Part 4. Examining Process

Chapter 75. Exempt Organizations Examination Procedures

Section 32. Declaratory Judgment Cases And The Administrative Record

4.75.32 Declaratory Judgment Cases And The Administrative Record

Manual Transmittal

May 2, 2019

Purpose

(1) This transmits revised IRM 4.75.32, Exempt Organizations Examination Procedures, Declaratory Judgment Cases and the Administrative Record.

Material Changes

(1) New section 4.75.32.1 to incorporate service-wide memorandum, Heightened Awareness, Sensitivity and Understanding of Internal Controls September 14, 2016.

(2) Revised IRM 4.75.32.2(1) and corresponding changes throughout to clarify that all foundation modifications receive declaratory judgment rights.

(3) IRM 4.75.32.4: Revised section to define what a foundation modification is.

(4) Exhibit 4.75.32-2: Amended to cover only efax.

(5) IRM 4.75.32.5.1: Added a Form 1024-A reference to supplement the Form 1024 in accordance with the Interim Guidance Memo TEGE-07-0218-0008

Effect on Other Documents

This manual supersedes IRM 4.75.32, Declaratory Judgment Cases and the Administrative Record, dated January 18, 2017.
This revision incorporates Revenue Procedure 2018-5.
This revision incorporates Interim Guidance Memorandum TE/GE-07-0218-0008, Form 1024-A Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code dated February 2, 2018.

Audience

Tax Exempt and Government Entities
Exempt Organizations
Examinations

Effective Date

(05-02-2019)

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

4.75.32.1 (05-02-2019)

Program Scope and Objectives

  1. Purpose: This IRM provides procedures for audit cases subject to IRC section 7428, including instructions on preparing a complete administrative record. Topics addressed include:

    1. Which cases are subject to declaratory judgment actions

    2. What a declaratory judgment action permits a taxpayer to do

    3. The definition of an administrative record

    4. How to maintain an administrative record file

    5. Documents exchanged in an administrative record file

    6. How to index an administrative record file

    7. Responsibilities which go with an administrative record file

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

    • GS-512

    • GS-526

    • GS-987

    • GS-501

  3. Policy Owner: Director, Exempt Organizations

  4. Program Owner: Exempt Organizations

4.75.32.1.1 (05-02-2019)

Background

  1. This section:

    1. Provides specific guidance for EO revenue agents and reviewers.

    2. Explains the legal consequences of the declaratory judgment and when it applies as well as the correct preparation of an administrative record and when it must be prepared.

4.75.32.1.2 (05-02-2019)

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 administration or enforcement of the Internal Revenue laws.

4.75.32.1.3 (05-02-2019)

Responsibilities

  1. During an audit, agents are responsible for:

    1. Knowing which cases are subject to declaratory judgement actions.

    2. Determining if a case file would require an administrative record.

    3. Determining how to maintain the administrative record.

    4. Knowing what documents are included in an administrative file.

    5. Properly preparing an index for an administrative record file.

4.75.32.1.4 (05-02-2019)

Program Controls

  1. Agents consult the Knowledge Management Network (K-Net) to ensure proper issue development and consistent application of the law.

4.75.32.1.5 (05-02-2019)

Acronyms

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

    Acronym Definition
    EO Exempt Organizations
    AIMS Audit Information Management System
    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
    NOL Net Operating Loss
    OCEP Office Correspondence Examination Program
4.75.32.2 (01-18-2017)

Introduction

  1. The instructions in this IRM apply to all audit cases subject to IRC section 7428, declaratory judgment actions. These include audits in which the IRS proposes to either:

    1. Revoke an organization’s exempt status (qualification).

    2. Modify an organization’s foundation status (classification).

  2. These audit cases must include a separate and complete administrative record file:

    • Revocations (both agreed and unagreed)

    • Disqualifications (both agreed and unagreed)

    • Foundation Status modification (both agreed and unagreed)

      Note:

      If the case is unagreed, an index is also required.

  3. Declaratory judgment rights for IRC 501(c)(3) organizations have been extended to all 501(c) & (d) organizations under the PATH Act of 2015.

  4. We no longer modify the exempt status of an organization which is:

    1. Not exempt under the code section for which it was granted exempt status

    2. Filing its return under another code section

4.75.32.3 (01-18-2017)

Background Information

  1. Certain organizations are allowed a swift review of their exempt status qualifications or foundation classifications (IRC 7428 , Declaratory Judgments Relating to Status and Classification of Organizations under Section 501(c)(3), etc.). The PATH Act of 2015 expanded declaratory judgment rights on exempt status qualification from 501(c)(3) organizations to all other IRC 501(c) and 501(d) organizations.

  2. An IRC section 501(c) or (d) case means a case with an audit of:

    • Form 990 series return or e-Postcard

    • Form 1065

      Note:

      Form 1065 is filed by IRC section 501(d) religious and apostolic associations.

  3. Form 990 series returns do not include:

    • A case of only Form 990-T returns

    • A Form 990 series return filed by a political organization.

  4. A declaratory judgment action permits an organization to challenge a revocation or foundation status modification in court before the assessment of any:

    1. Income taxes that might result from the loss of exemption.

    2. Excise taxes that might result from the reclassification of foundation status.

  5. These courts have jurisdiction over declaratory judgment actions:

    1. U.S. Tax Court

    2. U.S. District Court for the District of Columbia

    3. U.S. Court of Federal Claims

  6. The courts use the administrative record in cases involving declaratory judgments. They can decide the cases entirely on the contents of an administrative record.

  7. When one or both parties desires a trial in a revocation case in lieu of a determination based solely on the administrative record, additional evidence may be developed and submitted per ordinary trial procedures.

  8. Find the specific rules for declaratory judgment actions, including the content of the administrative record, in Tax Court Rules 210-218 at www.ustaxcourt.gov.

4.75.32.4 (05-02-2019)

Cases Subject to Declaratory Judgment Actions

  1. Declaratory judgment actions apply to cases involving an organization’s initial or continuing qualification or classification as:

    1. An organization described in IRC 501(c) or (d).

    2. An organization described in IRC 170(c)(2).

    3. A private foundation defined in IRC 509(a).

    4. A private operating foundation defined in IRC 4942(j)(3).

    5. A farmers' cooperative under IRC 521(b).

      Note:

      Large Business and International (LB&I) has audit jurisdiction over exempt farmers' cooperatives described under IRC 521.

  2. A foundation status modification (reclassification) occurs when the IRS-determined qualification or classification is different than the foundation status:

    1. Originally claimed by the organization.

    2. Determined by either EO Rulings and Agreements or EO Examination.

  3. Modification of an organization’s foundation status occurs when the IRS determines, for example, that an organization is:

    1. A private non-operating foundation, though it claims to be or is currently classified as a public charity, or is currently classified as a private operating foundation.

    2. A private operating foundation, though it claims to be or is currently classified as a public charity.

    3. An IRC 509(a)(3) organization, though it claims to be, or is currently classified as, a IRC 509(a)(1) or IRC 509(a)(2) organization.

    4. An IRC 509(a)(2) organization, though it claims to be, or is currently classified as, a IRC 509(a)(1) organization.

    5. An IRC 509(a)(1) organization, but it should be classified differently under IRC 170(b)(1)(A) than it is currently classified; i.e., a IRC 170(b)(1)(A)(ii) school reclassified as a IRC 170(b)(1)(A)(vi) publicly-supported charity.

  4. A determination subject to Section 7428 also includes any organization that claims to be described in IRC 170(c)(2) that the IRS determines is not.

  5. All revocations are treated the same (per the PATH Act of 2015), with declaratory judgment rights being conferred upon all revoked exempt organizations. Accordingly:

    1. All revocations of IRC 501(c) or (d) organizations follow the same procedures and processes as those previously used for IRC 501(c)(3) organizations.

    2. The IRS will revoke (or treat as revocation for declaratory judgement purposes) any organization that no longer qualifies under the code section for which tax-exemption was granted or self-declared.

    3. This includes self-declarer organizations (Status 36 entities) determined not to qualify under the code section for which they filed a return.

      Note:

      The self-declaring PF that has indicated on schedule A that they are a PF does not trigger a declaratory judgment action under IRC 7428. That right would apply only upon a subsequent IRS exam.

4.75.32.5 (01-18-2017)

Administrative Record

  1. The administrative record is the written record of the administrative proceedings between the IRS and the exempt organization.

  2. Tax Court Rule 210(b)(12) defines the administrative record as including:

    • The request for determination.

    • All documents the applicant submitted to the IRS as part of the determination request.

    • All protests and related papers submitted to the IRS.

    • All written correspondence between the IRS and the applicant about those protests.

    • All pertinent returns filed with IRS.

    • The notice of determination by the Commissioner.

  3. Agents must include in the administrative record all documents exchanged between the IRS and the organization for audits on:

    1. Continuing qualification (such as revocation of exempt status).

    2. Classification (such as modification of foundation status).

  4. Although not documents, items such as electronic disks or all other media are considered physical evidence and fall within the intent of Tax Court Rule 210(b)(12) when transmitted between the parties. If a disk is:

    1. Sent by letter, the disk is deemed part of that written document.

    2. Received at a conference, stamp and mark the disk appropriately, then reference it in a summary of the conference you send to the taxpayer.

  5. For documents to be considered exchanged with the IRS, the material(s) must go to or from the organization or its representative by:

    • Hand-delivery

    • Mail

    • Email

    • Fax

    Note:

    Don’t include documents reviewed on site in the administrative record unless the taxpayer gives you copies or you make copies for the exam files.

    Caution:

    Don’t email Sensitive but Unclassified (SBU) information to the organization.

  6. The administrative record does not include any internally generated and used materials, such as:

    • Exam workpapers

    • AIMS documents (Forms 5588, 5595, 5596, 5597, 5598, or 5599)

    • IDRS prints

    • Reviewer memos

  7. The administrative record does not include materials obtained from third-party sources, such as:

    • Referral packages

    • Claims (normally not shared under any circumstances)

    • Summoned records from third parties

    • Summoned third-party testimony

    • Records obtained from city, county, state or federal agencies

  8. You can include any document that is generated for internal use or obtain from a third-party in the administrative record by giving a copy of the document to the organization. For materials you obtained from outside sources, consult your group manager and Area Counsel as to what parts of the document(s), if any, you may share, and how to share them.

  9. Any statements made in correspondence (by either side) is deemed true if there’s no conflicting or clarifying evidence. Therefore, if the organization sends or otherwise provides something that doesn’t appear to be correct, get written clarification. Confirm clarification you receive by telephone either by requesting the information in writing or by sending a letter which explains what was discussed on the phone.

4.75.32.5.1 (01-18-2017)

Maintaining the Administrative Record File

  1. It’s a best practice to create an administrative record file or folder at the beginning of every IRC 501(c) and (d) audit. If you maintain the administrative record file contemporaneously, it will be much easier to assemble after you finish the audit, and for Mandatory Review to review the case.

  2. This file will contain all items exchanged between the IRS and the organization throughout the audit.

  3. Keep the contents of this file in one of these locations until you determine the outcome of the audit of exempt status (or foundation status):

    • An electronic folder or file

    • A box or paper folder

    • Combination of both

  4. Record the date each document was exchanged.

  5. Organize the administrative record file in chronological order, based on when the documents were exchanged. The first document exchanged is Exhibit #1, and all succeeding information should follow accordingly. See Exhibit 4.75.32-1.

  6. Typically, the first document in the administrative record is the determination application, such as those below, with all of the original attachments (articles, bylaws, financial statements, and expanded explanations of proposed activities) indexed as of the date the IRS received the application through to the date IRS issued the determination letter.

    • Form 1023, Application for Recognition of Exemption under section 501(c)(3) of the Internal Revenue Code

    • Form 1024, Application for Recognition of Exemption under section 501(a)

    • Form 1024-A, Application for Recognition of Exemption under section 501(c)(4) of the Internal Revenue Code.

    Exception:

    When organizations have claimed exemption without submitting an application, the first document is typically the earliest Form 990, Return of Organization Exempt From Income Tax, under audit.

  7. For any deviation from strict chronological order, consult Area Counsel for other assembly considerations, and document the discussion in the case chronology record.

    Example:

    You secure half of the year’s bank statements at the initial audit, a few more by IDR a month later, and the rest by bank summonses two months later. You subsequently exchange the summoned bank statements with the organization to include them in the administrative record. Counsel advises you to keep all bank statements for a given year together as one exhibit. Index the dates and methods describing the documents that were exchanged. Identify the number of pages of each set of documents in the description of the documents.

  8. See Exhibit 4.75.32-2 for a list of documents included in the administrative record, and instructions on how to index the documents into the record.

4.75.32.5.2 (01-18-2017)

Exchange of Documents

  1. In general, if a document is related to the continuing qualification or classification of an organization, and it’s a document that you haven’t exchanged with the organization, mail, or otherwise provide a copy of the document to the organization with a cover letter asking for any comments or clarification the organization may wish to provide.

  2. Refer to Exhibit 4.75.32-3 for examples of documents which might not otherwise be included in the administrative record and for solutions for getting the documents or information included.

  3. Even if a document is not related to an issue potentially subject to declaratory judgment relief, if it has been exchanged, include it in the administrative record file with an explanation in the administrative record index.

4.75.32.5.3 (01-18-2017)

Including the Determination Application as Part of the Administrative Record in Unagreed Audit Cases

  1. Exchange a copy of the determination application you received from Cincinnati with the organization during the audit, and request comments as to any changes in methods of operation from what was described in the application.

  2. Get a copy of the determination application from the EO Files and Records Unit in Cincinnati. Ask the unit to ship, send a disc or secure email the records.

  3. When exchanging the application with the organization, send only the documents labeled as public. Don’t send any PDF files listed as private because they are internal records that were never exchanged during the application process.

  4. If Cincinnati doesn’t have a copy of the determination, request it from the organization.

  5. If you got the application from:

    1. Cincinnati and sent it to the organization, index it twice, (with any cover letter and enclosures) once at the start of the record, and again as of the date you sent to the organization.

    2. The organization, index the application (and any cover letter and attachments) only as of the date you received it because the document wouldn’t have been date stamped as of the initial application.

    Note:

    The organization's copy of the application can’t be proven as being the true confirmed copy of the application.

4.75.32.6 (05-02-2019)

Index to the Administrative Record

  1. Prepare an index to the administrative record that will allow users to easily locate documents.

  2. Index each exhibit in order (i.e., 1, 2, etc.). Generally, number tabbed folder dividers or write the corresponding number of each exhibit on a Post-It note affixed to the first page of each document.

  3. In preparing the index, list:

    1. The exhibits by number.

    2. A description of each document, including how it was exchanged, followed by the number of pages for each exhibit in parentheses.

  4. Clearly describe all attachments to correspondence in the index. If it helps to clarify the index, give multiple attachments sub-numbers in an outline format (i.e., 4a, 4b, 4c).

  5. If the organization ultimately agrees to revocation, disqualification or a foundation status modification (in other words, you secure a Form 6018, Consent to Proposed Action), an administrative record is required, but an index is not.

4.75.32.7 (01-18-2017)

Agent's Responsibility

  1. Always track documents exchanged with the taxpayer and the dates the documents are exchanged. Be careful you don’t deface any documents (such as making notes or highlighting text using highlight markers).

    Caution:

    If a document is defaced, it might have to be exchanged with the organization again, with the markings on it. Discuss this situation with your group manager or Area Counsel.

  2. By carefully tracking all documents exchanged by date, it’s easier to compile the administrative record and prepare the index if the case goes unagreed. It’s recommended you compile an administrative record file contemporaneously with the various exchanges so that when items are exchanged, you make a copy of that item and put in the administrative record file/box.

  3. Tax Court Rule 217 imposes short deadlines for filing the administrative record. Further, Counsel reviews all determinations subject to declaratory judgment before IRS issues the final adverse letter. The administrative record must be well-organized and complete when Counsel receives it.

  4. Create the administrative record file at the beginning of every 501(c) and (d) audit upon indications of revocation and maintain it contemporaneously even if the revocation turns out to be agreed. An "agreed" case is one in which the taxpayer has communicated to the agent its agreement to the proposed action by signing Form 6018, Consent to Proposed Action. Even if the agreement to the revocation was never in doubt, you’re required to prepare the administrative record, but not an index.

    Note:

    A signed Form 6018 agreement is not binding for cases subject to declaratory judgment, as the taxpayer may still exercise their declaratory judgment rights under IRC 7428. Form 6018 is required to substantiate that the taxpayer has agreed to the proposed action.

  5. When photocopying documents, make sure that the copy is a pristine identical copy of the original (aside from being in black and white versus color). This requires that you:

    1. Lay the document flat on the glass pane in lieu of using an auto feeder if the document is folded or bent.

    2. Remove staples, paper clips, or other fasteners before copying.

    3. Copy the front and back of a document if information is present on the back.

    4. Check that no portions of the document are eliminated or missing in the copy.

    5. Double check each page copied to ensure that it is a pristine identical copy of the original.

    Note:

    When photocopying double-sided documents, create two single-sided pages: one for the front, and one for the back.

    Caution:

    Copies must be of high quality and resolution, as Counsel will redact the documents and submit copies of the redacted documents to court. The newer the copier, the better the result.

  6. When sending correspondence, date the letter with the actual date you mail, fax or hand deliver it.

  7. Staple a Form 3198 A, TEGE Special Handling Notice, to the front of the file folder or box. Write Administrative Record in the top margin and include the following information on it:

    1. Organization's name

    2. Organization's TIN

    3. MFT

    4. Year(s)

  8. Name the EO Administrative Record Index using the Reporting Compliance Case Management System (RCCMS), Naming Convention and save it in the RCCMS Office Documents folder.

4.75.32.7.1 (01-18-2017)

Documents Received from the Organization

  1. Do not deface documents you received from the organization in any way (writing, highlighting, noting or scribbling, etc.). If you need to write information on a document, make a copy for that purpose.

  2. Do not write the exhibit numbers from the "Administrative Record Index" on the documents, other than via tabbed folder dividers or Post-It notes, because Area Counsel prepares the final index and will place the final exhibit numbers on the documents.

  3. Date stamp documents and other items you received from the taxpayer on the cover memo or first page. Use the same date stamp the group secretary or manager uses to stamp incoming mail.

  4. Keep any "original" documents, such as original signed Forms 990, Forms 872, Consent to Extend the Time to Assess Tax, and Forms 2848, Power of Attorney and Declaration of Representative, in the workpaper file. Make copies for the administrative record file.

4.75.32.7.2 (01-18-2017)

Documents Provided to the Organization by the Service

  1. Outgoing correspondence and enclosures included in the administrative record file will inevitably be copies, because you’ve already returned the originals to the organization.

  2. Verify copies for exactness against their originals including the same dates and signatures. Make a copy of the signed letter before you mail it and keep the copy in the administrative record file.

  3. Do not forget to make copies of enclosures or attachments you sent with correspondence (or delivered by hand) and keep the copies in the administrative record file.

    Note:

    If the case goes to litigation years later, it may be impossible to recreate missing attachments (which might include court cases, rulings, media articles, etc.) at a future date.

  4. Copies must be identical to the correspondence or attachments you sent to the taxpayer. In the opening appointment letter, for example, IRS Pub. 1, Your Rights as a Taxpayer, must be enclosed. Include a photocopy or another pre-printed version of the Pub. 1 provided to the taxpayer (same revision) in the administrative record file.

  5. Clarify incorrect computations, misinterpretations of law (IRC, Regulations, Revenue Rulings, etc.) or incorrect conclusions in writing via subsequent correspondence to the taxpayer.

    1. Any information you previously shared with the taxpayer becomes a part of the administrative record; therefore, include incorrect information that you put in writing and sent to the taxpayer/representative in the administrative record.

    2. To correct a mistake, Do not remove the document from the administrative record. Rather, acknowledge the mistake and send a corrected statement or revised calculation to the taxpayer/representative.

4.75.32.7.3 (01-18-2017)

Verbal Communications

  1. The CCR and other workpapers may contain details of conversations with the officers or representative of an organization; however, these do not constitute a part of the administrative record. Thus, it’s important to take steps to make this information part of the administrative record. Do not refer to it in the revenue agent’s report if it has not been made part of the administrative record.

  2. To place information into the admin record that was communicated orally, create a transcript or summary of the discussion using Form 4564, Information Document Request, or Form 886-A, Explanation of Items. If you use Form 886-A, prepare a Form 4564 to reference the Form 886-A.

    1. Send Form 4564 (using the Letter 5464 as a cover letter) to the organization and ask them to confirm that the summary is an accurate representation of the information it contains, and if not, to provide specific clarification.

    2. Document the Form 4564 or 886-A with the date and time of the conversation, with whom the conversation was held, and the matters discussed.

    3. You may copy/paste the contents of your initial and other interview workpapers into either the Form 4564 or the 886-A and send the same way.

4.75.32.7.4 (01-18-2017)

Shipping and Logistics

  1. Before closing the case, we ship the audit case file and administrative record to a number of destinations. The case goes from:

    1. The agent to the manager.

    2. The manager to Mandatory Review.

    3. Mandatory Review to Counsel.

    4. Counsel to Mandatory Review to issue the Final Adverse Determination Letter.

  2. Each person with custody of the files must ship the case file and administrative record together in the same shipping container, so that they form a single parcel.

  3. To ensure the administrative record is not lost or destroyed in transit, keep either an electronic scanned or hard copy of the file in the group.

    Note:

    The group manager (in consultation with Area Counsel) has discretion over compliance with this requirement.

4.75.32.8 (06-01-2006)

Group Manager's Responsibility

  1. The group manager must ensure the following:

    1. The administrative record is properly prepared and indexed according to this IRM’s procedures.

    2. The case is flagged for Mandatory Review.

    3. All processing delays are fully explained on the CCR.

4.75.32.9 (05-02-2019)

Review Staff's Responsibility

  1. Mandatory Review responsibilities:

    1. Review the administrative record to ensure it’s properly prepared and contained all of the required documents.

      Note:

      An administrative record index is required for unagreed revocations, disqualifications or foundation status modifications.

    2. Send the entire administrative file, which includes the workpaper file and administrative record, to the appropriate Area Counsel office.

    3. Prepare a 90-day adverse determination letter, containing the language providing declaratory judgment rights, for all revocations and modifications of foundation status without protest.

Exhibit 4.75.32-1

Sample Administrative Record Index

Administrative Record Index
Taxpayer: ABC Charity Inc. TIN: 00–0000000
Address: 123 Any Street Form: 990
  Any Town, Any State Zip Code Tax Year(s): 201512
Index # Created by/ Received from Description of documents
(Mailed/e-mailed/faxed/handed to/received from the EO/POA)		 Letter dated, Date received # of pages
1 POA James Esquire Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, Articles of Incorporation, Bylaws, attached schedules describing proposed activities and financial statements 4/12/1989 - 11/7/1989 45
2 Revenue Agent J Letter 947, determination letter recognizing exemption under §501(c)(3), from the Internal Revenue Service to ABC Charity, Inc. 11/7/1989 4
3 EO Treasurer John Taxpayer Form 990, Return of Organization Exempt from Tax, for the year ended December 31, 2015 5/15/2016 25
4 Revenue Agent K Letter 3611, Publication 1, and Form 4564, Information Document Request, scheduling initial appointment from the Internal Revenue Service to ABC Charity, Inc. 1/9/2017 2
5 POA Jane Rep Letter from ABC Charity, Inc. to the Internal Revenue Service, with attachment Form 2848, Power of Attorney 1/14/2017,
1/16/2017		 2
6 POA Jane Rep Minutes of the Board of Directors of ABC Charity, Inc. dated January 5, 2015; February 1, 2015; March 10, 2015; April 5, 2015; May 3, 2015; June 7, 2015; June 25, 2015; July 12, 2015; August 2, 2015; September 2, 2015; October 4, 2015; November 8, 2015; December 6, 2015, received in person by Revenue Agent K from POA Jane Rep 2/6/2017 30
7 POA Jane Rep Copies of ABC Charity's cancelled checks numbered: 20013; 20022; 20045; 20046; 20047; 21055; 20156; 20157; 20158; 20203; 20204; 20205; 20288; 20289; 20335; 20421; 20551; and 20611, received in person by Revenue Agent K from POA Jane Rep 2/6/2017 18
8 POA Jane Rep Brochure entitled: "Summer Performances 2015" , received in person by Revenue Agent K from POA Jane Rep 2/9/2017 8
9 Revenue Agent K Letter 3606, and Form 4564, Information Document Request, from the Internal Revenue Service to ABC Charity, Inc. 2/9/2017 2
10 EO Treasurer John Taxpayer Letter from ABC Charity, Inc. to the Internal Revenue Service with 2 attachments as follows: Forms 941, response to questions. 2/23/2017,
2/26/2017		 16
11 POA Jane Rep Letter from ABC Charity, Inc.'s representative to the Internal Revenue Service 3/2/2017,
3/5/2017		 14
12 Revenue Agent K Letter to ABC Charity, Inc. scheduling a date for a group manager's conference. 3/10/2017 1
13 Revenue Agent K Letter to ABC Charity, Inc. summarizing the items discussed at the group manager's conference on March 26, 2017, with a copy of the Form 1023 and the attachments to the Form 1023. 3/27/2017 47
14 Revenue Agent K Letter from the Internal Revenue Service to ABC Charity, Inc., with 4 attachments: Form 4621-A, Report of Examination - Exempt Organizations, Forms 886-A, Explanation of Items, Form 6018, Consent to Proposed Action, and Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status 4/9/2017 30
Exhibit 4.75.32-2

Documents that Are Part of the Administrative Record

How to include documents that should be part of the administrative record:
   
Letters to the organization (mailed)
1. Make a copy of the letter at the time of issuance showing the original signature as signed or stamped.
2. Print a copy of any enclosures such as information document requests, reports of audit, any forms, (such as waivers, agreement forms, statute extensions, etc.) and any publications.
3. Make a copy of any return envelopes that were included with the letter.
4. If certified, make a copy of the certified mail receipt, PS Form 3800, and a copy of the front and back of the domestic return receipt (green card,) PS Form 3811.
5. List the letter as of the date of the letter in the admin record index.
   
Letters to the representative (mailed)
1. Make a copy of the cover letter to the Power of Attorney (Letter 3597) at the time you mailed it showing the original signature as signed or stamped.
2. Make a copy of the letter at the time you mailed it showing the original signature as signed or stamped.
3. Print a copy of any enclosures such as information document requests, reports of audit, any forms, (such as waivers, agreement forms, statute extensions, etc.) and any publications.
4. Make a copy of any return envelopes that were included with the letter.
5. If certified, make a copy of the certified mail receipt, PS Form 3800, and a copy of the front and back of the domestic return receipt (green card,) PS Form 3811.
6. List the letter as of the date of letter in the admin record index.
   
Letters to the organization (efaxed)
1. Users of efax will not have a cover sheet. Retrieve the efax from your Sent Items folder and print a copy of the sent efax to place in the administrative record.
2. Make a copy of the letter at the time you faxed it showing the original signature as signed or stamped.
3. Print a copy of any enclosures such as information document requests, reports of audit, any forms, (such as waivers, agreement forms, statute extensions, etc.) and any publications.
4. When using efax, the efax transmittal e-mail you receive is also not part of the administrative record.
5. List the letter as of the date of the efax transmission in the admin record index.
   
Letters to the representative (efaxed)
1. When using efax, you will not have a cover sheet. Instead, retrieve the efax from your Sent Items folder and print a copy of the sent efax to place in the administrative record.
2. Make a copy of the cover letter to the Power of Attorney (Letter 3597) at the time you faxed it showing the original signature as signed or stamped.
3. Make a copy of the letter at the time you efax it, showing the original signature as signed or stamped.
4. Print a copy of any enclosures such as information document requests, reports of audit, any forms, (such as waivers, agreement forms, statute extensions, etc.) and any publications.
5. When using efax, the efax transmittal e-mail you receive is also not part of the administrative record.
6. List the letter as of the date of the efax transmission in the admin record index.
   
E-mail sent to the organization or representative (no SBU data permitted)
1. At the time of transmission, retrieve the e-mail from the Sent Items folder in Outlook. (If archived, retrieve from the archive.)
2. Print a copy of the sent e-mail.
3. List the e-mail as of the date of transmission.
   
Letters from the organization or representative (mailed)
1. Use the group secretary or manager's received date stamp to stamp the first page of the correspondence with the date the mail was received.
2. Make a copy of the letter, all enclosures, and the envelope that the package came in.
3. List the letter in the admin record index as of the date of the letter, and include the date the letter was received.
   
Letters from the organization or representative (efaxed)
1. Make a copy of the efaxed letter, and enclosures.
2. If the efax time and date are not present, date stamp as described above.
3. List the letter in the admin record index as of the date of the letter, and include the date the fax was received.
   
E-mails from the organization or representative
1. Print out the e-mail as received.
2. After virus scanning any attachments, print out any attached documents.
3. List the e-mail in the admin record index as of the date received.
   
Documents handed to the organization's officers or representative
1. Make a copy of the document.
2. Prepare a transmittal memo, which can be signed by an officer of the organization to acknowledge receipt and then kept by the IRS.
3. Mention in the description of documents that the document was handed over.
4. Index the document as of the date the document was handed over.
   
Documents received by the agent while at the audit site or representative's office
1. If the document is to be retained, do not make any marks on the document.
2. Make a note of receipt in your CCR and describe what was received.
3. Upon return to the office, date stamp the document as received as of the date noted in the CCR.
4. After date stamping, you may make a separate copy of the document that can be modified or marked up as a workpaper.
 

Note:

Any document reviewed on site that is left at the audit site won’t be included in the administrative record.
   
The determination application
1. See IRM 4.75.32.5.3 for determination application procedures.
   
The determination letter
1. Follow the directions as listed above for the determination application.
2. If the determination application is available from Cincinnati, list it as the second item in the index.
   
Forms 990, 990-EZ, 990-PF, 990-T
1. Make a copy of the return.
2. List the return in the index as of the date of filing.
   
Form 990-N
1. Retrieve the Form 990-N information from http://www.irs.gov/app/ePostcard/.
2. Print the information retrieved from the website.
 

Note:

As with any information or tax return secured internally, make sure they are mailed to the taxpayer with an individually designed letter so that they can be included in the administrative record.
3. Index the Form 990-N as of the date of filing.
   
Statute extensions
1. Print a copy of the unsigned statute extension.
2. Index the unsigned statute extension with the cover letter used to issue the extension request. See the procedures for Letters to the organization (mailed.)
3. Upon receipt of the signed extension, make a copy before your manager signs it. Follow the procedures for Letters from the organization (mailed.)
4. Make a copy of the signed statute extension. Follow the procedures for Letters to the organization (mailed.)
5. Do not index or include the statute extension with the Form 990 series return. (The statute extension will be stapled to the return for the workpaper file only.) Index the statute extensions as separate entries if received without a cover letter.
   
Forms 2848 or 8821
1. Make a copy of the signed Form 2848/8821 as received (by mail, efax, hand, or e-mail) before you complete the upper right corner of the form and fax it to the appropriate campus.
2. Index the Form 2848 as of the date of receipt.
3. Do not index or include the Form 2848/8821 with the Form 990 series return. (The Form 2848/8821 is stapled to the return for the workpaper file only.)
   
Undelivered mail
1. Date stamp the envelope and the letter with the date of receipt (when returned to the Service as undeliverable.)
2. Make a copy of the letter, all enclosures, and the envelope that the package came in.
3. List the letter in the admin record index as of the date of the letter, and include the date the letter was returned to the Service.
Exhibit 4.75.32-3

Examples of Documents Not Included in the Administrative Record and Solutions for Getting the Documents or Information Included

Documents Not Included In the Administrative Record Solutions For Inclusion in the Administrative Record If Needed
1. Agent's case chronological record. If the CCR reflects information such as notes from a telephone call that are relied on in the decision process, create a transcript or summary of the discussion and send it to the organization with a request for confirmation or comment.
2. Notes taken by the agent during interviews or conferences with the organization. Reduce the interview or conference to writing and provide a copy to the organization with a cover letter or Information Document Request (IDR) requesting confirmation of the contents. If hand- delivered to the organization with an IDR, ask the receiving person to acknowledge receipt by signing a copy of the IDR to be retained by the IRS.
3. Newspaper articles concerning the organization provided to the agent by a third party. Provide copies of the newspaper articles to the organization with a cover letter or IDR requesting comments on the accuracy of the articles. If copies are sent by letter to the organization, send it certified. If hand-delivered to the organization with an IDR, ask the receiving person to acknowledge receipt by signing a copy of the IDR to be retained by the IRS. Be sure to attach copies of the newspaper articles to the copy of the IDR retained by the IRS.

Note:

For all documents secured from third parties and provided to the organization, be very careful to avoid disclosing a confidential source or making an unauthorized disclosure.
4. Newspaper articles concerning the organization clipped from the paper by the agent. Same as in item number 3.
5. Internet articles or information concerning the organization downloaded from the Internet by the agent. Provide copies of the downloaded information to the organization with a cover letter or IDR requesting comments on the accuracy of the information. If copies are sent by letter to the organization, send it certified. If hand- delivered to the organization with an IDR, ask the receiving person to acknowledge receipt by signing a copy of the IDR to be retained by the IRS. Make certain that copies of the downloaded information are attached to the copy of the IDR retained by the IRS.
6. Copies of the organization's cancelled checks provided to the agent by a former employee of the organization. To protect the identity of the former employee, make a written request for the organization to provide copies of the cancelled checks.
7. A copy of a rental agreement between the organization and a related IRC 501(c)(3) organization for the use of the organization's facilities provided to the agent by the related organization. Request a copy of the contract from the organization or provide a copy to the organization with a written request that the organization confirm that it is a true copy of the contract.
8. A letter sent to the Internal Revenue Service by the organization a week after the final adverse determination letter was mailed to the organization. None. There is no way to include documents received after the issuance of the final adverse determination letter in the administrative record. However, send the letter for association with the files in the case.
9. Documents that substantiate the revocation and enhance the Service's chances of sustaining the issue that were submitted to the Internal Revenue Service by a third party the day after a final revocation letter was mailed to the organization. None. There is no way to include documents received after the issuance of the final adverse determination letter in the administrative record. Collect the information and call attention to it by memo or otherwise.
10. Workpapers and computations prepared by the agent. Use either of two methods to include workpapers in the administrative record:
(a) Mail a copy of the workpapers to the organization with a cover letter requesting comments.
(b) Provide a copy of the original workpaper to the organization during the audit and request a receipt of acknowledgment.

Caution:

If shared, do not further modify the workpaper. If later modified, share the workpaper again.
11. Agent’s notes concerning records the organization failed to produce. Write to the taxpayer, reminding the taxpayer of what had been said, and note the failure to produce the documents. The letter with the taxpayer's verbal representations and failures to produce is then part of the record. Of course, any written response from the taxpayer is also a part of the record.