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. If the normal return due date falls on a Saturday, Sunday or holiday, the extension is due the first business day following the Saturday, Sunday or holiday. No adjustment will be made to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for occasions when the due date is extended because the 15th falls on a weekend or a holiday. The grace period always ends on the 22nd of the month.

  2. For periods which begin after December 31, 2015, Form 8868 will grant an automatic 6 month extension. Any short period returns filed with a beginning period date after December 31, 2015 and requesting an extension should be granted an automatic extension. Due to programming limitations, the filer may have filed the extension and only been granted three months.

  3. Refer to the table below to determine if the extension was filed timely.

    If Received Date is And Postmark is Then the extension is
    Before Due Date   Timely
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ On or before the due date Timely
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ On or before the due date Timely
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ After due date Not timely
  4. If the postmark isn't timely, refer to IRM 20.1.2.1.3 and IRM 21.5.1.4.2.4 for additional information.

Exempt Organization Penalties

  1. EOs may be subject to various penalties when they fail to meet the established guidelines in the Internal Revenue Code. These penalties include:

    • Daily Delinquency Penalty

    • Failure to File Penalty

    • Failure to Pay Penalty

    • Estimated Tax Penalty

    • Failure to Deposit Penalty

    Note:

    See IRM 20.1.1.3.3.2.1, First time abate for more information.

  2. All EO penalty abatement requests are worked in:

    • The EO Accounts units.

    • TE/GE telephone account representatives in the OAMC.

    • (EOCA) if the case is assigned to them.

      Note:

      Identify cases assigned to the EOCA by IDRS # 4070800000 and route them to EOCA, MS: 1112 for resolution.

  3. Additionally, TE/GE telephone account assistors, except as specifically prohibited in IRM 21.3.8, should use all available tools to resolve penalty issues during a call with an authorized caller. This includes, but isn't limited to:

    • OL-SEIN

    • AMS

    • Receipt of faxed POAs

    • Proof of timely filing of returns or extensions

  4. TE/GE telephone account assistors located at the OAMC may abate the DDP for late filing only if the penalty amount falls within the oral authority threshold of ≡ ≡ ≡ ≡ ≡. If the DDP was assessed due to missing or incomplete information, the verbal authority abatement doesn’t apply.

  5. Other than stated above, CSRs and tax examiners at other sites or campuses aren’t authorized to resolve EO penalty abatement cases. Areas not authorized to work EO Account penalties and account related issues must follow case referral procedures in IRM 21.3.5.

  6. EO accounts in collection status 22, 24 or 26 are worked in EO Accounts.

  7. When determining penalty abatement due to reasonable cause, the Reasonable Cause Assistant (RCA) isn't applicable to EOs. The RCA isn't designed to address EOs reasonable cause requests. Refer to the reasonable cause guidelines and criteria in IRM 20.1.1.3.2. Additional guidance can be found in IRM 21.7.7.6.24.

    Note:

    Per the Taxpayer Bill of Rights (TBOR #5), taxpayers have the right to Appeal an IRS Decision in an Independent Forum; therefore, if reasonable cause is not established it should be officially denied and penalty appeal rights provided.

    Note:

  8. The following table identifies the various penalties that may be applicable to EOs.

    Applicable EO Penalties
    Form MFT 23X
    DDP
    16X
    FTF
    17X
    ES
    27X
    FTP
    18X
    FTD
    Form 990 or Form 990-EZ 67 YES NO NO NO NO
    Form 990-T 34 NO YES YES YES YES
    Form 990-PF 44 YES YES YES YES YES
    Form 1041-A 36 YES NO NO NO NO
    Form 5227 37 YES YES NO NO NO
    Form 1120-POL 02 NO YES YES YES YES
    Form 4720 50 NO YES NO YES NO
  9. Find additional information on penalties and reasonable cause abatement in IRM 20.1, Penalty Handbook.

Daily Delinquency Penalty
  1. IRC 6652(c) imposes a Daily Delinquency Penalty (DDP) for failure to file a timely return (unless there is reasonable cause) as required under the following Code sections:

    • IRC 6033(a)(1)(Form 990 series)

    • IRC 6043(b) (final Form 990-series return, or information regarding substantial contractions)

    • IRC 6012(a)(6) ( Form 1120-POL)

    • IRC 6034 (Form 5227 and Form 1041-A)

    • IRC 6033(a)(2) ( Form 8886-T disclosure)

    A penalty is also imposed for failure to comply with public inspection requirements under IRC 6104(d) with respect to annual returns, periodic reports, exemption applications, and notices (other than Form 990-N).

  2. The penalty imposed on the organization for failure to file depends on the particular form.

    Form Penalty Amount
    Form 990 series returns (990, 990-EZ, 990-PF, 1065 by IRC 501(d) organization, and 990-BL), or Form 1120-POL, for failure to include required and correct information $20 per day, up to the lesser of $10,500 or 5% of gross receipts per return ($105 per day, up to $53,000 for organizations with gross receipts in excess of $1,067,000 )
    Form 1041-A, a final Form 990 series return, or information on Form 990 series return regarding substantial contraction $10 per day, up to $5,000
    Form 5227 returns, in effect only for tax years beginning on or after Jan. 1, 2007 $20 per day, up to $10,500 ($105 per day, up to $53,000 for trusts with gross income in excess of $266,500)
    Form 8886-T, imposed only on organizations described in IRC 501(c),IRC 170(c) (other than the federal government), and Indian tribal government $105 per day, up to $54,000. There’s an additional penalty of $105 per day, up to $10,500, for failure to file after a written IRS demand to file by a reasonable future date.

  3. A penalty is imposed on the manager or responsible person for failure to file or to comply with public inspection requirements. There is joint and several liabilities if more than one person is responsible. The penalty is:

    1. On the SSN of the individual as a Civil Penalty 600 or 601.

    2. Processed NMF.

  4. The penalty varies depending on the particular form.

    Penalty Description Penalty Amount Penalty Imposed on
    If an organization fails to comply with:
    1. An IRS demand for filing by a reasonable future date of a Form 990 series return (or information regarding substantial contraction), Form 1120-POL,Form 1041-A, or Form 5227

    $10 per day, up to $5000 per return. In addition, if the person required to file Form 5227 knowingly fails to file, the penalty imposed on the trust (described above) is also imposed on that person.

    Note:

    Applies only to returns for tax years beginning on or after Jan. 1, 2007.

    Person who fails to comply
    2) Public inspection requirements (other than Form 990-N) $20 per day, up to $10,000. There is no dollar limitation in the case of exemption application or notice materials. Person who fails to comply
    If a tax-exempt entity (other than one described in IRC 501(c) or (d),IRC 170(c), or Indian tribal government) fails to file Form 8886-T $100 per day, up to $50,000. There is an additional penalty on the entity manager of $100 per day, up to $10,000, for failure to file after a written demand by the IRS to file by a reasonable future date. Entity manager

  5. In some cases, the disaster freeze is not set until after the TC 150 has posted and/or a DDP is assessed. If it is determined that the DDP was assessed in error based on research and the determination that an organization meets the qualification for extension due to an official disaster area declaration, remove the DDP manually using RC 028.

  6. The penalty imposed on an organization that fails to submit the IRC 506 notification (Form 8976) is equal to $20 per day for each day the failure continues, up to a maximum of $5,000. Additionally, a similar penalty is imposed on organization managers who, in response to a written request by the Secretary, fail to submit the notification timely. For more information about this penalty see, IRM 20.1.8.3.2, IRC 6652(c)(4) - Failure to Submit Notice of Intent to Operate as IRC 501(c)(4) Organization Under IRC 506.

    Note:

    The penalty is automatically applied when the registration date is more than 60 days later than the organization date. The penalty posts to a civil penalty module (MFT 13) as TC 240 PRN 713 and the organization is issued a CP 215 Civil Penalty, which gives the organization three options: If they agree to the penalty assessment, they can pay the balance due. If they believe they have reasonable cause for not timely filing Form 8976 and want to appeal the assessment without paying the penalty first, they can send a written explanation within 10 days from the date of the notice. If they want to appeal the penalty assessment for any other reason or after the 10-day period expires, they must first fully pay the entire penalty and then file Form 843, Claim for Refund and Request for Abatement, within 2 years from the date of the payment.

    Caution:

    A request for penalty relief received after the 10 day timeframe given in CP215, will be considered per IRM 20.1.1.3.2, Reasonable Cause. A taxpayer’s request for penalty relief cannot be refused simply because they failed to respond to the CP215 within 10 days.

  7. Input a TC 290 for .00 with Blocking series 52 to remove the penalty. Input penalty reference code with a minus (i.e. - ref 600 for 100.00-). This input generates a TC 241 for the abated amount. Input appropriate penalty reason code. See IRM 20.1.1-2 Penalty Reason Code Chart. Do not use a hold code unless the taxpayer is not to be notified of the action.

Correspondence Codes
  1. Correspondence Codes (CC) are used on all EOMF forms to indicate information was missing from the return and the results of correspondence sent to the taxpayer to secure the missing information.

  2. Missing information is divided into two categories:

    • Correspondence Items (Non-IRI) - Correspondence items are requested only once.

    • Incomplete Return Items (IRI) - Information needed for the IRI Program are requested twice.

  3. Refer to the table below for Correspondence Codes and definitions.

    Correspondence Code (CC) Definition
    CC 11 Reply to IRI or non-IRI correspondence with all information
    CC 12 Reply to non-IRI correspondence with some information
    CC 13 Reply to non-IRI correspondence with no information
    CC 14 No reply to non-IRI correspondence
    CC 15 Reply to the first IRI correspondence with all information. (Zero filer)
    Note: A second correspondence isn't sent.
    CC 16 No Reply to the first IRI correspondence – Org. code 9 filer.
    Note A second correspondence isn't sent.
    CC 21 Reply to second IRI correspondence with all information: DDP assessed
    CC 22 Reply to second IRI correspondence with some information: DDP assessed
    CC 23 Reply to second IRI correspondence with no information: DDP assessed
    CC 24 No reply to second IRI correspondence: DDP assessed
Non-IRI Items
  1. When missing information is received on Non-IRI, input the applicable CC (11-14) and enter the Correspondence Received Date (CRD). If the return was filed late, the DDP is computed from the Return Due Date (RDD) to the Return Received Date (RRD).

  2. Non-IRI items are corresponded for only once. If the missing information isn't received within the allotted time frame, process the return as is. A DDP is only assessed on Non-IRI accounts if the return was filed late.

  3. When you determine that the missing information is a Non-IRI based on the Correspondence Codes (11-14), you may remove the DDP without securing the missing information if reasonable cause criteria for filing late have been provided.

  4. Associate all missing information received from an organization to the original return, regardless of the Correspondence Code.

  5. The following correspondence codes are applicable to Non-IRI Items. These items are corresponded only once.

    • Code 11 - Reply to IRI or Non-IRI correspondence with all information

    • Code 12 - Reply to Non-IRI correspondence with some information

    • Code 13 - Reply to Non-IRI correspondence with no information

    • Code 14 - No reply to Non-IRI correspondence

Incomplete Return Item Program (IRI)
  1. The IRS implemented an Incomplete Return Item (IRI) program for Form 990 , Form 990-EZ , and Form 990-PF . The program applies to tax periods 198312 and subsequent.

  2. A Daily Delinquency Penalty (per IRC 6652(c)(1)) is imposed for returns filed with required information omitted. The basis of this program is to secure a complete return rather than assess penalties against the organization.

    Note:

    Beginning January of 2018, the IRS will no longer correspond for missing information on exempt organization returns in the Form 990 series or for correct return types. The incorrect/incomplete return will be sent back to the filer unprocessed with a C letter explaining the missing or incorrect information. If the filer sends back the complete/correct return within 10 calendar days of the date of the C letter and includes a copy of the letter, the return will be processed as having been received on the date of the letter. Note that this treatment may not be reflected in the actual TC 150 date, but rather in the penalty having been suppressed. Complete/correct returns received after the tenth day will be processed under the date the complete/correct return was received. Incomplete return penalties will no longer apply to Form 990 series returns, but the returns will still be subject to the daily delinquency penalty. Where applicable, the filer may submit a reasonable cause statement with the delinquent return. Because the return is not processed, there will be no information on TXMOD or BMFOL indicating that a return was submitted and there will be no return image available on the SOI EO Imaging Network (SEIN). The only indication that an incomplete/wrong return was received/sent back will be the C letter shown on ENMOD while the entity module is active.

  3. If missing information is received or the return is purged from suspension for the IRI program, enter a Correspondence Code 11 or 21-24. If the taxpayer replies to either the first or second correspondence with the missing information or provides reasonable cause as to why the information cannot be furnished, enter the applicable correspondence code, along with the correspondence received date.

  4. If the taxpayer doesn’t respond to our second request for the missing information, enter a CCC 3 (no reply indicator) which indicates there was no reply to our correspondence. Also enter a Correspondence Code 24 and no correspondence received date.

  5. When the organization replies to either the first or second inquiries for the missing IRI, enter the correspondence received date to reflect the date Error Resolution received the missing information.

  6. The following correspondence codes are applicable to IRI Items:

    • CC 15 — Reply with all information to first correspondence (zero filers).

    • CC 16 — No Reply to first correspondence (zero filers).

    • CC 21 — Reply to second letter with all information.

    • CC 22 — Reply to second letter with some information.

    • CC 23 — Reply to second letter with no information.

    • CC 24 — No reply to second letter.

  7. If missing/incomplete information is received in EO Accounts and no TC 150 is posted to MF, research IDRS to determine if the original return is in ERS or Unpostables. If nothing is found, suspend the missing information pending the posting of a TC 150. Allow six weeks suspension time from the return due date or extended due date. If no TC 150 posts to MF by the end of the suspension period, take the following action;

    If Then
    a copy of the return is included with the missing information, 1) Attach the missing information to the return.
    2) Send return to Batching to be process as the original.
    a copy of the return isn't included, 1) Prepare the applicable CRX letter and return the missing/incomplete information to the organization.
    2) Instruct the organization to attach the missing/incomplete information to a copy of the original return and resubmit the entire package to IRS.

Incomplete Return Item (IRI) Codes
  1. Incomplete Return Item (IRI) codes allow the tax examiner to identify the IRI item that was missing from the organization's original return. Each IRI code identifies the specific item that was missing or incomplete on the original return. The codes are entered during the initial processing of the return and can be located on TXMODA, BMFOL or BRTVU.

  2. Due to the redesign of the Form 990 and Form 990-EZ for TY 2008, additional IRI codes were established.

  3. If the organization doesn’t respond to previous letter(s) from the IRS requesting the missing or incomplete information, Rejects enters the IRI code(s). The return continues through processing and if a penalty applies, a CP 141I (incomplete), CP 141L (late filed) or CP 141C (late filed and incomplete) notice is generated to the organization.

  4. The table below identifies the applicable form, IRI codes, related missing/incomplete items, and the notice paragraph that is generated when the CP 141"I," "L" or "C" is issued.

    IRI Codes for TY 2007 & Prior
    IRI Code Applicable
    Form
    Missing or Incomplete Item CP 141 Paragraphs
    92 990 Part II Form 990, Part II was blank or incomplete. All organizations must complete Part II column (A). If you are an organization exempt under Section 4947(a)(1), 501(c)(3), or 501(c)(4), then you must also complete columns (B), (C), and (D).
    94   Part IV Form 990 Part IV, Balance Sheets was blank or column (A) or (B) was not complete. You must complete lines 59, 66 and 73. If any line is zero, enter zero. According to the form instructions you may not submit a substitute balance sheet. Please complete both columns in Part IV, Balance Sheets.
    95   Part V Form 990, Part V was incomplete, blank, or the list attached did not include compensation paid. Please list each of the organization’s officers, directors, trustees, and key employees even if they didn’t receive any compensation from the organization. Enter zero in columns (C), (D), and (E) if no compensation was paid.
    96   Part XI Form 990, Part XI was blank or incomplete. Controlling Organizations defined in section 512(b)(13), must check the applicable box on lines 106, 107 and 108. If you checked the "Yes" box on lines 106 or 107, then you must also complete columns (a) through (d).
    61 990-EZ
    (Doc Code 09)
    Part I You must file Form 990 rather than Form 990-EZ because either your total assets shown on line 25 of your Form 990-EZ was more than $250,000 or your gross receipts are more than $100,000. To compute gross receipts, add the amounts on Forms 990-EZ lines 5b, 6b, and 7b back into the amount on line 9.
    62   Part II Form 990-EZ, Part II, Balance Sheets, is blank or column (A) or (B) isn't complete. You must make an entry on lines 25, 26, and 27. If any line is zero, enter. You may not submit a substitute balance sheet. Please complete both columns in Part II.
    64   Part IV Form 990-EZ, Part IV, List of Officers, Directors, Trustees, and Key Employees, is incomplete or an attached list did not include compensation paid. Please list each of the organization’s officers, directors, trustees, and key employees even if they didn’t receive any compensation from the organization. Enter zero in columns (C), (D), and (E) if no compensation was paid.
    30 990 or
    990-EZ
    Schedule A
    (entirety)
    Organizations exempt under section 501 (c) (3) or section 4947 (a) (1) must file Schedule A. Please see General Instructions A and D and complete pages 1-6 on Schedule A. Remember, PART IV, QUESTIONS 5-14 CANNOT BE BLANK or not applicable (N/A).
    31 990 Schedule A,
    Part I
    A name was present in Part I of Schedule A, but no amount was entered and Form 990, Part II, line 26, Column (A) was more than $50,000.
    41 990-EZ Schedule A,
    Part I
    A name was present in Part I of Schedule A, but no amount was entered and Form 990-EZ, Line 12, was more than $50,000.
    32 990 Schedule A,
    Part II
    A name was present in Part II of Schedule A, but no amount was entered and Form 990, Part II, Column (A), Lines 30-32 combined was more than $50,000.
    42 990-EZ Schedule A,
    Part II
    A name was present in Part II of Schedule A, but no amount was entered and Form 990-EZ, Line 13, was more than $50,000.
    33 990 or
    990-EZ
    Schedule A,
    Part III
    Schedule A, Part III, Question 1 was answered "yes" , and the dollar line was blank and Parts VI-A and VI-B are blank and a statement was not attached.
    34 990 or
    990-EZ
    Schedule A,
    Part IV
    Schedule A, Part IV required one box to be checked. Schedule A Part IV, questions 5-14 cannot be blank, not applicable, or have more than one box checked. If you checked the box on line 6, you must complete Part V. If you checked box 10, 11, or 12, you must complete Part IV-A, lines 15-24. If you checked the box on line 13, you must also check the applicable box that describes the type of supporting organization and complete columns (a) through (e).
    38 990 or
    990-EZ
    Schedule A,
    Part IV-A
    The information on your return or in our records requires you to complete Schedule A, Part IV-A, Support Schedule, Page 3.
    35 990 or
    990-EZ
    Schedule A,
    Part V
    Schedule A, Part V was incomplete or blank. All schools must complete Part V. You may not leave any question blank. Please complete all questions in Part V of Schedule A. If your organization isn't a school, please check the applicable box in Part IV, Schedule A and answer Part IV, Questions 5-14.
    36 990 or
    990-EZ
    Schedule A,
    Part VI-A
    Please complete Schedule A, Part VI-A, Lobbying Expenditures by Electing Public Charities, column (b), if you filed a lobbying election on Form 5768, Election/Revocation of Elections by an Eligible Section 501 (c) (3) Organization to Make Expenditures To Influence Legislation. If you didn’t file Form 5768, please complete Schedule A, Part VI-B, Lobbying Activity by Non-electing Public Charities and send us a detailed description of your legislative activities and the money you spent (or owe) on that activity. If the electing organization belongs to an affiliated group, the electing organization must also attach a schedule showing each member’s name, address, Employer Identification Number and lobbying expenses.
    37 990 or
    990-EZ
    Schedule A,
    Part VII
    You answered "yes" to question 51a, b, or c, on Schedule A, Part VII. However, you did not complete question 51d, Part VII. OR you answered "yes" to question 52a, on Schedule A, Part VII. However, you did not complete question 52b, Part VII. Please complete question 51d or 52b of Schedule A.
    59 990 Schedule H Schedule H or an Audited Financial Statements is missing. (Both must be present).
    01 990-PF
    (Doc Code 91)
    Part I Part I, column (a) was not completed.
    02   Part II The Balance Sheet in Part II was incomplete or blank and Part VII-A, Line 7 was marked "yes" .
    05   Part VII-A Part VII-A, Line 11 is blank. If the foundation owned a controlled entity within the meaning of section 512(b)(13), the questions on line 11a, 12 and 13 must be completed.
    06   Part VII-A You answered "yes" to question 11a in Part VII-A. However, you did not attach the required schedule. Please complete the schedule as outlined in the Form 990-PF instructions.
    07   Part VII-A You must complete Lines 11b and 12, Part VII-A, if you answered "yes" to line 11a.
    08   Part VIII Part VIII, Line 1 must list the names, addresses, and other information requested for the officers, directors, and trustees of the foundation. Line 2 must include compensation of the five highest paid employees earning over $50,000 and line 3 must include the amount for the five highest paid independent contractors earning over $50,000. Please complete Part VIII.
    10