Part 4. Examining Process
Chapter 81. Tax Exempt Bonds (TEB) Examination Program and Procedures
Section 2. Examination Selection
April 12, 2016
(1) This transmits revised IRM 4.81.2, Tax Exempt Bonds (TEB) Examination Program and Procedures, Tax Exempt Bonds Examination Selection.
(1) Minor editorial changes were made throughout this IRM.
(2) Reviewed and updated IRM 4.81.2 to improve the content for plain language and active voice.
(3) Updated organization titles throughout the IRM: TEB Technical Advisor and TEB Field Operations Technical Advisor references were changed to Tax Law Specialist.
(4) Updated IRM 126.96.36.199 to reflect that reflect that Arbitrage Claim cases will be assigned to examiners on a rotational basis.
Tax Exempt Bonds
Rebecca L. Harrigal
Director, Tax Exempt Bonds
Tax Exempt and Government Entities
This section sets forth procedures for the TEB examination selection and classification program through which examinations pertaining to tax-exempt and tax credit (including direct pay) bond transactions are selected in accordance with inventory requirements.
The Tax Exempt Bonds Compliance & Program Management ("CPM" ) function is responsible for the administration and oversight of the program.
The Tax Exempt Bonds Field Operations ("FO" ) function provides assistance and support to CPM in regards to this program.
TEB management provides program guidance and direction to all TEB employees with respect to TEB's fiscal year operating priorities in support of the IRS strategic goals.
TEB management (supported by input from sources within TEB as well as other functions within Tax Exempt and Government Entities division), determines TEB examination priorities and inventory needs based on issues and trends identified from examinations, compliance questionnaires and checks, voluntary resolution programs, outreach activities, and other internal or external sources.
CPM coordinates the selection and classification of returns to ensure adequate levels of inventory are available for examiners.
Returns selected for examination originate from the following sources:
Information gathering projects and compliance initiatives
Classification of returns filed by issuers
Referrals, including those from other federal agencies, informants, news articles, or internal IRS sources
Returns related to current examinations, including examinations of claims
Examinations include those of:
Claims for recovery of arbitrage payments (“Arbitrage Claims”)
Non-return units including, but not limited to, IRC 6700 related cases
Returns selected for general classification include compliance examinations of different types of bond issues, categorized according to various specified characteristics ("Market Segments" ). TEB management establishes parameters used to identify types and characteristics of the Market Segments selected for examination in the fiscal year, as well as the number of returns examined within a particular Market Segment. Within each identified Market Segment, returns to be examined will generally be selected randomly. TEB management may decide to use statistical sampling principles to determine the number of returns to be selected for examination within each Market Segment (including to replace returns determined to be inappropriate for examination within a Market Segment for failure to meet the segment characteristics or for other reasons, such as bonds no longer outstanding).
The assigned Tax Law Specialist reviews and monitors inventory needs to ensure adequate levels of inventory are available for examiners.
TEB management determines that return selection and establishment for a Market Segment is required, and the assigned Case Selection Coordinator coordinates with the TEB CPM analyst (the "Analyst" ) assigned to select and establish the cases for the Market Segment. This coordination will include information relating to the defining characteristics of the Market Segment to be used for population identification, as well as direction on the number of cases to be selected. In determining Market Segment characteristics, the assigned Case Selection Coordinator may consult with one or more subject matter experts related to the Market Segment, Tax Law Specialists and others as determined appropriate.
In classifying returns for Market Segment examinations, the Analyst selects returns for examination and establishes RCCMS case files for such exams by:
Using the selection criteria specified by the assigned Case Selection Coordinator for each Market Segment and reviewing RICS or other research information to identify all potential cases for examination within that Market Segment.
Selecting the desired number of individual cases to be examined, using a methodology indicated by the assigned Case Selection Coordinator.
Marking the selected cases on RICS for download of information into RCCMS and establishment on AIMS.
Posting classification forms into the Case File Documents Folder within each RCCMS compliance activity established for classification.
Verifying project codes of the cases selected for examination.
Surveying cases not selected for examination.
Referral case files will be established in RCCMS by the analyst responsible for establishing referrals, generally within 15 days of notification of approval by the referral committee. Upon establishment, the analyst sends the RCCMS case file to the manager of the FO group with responsibility for the referral examination. The manager gives heightened priority to the assignment of referral cases to an examiner for examination.
Arbitrage Claim case files will be established in RCCMS by the Arbitrage Claim Inventory Coordinator (analyst responsible for establishing claims on RCCMS, among other duties) generally within 15 days of receipt by TEB. Upon establishment, the Arbitrage Claim Inventory Coordinator will assign the case directly to an examiner on a rotational basis based on a list provided periodically by the Manager, Field Operations. Claims establishment and assignment are to be prioritized.
Cases selected for Market Segment or other examinations will be established in RCCMS by the analyst responsible for such establishment and added to the list of TEB exam inventory available for assignment. The RCCMS case files will be held in the analyst’s group RCCMS Unassigned Inventory Folder until cases are assigned. The assigned Tax Law Specialist selects available cases for FO group managers upon request. On notification by the Tax Law Specialist of case assignment, the analyst transfers the RCCMS case file to the examiner through the examiner’s group manager.
Cases surveyed after transfer to FO groups will be closed within RCCMS using the appropriate closing codes. The reason for survey is noted in the comments section of the Close To dialogue box in RCCMS. The reason for survey is used to reassess selection criteria for future classification. Before a Market Segment case is surveyed, the manager should consult with the Case Selection Coordinator.