- 4.81.3 Questionnaire Compliance Check Projects
- 126.96.36.199 In General
- 188.8.131.52 Project Assignments
- 184.108.40.206 Project Execution Phases
- 220.127.116.11 Requests for Voluntary Closing Agreements
- 18.104.22.168 RCCMS File Management
- 22.214.171.124 Project Closure and Project Report
Part 4. Examining Process
Chapter 81. Tax Exempt Bonds (TEB) Examination Program and Procedures
Section 3. Questionnaire Compliance Check Projects
January 07, 2016
(1) This transmits revised IRM 4.81.3, Tax Exempt Bonds (TEB) Examination Program and Procedures, Questionnaire Compliance Check Projects.
(1) Completed plain language edits throughout this manual.
(2) Made the following revisions:
IRM 126.96.36.199: Changed reference to various market segments to tax advantaged bonds. Added information concerning what compliance checks look for and can be used for.
IRM 188.8.131.52.1: Added reference to Government Entities Compliance Services and deleted sentence concerning the Project Team’s actions during the development stage.
IRM 184.108.40.206: Clarified that there are three phases to a project.
IRM 220.127.116.11.1: Modified the list of actions taken in the development phase.
IRM 18.104.22.168.2: Removed the explanation of what a Questionnaire Pack is and inserted information about the online materials that replaced the paper files. Added instructions for the Team Members and Team Leader with respect to their findings.
IRM 22.214.171.124.3: Added plan for need follow up with participants and/or examination referrals.
IRM 126.96.36.199: Added mention that the compliance documents provide instructions for requesting a voluntary closing agreement.
IRM 188.8.131.52: Modified the list of items in a case file and the number of files created, to reflect the change to online materials.
IRM 184.108.40.206: Removed the discussion concerning coordination of activities.
Government Entities and Shared Services
Tax Exempt Bonds Division
Rebecca L. Harrigal
Director, Tax Exempt Bonds
Government Entities and Shared Services
Tax Exempt and Government Entities
This section establishes procedures for developing and implementing compliance check projects ("Projects" ) to gather tax compliance information relating to the various types of tax-advantaged bonds. Compliance check projects are part of the ongoing efforts of Tax Exempt Bonds ("TEB" ) to promote voluntary compliance with federal tax requirements applicable to tax-advantaged bonds.
A compliance check is a taxpayer contact to gather information about how taxpayers adhere to certain federal tax requirements. A compliance check is neither an audit nor an investigation under section 7605(b) of the Internal Revenue Code ("Code" ) nor an audit under section 530 of the Revenue Act of 1978. As such, TEB does not review an entity's books and records during the course of a compliance check. A compliance check may, however, result in a examination referral.
Compliance checks inquire about an Issuer’s policies, procedures, and practices for issuing bonds. They do not directly relate to determining a tax liability for any particular period. Depending on the type of tax-advantaged bond relating to the Projects, TEB may conduct the Project with other parties related to the bond transaction (e.g., a conduit borrower) when appropriate. Compliance checks may relate to whether information returns were timely filed and included all required information.
TEB may use data gathered through compliance checks to develop educational resources and voluntary compliance programs to assist Issuers meet their pre- and post-issuance tax responsibilities with respect to bonds. TEB may also use information gathered from a compliance check for other compliance matters or as a basis to refer a bond issue for examination.
The Compliance & Program Management ("CPM" ) function of TEB develops, administers and oversees Projects as part of its voluntary compliance and education initiatives. TEB may coordinate a Project with Government Entities Compliance Services ("GECS" ) or other business units.
TEB generally will identify Projects and the objectives of the Projects to be implemented in the fiscal year's annual workplan ("Workplan" ).
The Manager, Compliance & Program Management ("CPM Manager" ) will identify and assign a CPM Group Manager (the "Group Manager" ) who will be responsible for implementing the Project.
If the participation of TEB Field Operations personnel is necessary for the successful implementation of the Project, the CPM Manager will coordinate with the Manager, Field Operations regarding the assignment of such personnel.
The Group Manager will identify who will participate on the project team (the "Project Team" ), explain the project objectives, and advise the Project Team as needed during the development, implementation and analysis of the Project.
During Project development, the Project Team members may review resources available on the Intranet relating to previous compliance check projects.
The purpose of the Project Team is to oversee the Project’s implementation. The Project Team’s key responsibilities are to develop, implement, and analyze a Project and to follow up on that Project as needed for a successful conclusion.
The Project Team will include a team leader and may include several other team members. The Group Manager for a specific Project will determine the number of team members based on Project needs and on whether TEB is coordinating with GECS in conducting the Project.
The leader of the Project Team ("Team Leader" ) is the point person of the Project Team. His/her responsibilities include the following.
Identify any strategic or legal issues and discuss these with the Group Manager to arrive at appropriate solutions.
Secure necessary approvals at key steps in the Project process. This will include coordination with Counsel for needed input, e.g., whether a particular project meets the definition of an examination, and obtaining any required internal TE/GE approval and any necessary OMB approval.
Ensure appropriate coordination among the Project Team members.
Plan and lead Project Team meetings.
Ensure a project memo is prepared.
Ensure that documentation needing review/approval is forwarded to the CPM Manager through the Group Manager.
Ensure all due dates related to the Project are met.
Coordinate the Project Team's activities and oversee the progress of Project development and implementation.
In conjunction with the other team members, ensure the maintenance of historical records (paper or electronic in the Reporting Compliance Case Management System ("RCCMS" )) of Project related documentation (Returns Inventory Classification System ("RICS" ) queries, sampling data, questionnaires, letters, responses from taxpayers, other Project-related communication, etc.).
Coordinate with TE/GE Research personnel on Project development and analysis.
Coordinate with TE/GE Research to ensure the compliance document is compatible with a web-based format, if applicable.
Provide report monitoring and status updates as needed or requested to the CPM Manager, through the Group Manager.
Work with Project Team members to prepare and finalize the project report ("Project Report" ) that explains and draws conclusions from the Project.
Project Team member ("Team Member" ) responsibilities include the following.
Provide technical input during all phases of the Project.
Brief the Team Leader on the Team Member's progress.
Work with other members of the Project Team to prepare and finalize all Project related documentation.
Advise the Project Team on procedural aspects of implementation, feasibility of identifying the subject population, securing addresses and contact information for subject population, project milestones, clarification of Project goals and objectives, and coordination with various stakeholders.
Secure needed information from various sources: RICS (profiling data, statistical samples, audit history, etc.), RCCMS (document and case management), and other sources of available data.
Ensure that paper or electronic records (RICS queries, sampling data, questionnaires, letters, responses from taxpayers, other project related communication, etc.) are properly maintained.
Assist the Team Leader in preparing memorandums and providing monitoring reports or status updates as needed or requested.
Work with the Team Leader and other Team Members to prepare and finalize the Project Report.
A Project has three phases: development, implementation and analysis.
The development phase begins when the Project is assigned to the Project Team and ends when the Project Team is ready to send the documentation used to collect information ("Compliance Check Package" ) to the Issuers or other entities identified in the project population ("Project Participants" ). The Compliance Check Package contains the compliance check letter or questionnaire (the "Compliance Document" ) developed to address the Project objectives, a cover letter explaining the Project to the Project Participant, instructions for completing the Compliance Document, and any enclosures required by IRS guidelines or the nature of the Project. Letters and instructions may be part of a single Compliance Document.
The development phase will consist of the following steps.
1) Preparing a project memo ("Project Memo" ) that outlines the Project and provides guidance on steps to be taken to develop and implement the Project. The Project Memo will include, among other things, deadlines for starting and completing: • Planning, gathering and analyzing available information • Defining subject population • Determining methodology and information gathering methods • Obtaining necessary approvals • Implementing methodology • Analyzing information obtained • Reporting findings and recommendations The Project Memo will set forth the objectives for the Project and analyze the burden placed upon the taxpayers and the potential benefits to the IRS. The Team Leader is ultimately responsible for preparing the Project Memo. The Team Leader also ensures that the timeline is up-to-date and accurate, and discusses any delays or changes with the Group Manager, who will update the CPM Manager. 2) The Project Team will gather information from available sources including, but not limited to: • External data or information sources • Historical information • RICS and other internal data sources • External publications and trade journals 3) The Team Leader will coordinate with the Group Manager on how to communicate progress on the Project's development, implementation, and analysis. 4) The Project Team will identify the estimated staff time resources and any training requirements needed to execute the Project. During planning, the Team should consider whether a web-based format for the Project would be the most efficient use of resources to accomplish the Project goals. 5) The Project Team is responsible for creating, preparing and disseminating the Compliance Check Package. The Project Team must ensure the Compliance Document addresses the Project’s objectives. 6) The Compliance Check Package includes an initial cover letter, a Compliance Document the Project Participant will complete and applicable forms and enclosures as required by IRS procedures or CPM Manager/Team Leader guidance. 7) The Project Team will submit a request to the Group Manager for any special procedures or instructions needed for a particular Project. The Group Manager will obtain any necessary approval from the CPM Manager. 8) The Group Manager will review and comment on the draft Compliance Document, correspondence and other Project documents. Upon approval, the Group Manager will coordinate CPM Manager’s review and comments. Upon approval, the CPM Manager will submit the Compliance Document to the Director, TEB for review, comment and approval. 9) The Director, TEB, may ask the Project Team to seek comments on the Compliance Document from external stakeholders. The level of stakeholder involvement may vary with each project. Generally, the Director, TEB will direct the Project Team to seek input from external stakeholders such as the Office of Counsel, TE/GE Research, and the Advisory Committee on Tax Exempt and Government Entities. The Team Leader will coordinate input from these and any other parties as directed. The Group Manager and Project Team will consider external stakeholder input in the development of the final form of the Compliance Document and related documentation. 10) The Group Manager will review and coordinate the Director, TEB, final approval of the Compliance Document. 11) To the extent required by applicable rules and procedures, the Team Leader will coordinate with the Office of Taxpayer Correspondence ("OTC" ) or other office that approves new and revised letters/notices, and Media & Publications ("M&P" ) that posts the approved letters/notices to the letter repository. This approval typically is required for all correspondence that will be used to collect information and will be delivered to 10 or more recipients(see IRM 220.127.116.11.1), and typically must occur before the correspondence may be distributed. Communications and Liaison assists with this process. OMB approval may also be required. 12) The Team leader or appropriate party on the Project Team will designate an analyst to run any needed RICS queries and to secure data to share with the Project Team. The Team Leader and Group Manager will determine when to initiate the queries necessary to create a master list for the selection of Project Participants ("Master List" ). 13) The Project Team will generally use RICS to define the population of possible bond issuance for the compliance check. The Project may require contact with the entire population or with a sample of the population (the Project Participants). If a sample is required, generally the Team will coordinate with TE/GE Research to determine an appropriate sample size and draw a random sample of that population. The sample should represent a statistically valid sample of the subject population unless otherwise directed by the Group Manager. 14) The Project Team will provide the list of Project Participants to the Group Manager. The Group Manager and Team Leader will review the selection to verify that the number of Project Participants is adequate and the sample, if used, was correctly selected so that a Master List containing the Project Participants may be created. The Master List contains all the selected Project Participants and information pertinent to the Project. The Master List will be the source of contact information and may be the means of tracking information during the Project. 15) All Team Members are responsible for ensuring that the data or other taxpayer information gathered during the Project is properly secured and protected as required under IRM 1.16.13,Information Protection, and kept from any unauthorized disclosure. IRC 6103 provides requirements for Confidentiality and Disclosure of Returns and Return Information. When the Project is finished, the documents will be properly disposed of as provided in IRM 1.15.3, Disposing of Records.
The implementation phase begins after the Team Leader receives all required approvals for the Project and Compliance Documents and related Project documents, the Project Participants are chosen, and the Master List is created. The focus of the implementation phase is distribution of the Compliance Check Package to the Project Participants and processing information received from the Project Participants.
The implementation phase will consist of the following steps:
The Group Manager and Team Leader will determine how to allocate the work involved in producing and distributing the Compliance Check Package among Team Members. The Group Manager and Team Leader will also determine the return dates, extension dates and general timing relating to a particular Project so that reasonable time is allowed to complete the Project while still meeting Workplan requirements.
The Compliance Check Package will be mailed to the Project Participant. If the Project is in a web-based format, an initial cover letter with instructions on how to access the online materials and any applicable forms or enclosures will be mailed to the Project Participants.
Upon receipt of a completed Compliance Check Package, a designated Team Member will inspect the submission to verify that the Participant provided all of the requested information. If an item is missing, the designated Team Member will contact the Project Participant and request the missing items within the required timeframes. If the Project is a web-based format, the Team Leader will work with TE/GE Research to obtain the gathered data.
Direct contact with Project Participants is very likely during the implementation phase of a Project. Project Participants may have questions related to the Compliance Document or the process for either returning information or in the case of a web-based format, accessing or completing the Compliance Document. A Team Member will make every effort to assist taxpayers in the process; however, they are not to inspect or otherwise inquire about books and records or other documentation relating to a specific liability for a particular tax period. Team Members must verify that they are speaking with an official or authorized representative of the taxpayer. Before a Team Member can speak with an attorney or other professional representing the taxpayer, (for example, a financial advisor), he or she must secure from the Project Participant a Form 2848 with respect to the Project.
As the Compliance Check Package information comes in, designated Team Members will organize the information to facilitate analysis of the gathered data. Additionally, all necessary documents and information will be uploaded into a case file established on RCCMS. If the Project is in a web-based format, the Team Members will work with TE/GE Research to retrieve and analyze the gathered data.
Filing or IRS business system processing errors may result in inaccurate contact information for a Project Participant or in a Project Participant being erroneously included on the Master List. While not a common occurrence, this could happen due to human error during the processing of the Project Participants tax information or because the Project Participant did not correctly complete its tax forms or information returns. In such instances, Team Members directly responsible for the contact will immediately notify the Team Leader, and, if appropriate, have the Project Participant note on the Compliance Document that the Compliance Document does not apply to them and why, sign and date the statement, and return the Compliance Document to the Team Member. The Team Member should review his or her findings with the Team Leader to confirm removal of the Project Participant from the Master List. If the Project used sampling, the Team Leader should consult with TE/GE Research to determine if the sample needs to be modified.
When a Project Participants does timely responded to a Compliance Document (accounting for any extensions), the Project Team will reconfirm the contact information and send a follow up letter requesting completion to the Project Participant in the required time frames set forth in the Project Memo.
If a Project Participant does not respond in the time permitted, the Project Team will contact the Project Participant via telephone. The Team Member will document in the case chronology all attempts to contact the non-responding Project Participant and provide updates to the Team Leader. The Team Leader and the Group Manager will discuss the best course of action for non-responding Project Participants. The Team Leader will coordinate with TE/GE Research to determine if modifications to the sample are necessary to compensate for the nonresponsive Participant.
Upon receipt and processing of a Project Participant’s response that does not require any additional contact, the Project Team will send the Project Participant any closing letter required by the Project Memo.
The analysis phase begins when all data and other gathered information has been collected and organized for analysis. The ending date is when the analysis of all the data and information is complete and the Project Report is final.
The analysis phase will consist of the following steps.
Analyze data and other information gathered during the implementation phase of the Project. This analysis can include creating data summary charts, conducting statistical analysis, identifying trends, and formulating recommendations for enhancements to enforcement, voluntary compliance, and education programs to improve tax compliance within the subject universe. TE/GE Research is available to assist in this analysis. The Team Leader will consult with the Group Manager on the appropriateness of scheduling travel for Project Team meetings for this purpose.
Develop a Project closure strategy that considers the following:
Formulate a plan for needed follow up with Project Participants and/or referrals for examination.
Formulate a plan and timeline for drafting the Project Report.
Proceed with closure of compliance activities established on RCCMS to ensure proper record storage.
The Group Manager will provide the Project Team with guidance on the type of Project Report needed at the conclusion of the project.
In the process of participating in a Project, a Project Participant may find issues that affect the tax-advantaged status of one or more of its bond issues and may indicate an intention to request relief through a closing agreement under the TEB Voluntary Closing Agreement Program (see Notice 2008-31 and IRM 7.2.3).
The Team Member coordinating the Project Participant’s documentation will advise the CPM Manager of the anticipated request.
The Compliance Documents generally will provide instructions to the Project Participant on how to seek a VCAP.
The Project Team will use RCCMS for organizing, storing and safeguarding all documents and other records related to the Project as required for retention following completion of the Project.
Any returned Project Participant responses submitted on paper will be uploaded into compliance activities established on RCCMS for the Project ("Project Cases" ). The Team Leader and Team Members will need to review the roles and permissions they each have in RCCMS to assure they are able to complete Project Case record retention.
A Project Case file for paper submissions established on RCCMS will contain the following:
Initial cover letter explaining the Project together with applicable attachments.
Compliance Documents to be completed by the Project Participant.
Project Participant’s submission including any attachments to the Compliance Document or documentation submitted in support of Compliance Document and the returned initial cover letter if it has any information to be completed by the Project Participant.
Team Member case chronology.
Follow up letter (in case Compliance Document not returned by initial due date).
Closing letter, if any.
Other correspondence (if applicable).
Closure of Project Cases on RCCMS may occur prior to completion of the Project and Project Report. The Team Leader and Team Members will evaluate and decide on the timing for closing Project Cases on RCCMS. The Project Team will obtain Group Manager approval of the RCCMS closing process during the analysis phase of the Project.
If submissions are to be received electronically, the Team Leader may determine that only one activity will be established on RCCMS and that all the relevant documents will be contained in one file rather than a separate file for each Project Participant.
The Team Leader will submit the Project Report to the Group Manager after analyzing the data and other gathered information collected during the Project in accordance with timeframes established by the Group Manager. Specific taxpayer information will not be included in the Project Report. The Project Report will address each of the following:
The Project's objectives
Data gathering methods
Impact on resources
Project critique (what worked well, what didn't work)
Recommendations (may address improvements or future projects relating to TEB's enforcement, voluntary compliance, and educational programs).
The Project Team will submit the Project Report to the Group Manager for review and comment.
Upon completion and final approval of the Project Report by the Group Manager, the Group Manager will coordinate review and comments by the CPM Manager. Upon approval, the CPM Manager will send the Project Report to the Director, TEB, who will decide how the Project Report will be distributed.