4.75.5 Information Items

Manual Transmittal

August 19, 2016

Purpose

(1) This transmits revised IRM 4.75.5, Exempt Organizations Examination Procedures, Information Items.

Background

This IRM provides procedures for processing, controlling, and tracking information items received by EO Examinations concerning the activities of exempt organizations.

Material Changes

(1) IRM 4.75.5 has been converted to plain language to comply with the Plain Writing Act of 2010, P.L. 111-274.

(2) All EO referral committees other than the Political Activities Referral Committee (PARC) are discontinued.

(3) Removed IRM 4.75.5.3. New IRM 4.75.15.2 defines information items.

(4) All references to "EO Classification-Referrals" are deleted and replaced by "EO Referrals Group."

(5) Renumbered IRM 4.75.5.4 to 4.75.5.3. Also added reference to IRM 25.27.1, Third Party Contact - Third Party Contact Program.

(6) Added paragraph (12) to new IRM 4.75.5.3, introducing the peer review team of classification specialists within the EO Referrals Group.

(7) Renumbered IRM 4.75.5.5 to 4.75.5.4 and retitled to EO Referral Procedures Timeframes.

(8) Renumbered IRM 4.75.5.6 to 4.75.5.5 and retitled to Political Activities Referral Committee (PARC).

(9) Incorporated in new IRM 4.75.5.5 the contents of Interim Guidance Memorandum TEGE -04-0715-0018, Political Activities Referral Committee.

(10) Incorporated in new IRM 4.75.5.5, classifiers will only refer information items containing evidence or allegations of political or lobbying activities to the PARC.

(11) Added IRM 4.75.5.6, EO Referrals Group - Peer Review Team to include referral items previously contained in IRM 4.75.5.4(9).

(12) Removed IRM 4.75.5.7. The Information is now contained in IRM 4.75.5.5.

(13) Removed contents in IRM 4.75.5.8 as churches are no longer automatically subject to committee review. Churches are discussed in IRM 4.75.5.6.

(14) Renumbered IRM 4.75.5.9 to 4.75.5.7 and retitled to Information Items Record Keeping on RCCMS. Instructions simplified.

(15) Renumbered IRM 4.75.5.10 to 4.75.5.8. Replaced contents with new content to provide instructions specifically to the EO Referrals Group

(16) Created IRM 4.75.5.9 to include information previously located in IRM 4.75.5.5(8).

(17) Exhibit 4.75.5-1 - Removed Information Item Tracking Sheet (obsolete) and replaced with Incoming Referral Cover Sheet.

(18) Exhibit 4.75.5-2 - Removed OUO content, Information Items Record Keeping System - Information Database (obsolete), and replaced with Classification Lead Sheet.

Effect on Other Documents

This manual incorporates and supersedes Interim Guidance Memorandum TEGE-04-0715-0018, dated July 15, 2015, Political Activities Referral Committee.
This manual incorporates and supersedes Interim Guidance Memorandum TEGE-04-1215-0029, dated December 30, 2015, Discontinuance of Referral Committees
This manual supersedes IRM 4.75.5, Exempt Organizations Examination Procedures, Information Items, dated 08-07-2013.

Audience

Tax Exempt and Government Entities
Exempt Organizations
Examinations

Effective Date

(08-19-2016)

Tamera L. Ripperda
Director, Exempt Organizations
Tax Exempt and Government Entities

Introduction

  1. This IRM section establishes procedures to review, evaluate, and preserve information items received by Exempt Organizations (EO). In following these procedures EO’s goals are to:

    • Operate in an unbiased and appropriate manner.

    • Protect against impropriety in its compliance programs.

    • Protect against undue influence in its compliance programs.

  2. The Director, EO Examinations, has broad discretion to coordinate and develop procedures for an effective referral program.

Information Items Defined

  1. An information item is a document or other communication (including electronic) that is:

    1. Received by EO Referrals Group (Referrals) from a source outside the Internal Revenue Service (IRS). The information item alleges possible noncompliance with a tax law by an exempt organization, political organization, taxable entity, or individual.

    2. Received by Referrals from an IRS employee who identifies current or potential noncompliance discovered during the performance of official duties.

    Note:

    IRC 7217 prohibits Executive Branch influence over taxpayer audits and other investigations. Immediately report any such incidents to the Treasury Inspector General for Tax Administration (TIGTA). See IRM 1.54.1.9.1(3)c, TE/GE Division Organization and Management, TE/GE Roles and Responsibilities. In addition to contacting TIGTA, elevate the occurrence of such contact up the chain of command for informational purposes.

General Procedures

  1. Referral Classification Specialists (Classifiers) review and sort the incoming information items.

  2. Classifiers store electronic data on the Dallas shared drive and prepare the Incoming Referral Cover Sheet. See Exhibit 4.75.5-1.

  3. A tax examiner (TE):

    • Uses the Incoming Referral Cover Sheet to input the referral information into Reporting Compliance Case Management System (RCCMS).

    • Uploads referral documents to RCCMS from the Dallas shared drive.

    • Moves the completed referral to the unassigned inventory folder.

    • Mails acknowledgement letter to third party informant. See IRM 25.27.1, Third Party Contact - Third Party Contact Program.

  4. The TE places the case in "classifier" status within 30 days of receipt.

  5. Classifiers work referrals from the unassigned inventory on a first in, first out basis.

  6. The classifier determines the entity type as one of the following:

    • An organization recognized as tax-exempt and described under IRC 501(c) or IRC 501(d)

    • A church or other organization described in IRC 508(c)(1)

    • A political organization

    • A taxable private foundation

    • An EO Business Master File (BMF) status 36 organization (self-declarer of tax-exempt status)

    • An EO BMF status 40 organization

    • An IRC 4947(a)(1) non-exempt charitable trust

    • An IRC 4947(a)(2) split-interest trust

    • A disqualified person, self-dealer, manager, donor or donor advisor for purposes of Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC

    • A whistleblower as described in IRM 4.75.4, Exempt Organization Examination Procedures - Case Selection and Delivery, and IRM 25.2.2, Information and Whistleblower Awards, Whistleblower Awards.

  7. If the classifier determines the referred entity isn’t any of the types listed in paragraph (6) above, the mis-routed information item is given to the TE who then routes it to the appropriate division.

  8. The classifier determines whether the information item:

    • Has audit potential based on the available information.

    • Should be considered in a future year.

    • Needs additional information before a decision can be made.

    • Should be referred to the EO Political Activities Referral Committee (PARC) (See IRM 4.75.5.5).

    Note:

    "Status 97" indicates an automatic revocation on the EO BMF status code field. With the passage of the Pension Protection Act of 2006, tax-exempt organizations that fail to file an annual return or electronic postcard (Form 990-N) for three consecutive years are subject to automatic revocation of tax-exempt status. Classifiers shouldn’t select status 97 referrals for audit unless there is a compelling reason.

  9. If the classifier identifies information items having audit potential, a closing record is created and the interim action code is updated to "pending" . The case is transferred to Group 7998 where it remains until assigned to a field group.

  10. If an audit isn’t warranted, the classifier creates a closing record and closes the referral on RCCMS (status 90).

  11. A designated classifier reviews all Specialist Referral System (SRS), fraud, Financial Investigative Unit (FIU), and Criminal Investigation (CI) cases. The classifier reviews incoming information items on a daily basis and identifies those requiring prompt handling. All classifiers are cross-trained to review these types of information items.

  12. An authorized classifier name-checks suspected terrorist connections against the Specially Designated Nationals (SDN) list at Office of Foreign Assets Control website. If confirmed, the authorized classifier will bring the information to the attention of the Referrals’ unit manager who works with FIU to process the information item accordingly.

  13. In cases of uncertainty, the initial classifier or the Referrals Group Manager may recommend information items to be reviewed by a peer review team of three other classifiers within the EO Referrals Group.

EO Referral Procedures Timeframes

  1. The tasks necessary to process information items will be completed within the following time frames:

    Actions to be completed Time frame*

    • Initial mail categorization (including identification of entity and appropriate process)
    • Creation of referral on RCCMS in "classifier" status
    • Acknowledgement letter to external informants
    • Transfer to unassigned
    30 days
    The classifier:
    • Makes a determination
    • Completes RCCMS record
    75 days
    *All deadlines are counted in business days after the date of receipt in EO Referrals Group

Political Activities Referral Committee (PARC)

  1. Classifiers in the EO Referrals Group will refer information items containing evidence or allegations of political or lobbying activities to the Political Activities Referral Committee (PARC).

  2. Information items that contain one or more of the following criteria, along with implied or explicit allegations of impermissible political or lobbying activities may also be referred to the PARC:

    • Items submitted by a member of Congress (or congressional staff)

    • Sensitive cases (e.g., the information was submitted by an elected official (other than Congress or the Executive Branch))

    • Other factors indicating that review by the PARC would be desirable for reasons of fairness or integrity

  3. The PARC is composed of three members selected at random from a pool of all EO Examinations and Ruling and Agreements front-line IR-04 managers. Each member receives appropriate training and serves on a PARC for 24 months as a collateral duty. The volume of political activity referrals received will determine the number of PARCs established and the time commitment of the members.

  4. A PARC’s responsibility is to consider the audit potential of referrals in a fair and impartial manner. PARC members are expected to use their experience, judgment and concern for fairness in making this determination.

  5. Classifiers will follow normal referral case-building procedures prior to submitting a referral to a PARC. This includes, but is not limited to:

    • IDRS information

    • Accurint research

    • Internet research

    • Completion of the Classification Lead Sheet Exhibit 4.75.5-2

  6. A PARC will determine audit potential based on whether information establishes a "reasonable belief" that warrants further action by the Service. To meet the "reasonable belief" standard, the information needs to:

    • Show a violation of EO tax laws may have occurred

    • Appear likely to lead to the discovery of a violation of EO tax laws upon audit

    Note:

    The PARC may determine that additional information is required before a decision can be made about audit potential.

  7. Two out of three PARC members must make a forwarding recommendation (majority rule) for the referral to be forwarded to an EO Examination group.

  8. PARC members will use RCCMS to document their activities and conclusions.

EO Referrals Group - Peer Review Team

  1. The peer review team is a team of three classifiers within the EO Referrals Group rotated on an annual basis. The peer review team will be responsible for reviewing high-profile referrals.

  2. High-profile referrals include information items containing or involving the following:

    1. Evidence or allegations of non-compliance involving a church

    2. Evidence or allegations of financial transactions with, including contributions to, individuals or organizations with known or suspected terrorist connections

    3. High-impact issues (e.g., the decision may result in media attention)

  3. For more information on churches or organizations claiming to be a church, see IRM 4.76.7.4.2, Church Information Referrals.

  4. Two out of three peer review team members must make a forwarding recommendation (majority rule) for the referral to be forwarded to an EO Examination group.

Information Items Recordkeeping on RCCMS

  1. All classification referrals will be maintained on RCCMS.

  2. RCCMS allows management to track:

    • The date the information item was received by IRS and Referrals.

    • The source of the item.

    • Who made the decision to audit, or not, and the reason.

    • The present location of the item.

    • Referral determination and issue codes.

  3. The following items are kept for seven years on RCCMS from the last action date on the file:

    • Information items and related documents

    • Incoming referral cover sheet

Referral Case Delivery

  1. Once the classifier recommends a referral for audit, the EO Referrals Group will transfer the RCCMS controls to Case Selection and Delivery (CS&D).

  2. When the referral is pulled for a case order, CS&D establishes the case on Audit Information Management System (AIMS) and transfers the RCCMS controls to the assigned field audit group.

Other Operating Divisions

  1. Other operating divisions submitting EO information items should do so by using Form 5666, TE/GE Referral Information Report, or any other equivalent information report. EO information items should be sent to:

    Internal Revenue Service
    EO Referrals Group
    4910 DAL
    1100 Commerce St.
    Dallas, TX 75242

Incoming Referral Cover Sheet

EIN
EO name
EO address
Informant’s name
Informant’s address
Cat Code/Referral type
Tax year
Source Code
IRS received date
*Class received date
Form 13909 __
Source document Form 3949A __
Form 5666 __
Other __

Classification Lead Sheet

Classifications Lead Sheet for Committee Cases
EIN: MFT: Year(s):
Classifier
EO Name
Address
COMPLETED BY REVENUE AGENT (Sections I - III)
SECTION I - RECOMMENDATION
Not Selected Selected Other Actions Deemed Necessary
RECOMMENDATION: Referred Issue/Facts/Law/Conclusion
FORM 990 REVIEW/EXAM POTENTIAL/LARGE UNUSUAL QUESTIONABLE ITEMS
SECTION II - WEBSITE INFORMATION
ORGANIZATION WEBSITE
Does the organization have a valid website? If so, enter web address:
Describe contents (activities, programs/services) and list any significant items of interest (upload relevant information to RCCMS)
SECTION III - OTHER RESEARCH
Search for information regarding the EO, Related EO, and Interested Individuals
Internet Search Date Research and Issues Found (upload relevant information to RCCMS)
INTERNET
IDRS
ACCURINT
OTHER