4.75.20 Final Case Processing

Manual Transmittal

July 31, 2017

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) IRM 4.75.20.2: Added a note containing the new statute timeframe for appeals.

(4) IRM 4.75.20.4(3): 90 day letters are issued for status 36 organizations as well as (c)(12) or (c)(15) organizations.

(5) 4.75.20.4(4): 90 day letters now include all "other 501(c)" determination letters.

(6) This manual takes into consideration Section 406 of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act of 2015), P.L. 114-113, enacted on December 18, 2015. The PATH Act extends declaratory judgment rights under IRC 7428 of the Internal Revenue Code from IRC 501(c)(3) organizations to all IRC 501(c) and IRC 501(d) organizations. These rights apply to all revocations of tax-exempt status”..

(7) 4.75.20.6.1(3): Added for Reviewers the new Statutory Notices of Deficiency.

(8) 4.75.20.8 (3): Replaced Chief Counsel with Division Counsel.

(9) 4.75.20.9: Revised paragraph on Inadequate Record Notices as they are no longer subject to Mandatory Review.

(10) Updated the Mandatory Review Cover Sheet. See Exhibit 4.75.20-1

(11) Deleted contents in Exhibits 4.75.20-6, 4.75.20-7, and 4.75.20-8, and renumbered succeeding exhibits accordingly. Shortened the titles of new Exhibits IRM 4.75.20-8 and 4.75.20-9. Added new Exhibits 4.75.20-10 and 4.75.20-11.

Old Exhibit New Exhibit
Exhibit 4.75.20-6, Statutory Notice of Deficiency: Income Tax Exhibit 4.75.20-6, Statutory Notice of Deficiency: IRC 4941(a)(1): Continuing Act
Exhibit 4.75.20-7, Statutory Notice of Deficiency: IRC 4958 Exhibit 4.75.20-7, Examples of 90-day Letter Summaries
Exhibit 4.75.20-8, Statutory Notice of Deficiency: IRC 4941(a)(1), (a)(2), (b)(1), and (b)(2) Discrete Act Exhibit 4.75.20-8, Form 2363-A Instructions: IRC 501(c)(3) Revocation
Exhibit 4.75.20-9, Statutory Notice of Deficiency: IRC 4941(a)(1): Continuing Act Exhibit 4.75.20-9, Form 2363-A Instructions: IRC 501(c)(3) Foundation Status Modification
Exhibit 4.75.20-10, Examples of 90-day Letter Summaries Exhibit 4.75.20-10, Deletions Statement
Exhibit 4.75.20-11, Instructions for Form 2363-A, Request for IDRS Input for BMF/EO Entity Change: 501(c)(3) Exemption Revocation Exhibit 4.75.20-11, Checklist for EO IRC 6110 Written Determination
Exhibit 4.75.20-12, Instructions for Form 2363-A, Request for IDRS Input for BMF/EO Entity Change: 501(c)(3) Foundation Status Modification Deleted

Effect on Other Documents

This supersedes IRM 4.75.20 dated 10/15/2014.
Additionally, this manual incorporates the information in the following IG memo’s and alerts:
Interim Guidance Memorandum TEGE-04-0316, Short Statute Procedures
Interim Guidance Memorandum TEGE-04-0216-00, PATH ACT - Impact on Revocations and Modifications of Exempt Status, Effective December 18, 2015.

Audience

Tax Exempt and Government Entities
Exempt Organizations
Examinations

Effective Date

(07-31-2017)

Margaret Von Lienen
Director, Exempt Organizations
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: This manual focuses on Review Staff’s responsibilities in concluding the agent’s audits. Topics addressed include:

    1. Forwarding cases to Appeals

    2. 90 day closing letters

    3. Statutory Notices of Deficiency

    4. Claims - not before Tax Court

    5. Determinations of Worker Classification

  2. The procedures in this manual apply to Exempt Organization Examination agents and reviewers in the following series:

    • GS-512

    • GS-526

    • GS-987

  3. Policy Owner: Director, Exempt Organizations

  4. Program Owner: Exempt Organizations

Background

  1. This section contains specific for EO reviewers on the proper final case closing processing procedures and also provides information regarding the quality control procedures established for EO Examination review functions.

Authority

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

  2. IRC 7602 gives agents the authority to:

    1. Examine any books, papers, records or any data necessary to complete an audit.

    2. Issue a summons for information necessary to complete an audit.

    3. Take testimony under oath to secure additional information needed.

    4. Ask about any offense connected with the administering or enforcing of the Internal Revenue laws.

Responsibilities

  1. After the audit, Mandatory Review reviewers are responsible to determine if the organization:

    1. Meets the requirements for continued tax exempt status.

    2. Filed all required tax and information returns.

    3. Reported information and tax liabilities correctly.

    4. Prepared 90 day and Stat Notices properly.

  2. Other Review Staff members are responsible for published material including:

    1. Writing, editing and updating the IRM.

    2. Preparing memoranda and alerts.

    3. Preparing classroom presentations and CPE courses.

    4. Redacting final adverse determination letters for non-disclosure purposes.

Program Controls

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

Acronyms

  1. The table lists commonly used acronyms and their definitions.

    ACRONYM DEFINITION
    EO Exempt Organizations
    AIMS Audit Information Management System
    EP Exempt 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

Quality Control

  1. Mandatory Review receives cases after unagreed formal audit reports proposing changes in exemption, foundation status, and tax are issued and other specific types of cases. See IRM 4.75.16.6, Cases Subject to Mandatory Review, for a list of the types of cases. 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 4.75.18.9.1, Reopening Memorandum.) 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 - EP/EO. See IRM 4.75.17.2.3, Returning a Case.

    • Forward the case to Appeals. See IRM 4.75.20.3.

    • Prepare and issue an adverse determination letter. See IRM 4.75.20.5.

    • Prepare and issue a statutory notice of deficiency. See IRM 4.75.20.6.

    • Prepare and issue a notice of determination of worker classification. See IRM 4.75.20.8.

  2. All EO Examination employees: Observe and follow the quality control procedures below:

    1. 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.

    2. 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, Case Closing Procedures.

    Note:

    For Appeals statute timeframes, refer to IRM 4.75.20.3.1, New Statute Timeframes for Appeals

  3. Group Manager: before you send a case to Mandatory Review, inspect the case and initial your concurrence.

    Note:

    Initial on the bottom of the last page of Form 5464, Case Chronology Record.

  4. Reviewer: verify computations in "change" cases, before forwarding to the closing unit.

  5. 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 4.75.16.4.8.1, Form 5666 - Revocations.

Forwarding TE/GE Cases to Appeals

  1. Reviewer: ensure the case file includes the following information in the taxpayer's protest:

    • The taxpayer’s name, address, Employer Identification Number (EIN) and a daytime phone number.

    • A statement that the taxpayer wants to protest the proposed determination.

    • An explanation of the taxpayer's reasons for disagreeing, including any supporting documents.

    • The law or authority, if any, relied upon by the taxpayer.

    Note:

    The taxpayer must submit the protest statement with the following signed declaration: "Under penalties of perjury, I declare that I have examined this protest statement, including accompanying documents, and to the best of my knowledge and belief, the statement contains all relevant facts, and such facts are true, correct and complete."

  2. If the taxpayer's representative submits the protest, the representative must include a substitute declaration stating:

    • That he/she submitted the protest and accompanying documents.

    • Whether he or she knows personally that the facts stated in the protest and accompanying documents are true and correct.

  3. Reviewer: ensure the:

    1. Agent assembled the case file per IRM 4.75.16.7, Case File Assembly. Place the protest on top of the 30-day letter. If the case file spans multiple boxes, note the location of the protest, audit report, and rebuttal on Form 3198-A, TE/GE Special Handing Notice.

    2. Form 5599, TE/GE Examined Closing Record, contains appropriate Appeals office and issue codes. See Document 6379, Exempt Organizations Management Information Systems Codes for the list of applicable codes.

    3. Agent prepared and mailed a rebuttal to the protest, with copies to the power of attorney.

  4. Reviewer: verify that the agent prepared a disc for Appeals. If none is present, return the case to the agent to burn a disc with the following items:

    • Proposed adverse (30-day) letter

    • Form 886-A, Explanation of Items (final version only)

    • Form 5772, EO Workpaper Summary

    • Form 5773, EO Workpaper Continuation Sheet

    • Form 5464, Case Chronology Record

    • Administrative Record Index (if applicable)

    • Computational spreadsheets

    • Taxpayer’s protest (if electronically available)

    • Rebuttal to protest

    Note:

    For the taxpayer’s protest, if the taxpayer (or representative) doesn’t submit it electronically, the agent need not scan the document. However, if the agent chooses to scan the protest, they should scan any attachments in addition to the letter.

    Note:

    See IRM 4.75.17.2.3, Returning a Case, for directions on returning a case to an agent.

  5. Potentially any case going to Appeals may go to court. For employment, income, and excise taxes, Chief Counsel requires the original return to be in the file. Chief Counsel accepts copies of Forms 990 and 4720 series returns generated from SEIN. For e-filed returns, obtain the complete TRDBV print from the Integrated Data Retrieval System (IDRS).

  6. Reviewer: close the case per IRM 4.75.17.2.4, Closing a Case. Upon receipt in Dallas, the Mandatory Review Statute Coordinator processes the closing check sheet, prepares a Form 3210, Document Transmittal, and closes the case to Examination Special Support.

New Statute Timeframes for Appeals

  1. Due to changes made by Appeals, Mandatory Review doesn’t accept protested cases subject to Appeals with less than 455 days (15 months) remaining on the statute of limitations for assessment.

  2. For cases returned to Appeals after new information or a new issue is considered, Mandatory Review doesn’t accept protested cases with less than 270 days (9 months) remaining on the statute.

90-Day Letters

  1. Area managers and reviewers (grade 12 and above) have the authority to issue statutory notices of deficiency and notices of determination concerning worker classification Delegation Orders 4-8, (IRM 1.2.43.9 and 4-26 (IRM 1.2.43.24)IRM 1.2.46.3).The manager, Exam Programs and Review has the authority to issue a final adverse determination letter. (Delegation Order 7-2 (IRM 1.2.46.3) and TE/GE Delegation Order 18).

  2. Reviewers in Mandatory Review prepare and issue most 90-day letters, with three exceptions:

    1. Reviewers in Special Review prepare and issue 90-day letters in cases reopened by Special Review.

    2. The Manager, Exam Programs and Review approves all final adverse determination letters (FADLs). The reviewer date stamps and mails the approved letter.

    3. Groups holding short statute cases prepare the 90-day letters, with a reviewer’s help. The reviewer issues the 90-day letter. See IRM 4.75.16.4.2.3, Short Statute Cases - 90-Day Letter Process.

  3. The following lists the possible adverse situations for which reviewers may issue 90-day letters to taxpayers:

    • Modifications of foundation status under IRC 509 (IRC 7428)

    • Revocations 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 converted Form 1120 assessments (IRC 6212)

    • Unagreed discrepancy adjustments (IRC 6212)

    • Unagreed excise tax assessments (IRC 6212)

    • Unagreed unrelated business income tax assessments (IRC 6212)

    • Unagreed worker classification determinations (IRC 7436)

  4. 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

    • Notices of determination of worker classification

    • Statutory notices of deficiency

  5. Potentially any taxpayer receiving a 90-day letter may go to court. For employment, income, and excise taxes, Division Counsel requires the original return to be present in the file. Division Counsel accepts copies of Forms 990 and 4720 series returns generated from SEIN. For e-filed returns, obtain the complete TRDBV print from IDRS.

Declaratory Judgments Under IRC 7428

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

  2. 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 4.75.13.8.9, Issues Subject to Declaratory Judgment Under IRC 7428.

  3. 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. Because the government may file a motion to dismiss before submitting an answer, timeliness is critical.

  4. 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.

Final Adverse Determination Letter Case Processing

  1. Reviewer: If you agree with the agent’s proposal to revoke (or disqualify) any IRC 501(c) or (d) tax-exempt status without protest:

    1. 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.

    2. If unagreed, prepare a memo to Area Counsel requesting a pre-issuance review of the letter. See Exhibit 4.75.20-2.

    3. If unagreed, prepare Form 3210, Document Transmittal, and Form 9814, Request for Mail/Shipping Service, in order to send the case to the appropriate area counsel office. For office addresses, see http://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 in receipt of a signed Form 6018, except that Area Counsel review of cases with a signed Forms 6018 is not required.

  2. Reviewer: See IRM 4.75.17.2.5, 90-Day Letter Preparation and Issuance for directions on preparing and issuing the FADL.

  3. Reviewer: Upon issuing a 90-day FADL to an organization, in the file.

    1. Check for a completed Form 2363-A, Request for IDRS Input for BMF/EO Entity Change

    2. Make corrections as needed or prepare a new Form 2363-A.

    3. See Exhibit 4.75.20-8 or Exhibit 4.75.20-9 for instructions in preparing Form 2363-A.

    4. Sign and e-mail Form 2363-A to the FAST unit for processing. Your signature assures the FAST you reviewed the adverse determination.

    5. A reviewer’s signature on Form 2363-A assures the FAST the adverse determination has been reviewed and upheld.

Publication of the Determination

  1. The IRS publishes a list of revoked IRC 501(c)(3) organizations in the Internal Revenue Bulletin. The IRS also publishes a list of IRC 501(c)(3) organizations that lost their public charity status and have become private foundations. The taxpaying public can:

    1. Search an organization's exemption or foundation status via EO Select Check

    2. Inspect a redacted copy of a FADL at the IRS Electronic Reading Room.

  2. Reviewer: For purposes of public notice, prepare:

    • Form 4194, Revocation of IRC 170(c) Status. See Exhibit 4.75.20-5 for directions

    • Form 5060, Report of Adverse Determination on Private Foundation Status and Private Operating Foundation. See form instructions.

    Note:

    Prepare Form 4194 for 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).

    Note:

    Prepare Form 5060 for 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. 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.

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

    1. The electronically signed Form 4194 (or Form 5060)

    2. The 30-day letter

    3. The revenue agent report (RAR), including Form 886-A, Explanation of Items

    4. The final adverse determination letter, with date of mailing

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

    • IRB Notice process

    • Redaction process

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

    1. E-mails a notice of a revocation of any IRC 501(c) or (d) organization to irb@irs.gov 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.)

    2. Maintains a retention file for Form 4194 (or Form 5060).

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

    1. Redacts a copy of the 30-day letter, RAR, and FADL.

    2. Refers to redaction guidance in IRM 7.28.4.4, General Guidelines for IRC 6110 Deletions.

    3. Refers to redaction guidance in IRM 7.28.4.5, Submitting IRC 6110 Determination Letters for Disclosure, reviewer procedures.

    4. 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

    5. E-mails the following documents to 6110.Disclosure@irscounsel.treas.gov:

      • 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

  7. These procedures are based on Section 3.01 and 3.02 of Rev. Proc. 2011-33, 2011-25 I.R.B. 887.

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

Statutory Notice of Deficiency

  1. A notice of deficiency, also called a "statutory notice of deficiency" or "stat notice" , is the Service's determination of a taxpayer's income, excise, estate or gift tax deficiency sent to the taxpayer by certified or registered mail.

  2. 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.

  3. Mandatory Review issues a statutory notice of deficiency when the taxpayer:

    1. 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, and discrepancy adjustments.

    2. 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.

Preparation and Issuance

  1. The notice of deficiency is a legal determination that is presumptively correct. The notice of deficiency will consist of:

    1. A letter explaining the purpose of the notice, the amount of the deficiency, and the taxpayer's options.

    2. A copy of the letter in line a, above.

    3. A waiver, typically Form 4089, Notice of Deficiency -Waiver or Form 4089-B, Notice of Deficiency - Waiver.

    4. Appropriate tax computation forms such as Form 4549-A, Income Tax Discrepancy Adjustments, or Form 4883, Exempt Organizations Excise Tax Audit Changes.

    5. A written explanation of all the adjustments, often on Form 886-A, Explanation of Items.

    6. Information about the Taxpayer Advocate Service (TAS) services, along with the closest TAS office address.

  2. 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.

  3. Reviewers should use Letter 531 (Rev. 2/17) for income tax assessments. Reviewers should use Letter 1753 (In Revision) for excise tax cases. Use Letter 5264 (In Revision), Disqualified Person Excise Tax Notification, for Disqualified Persons liable for excise taxes.

  4. 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.

    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, and that Examination Support Services processes the notices in lieu of Small Business/Self Employed's (SB/SE) Centralized Case Processing (CCP) units. Also note that for Chapter 42 excise taxes, replace Letter 531 with Letter 1753 (In Revision). Refer to Exhibit 4.75.20-6 for an example for purposes of a continuing transaction.

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

  6. 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 will use 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.

  7. See IRM 4.75.17.2.4, Closing a Case, for directions on closing the case.

Procedures Following the 90 Day Period

  1. If the organization does not respond to the statutory notice of deficiency within 90 days and the case is not docketed, hold the case for an additional 15 days and then close to EO Closing Unit.

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

  3. Before closing, the Mandatory Review Statute Coordinator verifies that the case has not been docketed. If the case is 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

    .

Rescinding A Notice of Deficiency

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

  2. If the taxpayer responds to the statutory notice of deficiency 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:

    The signed and executed consent must be in hand before mailing the Form 8626.

  3. If the organization agrees to the deficiency by signing Form 4089,close the case following agreed case closing procedures.

Protests, Correspondence and Waivers Received After Issuance

  1. 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.

  2. Reviewer: If during the 90 day period the taxpayer submits a signed Form 4089, notify the Mandatory Review Statute Coordinator, who will send the case to closing unit for assessment of the deficiency.

Claims - Issue Not Before Tax Court or Other Courts

  1. 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.

Overassessment - Claim Invitation

  1. While the taxpayer may be advised in a notice of deficiency 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 is not 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:

    1. Based on the issues producing the overassessment.

    2. Within the time provided by law.

  2. For directions, see IRM 4.8.9.15, Overassessments and Claims. When inserting the paragraph provided 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.

Waiver of Restrictions

  1. 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. If this situation comes up, 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 the accumulation of further penalty and interest on the partial agreement amount.

    • Explain that the taxpayer must file the petition in to contest the remaining unagreed amount.

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

Notice of Determination of Worker Classification

  1. The 30-day letter in employment tax cases that don’t involve IRC 7436 worker classification issues serves as the final report. Cases that involve IRC 7436 worker classification issues that go unagreed require a notice of determination of worker classification to be issued.

  2. SB/SE holds jurisdiction over employment taxes, even though TE/GE Counsel provides the legal guidance to SB/SE. As such, when you need to prepare a Notice of Determination of Worker Classification, refer to IRM 4.8.10, Notice of Determination of Worker Classification, and IRM 4.23.10, Report Writing Guide for Employment Tax Examinations.

  3. 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 determination of worker classification before they’re issued.

    • EO Closing Unit processes the case upon closure, not SB/SE's CCP.

Inadequate Record Notice Case Processing

  1. Agents follow IRM 4.75.16.5.6.1, Inadequate Records Notice, which notes the documents necessary for an inadequate records notice.

  2. Agent: Prepare Form 2807, Agreement to Maintain Adequate Books of Account and Records. Personally serve Form 2807 or send Certified Mail and solicit an agreement.

  3. We don’t send unagreed inadequate record notice cases to Mandatory Review Staff. The group manager reviews the case. the group mails the Notice of Inadequate Records to the taxpayer. Use disposal code 08, Written Advisory on Form 5666.

  4. Complete Form 5666, TE/GE Referral Information Report,.The EO closing unit sends Form 5666 to Classification for a future year audit in both agreed and unagreed situations. Classification then determines whether a follow-up audit is warranted.

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 ESS
Reviewer signature on Form 5599
Appeals Issue: Agent:
All Revocations - Redaction Package e-mailed to Group Mgr on:
1120 Suspense file
Appeals Issue and Office Codes included on Form 5599 (if applicable)
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

Memorandum to Area Counsel

DEPARTMENT OF THE TREASURY
INTERNAL 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]

Final Adverse Determination Letter: 501(c)(3) Exemption Revocation

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

Final Adverse Determination Letter: 501(c)(3) Foundation Status Modification

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

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

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-A
Person 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 Deficiency
I.R.C. 4941(a)(1):

12/31/2011
12/31/2012
12/31/2013

$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
12/31/2011 12/31/2012 12/31/2013
Internal Revenue Code Section for Proposed Adjustment 4941(a) 4941(a) 4941(a)
Self-dealing: Amount involved 3,000.00 9,000.00 15,000.00
1. Adjustments
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, 2011, 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, 2013. 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, 2011, December 31, 2012 and December 31, 2013, 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
7/1/2011 $100,000 6% 5% 1/2 $3,000 $3,000
1/1/2012 $100,000 6% 6% 1 $6,000 $9,000
1/1/2013 $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 2008 2009 2010 Total
7/1/2011 $300 $300 $300 $900
1/1/2012 $600 $600 $1,200
1/1/2013 $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:EPR: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, 2011 $300.00
December 31, 2012 $900.00
December 31, 2013 $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
Corporate

Name:
Corporate

Officers
(Date signed)

Sign Here
(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 (Rev. 1-1983)

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, 2005 and 2006, pursuant to an employment contract approved by your board of directors. During 2005 and 2006, 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, 2005 and 2006, 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 2005 and 2006 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, 2005 and 2006, 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 2005 and 2006, 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 2005 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 2005. For 2006, 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.. 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 2008, 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 2008 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.

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 Instruction
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 one 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:EPR:MR

Form 2363-A Instructions: IRC 501(c)(3) Foundation Status Modification

Foundation Status Modifications - Instructions For Form 2363-A

Field Instruction
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 one 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:EPR:MR

Deletions Statement

The subsection that refers to this exhibit is IRM 4.75.20.5.1, 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 not disallow deductions for contributions made to a listed organization on or before the date of announcement in the Internal Revenue Bulletin that an organization no longer qualifies. 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

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: 6110.Disclosure@irscounsel.treas.gov.
AUTHOR: Name of IRC 6110 Redaction Coordinator Date:
REVIEWER: Name of IRC 6110 Redaction Coordinator or other delegated employee in Mandatory Review Date: