The primary objective of the EO examination program is regulatory, with emphasis on continued qualification of exempt organizations (Policy Statement 4-119, formerly P-7-20). See IRM 1.2.1.5.36.

IRC 7602 gives examiners the authority to:

Examiners and managers are also responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3).

FSL/ET examiners are responsible for Federal tax administration issues relating to governmental units and their subordinate agencies.

During an examination, examiners are responsible for determining if the organization/entity:

Taxpayer Bill of Rights(TBOR): In June of 2014 the IRS adopted the TBOR therefore, examiners are also responsible for:

Along with their managers, examiners are responsible for controlling and monitoring statutes on their assigned cases.

General EO terms and definitions:

For additional AIMS terminologies, see IRM Exhibit 4.4.1-1, Reference Guide.

The table lists commonly used acronyms and their definitions.

For common IDRS research and command codes, refer to IRM 4.5.1.2. For their definer codes and definitions, refer to Exhibits 4.5.1-1 through 4.5.1-7.

The following lists IRMs referenced in this manual:

TE/GE IRMs mentioned in this manual include:

Servicewide or Other BOD IRMs mentioned in this manual include:

The following paragraphs provide a comprehensive list of the relevant forms and publications you may need to close an examined or non-examined case:

Publications and Documents:

AIMS forms:

Statute forms:

Basic report forms:

Case closing forms:

Case file and workpaper forms:

Make your best effort to close examinations within established time-frames.

The National Standard Timeframes for closing cases are guidelines for quality exam purposes in TEQMS:

Record the date you close the case on the CCR. The group manager records the date he or she approved the closure.

RCCMS allows for the electronic establishing, updating, and closing of AIMS records.

For paper case files associated with a RCCMS record, close the case with a printed copy of Form 5599, Form 5595, Form 5596 and Form 5597.

For electronic and paper FSL/ET cases follow the FSL/ET RCCMS Naming Convention to index and name documents. See Exhibit 4.75.16-4. Include:

For information on assembling an electronic case file in RCCMS, see:

For closing a RCCMS record, see IRM 4.75.16.4.4.3, RCCMS Closing Record - Closing With Field.

In order to close a RCCMS record opened in error without a corresponding AIMS record, or an AIMS record is closed without a corresponding RCCMS record, the group manager:

Use Form 10904 to delete an AIMS account on MF and NMF.

AIMS deletions are generally NMF closures. Surveys are generally MF closures.

You must justify and document an AIMS deletion in the "Reason for Request (Narrative)" block of Form 10904.

Some MF accounts may be deleted, such as a filed return ordered or classified but not received and you did not start the examination.

Use one of the two following DCs for AIMS deletions at the group level:

You and your group manager have the authority to determine whether to survey a return instead of conducting an examination.

Before surveying a return, consider all case facts. Analyze the following factors (not all-inclusive) to help you strategically decide whether to survey the return. While the group manager approves the decision to survey a return and must document it in the RCCMS case file, both managers and examiners must document the case file with all case actions:

When you decide to survey a case, use the appropriate disposal codes (DC):

All determinations to survey will be treated with the same level of review.

Check the following items before closing and shipping your case:

Communicate examination results to t/p

Finalize workpapers

Complete the Closing Documents

Verify the correctness of the statute of limitations date:

Make every attempt to complete the case before a statute extension becomes necessary.

Identify short statute returns. A "short statute return" for EO is a return with less than 270 days remaining until the ASED.

To the extent the procedures in this IRM impose tighter controls than those in IRM Chapter 25.6 use the procedures in this IRM.

Maintain "statute controls" for all short statute returns under examination, whether or not controlled on AIMS. See also IRM 4.75.16.4.2.1.

The closing conference is part of the examination communication process that precedes the closing and shipping procedures of this manual.

See IRM 4.75.13.7.2, The Closing Conference, for instructions on conducting a closing conference.

Complete RCCMS Closing Record screens, for examined closings.

Complete Form 5599 for paper closures. Refer to IRM 4.5.2.4 for Form 5599 instructions.

Other guidance for completing Form 5599 for employment tax returns are found in:

For instructions on completing the Form 2363-A refer to IRM 25.7.1.5, Form 2363-A Preparation Instructions.

Complete Form 2363-A to correct any EOBMF entity errors identified during the examination, including name and address.

Also, complete Form 2363-A to reflect any changes to an organization’s status resulting from your examination.

The FAST’s address and other contact information is provided below:

Some common changes requiring the preparation of a Form 2363-A and the disposition of the Form 2363-A are as follows:

Place in the workpapers retained copies of Form 2363-A processed. Mark as "Copy - Original Sent to the FAST on Date."

For Forms 2363-A to be processed based on examination results, complete Form 3198-A by checking the box, "Entity Change Form 2363 Prepared _____."

Attach a Form 3198-A to any case file requiring special handling.

Appropriately note the following items on Form 3198-A:

Under “Other instructions” may include, but don’t limit to, the following:

For revocations, refer to IRM 4.75.31.2.5 for further instructions on completing Form 3198-A.

For a converted return case file, refer to IRM 4.75.31.3.2 for further instructions.

Use Form 5666 to:

The general instructions for completing Form 5666 are on the back of the form.

Scan, or obtain in electronic format, supporting documents and attach them to Form 5666.

In the case of Form 5666 that can you process immediately:

Include the following in Item D, Forward Report to Name/Date/Organization/Telephone Number: All Forms 5666 go to the EO Referrals group:

The EO Referral’s group street address is:

If the case involves a tax liability extending beyond the taxable years under examination or into a taxable period for which a return is not yet due, prepare a Form 5666 recommending a future year examination to ensure compliance.

Prepare and submit Form 5666 or Form 5346 through the EO Referrals group to LB&I or SB/SE if you find:

Form 5666 is required if you observe activities or operations, which if enlarged or ongoing, may jeopardize the organization’s exempt status. Use DC 08 (213) unless a higher priority disposal code applies. Keep the form in the case file for the EO Closing Unit. The EO Closing Unit will be looking for the form to be processed. Don’t send the form to the EO Referrals Group in this case.

Form 5666 for a future examination is required for inadequate records notices. The future examination applies to no less than two years subsequent to the year of the current examination.

For revocations and disqualifications, in lieu of EO enforcing income taxes on the non-qualifying organization, you must prepare Form 5666.

Track the time spent on the case. Update your CCR when working on the case. Record the hours spent on both the CCR and on WebETS.

If working multiple returns, list all of the returns on WebETS. As needed, use the Copy button when viewing a case on WebETS (Case Quick View, click on the case.) Change the tax year and click Add Case.

Split the time among related returns, if working those returns.

At closing, record the total hours for each type of return on the Form 5773. Prepare one Form 5773 for each type of return worked.

Record the examiner's time on item 28 of Form 5599 and on the RCCMS Closing Records Details Tab to the nearest tenths of an hour (one decimal place), in 15 minute increments. A zero, "0," is required if the tenths field is zero. Report the 15-minute increment as follows:

Use WebETS to complete the closing record. The CCR tracks the total time spent, while WebETS tracks the time per return.

Verify that the time on Forms 5599 and the CCR match and that they reconcile to Form 5773 and WebETS.

With respect to the initial or continuing qualification of an organization as exempt from federal income tax, Section 406 of the PATH Act expanded declaratory judgment rights under IRC 7428 to all IRC 501(c) organizations regardless of paragraph and to IRC 501(d) organizations.

Revocations or disqualifications of organizations exempt under other thanIRC 501(c)(3), IRC 501(c)(9) and IRC 501(c)(17), will not have an effective date. These organizations will be revoked (or treated as revoked in the case of disqualifications) for the specified tax years they failed to qualify.

Declaratory judgment rights also applies to disqualifications of organizations described under IRC 501(c)(12) or IRC 501(c)(15) that fail their respective 85 percent member income test or gross receipts test for specified tax years. These cases will be treated as a revocation for declaratory judgment purposes for the failed tax years only. For closing purposes continue to follow IRM 4.75.16.4.4.1.

IRC 7428 continues to apply to IRC 501(c)(3) organizations the same way it did prior to the PATH Act when proposing:

Before closing a declaratory judgment case, refer to IRM 4.75.32, Declaratory Judgment and the Administrative Record.

This subsection provides instructions for closing examinations where the organization was automatically revoked under IRC 6033(j).

An automatic revocation is reflected in the status code field of the EOBMF as "97."

Automatic revocation is effective for tax periods beginning after 2006.

If a status 97 posts, survey the case. Prepare Form 1900. See sample language in Exhibit 4.75.16-2 for auto-revoked organizations. Use either:

If there is a compelling reason to continue the examination after a status 97 has posted, submit a request to the Director, EO Examinations (or their delegate). Examples of reasons to continue an examination include:

For IRC 501(c)(12) and 501(c)(15) organizations, the posting of a Form 1120 series tax return in lieu of Form 990, is considered a filed return satisfying the filing requirement for automatic revocation purposes.

A substitute for return (SFR) with a TC 150 is not a filed return for automatic revocation purposes.

Employment tax returns and Chapter 42 tax returns are not subject to these procedures.

Surveys of auto-revoked organizations are not subject to mandatory review.

IRM Chapter 4.23 provides Servicewide instructions for all operating divisions with employees involved with the correct filing, reporting, and payment of employment taxes. IRM 4.23 serves as the foundation for consistent administration of ET by various IRS operating divisions.

However, for purposes of closing EO ET cases after issuing your report, follow the closing instructions in this manual unless directed otherwise.

Closing agreements are used to resolve matters that cannot be resolved through normal compliance procedures. Closing agreements encourage future voluntary compliance.

T/ps must meet certain requirements to qualify for a closing agreement. See procedures for closing agreements in IRM 4.75.25.

T/ps may request closing agreements, either during the examination, or by voluntarily contacting the Area Office outside the context of an examination (normally referred to as "walk-in" closing agreements). Walk-in requests must be forwarded to the EO Examinations Closing Agreement Coordinator (Attn: EOCAC) in Mandatory Review.

Examined closing agreements are closed with DC 12 (104) unless a higher priority disposal code applies.

Follow normal examination closing procedures.

To recognize a Form 990-N filing on BMFOLT, refer to the 4th and 5th digits of the DLN containing "8" and "9" respectively, or by checking online at the select check site, http://www.irs.gov/app/ePostcard.

If you determine that an organization was in fact required to file an annual information return, follow delinquent return procedures in IRM 4.75.22.

A dummy Form 990 must be in the case file. See IRM Exhibit 4.75.16-6. Refer to IRM 4.75.21.3(8) for details on "dummy" Form 990.

Refer to Inadequate Records Notices reporting in IRM 4.75.15.8.10.

Close the case using DC 08 (213), Written Advisory - Form 5666 Required, to the EO Closing Unit.

If the t/p makes a request for an installment agreement. For procedures Refer to IRM 4.75.28.5.5, Installment Agreement Procedures.

If you determine a non-filer was in fact not required to file a Form 990, or files Form 990-N:

Organizations not required to file a Form 990 include:

In all other circumstances, establish Form 990 returns on AIMS Master File before closing the case to the EO Closing Unit.

If you determine a non-filer exempt from filing Form 990 in the EOBMF was in fact required to file a Form 990, issue a 30-day letter and a report of examination explaining the filing requirement. Solicit the organization’s agreement on Form 6018, at Line 10. This type of status change is not subject to declaratory judgement rights. The organization can protest the proposed change to Appeals if it disagrees. If the t/p fails to respond to your proposal, your 30-day letter becomes final and the organization must file Form 990.

Before closing a case as unable to locate, follow the procedures outlined below for locating the t/p.

If you can’t make contact, research public records about the dissolution of the organization.

If you are unable to locate the t/p, or the initial contact letter is returned by the Post Office as undeliverable:

Follow these additional steps if the preceding steps are unsuccessful:

Although not required in TE/GE, you can use Form 1900-B, Unlocatable Taxpayer Checksheet, as a worksheet.

If you can’t locate an authorized contact after following the applicable procedures above, send initial contact letters by certified mail to the organization’s last known address and the last known address of officers, as reported to the state or to the Service, whichever was most recently reported.

Put a due date on the letters, such as 30 days after the date of the letter.

Refer to IRM Exhibit 4.75.16-3 for closing procedures depending on the outcome of your attempts to locate.

For all cases with a formal protest to Appeals (no longer subject to mandatory review), ensure the protest:

The officer, director, or trustee's jurat statement must read "Under penalties of perjury, I declare that I have examined the statement of facts presented in this appeal and in any accompanying schedules and statements and, to the best of my knowledge and belief, they are true, correct, and complete."

A designated representative submitting the protest on behalf of the t/p must submit their own substitute statement. They must state that they prepared the appeal and accompanying documents, and whether they know personally that the statements of fact contained in the appeal and accompanying documents are true and correct. See Pub 892.

Close all cases protested to Appeals to the EO Closing Unit.

The following cases are not submitted to the Mandatory Review group:

Mandatory review will not accept imminent statute returns. Refer to IRM 4.75.16.4.2.4.

Attach the following forms and documents to the outside-front of the examination case file folder, top to bottom, as follows:

In RCCMS, place these documents in the "Office Documents Folder."

Attach the following forms and discs to the inside left of the case file folder, top to bottom, as follows:

The flash drive must contain the following 9 items:

In RCCMS, place these documents in the "1 - Non-Disclosure" sub-folder in RCCMS.

Arrange the documents, top to bottom:

Final closing letters issued by the examination group include the following unless otherwise subject to mandatory review:

Final closing letters issued by the review function include:

For purposes of case file assembly, a working return is the return under examination.

The working return assembly denotes the working return and all its required attachments in the case file.

Statute forms are listed in IRM 4.75.16.1.6 (4).

The working return itself can take the following forms in addition to the actual originally-filed paper return:

.

A dummy return is a skeletal first page of Form 990 serving as a physical placeholder in the MFT 67 non-return unit case file. Allowable entries on a dummy return include the organization’s:

For purposes of a working return assembly, staple to the first page of the paper form of the working return, top to bottom:

Staple Form 2848 behind the first page of the paper form of the working return facing forward.

Staple to the back of the last page of the paper form of the working return, top to bottom, facing out:

Use a separate case file folder for each type of MFT. You can place multiple years of the same MFT for one t/p in one folder.

For unagreed IRC 7428 cases, place the administrative record in a separate folder. The electronic case file must have an Administrative Record sub-folder for paperless administrative records.

Place information reports received, referrals, whistleblower information, and other confidential information in a separate folder. Staple Form TD F 15-05.11, Sensitive But Unclassified (SBU) Cover Sheet (Catalog Number 56033J), to the outside-front of the folder.

For large case files use expanding folders if a manila folder is inadequate. Label all folders with the organization's name, EIN, type of return, and year. Number multiple folders in consecutive order.

Ensure all case file folders remain together. Attach a Form 3198-A to each case folder. Write on the bottom of the form in large red letters: "Multiple Returns/Case Folders Involved - DO NOT SEPARATE" .

Indicate the number of case file folders on Form 3210 for transit purposes.

See also IRM 4.75.32.7.4, Declaratory Judgment Cases and the Administrative Record, Shipping and Logistics.

Certain returns can be closed 100 percent paperless. To qualify, the case must:

.

Eligible disposal codes for 100 percent paperless closure are as follows:

The following cases are not eligible for 100 percent paperless closure even if all 100 percent paperless criteria are otherwise met:

Check the second page of an AMDISA print for the following indicators to determine if AIMS will allow a paperless closure:

For information on assembling an electronic case file in RCCMS, see IRM Exhibit 4.75.16-4. For general RCCMS instructions, see IRM 4.75.16.2.2.

Scan any critical paper document into the paperless case file, including substantiating documents or evidence. Scan informant letters and referrals notes into Folder 1, Non-Disclosure Folder, of the RCCMS electronic case file. Don’t scan irrelevant or unnecessary papers into the case file.

Legal documents with original signatures must be maintained in a "correlating paper file," such as:

A case closing 100 percent paperless will generally not have an administrative record file since declaratory judgment cases are paper case files subject to Mandatory Review. If the case eventually closes no-change or other non-declaratory judgment closure, place the residual administrative record documents in the "correlating paper file" . Ultimately the correlating paper file contains only administrative record documents.

Upload to RCCMS all workpapers, forms, reports, letters, and other documents that would normally be included in a paper case file.

Check the "All Electronic" case file indicator in the Compliance Activity screen on RCCMS. This is acceptable even if there is correlating paper file.

Include in the RCCMS comments section either "100 percent Paperless Case" or "100% Paperless Case, Forms 2848, 8821 and/or Form 872 sent by UPS."

Close the case with the following codes when closing a case to the EO Closing Unit on RCCMS:

Notify the EO Closing Unit of the paperless closure using RCCMS by:

Verify that the following is correct on the EOBMF. If not correct, prepare and submit Form 2363-A immediately to the FAST:

If subject to Mandatory Review, print out all workpapers and correspondence.

Verify that the time on Forms 5599 and CCR match and that they reconcile to Forms 5773 and WebETS.

Prepare and print out closing letters. Place the letters in the file.

Review the case on RCCMS and/or paper.

Verify the final case grade is accurate.

Approve the case for closing. Note your approval of the case on both the RCCMS version of the CCR and the printed version.

IRC 6751 requires written documentation of your involvement in any decision to assess most penalties. Document your interaction on the CCR. The following penalties don’t require your approval:

Return the case to the examiner as needed.

Contact the Manager, Mandatory Review if required. See IRM 4.75.16.4.2.

Close to the appropriate function. See IRM 4.75.16.8 (7).

AIMS Status 38, Suspense, All Others (GE Examinations Information Systems Codes FY 2020) or 39, Suspense in Group, removes an examined return from cycle time pending an administrative or judicial action beyond the control of the group. AIMS Status 38 or Status 39 ensures the group isn't penalized for certain aged returns.

The use of AIMS Status 38 or Status 39 is only authorized for use under the following conditions:

The group charged with a return in Status 38 or Status 39 is responsible for protecting the statute of limitations for assessment.

If Status 38 or Status 39 is approved, attach the Suspense Case Cover Sheet in IRM Exhibit 4.75.36-2 to outside-left of the case file folder. Circle the row corresponding to Status 38 or Status 39 on the cover sheet and follow the closing instructions on the cover sheet.