4.75.20 Final Case Processing 4.75.20.1 Program Scope and Objectives 4.75.20.1.1 Background 4.75.20.1.2 Authority 4.75.20.1.3 Responsibilities 4.75.20.1.4 Program Controls 4.75.20.1.5 Acronyms 4.75.20.2 Quality Control 4.75.20.3 90-Day Letters 4.75.20.3.1 Declaratory Judgments Under IRC 7428 4.75.20.4 Final Adverse Determination Letter Case Processing 4.75.20.4.1 Publication of the Determination 4.75.20.5 Statutory Notice of Deficiency 4.75.20.5.1 Preparation and Issuance 4.75.20.5.2 Procedures Following the 90 Day Period 4.75.20.5.3 Rescinding A Notice of Deficiency 4.75.20.5.4 Protests, Correspondence and Waivers Received After Issuance 4.75.20.6 Claims - Issue Not Before Tax Court or Other Courts 4.75.20.6.1 Overassessment - Claim Invitation 4.75.20.6.2 Waiver of Restrictions 4.75.20.7 Notice of Employment Tax Determination Under IRC 7436 4.75.20.8 Inadequate Record Notice Case Processing Exhibit 4.75.20-1 Mandatory Review Cover Sheet Exhibit 4.75.20-2 Memorandum to Area Counsel Exhibit 4.75.20-3 Final Adverse Determination Letter: 501(c)(3) Exemption Revocation (90 Day Letter) Exhibit 4.75.20-4 Final Adverse Determination Letter: 501(c)(3) Foundation Status Modification (90 Day Letter) Exhibit 4.75.20-5 Form 4194 Instructions, Revocation of IRC 170(c) Status Exhibit 4.75.20-6 Statutory Notice of Deficiency: IRC 4941(a)(1): Continuing Act Exhibit 4.75.20-7 Examples of 90-Day Letter Summaries Exhibit 4.75.20-8 Form 2363-A Instructions: IRC 501(c)(3) Revocation Exhibit 4.75.20-9 Form 2363-A Instructions: IRC 501(c)(3) Foundation Status Modification Exhibit 4.75.20-10 Deletions Statement Exhibit 4.75.20-11 Checklist for EO IRC 6110 Written Determinations Part 4. Examining Process Chapter 75. Exempt Organizations Examination Procedures Section 20. Final Case Processing 4.75.20 Final Case Processing Manual Transmittal July 30, 2019 Purpose (1) This transmits revised IRM 4.75.20, Exempt Organizations Examination Procedures, Final Case Processing. Material Changes (1) Converted the manual to plain language. For more guidance on plain language, see www.plainlanguage.gov. (2) IRM 4.75.20.1: Revised to incorporate service-wide memorandum, "Heightened Awareness, Sensitivity and Understanding of Internal Controls" (September 14, 2016). (3) All references to “EO Manager, Examination Programs and Review”(EPR), becomes, FSL/ET Area Manager. (4) All references to “Notice of Determination of Worker Classification” are changed to “Notice of Employment Tax Determination Under IRC 7436”. (5) IRM 4.75.20.3 & 4.75.20.3.1: Removed the former sections “Forwarding TE/GE cases to Appeals” and “New Statute Timeframes for Appeals” as they are currently obsolete. (6) IRM 4.75.20.4.1(8): Updated the Rev. Proc. dealing with the publication of the determination. (7) 4.75.20.5.1(5): Section added to instruct agents when and how to abate a second-tier assessment. (8) 4.75.20.7(1)&(2): “Notice of Employment Tax Determination under IRC 7436”. Updated the sections with the new 30 day Employment Tax Letters. Updated the new unagreed worker classification issues that require a Letter 3523. (9) Renumbered succeeding sections after deleting IRM sections 4.75.20.3 & 4.75.20.3.1 as follows: Old Section New Section IRM 4.75.20.4, 90 Day Letters IRM 4.75.20.3, 90 Day Letters IRM 4.75.20.5, Final Adverse Determination Case Processing IRM 4.75.20.4, Final Adverse Determination Case Processing IRM 4.75.20.6, Statutory Notice of Deficiency IRM 4.75.20.5, Statutory Notice of Deficiency IRM 4.75.20.7, Claims-Issue Not Before Tax Courts or Other Courts IRM 4.75.20.6, Claims-Issue Not Before Tax Courts or Other Courts IRM 4.75.20.8, Notice of Determination of Worker Classification IRM 4.75.20.7, Notice of Employment Tax Determination Under IRC 7436 IRM 4.75.20.9, Inadequate Record Notice Case Processing IRM 4.75.20.8, Inadequate Record Notice Case Processing Effect on Other Documents This manual supersedes IRM 4.75.20, Final Case Processing, dated 7/31/2017. Additionally, this manual incorporates the information in the following IG memo’s and alerts: Interim Guidance Memorandum TEGE-04-0517-0019, Procedures Following the TEGE Reorganization, Effective May 22, 2017. Audience Tax Exempt and Government Entities Exempt Organizations Examination Effective Date (07-30-2019) Margaret Von Lienen Director, Exempt Organizations Tax Exempt and Government Entities 4.75.20.1 (07-30-2019) Program Scope and Objectives Purpose: This manual focuses on Mandatory Review Staff’s responsibilities in concluding the agent’s audits. Topics addressed include: 90 day closing letters Statutory Notices of Deficiency Claims - not before Tax Court Notice of Employment Tax Determination Under 7436 The procedures in this manual apply to Exempt Organization Examination agents and reviewers in the following series: GS-501 GS-512 GS-526 GS-987 Policy Owner: EO Director Program Owner: EO 4.75.20.1.1 (07-30-2019) Background This section contains specific procedures for EO Mandatory Review on: Final case closing processing procedures Quality control procedures established for EO Examination review functions. 4.75.20.1.2 (07-30-2019) Authority 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: Examine any books, papers, records or any data necessary to complete an audit. Issue a summons for information necessary to complete an audit. Take testimony under oath to secure additional information needed. Ask about any offense connected with the administering or enforcing of the Internal Revenue laws. 4.75.20.1.3 (07-30-2019) Responsibilities After cases are selected for Mandatory Review, reviewers determine if the organization: Meets the requirements for continued tax exempt status. Filed all required tax and information returns. Reported information and tax liabilities correctly. Required 90 day letters and Stat Notices accurately prepared by the agent. Reported correct FSL/ET obligations and filed the correct notices. Other Review Staff members are responsible for published material including: Writing, editing and updating the IRM. Preparing memoranda and alerts. Preparing classroom presentations and CPE courses. Redacting final adverse determination letters for non-disclosure purposes. 4.75.20.1.4 (07-30-2019) Program Controls Agents should consult the Knowledge Management Network (K-Net) to ensure they properly developed issues and consistently applied the law. 4.75.20.1.5 (07-30-2019) Acronyms The table lists commonly used acronyms and definitions. ACRONYM DEFINITION EO Exempt Organizations AIMS Audit Information Management System EP Employee Plans K-NET Knowledge Management Network RAR Revenue Agent Report TAM Technical Advice Memorandum TE/GE Tax Exempt/Government Entities STAT NOTICE Statutory Notice of Deficiency PF Private Foundation FSL/ET Federal State & Local/Employment Tax Area REVIEW OR REVIEWERS Referring to a member or members of Mandatory Review Staff (who receive the responsibilities in this section). 4.75.20.2 (07-30-2019) Quality Control Mandatory Review receives cases after EO Examinations issues unagreed formal audit reports proposing changes in exemption, foundation status, and tax (including employment tax) and for other specific types of cases. See IRM 4.75.16.6, Cases Subject to Mandatory Review, (As referenced in the TEGE IG “Interim Guidance on cases subject to MR”, dated 9/1/17, which provides the updated cases, for a list of the restricted types of cases which go to Mandatory Review Staff). Certain types of unagreed cases bypass Mandatory Review, such as unagreed non-worker classification employment tax cases and cases returning to Special Review. (See IRM 4.70.7.5, Case Review Criteria.) Before closing a case to the EO Examinations Mandatory Review Statute Coordinator(s) for final processing, reviewers inspect the cases and either: Return the case to the group via a Form 5456, Reviewer's Memorandum - TE/GE. See IRM 4.75.17.2.3, Returning a Case. Prepare, sign and issue an adverse determination letter. See IRM 4.75.20.4. Prepare and issue a statutory notice of deficiency. See IRM 4.75.20.5. Prepare and issue a Notice of Employment Tax Determination Under IRC 7436. See IRM 4.75.20.7. All EO Examination employees: Observe and follow the quality control procedures below: Agents: Send all completed case files through your group manager for closing. See IRM 4.75.16.9, Shipping From the Group, when forwarding cases to Mandatory Review. Group Managers: If a case requires action by another group or area before its final closing, send the case directly to that area after you approve and update it to the correct status per IRM 4.75.16.8, Closing the Case. Group Manager: before you send a case to Mandatory Review, inspect the case and initial your concurrence on the bottom of the last page of Form 5464, Case Chronology Record. Note: FSL/ET, use Form 9984, Case Activity Record. Reviewer: verify computations in "change" cases before you forward the case to the closing unit. Reviewer: if you receive a case with Form 5666, TE/GE Information Report, review and perfect the form if incorrect. For form instructions, see IRM Exhibit 4.5.1-12, Instructions for Preparing Form 5666, TE/GE Referral/Information Report in IRM 4.5.1.3.9.2 For information on what to include with the form, see IRM 4.75.16.4.8, Form 5666 - Revocations. 4.75.20.3 (07-30-2019) 90-Day Letters Group managers and reviewers (grade 12 and above) have the authority to issue statutory notices of deficiency and notices of determination concerning worker classification under IRC section 7436 per Delegation Orders 4-8, (IRM 1.2.43.9 and 4-26 (IRM 1.2.43.23 ). Grade 12 reviewers and above may authorize and sign final adverse determination letters as well per Delegation Order 7-2, dated 10/12/2018. Reviewers in Mandatory Review prepare and issue most 90-day letters, with three exceptions: Special Review prepares and issues 90-day letters in cases they reopen. The FSL/ET group manager approves all final adverse employment tax determinations (pending Counsel approval). The reviewer date stamps and mails the Notice of Determination of Worker Classification (NDWC). Groups holding short statute cases prepare and issue the 90-day letters. The Area Manager approves and signs the 90-day letters. Note: Agents now work directly with Counsel on cases with an imminent statute. The following lists possible adverse situations for which reviewers may issue 90-day letters to taxpayers: Modifications of foundation status under IRC 509 (IRC 7428) Revocations, disqualifications of exemption of IRC 501(c) and (d) organizations (IRC 7428) Disqualification of a Status 36 organization Year to year disqualification of a IRC 501(c)(12) or (c)(15) organization Unagreed without protest converted Form 1120 assessments (IRC 6212) Unagreed without protest discrepancy adjustments (IRC 6212) Unagreed without protest excise tax assessments (IRC 6212) Unagreed without protest unrelated business income tax assessments (IRC 6212) Unagreed without protest Notices of Employment Tax Determination Under 7436 Reviewers issue the following types of 90-day letters to taxpayers: Final adverse IRC 501(c)(3) determination letters (revocations and foundation status modifications) All other 501(c) determination letters Notice of Employment Tax Determination Under 7436 Statutory Notices of Deficiency Potentially, any taxpayer who receives a 90-day letter may go to court. For e-filed returns, obtain the complete TRDBV print from IDRS. For employment, income, and excise taxes, Division Counsel: Requires the original return to be in the file. Accepts copies of Forms 990 and 4720 series returns generated from SEIN (Statistics of Income Exempt Organizations Return Image Net). Note: The 90 day letter is the final closing letter normally issued by Mandatory Review or Appeals for unagreed adjustments and declaratory judgment cases. (They include Stat Notices of Deficiency and notices of determination concerning worker classification under IRC section 7436). 90 day letters can be delegated to the exam groups in short statute situations. Refer to IRM 4.75.15.7 for more on 90 day letters. 4.75.20.3.1 (07-30-2019) Declaratory Judgments Under IRC 7428 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). Note: Refer to IRM 4.75.13.8.8, Issues Subject to Declaratory Judgment Under IRC 7428. 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. 4.75.20.4 (07-30-2019) Final Adverse Determination Letter Case Processing Reviewer: If you agree with the agent’s proposal to revoke (or disqualify) any IRC 501(c) or (d) tax-exempt status without protest: Prepare the 90-day Final Adverse Determination Letter (FADL) and any accompanying power of attorney cover letters. If a FADL is already in the file, correct as needed. See Exhibit 4.75.20-3 or Exhibit 4.75.20-4. Note: You may further customize IRC 501(c)-other and 501(d) revocations. If unagreed, prepare a memo to Area Counsel requesting a pre-issuance review of the letter. See Exhibit 4.75.20-2. If unagreed, prepare Form 3210, Document Transmittal, and Form 9814, Request for Mail/Shipping Service, to send the case to the appropriate area counsel office. For office addresses, see https://ccintranet.prod.irscounsel.treas.gov/OrgStrat/Offices/TEGE-DC/Pages/AreaCounselOffices.aspx. Note: For purposes of the FADL, treat IRC 7428 declaratory judgment cases as unagreed even if you received a signed Form 6018, Consent to Proposed Action, except that Area Counsel review of cases with a signed Forms 6018 is not required. See IRM 4.75.17.2.5, 90-Day Letter Preparation and Issuance for directions on preparing, signing and issuing the FADL. Upon issuing a 90-day FADL to an organization, perfect the case file. Check for a completed Form 2363-A, Request for IDRS Input for BMF/EO Entity Change Make corrections as needed or prepare a new Form 2363-A. See Exhibit 4.75.20-8 or Exhibit 4.75.20-9 for instructions in preparing Form 2363-A. Sign and e-mail Form 2363-A to the *TEGE FAST unit for processing. Your signature assures the FAST you reviewed the adverse determination. 4.75.20.4.1 (07-30-2019) Publication of the Determination The IRS publishes lists of: Revoked IRC 501(c)(3) organizations in the Internal Revenue Bulletin IRC 501(c)(3) organizations that lost their public charity status and have become private foundations. The public can: Search an organization's exemption or foundation status via Tax Exempt Organization Search. Inspect a redacted copy of a FADL at the IRS Electronic Reading Room. Note: Redacted FADL’s of revoked organizations other than 501(c)(3) organizations are also posted to the IRS Electronic Reading Room. Reviewer: For purposes of public notice, prepare: Form For Form 4194, Revocation of IRC 170(c) Status. See Exhibit 4.75.20-5 for directions. The revocation of a IRC 501(c)(4), (c)(8), (c)(10), (c)(13) or (c)(19) organization, if contributions to the organization are no longer deductible under IRC 170(c). Form 5060, Report of Adverse Determination on Private Foundation Status and Private Operating Foundation. See form instructions. A reclassification of: an IRC 509(a)(1), 509(a)(2) or 509(a)(3) organization to either a private foundation or a Type III non-functionally integrated supporting organization; or a private operating foundation (as indicated in the EOBMF) to a private non-operating foundation. Note: For purposes of public notice and Form 5060, this does not include a reclassification from a IRC 509(a)(1) to IRC 509(a)(2) and vice-versa 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: The electronically signed Form 4194 (or Form 5060) The 30-day letter The revenue agent report (RAR), including Form 886-A, Explanation of Items The final adverse determination letter, with date of mailing Note: The 30 day letter is a transmittal letter to the RAR soliciting agreement to the proposal. It also informs the organization of the right to appeal. For more on 30 day letters including their ability to become a final letter if unchallenged, refer to IRM 4.75.15.7 Manager, Mandatory Review: Forward the e-mail to the IRC 6110 Redactions Coordinator in Mandatory Review for a: IRB Notice process Redaction process The "IRB notice process" : The IRC 6110 Redactions Coordinator: E-mails to irb@irs.gov a notice of a revocation or the appropriate adverse change in foundation status by sending the following items: Form 14712, Memorandum for Bulletin Program Coordinator and Internal Revenue Bulletin Submission Deletions Statement for revocations (See Exhibit 4.75.20-10.) A Foundation Change statement for adverse changes to a foundation status Electronically signs Form 4194 (or Form 5060) upon completing the IRB notice process. Keeps a retention file for Form 4194 (or Form 5060). The "redaction process" : The IRC 6110 Redaction Coordinator: Redacts a copy of the 30-day letter, RAR, and FADL. Refers to redaction guidance in IRM 7.28.4.4, General Guidelines for IRC 6110 Deletions. Refers to redaction guidance in IRM 7.28.4.5, Submitting IRC 6110 Determination Letters for Disclosure, reviewer procedures. Sends to the revoked organization’s address of record (and up to two designated representatives) the following items: Notice 437, Notice of Intention to Disclose, with the blank fields filled-in. Notice 437 directs the organization to reply directly with the IRS Chief Counsel Legal Processing Division in Washington D.C. Copy of FADL Copy of FADL (redacted) Copy of 30-day letter Copy of 30-day letter (redacted) Copy of Form 886-A Copy of Form 886-A ) (redacted) Emails to *CC 6110 Disclosure the following documents: Copy of Notice 437 sent to the organization Checklist for EO IRC 6110 Written Determinations (see Exhibit 4.75.20-11) Copy of FADL Copy of FADL (redacted) Copy of 30-day letter Copy of 30-day letter (redacted) Copy of Form 886-A Copy of Form 886-A (redacted) 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. 4.75.20.5 (07-30-2019) Statutory Notice of Deficiency A notice of deficiency, also called a "statutory notice of deficiency" or "stat notice," is the IRS's determination of a taxpayer's income, excise, employment, estate or gift tax deficiency sent to the taxpayer by certified or registered mail. The IRS is authorized to send this notice per IRC 6212(a) and 26 CFR 301.6212-1 The issuance of a statutory notice of deficiency begins the litigation process. Mandatory Review issues a statutory notice of deficiency when the taxpayer: Doesn’t file a valid protest in response to a 30-day letter or fails to respond to a 30-day letter for unrelated business income deficiencies, excise taxes, employment, estate or gift taxes, and discrepancy adjustments. Requests one to plead the case in the US Tax Court. Note: Review Staff doesn’t accept any case with an imminent statute expiration date. The agent must arrange a pre-issuance review of the notice with Area Counsel. 4.75.20.5.1 (07-30-2019) Preparation and Issuance The notice of deficiency is a legal determination that is presumptively correct. The notice of deficiency consists of: A letter explaining the purpose of the notice, the amount of the deficiency, and the taxpayer's options. A copy of the letter in line a, above. A waiver, typically Form 4089, Notice of Deficiency -Waiver or Form 4089-B, Notice of Deficiency - Waiver. Appropriate tax computation forms such as Form 4549-A, Income Tax Discrepancy Adjustments, or Form 4883, Exempt Organizations Excise Tax Audit Changes. A written explanation of all the adjustments, often on Form 886-A, Explanation of Items. Information about the Taxpayer Advocate Service (TAS) services, along with the closest TAS office address. 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. Caution: Never include the complete revenue agent report in the statutory notice of deficiency. Reviewer: use: Letter 531 (Rev. 01/19) for income tax assessments. Letter 1753 (Rev. 01/19) for chapter 42 and 43 excise tax cases. 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. Note: When reviewing directions in IRM 4.8.9, keep in mind that: • Area Counsel ( TE/GE Division Counsel) reviews all TE/GE issued statutory notices of deficiency before they’re issued • EO Closing Unit processes the notices, not Small Business/Self Employed's (SB/SE) Centralized Case Processing (CCP) units 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. Note: If we are notified that the taxpayer corrected within the 90-day period, the reviewer sends the case file back to the agent assigned to the case. The agent would then abate the second tier assessment following the same procedures in IRM 4.75.37 (Claims manual) for abatement requests. 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. 4.75.20.5.2 (07-30-2019) Procedures Following the 90 Day Period 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. Note: For information on petitions, see IRM 4.8.9.25, United States Tax Court Petition Filed . 4.75.20.5.3 (07-30-2019) Rescinding A Notice of Deficiency 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. Note: You must have the signed and executed Form 872 consent before you mail the Form 8626. 4.75.20.5.4 (10-16-2014) Protests, Correspondence and Waivers Received After Issuance 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. 4.75.20.6 (07-30-2019) Claims - Issue Not Before Tax Court or Other Courts If a taxpayer invokes the jurisdiction of the Tax Court in redetermining the amount of the deficiency, the taxpayer is precluded from later filing suit in the courts on a claim for refund filed for the same kind of tax for the same taxable year. See IRM 4.8.9.15.3, Claims and Petitions to the United States Tax Court for guidance. 4.75.20.6.1 (07-30-2019) Overassessment - Claim Invitation 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: Based on the issues producing the overassessment. Within the time provided by law. 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: Insert Form 990-T, Exempt Organization Business Income Tax Return, or Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation, if applicable. 4.75.20.6.2 (07-30-2019) Waiver of Restrictions 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: Calculate the amount of penalty and interest using the Report Generation System NT (RGS) for the partial agreement amount. Give the taxpayer the computed amount of tax, penalties, and interest. Advise the taxpayer to pay that amount at this time to prevent further penalty and interest on the partial agreement amount from accumulating. Explain that the taxpayer must file the petition in court to contest the remaining unagreed amount. 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. 4.75.20.7 (07-30-2019) Notice of Employment Tax Determination Under IRC 7436 The 30-day letter in employment tax cases that don’t involve IRC 7436 worker classification is Letter 950-D, Employment Tax 30-Day Letter, and will contain the Non-IRC 7436 issues. Letter 950-C, Employment Tax 30-Day Letter - Tax Court (TC), IRC 7436 issues. SB/SE holds jurisdiction over employment taxes, even though TE/GE Counsel provides the legal guidance to SB/SE. Cases that involve IRC 7436 worker classification issues that go unagreed now require a Letter 3523, Notice of Employment Tax Determination Under IRC 7436, and must be issued by review staff to the taxpayer within 60 days after the expiration of the 30 day period. Reviewer: When following the procedures in IRM 4.8.10, keep in mind that: You hold the authority to sign and issue the notice. See IRM 1.2.43.24, Delegation Order 4-26 (Rev. 1) (formerly DO-251). Division Counsel (formally "Chief Counsel TE/GE Field Service" ), reviews all TE/GE issued notices of employment tax determination under IRC 7436 before they’re issued. EO Closing Unit processes the case upon closure, not SB/SE's CCP. 4.75.20.8 (07-30-2019) Inadequate Record Notice Case Processing Agents follow IRM 4.75.15.8.10.1, Inadequate Records Notice, which notes the documents necessary for an inadequate records notice. Don’t send unagreed inadequate record notice cases to Mandatory Review Staff. The group manager reviews the case and the group mails the Notice of Inadequate Records to the taxpayer. Use disposal code 08, Written Advisory on Form 5666. Exhibit 4.75.20-1 Mandatory Review Cover Sheet MANDATORY REVIEW COVER SHEET (Place on outside of Case File when closing) TAXPAYER NAME: EIN: ASSIGNED TO: MGR APPROVAL: STATUTE VERIFICATION MFT YEAR STATUTE DATE DATE VERIFIED RETURN INITIALS BMFOLT/AMDIS PRINTS ATTACHED? YES NO, WHY NOT? Close to EO Closing Unit Reviewer signature on Form 5599 All Revocations - Redaction Package e-mailed to Group Mgr on: 1120 Suspense file 90 day suspense date: Taxable related case(s) enclosed needing assessment Copy of final closing letter enclosed in file 2363-A's in file for processing Release of V-freeze Release of freeze code 3 Reviewer Signature Date Exhibit 4.75.20-2 Memorandum to Area Counsel DEPARTMENT OF THE TREASURYINTERNAL REVENUE SERVICE MC:4920:DAL 1100 Commerce St. Dallas, TX 75242 [Insert date] Memorandum for: [Insert name of Area Counsel] [Insert Area] Area Counsel [Insert street address with mail stop] [Insert city, state and zip code] [Insert phone number] From: [Insert name of reviewer] TE/GE Mandatory Review Subject: Pre-issuance review of [insert final adverse determination letter or statutory notice of deficiency] Please review the attached case file for issuance of the [insert final adverse determination letter or statutory notice of deficiency] and return to Reviewer at the following address: Internal Revenue Service [Insert street address with mail stop] [Insert city, state and zip code] If you have any questions, please call [Insert phone number] or e-mail [Insert e-mail address]@irs.gov. Attachment(s): Case file of [Insert name of entity] Exhibit 4.75.20-3 Final Adverse Determination Letter: 501(c)(3) Exemption Revocation (90 Day Letter) Internal Revenue Service Department of the Treasury TE/GE Exempt Organizations Examinations 1100 Commerce Street M/C 4920 DAL Dallas, TX 75242 Date: [Insert date] Taxpayer Identification Number: [Insert TIN]Person to Contact: [Insert name]Employee Identification Number: [Insert ID Number] [Insert name of entity] [Insert attention line] [Insert street address] [Insert city, state, and zip code] Employee Telephone Number: [Insert phone number] (Phone) [Insert fax number] (Fax) CERTIFIED MAIL Dear [Sir or Madam], This is a final adverse determination regarding your exempt status under section 501(c)(3) of the Internal Revenue Code (the Code). Our favorable determination letter to you dated [date] is hereby revoked and you are no longer exempt under section 501(a) of the Code effective [date]. The revocation of your exempt status was made for the following reason[s]: [Insert applicable and appropriate summary of the reasons for the revocation.] Contributions to your organization are no longer deductible.{Note: If, the organization has deductibility code “2”, this paragraph is not applicable} You are required to file income tax returns on Form [1120 or 1041]. If you have not already filed these returns and the agent has not provided you instructions for converting your previously filed Form(s) 990 [or 990-EZ or 990-BL or 990-PF] to Form(s) 1120 [or Form(s) 1041], you should file these income tax returns with the appropriate Service Center for the tax year[s] ending [date], and for all tax years thereafter in accordance with the instructions of the return. [As you were a private foundation as of the effective date of revocation, you are considered to be taxable private foundation until you terminate your private foundation status under section 507 of the Code. In addition to your income tax return, you must also continue to file Form 990-PF by the 15th Day of the fifth month after the end of your annual accounting period.] Processing of income tax returns and assessments of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Internal Revenue Code. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: United States Tax Court, the United States Court of Federal Claims, or the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed before the 91st day after the date this determination was mailed to you if you wish to seek review of our determination. Please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory judgment by referring to the enclosed Publication 892. Please note that the United States Tax Court is the only one of these courts where a declaratory judgment action can be pursued without the services of a lawyer. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 U. S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 You also have the right to contact the Office of the Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute for established IRS procedures, such as the formal Appeals process. The Taxpayer Advocate cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You may call toll-free, 1-877-777-4778, and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your local Taxpayer Advocate at: Taxpayer Advocate Service [1st Line Address] [2nd Line Address] [City, State Zip] [Phone Number] If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, [Name of Designated Official] Designated Official Enclosure: Publication 892 Exhibit 4.75.20-4 Final Adverse Determination Letter: 501(c)(3) Foundation Status Modification (90 Day Letter) Internal Revenue Service Department of the Treasury TE/GE Exempt Organizations Examinations 1100 Commerce Street M/C 4920 DAL Dallas, TX 75242 Date: [Insert date] Taxpayer Identification Number: [Insert TIN]Person to Contact: [Insert name]Employee Identification Number: [Insert ID Number] [Insert name of entity] [Insert street address] [Insert city, state, and zip code] Employee Telephone Number: [Insert phone number] (Phone) [Insert fax number] (Fax) CERTIFIED MAIL Dear [Sir or Madam], This is a final determination regarding your foundation classification. This letter modifies our letter to you dated [date], in which we determined that you were an organization described in section[s] 509(a)(_) [and 170(b)(1)(A)(__)] of the Internal Revenue Code (Code). [Based on your sources of support, we have determined that you are a private [operating] foundation described under section[s] 509(a) [and 4942(j)(3)] of the Code, effective [ date ]. [You will be treated as a private operating foundation as long as you continue to meet the requirements of section 4942(j)(3).] Your tax exempt status under section 501(c)(3) of the Internal Revenue Code is not affected.] [Based on your sources of support, we have determined that you are not a private foundation within the meaning of section 509(a) of the Code because you are an organization of the type described in section[s] 509(a)(__) [and 170(b)(1)(A)(__) of the Code], effective [ date ]. Your tax exempt status under section 501(c)(3) of the Internal Revenue Code is not affected.] Grantors and contributors may rely on this determination, unless the Internal Revenue Service publishes a notice to the contrary. Because this letter could help resolve any questions about your private foundation status, please keep it with your permanent records. {For all organizations modified from publicly supported status to a private [operating] foundation} [Because you are a Private [Operating] Foundation, you are required to file Form 990-PF, Return of Private Foundation. If you have not already filed these returns and you have not received instructions for filing substitute Form[s] 990-PF, you should file these returns with the appropriate Service Center for the tax year[s] ending [ date ], and for all tax years thereafter in accordance with the instructions of the return.] {For small organizations still considered publicly supported; i.e. modification from 509(a)(1) to 509(a)(2)} [For tax periods beginning after December 31, 2006, small tax-exempt organizations with gross receipts normally less than $50,000 a year are required to file an annual electronic notice, Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ. Organizations that do not file a return or a notice for three consecutive years will lose their tax-exempt status.] Processing of tax returns and assessments of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Internal Revenue Code. If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: United States Tax Court, the United States Court of Federal Claims, or the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed before the 91st day after the date this determination was mailed to you if you wish to seek review of our determination. Please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory judgment by referring to the enclosed Publication 892. Please note that the United States Tax Court is the only one of these courts where a declaratory judgment action can be pursued without the services of a lawyer. You may write to the courts at the following addresses: United States Tax Court 400 Second Street, NW Washington, DC 20217 US Court of Federal Claims 717 Madison Place, NW Washington, DC 20005 U. S. District Court for the District of Columbia 333 Constitution Ave., N.W. Washington, DC 20001 You also have the right to contact the Office of the Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute for established IRS procedures, such as the formal Appeals process. The Taxpayer Advocate cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You may call toll-free, 1-877-777-4778, and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your local Taxpayer Advocate at: Taxpayer Advocate Service [1st Line Address] [2nd Line Address] [City, State Zip] [Phone Number] If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, [Name of Designated Official] Designated Official Enclosure: Publication 892 Exhibit 4.75.20-5 Form 4194 Instructions, Revocation of IRC 170(c) Status Revocation of IRC 170(c) Status Instructions: The purpose of this form is to request that an announcement be published in the Internal Revenue Bulletin for an organization whose tax-exempt status has been revoked, and which no longer qualifies for deductible contributions under IRC 170(c). The form is to be fully completed, giving the reason for revocation, and is to be signed by the preparer's reviewer. This form should be submitted when the final revocation letter has been issued. It is not be completed for organizations that have voluntarily terminated. Name of Organization [Insert name of entity, as per INOLES/BMFOLO] City State [Insert city, as per INOLES/BMFOLO] [Insert state, as per INOLES/BMFOLO] Signature Title Location of Preparer Signature Title Location of Preparer [Sign here. Electronic signature acceptable] Mandatory Reviewer [Insert POD] Reason for revocation, including date of final letter. [Insert the paragraph(s) from the Final Adverse Determination Letter explaining the reason for revocation.] [Insert the date of the Final Adverse Determination Letter.] Check the box applicable to the organization type. X 501(c)(3) organizations that are described in section 170(c)(2). Non-501(c)(3) organizations that are eligible to receive deductible contributions because they are described in either: 170(c)(1) (contributions or gifts made to a State or possession of the U.S., to the U.S. to be used exclusively for public purposes); 170(c)(3) (a post or organization of war veterans, or an auxiliary unit, society of, or trust or foundation for any such post or organization exempt under section 501(c)(19)); 170(c)(4) (contributions or gifts made to a domestic fraternal society, order, or association operating under the lodge system that is exempt under either 501(c)(8) or (c)(10), but only if the contribution or gift is to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals); or, 170(c)(5) (certain cemetery companies of corporations chartered solely for burial purposes that are exempt under 501(c)(13)). Upon case closing, this document should be sent to the Internal Revenue Bulletin unit at *IRB@irs.gov In addition, the following documents must accompany the Form 4194: • Form 12971 - Memorandum for Bulletin Unit Coordinator • Form 12972 - Internal Revenue Bulletin Submission Record • Narrative statement for publication Form 4194 (Rev. 03-2010) Catalog Number 41436A Department of the Treasury — Internal Revenue Service Exhibit 4.75.20-6 Statutory Notice of Deficiency: IRC 4941(a)(1): Continuing Act Internal Revenue Service Department of the Treasury TE/GE Exempt Organizations Examinations 1100 Commerce Street M/C 4920 DAL Dallas, TX 75242 Date: [Insert date] Taxpayer Identification Number: [Insert TIN]Form Number: 4720-APerson to Contact: [Insert name/ID number]Contact Hours: [Insert disqualified person's name] [Insert disqualified person's street address] [Insert city, state, and zip code] Telephone Number: [Insert phone number] [Insert fax number] (Fax) LAST DAY TO FILE A PETITION IN THE UNITED STATES TAX COURT: [Insert date] CERTIFIED MAIL Tax Year(s) Ended: First Tier (Initial) Tax DeficiencyI.R.C. 4941(a)(1): 12/31/2013 12/31/2014 12/31/2015 $300.00 $900.00 $1,500.00 Dear [Sir or Madam], NOTICE OF DEFICIENCY We have determined that there is a deficiency (increase) in your excise tax as shown above. This letter is a NOTICE OF DEFICIENCY sent to you as required by law. The enclosed statements show how we figured the deficiency. The second tier tax deficiency shown above will be eliminated if correction is made by the end of the correction period, which ends 90 days after the mailing of this letter plus the total period of any extensions that may apply. You may request this office to grant an extension of the correction period for the time reasonable and necessary for you to bring about correction of the act giving rise to the first tier tax. However, an extension can be granted only if warranted by the facts and requested before the correction period would otherwise end. A statement as to the actions required for correction is enclosed. If you want to contest this deficiency in court before making any payment, you must file a petition with the United States Tax Court for a redetermination of the deficiency. Your petition must be filed with the Court within 90 days from the mailing date of this letter (150 days if addressed to you outside of the United States), plus the time (if any) during which this office has extended the correction period as a result of your request. The petition should be filed with the United States Tax Court, 400 Second Street N.W., Washington, D.C. 20217, and the copy of this letter should be attached to your petition. The time in which you must file a petition with the Court (90 or 150 days, as the case may be, plus any extension of the correction period that may be granted) is fixed by law and the court cannot consider your case if your petition is filed late. Filing a petition will extend the correction period until after the Tax Court has decided whether the second tier tax was properly imposed. If your petition involves a dispute of not more than $50,000 for any one taxable period (or, if there is no taxable period, taxable event) a simplified procedure is provided by the Tax Court for small tax cases. You can get information about this procedure, as well as a petition form you can use, by writing to the Clerk of the United States Tax Court at 400 Second Street N.W., Washington D.C. 20217. You should do this promptly if you intend to file a petition with the Tax Court. If you decide not to file a petition with the Tax Court, please sign and return the enclosed waiver form. This will permit us to assess the deficiency quickly and will limit the accumulation of interest. The enclosed envelope is for your convenience. If you decide not to sign and return the statement and you do not timely petition the Tax Court, the law requires us to assess and bill you for the deficiency after 90 days from the mailing date of this letter (150 days if this letter is addressed to you outside the United States). The time for making the assessment is extended by any extension of the correction period that may be granted. You have the right to contact the office of Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute for established IRS procedures, such as the formal appeals process. The Taxpayer Advocate cannot correct a legally correct tax determination or extend the time fixed by law that you have to file a petition in a United States court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels get prompt and proper handling. You may call toll-free 1-877-777-4778 and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your local Taxpayer Advocate at the address and telephone number shown below: Taxpayer Advocate Service [1st Line Address] [2nd Line Address] [City, State Zip] [Phone Number] If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter. Sincerely, [Commissioner's Name] Commissioner By [Name of Designated Official] Designated Official Enclosures: Statements (Form 4883 and Explanation of Items) Copy of this letter Waiver (Form 4089) Envelope Exempt Organizations Excise Tax Audit Changes (Chapter 41, Chapter 42, and Section 170(f)(10(F) Excise Taxes) Name of Taxpayer Employer ID No. Schedule or Exhibit [Insert name] [Insert SSN] Name of Exempt Organization (if different from taxpayer) [Insert name of private foundation] Taxable Years Ended 12/31/2013 12/31/2014 12/31/2015 Internal Revenue Code Section for Proposed Adjustment 4941(a) 4941(a) 4941(a) 1. Adjustments Self-dealing: Amount involved 3,000.00 9,000.00 15,000.00 2. Total adjustments 3,000.00 9,000.00 15,000.00 3. Amount reported on return or as previously adjusted 0 0 0 4. Total amount as corrected 3,000.00 9,000.00 15,000.00 5. Applicable tax rate % 10% 10% 10% 6. Initial tax liability as corrected (line 4 x line 5) 300.00 900.00 1,500.00 7. Initial tax liability reported 0 0 0 8. Increase (or decrease) in tax 300.00 900.00 1,500.00 9. Additional tax (minimum) 10. Penalties (Code section ________) Explanation of Adjustments See attached Explanation of Items Form 4883 (Rev. 1-2004) Catalog Number 42083F Department of the Treasury-Internal Revenue Service www.irs.gov Addendum to Form 4883 Explanation of Adjustments [Name of Taxpayer] [EIN of Taxpayer] On July 1, 2013, XYZ Foundation, a private foundation pursuant to I.R.C. section 509, made a loan to you in the amount of $100,000 at an annual interest rate of 6%. Interest on the loan was paid timely. The loan was repaid on December 31, 2015. As a substantial contributor to the Foundation and a foundation manager, you are a disqualified person with respect to the Foundation. I.R.C. 4941(d)(1)(B) provides that the lending of money or other extension of credit between a private foundation and a disqualified person is an act of self-dealing. Where the transaction relates to the lending of money or other extension of credit, the transaction is an act of self-dealing on the day the transaction occurs plus an act of self-dealing on the first day of each taxable year or portion of a taxable year which is within the taxable period and which begins after the taxable year in which the transaction occurs. See Treas. Reg. 53.4941(e)-1(e)(1). The taxable period begins with the date on which the act of self-dealing occurs and ends on the earliest of (a) the mailing date of a notice of deficiency; (b) the date on which tax is assessed; or (c) the date on which correction of the act of self-dealing is completed. See I.R.C. 4941(e). I.R.C. 4941(a)(1) imposes a 10% excise tax on the amount involved in the act of self-dealing for each year (or part thereof) in the taxable period. The amounts involved are determined using the greater of interest paid or fair market interest rate on day the act occurs. The tax is imposed on disqualified persons who participate in the act of self-dealing. Appendix 1 shows how we calculated the amount involved. Accordingly, you are liable for excise taxes under I.R.C. 4941(a)(1) in the amounts of $300.00, $900.00 and $1,500.00 for the taxable years ended December 31, 2013, December 31, 2014 and December 31, 2015, respectively (the taxable period). [Taxpayer name] [EIN] [Taxable years] Appendix I Date of Act Loan Amount Interest Rate Paid FMV Interest Rate Time in Years Amount Involved Total Amounts Involved 7/1/2013 $100,000 6% 6% 1/2 $3,000 $3,000 1/1/2014 $100,000 6% 6% 1 $6,000 $9,000 1/1/2015 $100,000 6% 6% 1 $6,000 $15,000 Amount of tax (10% of amount involved with respect to each act of self-dealing for each year in taxable period) is calculated as follows: Act Date/Taxable Period Beginning Date 2013 2014 2015 Total 7/1/2014 $300 $300 $300 $900 1/1/2015 $600 $600 $1,200 1/1/2016 $600 $600 Totals: $300 $900 $1,500 $2,700 Form 4089 Department of the Treasury - Internal Revenue Service Symbols (Rev. January 1983) Notice of Deficiency - Waiver SE:T:EO:E:FSL:ET:MR Name, SSN or EIN, and address of Taxpayer(s) [Insert name of taxpayer] [Insert SSN] [Insert street address] [Insert city, state, and ZIP code] Kind of Tax Copy to Authorized Representative 4720-A Tax Year Ended Deficiency Increase in Tax Penalties December 31, 2013 $300.00 December 31, 2014 $900.00 December 31, 2015 $1,500.00 See the attached explanation for the above deficiencies I consent to the immediate assessment and collection of the deficiencies (increase in tax and penalties) shown above, plus any interest provided by law. Your Signature (Date signed) Spouse’s Signature, If a Joint Return Was Filed (Date signed) Taxpayer’s Representatives Sign Here (Date signed) Corporate Name: Corporate Officers Sign Here (Date signed) (Date signed) Note: Who Must Sign If you consent to the assessment of the amounts shown in this waiver, please sign and return it in order to limit the accumulation of interest and expedite our bill to you. Your consent will not prevent you from filing a claim for refund (after you have paid the tax) if you later believe you are entitled to a refund. It will not prevent us from later determining, if necessary that you owe additional tax; nor will it extend the time provided by law for either action. If you later file a claim and the Internal Revenue Service disallows it, you may file suit for refund in a district court or in the United States Claims Court, but you may not file a petition with the United States Tax Court. If this waiver is for any year(s) for which you filed a joint return, both you and your spouse must sign the original and duplicate of this form. Sign your name exactly as it appears on the return. If you are acting under power of attorney for your spouse, you may sign as agent for him or her. For any agent or attorney acting under a power of attorney, a power of attorney must be sent with this form if not previously filed. For a person acting in a fiduciary capacity (executor, administrator, trustee), file Form 56, Notice Concerning Fiduciary Relationship, with this form if not previously filed. For a corporation, enter the name of the corporation followed by the signature and title of the officer(s) authorized to sign. If you agree, please sign one copy and return it; keep the other copy for your records. Cat. No. 22650Y www.irs.gov Form 4089 ) Exhibit 4.75.20-7 Examples of 90-Day Letter Summaries The following examples of caveats can be used to explain the reasons for the adverse action. Every caveat must be tailored to fit the unique facts and circumstances of particular situations. Revocation of IRC 501(c)(3), Failure to Provide Books and Records 1. You have failed to produce documents to establish that you are operated exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3), and that no part of your net earnings inure to the benefit of private shareholders or individuals. Also, you have failed to keep adequate books and records as required by IRC section 6001 and the regulations thereunder. 2. In our letter(s) dated Month, DD, YYYY and Month DD, YYYY, we requested information necessary to conduct an examination of your Form 990 for the year ended Month, DD, YYYY. We have not received the requested information. Section 1.6033-2(i)(2) of the Income Tax Regulations provides, in part, that every organization which is exempt from tax, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status. Since you have not provided the requested information, you have failed to establish that you are operated exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. Revocation of IRC 501(c)(3), Operational Test – including failure to provide Books and Records. 3. You have failed to provide documents to establish that you are organized and operated exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3) and that no part of your net earnings inure to the benefit of private shareholders or individuals. Also, you have failed to keep adequate books and records as required by I.R.C. section 6001 and the regulations thereunder. Revocation of IRC 501(c)(3), Operational Test. 4. Your primary activity since your inception has consisted of the operation of bingo games, which is an activity not accomplishing an exempt purpose. In addition, your executives unlawfully appropriated funds for their personal use, which is a means by which net earnings of your organization have inured to your private shareholders or individuals. I.R.C. 501(c)(3) requires organizations to operate exclusively for an exempt purpose, which includes having a primary activity accomplishing exempt purposes. See Treas. Reg. 1.501(c)(3)-1(a). Section 501(c)(3) precludes Federal income tax exemption if net earnings inure to the benefit of private shareholders or individuals. See Treas. Reg. 1.501(c)(3)-1(c)(2). As such, you are not an organization described in section 501(c)(3). 5. You paid over $100,000 in compensation to your Chief Executive Officer during each of the tax years ended December 31, 2015 and 2016, pursuant to an employment contract approved by your board of directors. During 2015 and 2016, you received only $125,000 and $117,000, respectively, in monetary donations. You did not in either year fund acquisitions for your collection of natural history exhibits. You also cut back the hours of the museum from 6 days a week to weekends only. In addition, you turned down a large bequest from a private donor because you did not have the funds to pay for storing, cataloging or displaying the donated items. You did make two $10,000 grants to CEO Foundation, an organization set up by your CEO’s step-son to rescue retired greyhounds, and guaranteed a note from CEO Foundation to ABC Bank, the proceeds of which were used to build a state-of-the art kennel on your CEO’s property (CEO Foundation conducted its rescue operation at CEO’s ranch). I.R.C. 501(c)(3) precludes federal income tax exemption if net earnings inure to the benefit of private shareholders or individuals and if it is operated for the benefit of private interests. Because I.R.C. 501(c)(3) prohibits inurement of earnings and you operated for the benefit of private interests more than insubstantially, your exempt status is hereby revoked. 6. As a result of our examination of your activities and financial records for the year ending October 31, we have determined that your organization has been inactive for several prior years and that there have been no operations or financial activities conducted or planned. As such, you fail to meet the operational requirements for continued exemption under IRC 501(c)(3). Unrelated Business Income Tax 8. During the tax year ending December 31, 2015 and 2016, while described as a tax exempt organization under I.R.C. 501(c)(6), you received gross income of $75,000 and $100,000, respectively, for engaging in the business of providing management services, for a market-priced fee, on a regular basis. I.R.C. 511 imposes a tax on the unrelated business taxable income of exempt organizations. I.R.C. 513 provides that an unrelated trade or business is any trade or business not substantially related (aside from the need of such organization for income) to the exercise or performance by such organization of its exempt purpose or function constituting the basis for its exemption. Because the provision of management services, for a market-priced fee, on a regular basis, is not substantially related to and does not contribute importantly to the accomplishment of the purposes for which tax exemption was granted (aside for the need to produce income), you received unrelated business taxable income in the amounts of $50,000 and $30,000 in taxable years 2015 and 2016 respectively. Accordingly, you are subject to unrelated business income tax in the amount of $7,500 and $4,500 for the tax years ending December 31, 2015 and 2016, respectively. [Set forth any applicable penalties and their explanations in separate paragraphs.] Note: Since this is a tax determination, a Form 4549-A should be attached showing the computation and summary. Chapter 42 Excise Tax 9. We have determined that you were a disqualified person of XX Public Charity (“XXPC”) during 2015 and 2016, within the meaning of I.R.C. 4958(f)(1). We have further determined that XXPC is an applicable tax exempt organization and that you engaged in certain “excess benefit transactions” with XXPC. Specifically, we have determined that in 2015 XXPC paid $12,434.23 in economic benefits to you or for your use and that you provided reciprocal value to XXPC in the amount of $121.65. The payments to or for your personal use occurred throughout 2015. For 2016, we have determined that you intercepted $10,000 of XXPC assets without providing any reciprocal value. As such, you engaged in excess benefit transactions and are liable for the first tier excise taxes computed pursuant to I.R.C. 4958(a)(1) as shown on the attached Form 4883. We have further determined that you were an organization manager of XXPC and that as an organization manager you participated in the excess benefit transactions described above, knowing them to be such transactions within the meaning of I.R.C. 4958(a)(2). We have further determined that you have not demonstrated that such participation was not willful or that there was reasonable cause for such knowing participation. As such, you are liable for the excise taxes computed pursuant to I.R.C. 4958(a)(2) as shown on the attached Form 4883. We have further determined that you have not established that you have corrected these excess benefit transactions. To correct, the amount of the excess benefit transactions plus applicable interest must be paid to an organization described in I.R.C. 501(c)(3) in accord with the principles enumerated in Treas. Reg. 53.4958-7, including sub-paragraph (e) of these regulations, Correction in the case of an applicable tax-exempt organization that has ceased to exist, or is no longer tax-exempt is specifically mandated. As such, we have determined that you are liable for the applicable second tier excise tax of I.R.C. 4958(b). Addendum to Form 4883 Explanation of Adjustments Name of Taxpayer EIN of Taxpayer We have determined that you were a disqualified person of XXPC during 2012, within the meaning of I.R.C. 4958(f)(1). We have further determined that XXPC is an applicable tax exempt organization and that you engaged in certain “excess benefit transactions” with XXPC. Specifically, we have determined that in 2012 XXPC paid $100,000 in economic benefits to you or for your use by making credit card payments on your behalf for purchases of personal goods and services. You have not demonstrated that you provided reciprocal economic value to XXPC and have not demonstrated that you received these economic benefits as a bona fide loan from XXPC to you. Our determination is made in accordance with the principles described in Treas. Reg. 53.4958-4(c)(1). As such, you engaged in excess benefit transactions and are liable for the first tier excise taxes computed pursuant to I.R.C. 4958(a)(1) as shown on the attached Form 4883. Exhibit 4.75.20-8 Form 2363-A Instructions: IRC 501(c)(3) Revocation Revocation of §501(c)(3) - Instructions For Form 2363-A, Request for IDRS Input for BMF/EO Entity Change Field 1 Enter the EIN Field 2 Enter the name control Field 3 Place an X in the box next to 80 Field 4 Place an X in the box next to 016 Field 5 Type in definer codes A and B Field 8 Type in the name of the entity. Field 17 Enter 03 Field 18 Type in the two digit foundation status code. See BMFOLO or INOLES. Field 19 Type in the two digit classification code. See BMFOLO or INOLES. Field 22 Type in 22 followed by the year and month of effective revocation. Field 35 Type in the two digits representing the ending month of the fiscal year. Field 38 Place an 01 in the 941 field and an 01 in the 940 field (if applicable.) Field 39 Type REVOKE C-3 AND SET 941-940 AND 1120 FILING REQ Field 40 Digitally sign and date or print the form, sign and date it. Field 41 Type EO:E:FSL/ET:MR Exhibit 4.75.20-9 Form 2363-A Instructions: IRC 501(c)(3) Foundation Status Modification Foundation Status Modifications - Instructions For Form 2363-A Field 1 Enter the EIN Field 2 Enter the name control Field 3 Place an X in the box next to 80 Field 4 Place an X in the box next to 016 Field 5 Type in definer code A Field 17 Enter 03 Field 18 Type in the two digit foundation status code. See Document 6379, II-5. Field 19 Type in the two digit classification code. See Document 6379, II-2. Field 35 Type in the two digits representing the ending month of the fiscal year. Field 38 Place an 01 in the Form 990 field. Place a 1 in the Form 990-T if applicable. Field 39 Type FDN ST-CHANGE in the boxes Field 40 Digitally sign and date or print the form, sign and date it. Field 41 Type EO:E:FSL/ET:MR Exhibit 4.75.20-10 Deletions Statement The subsection that refers to this exhibit is IRM 4.75.20.4.1, Publication of the Determination. Below is a sample deletions statement for revoking an organization described under IRC 170(c). The deletions statement accompanies Form 14712 to the Bulletin Program Coordinator. Internal Revenue Bulletin: 2017-XX November XX, 2017 Announcement 2017-X Deletions From Cumulative List of Organizations, Contributions to Which are Deductible Under Section 170 of the Code Table of Contents The Internal Revenue Service has revoked its determination that the organizations listed below qualify as organizations described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986. Generally, the IRS will allow deductions for contributions made to a listed organization that no longer qualifies to receive deductible contributions if the contributions occurred on or before the date of announcement in the Internal Revenue Bulletin. However, the IRS is not precluded from disallowing a deduction for any contributions made after an organization ceases to qualify under section 170(c)(2) if the organization has not timely filed a suit for declaratory judgment under section 7428 and if the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for or was aware of the activities or omissions of the organization that brought about this revocation. If on the other hand a suit for declaratory judgment has been timely filed, contributions from individuals and organizations described in section 170(c)(2) that are otherwise allowable will continue to be deductible. Protection under section 7428(c) would begin on November XX, 2017 and would end on the date the court first determines the organization is not described in section 170(c)(2) as more particularly set for in section 7428(c)(1). For individual contributors, the maximum deduction protected is $1,000, with a husband and wife treated as one contributor. This benefit is not extended to any individual, in whole or in part, for the acts or omissions of the organization that were the basis for revocation. Name of Organization Effective Date of Revocation LOCATION Organization 1 1/1/2014 City, ST Organization 2 9/1/2013 City, ST Exhibit 4.75.20-11 Checklist for EO IRC 6110 Written Determinations The subsection that refers to this exhibit is IRM 4.75.20.5.1, Publication of the Determination. CHECKLIST FOR EO IRC 6110 WRITTEN DETERMINATIONS CASE CONTROL NAME: Organization’s name CASE CONTROL NUMBER: UIL CODE: ISSUING OFFICE: EO Examinations CONTACT NAME: Name of IRC 6110 Redaction Coordinator PHONE: E-MAIL: DATE OF ISSUANCE: X 1) Does the written determination show the uniform issue list number(s) (See Pub 1102)? X 2) Is the document a final written determination? (i.e. has it exhausted its rights to administrative remedy and are all approvals in place?) X 3) Did the author solicit proposed deletions and resolve any disputes (Case file should contain copies of Pattern Letter 38 and, in some cases, 39)? NA 4) If a third party communicated with the author about this written determination, did the author add a notation on the document and in the case history? X 5) Did the author prepare the Notice 437, Notice of Intention to Disclose for issuance? X 6) Has an electronic redacted version of the written determination been prepared? Note: If the original was date-stamped, the date that the document was signed should be inserted directly below the letterhead on the first page of the redacted document. X 7) Has the author identified and redacted all non-disclosable items? (If any items other than taxpayer identifying information is redacted, please explain in the box below. See attached list and don’t forget to redact tax years and dollars and amounts) X 8) Have sufficient copies of the unredacted and redacted written determination been printed? One copy each for the taxpayer, plus one additional copy each for each representative of the taxpayer (up to two representatives) designated to receive the document. One copy each for the office’s administrative records. X 9) Were copies of this checklist and the final, issued unredacted and redacted written determinations sent by attachment in encrypted email to the Chief Counsel Disclosure Unit? Primary email address: *CC 6110 Disclosure. AUTHOR: Name of IRC 6110 Redaction Coordinator Date: REVIEWER: Name of IRC 6110 Redaction Coordinator or other delegated employee in Mandatory Review Date: More Internal Revenue Manual