This section contains specific procedures for EO Mandatory Review on:

Policy Statement 4-119 says the primary objective of the EO audit program is regulatory with emphasis on continued qualification of exempt organizations. IRM 1.2.13.1.36.

IRC 7602 gives agents the authority to:

After cases are selected for Mandatory Review, reviewers determine if the organization:

Other Review Staff members are responsible for published material including:

Agents should consult the Knowledge Management Network (K-Net) to ensure they properly developed issues and consistently applied the law.

The table lists commonly used acronyms and definitions.

IRC 7428 provides for the judicial review of certain final adverse EO determinations by either the United States Tax Court, the United States Court of Federal Claims or the United States District Court for the District of Columbia (IRC 7428).

Matters subject to court review covered under IRC 7428(a)(1) include disagreements on an organization’s initial or continuing qualification under IRC 501(c)(3).

For an organization’s initial or continuing qualification 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.

When a taxpayer files suit under IRC 7428, the government has 45 days (motions) to 60 days (answers) to file a response with the court, (pertains to the Tax Court). Because the government may file a motion to dismiss before submitting an answer, timeliness is critical.

The IRS publishes lists of:

The public can:

Reviewer: For purposes of public notice, prepare:

The preparation of Form 4194 publishes the non-501(c)(3) organizations that are no longer deductible under IRC 170(c) in the IRB notices.

Reviewer: Secure-email the following items to the Manager, Mandatory Review:

Manager, Mandatory Review: Forward the e-mail to the IRC 6110 Redactions Coordinator in Mandatory Review for a:

The "IRB notice process" : The IRC 6110 Redactions Coordinator:

The "redaction process" : The IRC 6110 Redaction Coordinator:

These procedures are based on Section 3.01, 3.02 and 3.03 of Rev. Proc. 2018-32, 2018-32 IRB 739.

Foundation status changes do not require redaction as they are not disclosed or sent to the IRS Reading Room.

The notice of deficiency is a legal determination that is presumptively correct. The notice of deficiency consists of:

When you write the explanation of the adjustments, provide a short synopsis of the facts and law. For examples, see Exhibit 4.75.20-7.

Reviewer: use:

Refer to IRM 4.8.9, Statutory Notices of Deficiency for directions on preparing notices. Focus on IRM 4.8.9.8, Preparing Notices of Deficiency, IRM 4.8.9.10, Signing and Dating the Notice of Deficiency, IRM 4.8.9.11, Disposition of Copies, IRM 4.8.9.15, Overassessments and Claims, IRM 4.8.9.16, Special Issues and IRM 4.8.9.17, Special Cases. For Chapter 42 excise taxes, replace Letter 531 with Letter 1753 (Rev. 01/19). Refer to Exhibit 4.75.20-6 as an example for purposes of a continuing transaction.

For excise taxes involving a second tier tax for failure to correct without full correction, IRS must determine the second level at the time liability for the first level is determined. It is therefore included in any notice of deficiency, regardless of whether the first level tax is agreed. The second level will be abated if correction is made after the mailing of the notice plus extensions that apply. See IRC 4961(c) for suspending the collection period for the second tier tax to allow the taxpayer to seek judicial review of the assessment.

Reviewer: see IRM 4.75.17.2.5, 90-Day Letter Preparation and Issuance for directions on issuing the notice.

The Mandatory Review Manager approves the stat notice and Review issues it.

After issuing the notice, add 150 days (210 if sent to a foreign address) to the statute of limitations for each tax year in the notice. Notify the Statute Coordinator, Mandatory Review, who uses RCCMS to update AIMS. Complete the Mandatory Review check sheet (Exhibit 4.75.20-1), checking the box for the 90-day suspense date. Enter a date 105 days from the date you issued the notice.

If the organization agrees to the deficiency by signing Form 4089, close the case following agreed case closing procedures and IRM 4.75.17.2.4, Closing a Case.

If the organization doesn’t respond to the stat notice within 90 days and the case is not docketed, hold the case for an additional 15 days and then close to EO Closing Unit.

Attach Form 3198-A, EO Special Handling Notice, with the following instructions "STATUTORY NOTICE OF DEFICIENCY DEFAULTED - ASSESS TAX IMMEDIATELY."

Before closing, the Mandatory Review Statute Coordinator verifies that the case hasn’t been docketed. If docketed for Tax Court, the coordinator updates and forwards to the closing unit to transfer to Appeals.

.

Reviewers can rescind a stat notice they mailed to a taxpayer, but only with the consent of the taxpayer (Delegation Order 4-8 IRM 1.2.43.9).

If the taxpayer responds to the stat notice by signing Form 872, Consent to Extend the Time to Assess Tax, prepare a Form 8626, Agreement to Rescind Notice of Deficiency, to secure an agreement between the taxpayer and the government.

See IRM 4.8.9.23, Protests, Correspondence and Waivers Received After Issuance of Notice of Deficiency, for general procedures when the taxpayer sends in something other than a signed Form 4089.

Reviewer: If during the 90-day period the taxpayer submits a signed Form 4089, notify the Mandatory Review Statute Coordinator, who sends the case to closing unit to assess the deficiency.

While the taxpayer may be advised in a stat notice that there is an overassessment of income tax for another year or years, the Tax Court has no authority to review and redetermine these overassessments. Therefore, if the overassessment of tax shown in a deficiency notice isn’t protected by a claim for refund based on the issues producing the overassessment, advise the taxpayer of his/her right to file a claim for refund:

For directions, see IRM 4.8.9.15, Overassessments and Claims. When inserting the paragraph in IRM 4.8.9.15.1(2), Claim for Refund Invitation:

In some cases, the deficiency in tax is attributable to many adjustments. The taxpayer may agree with some of the adjustments and may be willing to consent to the immediate assessment and collection of that part of the deficiency if IRS assures them that doing so wouldn’t deprive them of their right to file a petition with the Tax Court. In this situation, the agent should:

See IRM 4.8.9.20.3.1(3), Telephone Contact and IRM 4.8.9.23.3, Waiver of Restriction on Assessment, for further guidance on this procedure.