The guidelines, procedures and techniques in this manual are meant to help examiners conduct an effective examination and to ensure a uniform approach to all TEB examinations (exams).

The procedures contained in this IRM are not intended to be all inclusive. Examiners must use their professional judgment in completing their exam cases and other compliance activities.

TEB’s examination’s authority to resolve issues is derived from its authority to examine any books, papers, records, or other data which may be relevant to its authority to summon, etc. under IRC 7602. The authority to conduct examinations, resolve issues and determine tax liability is derived from Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, which includes but isn’t limited to:

Generally, Compliance Planning & Classification (CP&C):

The Functional Assignment Coordinator (FAC) assigns cases to the TEB Exam group managers’ unassigned inventory.

The Program Manager, Tax Exempt Bonds is the program manager responsible for the TEB examination program.

Group Managers are responsible for:

It is important for all employees to understand that they are responsible for making decisions regarding their own personal safety, considering their local conditions, and they are not expected to place themselves in dangerous situations even if the building/office has not been officially closed.

CP&C administers inventory control of refund claims.

The FAC coordinates the refund claims inventory.

TEB exam groups (TEB Exam) examine refund claims.

TEB Technical (Technical) provides TEB Exam technical assistance and performs mandatory review of certain refund claims as described in this IRM.

In order to ensure a consistent level of managerial engagement in the process of making key strategic decisions during an exam, the examiner submits requests for approval by their manager through RCCMS.

The manager approves or rejects any request through RCCMS.

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with the taxpayer rights. (See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see https://www.irs.gov/taxpayer-bill-of-rights.

This manual uses the following acronyms and terms.

Determining the scope of your exam is the process by which you select issues and related returns that warrant examination.

After applying scope, risk and materiality parameters, document your assessment of classified issues for developmental potential in the workpapers and using the RCCMS Issue Code Data Grid. (See IRM 4.81.5.15.2, RCCMS Issue Code Data Grid.)

Get your manager’s agreement on the scope of the examination.

Adjust the scope by meeting with your manager after your initial interview and review of books and records.

Scope of Examination also relates to conducting the exam in the most efficient way and to the degree to which you use examination techniques to verify an item’s accuracy. Consider these factors when determining your examination scope:

Scope Adjustment Criteria. Examiners and managers must consider these minimal criteria when determining how to conduct an exam and whether to expand or contract an examination’s scope:

Always consider and explain any LUQ items on the return, which if left unexplained, might raise compliance concerns.

Survey cases require group manager approval before you survey. See IRM 4.81.5.7.2, Risk Analysis and Examination –Scope and Depth, and IRM 4.81.5.7.3, Surveying Cases - Before and After Assignment, for additional information regarding surveys.

When examining a bond issue, examiners routinely review information about other bond transactions and returns.

You may open a related return examination under the following common situations:

Establish related return: When you decide, with your group manager’s agreement, to examine a related tax-advantaged bond return, request establishment of the related return through RCCMS and an update to AIMS.

While appropriate inventory management methods for a particular case may vary, work all cases promptly and according to organizational priorities.

Examiner:

Plan your work to promptly communicate with taxpayers, including responding to telephone calls and letters. Allow time to complete administrative processes.

Notify your manager when you need cases. Ask for the number of cases that you can start within 10 business days.

Tell your manager about unusual or problem situations so she or he is involved in the issues.

Be professional: set the tone for the exam. Timeliness is one measure of a quality examination. The IRS and the taxpayer depend on your professional judgment to ensure that exams are processed accurately and efficiently. Every case has its own unique set of circumstances. Generally, apply the following guidelines:

Examination scope defines the exam parameters, including identifying the tax compliance items that you will test. Throughout the examination, you should use professional judgment and risk-based decision-making to determine the exam scope, including the originally determined scope. See IRM 4.81.5.4 for additional information about exam scope.

Examination depth is the extent to which you develop a compliance issue. It demonstrates the degree of intensity and thoroughness applied in determining an item’s correctness. Use judgment to determine exam depth for items considered during the exam. Planning your exam depth helps you better estimate the time needed to complete the exam. The following factors help determine exam depth:

With the approval of your manager, you may determine not to examine a return selected for examination and close it by survey. Employees will carry out this duty per Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. (See IRM 1.2.1.2.35.) Surveys are not subject to mandatory review. These cases should be closed fully electronically as "100 percent paperless" closings.

Before deciding to survey a case, examiners and managers must consider all case facts. Analyze the following factors (not all-inclusive) to help you decide whether to survey the return:

Prior to surveying an exam case, obtain approval from your group manager. The group manager must notify the PM. The group manager will inform the examiner that the PM was notified by secure e-mail. Document the case file (the case chronology record) to indicate that approval for the survey was obtained from your group manager and notification was given to the PM.

All surveyed cases must contain a clear explanation of the circumstances and rationale for closing the case as a survey. Although a lengthy explanation is not required, the case chronology record must document a clear rationale for the survey. A reviewer must be able to evaluate the decision-making process.

When you decide to survey a case, use the appropriate disposal codes:

Complete on RCCMS the designated mandatory fields for closure of a surveyed case:

Use the following survey reason codes on the RCCMS Closing Record, General tab, Survey Reason Code field for all surveys.

SRC A – No LUQs:

SRC E –Other:

Examples of "Other" category:

Group managers have overall responsibility for the efficient processing of their group’s cases.

Generally, only assign examiners cases that they can start within 10 business days.

Effective inventory management requires ongoing group manager involvement in, and monitoring of, case work. Group managers should conduct workload, case and 6490 (WebETS), reviews to ensure that cases are progressing to resolution.

The manager should ensure effective inventory management by:

Ensure examiners understand the importance of involving the manager in appropriate situations.

Timely process all closed cases.

The issuer of the tax-advantaged bond is treated as the taxpayer throughout the exam process. The issuer is responsible for maintaining and producing adequate records to substantiate the tax-advantaged status of the bonds. Generally, other parties to the transaction, including conduit borrowers, will also maintain records and might do so as part of a contractual agreement with the issuer.

During an exam, you may review any records necessary to make a bond tax compliance determination. Consider exam scope, depth and the type of bond under examination when you determine the books and records to review. Generally, when applicable to the case and its scope, review documents and records described in this section and other documents and records as relevant to the exam.

The bond transcript and other documents in the bond issuance closing file will likely document compliance with requirements that apply when the bonds are issued and, unless amended, apply for the life of the bonds.

For post-issuance compliance matters (for example, expenditure, investment and use of bond proceeds), review post-issuance records and records that substantiate compliance with applicable requirements.

Review records substantiating the following matters:

Review records that substantiate how bond proceeds were spent. These include records substantiating:

Review records pertaining to the investment of gross proceeds of an issue. These records should include the following investment information:

Review records pertaining to the use of bond-financed facilities or property, including:

Issuers frequently keep and can provide a bond transcript with:

A trustee is involved with most tax-advantaged bond issuances.

These records are often important to review in an exam of a tax-advantaged bond issue, but they are not all-inclusive:

Internal controls are the issuer’s policies and procedures (and the conduit borrower’s with respect to its books and records) that are intended to identify and measure business operations that impact bond compliance and ensure the accuracy of operating records. These include procedures the issuer or conduit borrower has in place to monitor post-issuance compliance.

Evaluate the issuer’s internal controls and how the controls are implemented to:

"Control risk" is the risk that a material misstatement in the books and records could occur and not be detected by the business’s internal control structure, policies, or procedures.

Collect the information needed to review internal controls by:

Document the internal controls you evaluated, including:

Test the reliability of summaries of records using appropriate examination and sampling techniques.

Use appropriate sampling techniques to substantially enhance the process of examining the books and records.

There are two basic types of sampling: judgment sampling and statistical sampling, which are discussed in the following subsections.

When the examiner opens the examination, the examiner will first contact the taxpayer through an initial exam letter.

In certain situations, the issuer or conduit borrower appoints an attorney or other qualified person to represent them before the IRS.

For information on third party contacts, see IRM 25.27.1, Third Party Contacts - Third Party Contact Program, which is intended to serve as a general reference for the Third Party Contact Program. The Taxpayer First Act amended IRC 7602(c)(1) effective for all notices regarding third-party contacts made after August 15, 2019. You must provide a notice that meets the new requirements for third-party contact notices after August 15, 2019.

IRC 7602 provides that, in determining a return’s correctness or any person’s liability for any internal revenue tax or liability, the Secretary is authorized to:

Secure the records necessary to perform a quality examination using a Form 4564, Information Document Request (IDR).

Initial Contact:

Follow-up:

Enforcement Process

If an issuer or conduit borrower is unable or unwilling to provide records necessary to perform a quality exam, you are authorized per IRC 7602 to summons or otherwise secure records relevant to the examination. Discuss the particular circumstances with your manager. Generally, you will secure the records from third parties either using a summons, third party contact, or another type of contact.

For third party contact procedures, see IRM 4.81.5.10.3.

The authorized purposes for issuing a summons under IRC 7602 are to:

For general summons information, procedures and examples, refer to IRM 25.5, Summons.

Consult the following sections of the Code when preparing and issuing a summons.

The IRS sends a summons using Form 2039. There are certain line items on the first page of Form 2039 requiring specific instructions related to TEB. Prepare these line items as follows:

Interviews should be scheduled to obtain information needed to make informed judgments. Interviews provide information that might not be available from other documents.

Interview the person who has sufficient knowledge and ability to answer questions in a factual context for the area(s) of interest. You may interview issuers, designated representatives, conduit borrowers and other third parties.

Ask about available books and records during the interview. Use interviews to understand the taxpayer’s operations and help to reach informed judgments about the scope and depth of the examination.

Use interviews to get information on unusual or questionable items. Ask follow-up questions to clarify questionable areas.

Interviews may be recorded in several ways:

Informal Notes: Informal note-taking is a commonly used way to record an interview. It may consist of notes you made during or immediately after an in-person or telephone interview or conversation.

Memoranda: A memorandum of interview is an informal statement of the facts obtained during an interview.

Affidavits: An affidavit is a written statement of facts, made voluntarily and confirmed by oath.

Questions and Answers: A question and answer statement is a transcript of questions and the participant’s answers and statements during an interview. This form of recording an interview can become an affidavit if it is confirmed by a declaration made under oath. This form has the advantage of following the exact sequence of the questions asked in the interview.

Deposition (Verbatim Recordings). Depositions are formal interviews primarily recorded during criminal investigations, at which the examiner, any counsel, and a stenographer are present. For further information, see IRM 9.4.5, Investigative Techniques, Interviews.

Initial Interviews: Initial interviews should be held as soon as possible after opening a case. Prepare for the interview by conducting a pre-audit analysis, which must include a thorough review of the case file, review of internal and external data, and preliminary research.

Subsequent Interviews: Hold subsequent interviews with the taxpayer if:

Plan and Research. Planning the interview is an integral part of the interview process. Prior to any interview, review all the information and data relating to the case.

Prepare an Outline. Determine the purpose for conducting the interview and prepare an outline to facilitate obtaining the required information. The outline must contain only relevant and material information and list topics in their proper sequence. Open ended questions are preferred; keep specific questions to a minimum, since they tend to reduce an interviewer's flexibility.

Location of the Interview.IRC 7605(a) and the corresponding Reg. 301.7605-1 allow the Secretary to set the time and place of interviews as long as they are reasonable. In general, the IRS will determine if the interview is more appropriately conducted at an IRS office, a taxpayer or representative's location, or by telephone. Examiners must consider conducting interviews in conjunction with facility tours, when appropriate.

Interview Techniques. It’s important to create an environment in which the taxpayer feels comfortable. Maintain a friendly and professional demeanor. Examiners should consider the following suggestions in establishing rapport:

An on-site visit is often an important part of a quality TEB examination:

Consider these factors to determine when an on-site visit may be warranted:

Examples of when you may decide not to do an on-site tour include:

When bonds finance multiple projects, as in the case of multi-purpose bonds or pooled financing, identify all projects financed by the bonds:

When you determine an on-site visit isn’t warranted or don’t conduct one, document the case file to show your determination or the case circumstances.

Authority to tour bond-financed facilities during the examination comes from 26 CFR 301.7605-1(d)(3)(iii), which states "regardless of where an examination takes place, the IRS may visit the taxpayer’s place of business or residence to establish facts that can only be established by direct visit, such as inventory or asset verification. The IRS generally will visit for these purposes on a normal workday of the IRS during the IRS’s normal tour of duty hours."

Your physical observation of the bond-financed facilities provides you the opportunity to:

Schedule the facility tour after determining which assets were financed with bond proceeds. Adjust the scope and depth of the exam based on your findings during the tour.

Take the tour with knowledgeable individuals. Taxpayers, or their representatives, can often explain business practices that appear unusual to you.

Document a completed tour or inspection. Indicate:

As part of the exam, document the facts necessary to reach conclusions during the examination. Documentation of the facts may take several forms, including observations, documents and oral testimony.

There are many methods available for an examiner to consider in gathering facts, including observations, documents and oral testimony.

Observations. An observation is the act of recognizing and noting a fact or occurrence. Observations are generally obtained in an exam during a facility tour or an interview.

Documentation. A taxpayer’s books and records, or records of third parties, are forms of documentation. Writings made contemporaneously with an event are more likely to reflect the actual facts and demonstrate the parties' intent. Likewise, original documents are generally given greater weight than copies or summaries. While documentation has great value, don’t solely rely on it and exclude other facts and oral testimony.

Oral Testimony. Oral testimony can also establish facts and there are instances in which courts have given greater weight to it than to documentation. Oral testimony is the verbal testimony provided in support of a fact. Do not use oral testimony in lieu of available documentation when:

Synchronize RCCMS at least once per workday.

The RCCMS Office/Case File Documents folders are part of the electronic case file.

There are certain circumstances that require the use of paper documents:

The RCCMS Issue Data Grid is a functionality in RCCMS that tracks the development of examination cases from selection through the entire examination process. This is required for all examinations. See the TE/GE Examination Process Procedural Handbook for additional details.

Proper workflow associated with this functionality ensures a consistent level of managerial engagement in the process of making key strategic decisions during examinations. Those decisions include, but are not limited to, establishment and/or revision of the exam plan including modifications to the examination scope. Submit requests for approval by your manager through RCCMS. These messages go directly to the manager’s inbox in RCCMS for approval or rejection. Managers must monitor this inbox to ensure appropriate and timely action on these messages. See the RCCMS Release 3.5.1 Change Document (July 2020) for additional details.

The Issue Code Data Grid replaces the capturing of Principal Issue Codes in the RCCMS Closing Record tabs. Your use of the Issue Code Data Grid will:

This section provides guidance on developing workpaper content, format, organization, and case file documentation. These guidelines are meant to promote quality and consistency in examiners’ workpapers.

Workpapers are the written records that provide the principal support for your determination. Workpapers document the scope, procedures applied, tests performed, information obtained, tax law considered and applied, and the conclusions reached in the examination. They must include or reference all the information that was necessary to conduct the examination and support the examination results. Well-prepared workpapers quickly communicate the case status. Poorly prepared and disorganized workpapers leave others uncertain as to the status of the case or the questions raised. Workpapers reflect on the quality of the examination.

Workpapers serve four basic purposes:

Workpapers must be:

Workpapers prepared electronically are generally prepared in Microsoft Word (Word), Excel, or Adobe.

To facilitate preparing electronic workpapers, ask that the taxpayer provide, whenever possible, all documents and information in electronic format. Taxpayer records commonly available in an electronic format are the Official Statement, Bond Transcript, trustee account statements, and rebate reports. Appropriate IT procedures must be followed to scan any electronic data for viruses, prior to reviewing. You must submit an IT help ticket to increase the allowable upload file size when the workpaper file cannot be loaded onto RCCMS due to file size limitations. Large PDF documents obtained from a taxpayer should be loaded under Case File Documents to prevent exceeding the size limitations. Workpapers must be loaded under Office Documents.

If possible, transfer documents to a digital format using a scanner,. This includes any key documents, or portions thereof, secured in a non-digital format that are vital to supporting examination conclusions.

During the exam, electronic workpapers should be maintained on your computer’s hard drive. To minimize the risk of losing data, during the exam, workpapers should also be posted to the RCCMS case file as a backup procedure. As workpapers are completed, attach them as a comment to your workpaper summary file in RCCMS (See IRM 4.81.5.16.3) and the backup working file previously posted to the RCCMS case file may be removed.

The Tax Exempt Bond Workpaper Summary ("TWS" ) serves as the organizing case file document for TEB examination cases.

The TWS is designed as a working tool for:

A single TWS may include 100 or more attached files including:

The TWS must include an "Issue Lead Sheet" with supporting papers that:

Include these elements in an Issue Lead Sheet:

Not all the TWS template exam sections will apply to all bond examinations. In some exams, the scope may be limited. The TWS contains fillable fields that may be used to indicate a section is not applicable or the scope has been limited.

In addition to the Issue Lead Sheets, include other relevant supporting workpapers and documents in the case file. Workpapers and documents:

These workpapers include documents you generated or secured from the issuer, conduit borrower or other third party, if they are relevant or add value to the case. Typical examples include:

Use caution to include only pertinent information supporting the conclusions reached. Extraneous information not supporting the conclusions must not be included in the file. Extraneous documents the issuer or a third party provided must be returned when the exam is concluded.

Your documentation on the Issue Lead Sheets must describe the question/noncompliance, facts, exam procedures, applicable tax law, application and analysis of law, and conclusions in a format that can be readily copied to a Form 886-A, Explanation of Items, when an issue warrants issuing Form 5701-B, Notice of Proposed Issue.

Use Form 5464, Case Chronology Record (CCR) to record actions taken on the case, contacts made, follow-up dates, and time expended. The form is a historical record and essential part of the exam case file. Update it when you act on the case.

A clear, concise CCR is particularly important in sensitive or high-profile cases, and when the case involves uncooperative issuers or representatives, or will be the subject of litigation.

The CCR must indicate a follow-up or response date when appropriate and any approved extensions with the new response date. If the taxpayer misses a deadline, document the CCR to indicate what follow-up actions you took to address the missed deadline.

RCCMS has an automated version of Form 5464 embedded in the compliance activity information tabs of each electronic case. The RCCMS chronology:

Because the RCCMS chronology is a system feature, you are not required to post the file to the RCCMS Office Documents folder or to check the electronic file out/in when you use it.

The CCR must clearly reflect the status of the case. The time reflected in the chronology should agree with the time charged to the case on WebETS.

The CCR should contain the following information:

Safeguard confidential information related to the case file from unauthorized disclosure. If you determine that information contained in a file is sensitive, place it in a confidential envelope inside the case file. If a Freedom of Information Act (FOIA) request is received on a case that contains sensitive information, a Disclosure Officer will determine if any information should be redacted. See IRM 11.3.13.5, Disclosure of Official Information, Freedom of Information Act, Review and Redacting, for additional information.

When a case file contains sensitive or confidential information, it will normally be in a paper format. If you receive the documents electronically, do not place them into RCCMS or keep them in the same folders in your hard drive.

Protect these documents from disclosure. Place TDF 15-05.11, Sensitive But Unclassified Cover Sheet, on the outside of the case jacket. This will alert users that the file contains sensitive information requiring protection.

When you identify potential noncompliance, discuss it with the taxpayer or the taxpayer’s representative as soon as possible. Discussing potential noncompliance can lead to an early resolution of the case.

If the taxpayer concurs with your position on the identified noncompliance, notify your manager and determine an appropriate resolution.

Depending on the violation, the appropriate resolution may require you to:

If the taxpayer doesn’t agree, discuss the noncompliance with your manager. With your manager’s concurrence, give the taxpayer or the taxpayer’s representative a written summary of potential noncompliance on Form 5701-B, Notice of Proposed Issue. The Form 5701-B must include the issues, facts, law, and the examiner’s position. The taxpayer has 30 days to respond to the Form 5701-B. If the taxpayer does not respond, proceed as if the taxpayer does not concur with your conclusions.

If at any time the taxpayer requests technical advice on potential noncompliance, follow the appropriate revenue procedure, which is updated annually as the second revenue procedure of the year (for example, Rev. Proc. 2021-2). See IRM 4.80.1, Government Entities Examination Program and Procedures, Technical Assistance and Technical Advice Requests, for additional procedures.

The examiner or manager should not initiate closing agreement discussions with an issuer/POA. Closing agreement discussions are initiated solely at the request of the issuer/POA. It is permissible to inform an issuer or POA that closing agreements may be used to resolve tax matters.

As a result of the examination, you may conclude that the bonds are in compliance. You must obtain your manager’s concurrence with this conclusion.

Prepare the closing letter (Letter 6049, Examination Closed - No Change). Close the case in accordance with IRM 4.81.5.24.1 and forward it to the manager.

The manager reviews the case file and issues the closing letter. Then, the manager documents these actions on the Case Chronology Record.

Close exams when you issue Letter 6049 with the appropriate RCCMS disposal code (107 - No Change).

You may conclude from the examination that the bonds are currently in compliance. However, you may identify potential future noncompliance.

Examples of potential noncompliance are:

Discuss future noncompliance with the manager to determine whether a referral or information notice for a future year examination should be recommended. If so, prepare referral Form 5666, TE/GE Referral/information Report, requesting a subsequent examination and secure e-mail it to: eoclass@irs.gov. Ensure the subject line references the referral type and TEB’s functional unit. If the file is too large to scan or e-mail, mail to:

Prepare Letter 5954 with the appropriate advisory language for review and issuance by the manager.

Close exams with the Letter 5954 using the RCCMS disposal code 213 if a referral was warranted or disposal code 214 if no referral is warranted.

If you identify a failure to pay rebate or a yield reduction payment, then the bonds are arbitrage bonds under IRC 148. However, it might be appropriate to resolve the noncompliance by securing delinquent or amended Form 8038-Ts. If so, solicit the returns, place the returns under examination through RCCMS and assert the appropriate penalties. See IRM 4.81.5.22 for instructions on processing these returns.

If you determine that the operator of a facility failed to file the Form 8703, Annual Certification of a Residential Rental Project, when required, solicit the certification for the delinquent periods and forward the delinquent forms for processing per the instructions in IRM 4.81.5.22.1, Procedures for Processing Delinquent Returns. Consider assessing the penalty provided under IRC 6652(j). Discuss assertion of appropriate penalties with your manager before proposing any penalty to the operator of a facility. See the penalty handbook, IRM 20.1.10, Penalty Handbook, Miscellaneous Penalties.

The examiner or manager should not initiate closing agreement discussions with an issuer/POA. Closing agreement discussions are initiated solely at the request of the issuer/POA. It is permissible to inform an issuer or POA that closing agreements may be used to resolve tax matters.

If the issuer requests resolution of noncompliance determined during the exam, then with your manager’s agreement, begin the closing agreement process outlined in IRM 4.81.6, Tax Exempt Bonds Examination Program and Procedures, Closing Agreements.

If the identified noncompliance determined during the examination is unresolved, with your manager’s concurrence, follow the procedures for unagreed issues in IRM 4.81.14.

IRM 25.1, Fraud Handbook, contains specific guidance on all aspects of both criminal and civil fraud. IRM 25.1.9, Fraud Handbook, Tax Exempt/Government Entities, outlines guidelines for Tax Exempt/Government Entities (TE/GE) determination letter applications and that apply to tax and information returns under TE/GE's jurisdiction. Specific sub-sections provide procedures that apply to each function. IRM 25.1.9.7 provides guidance and specific procedures for developing fraud related to a tax-exempt bond examination.

Fraud activities generally arise from examinations and requests from Criminal Investigation (CI) for cooperating examiners. Requests for a cooperating examiner are generally submitted via Form 6544. The TE/GE Fraud Specialist processes these requests.

There are different types of criminal investigations:

If you identify indications of potential fraud in an examination, you will work with your group manager, the TE/GE Fraud Specialist, the TEB Fraud Subject Matter Expert, and the SBSE Fraud Technical Advisor to develop the potential fraud issue. If warranted, prepare and submit a criminal referral to CI.

If you identify indications of potential fraud in an examination, discuss the indications with your manager and the TE/GE Fraud Specialist. When it is determined by all parties that the fraud issue should be developed, you should prepare a Form 11661, Fraud Development Recommendation – Examination, for review by the SB/SE Fraud Technical Advisor. Once the Form 11661 is approved, the case becomes a fraud case and you must update the case to status 17 (fraud development). A case moves into status 18 (accepted by Criminal Investigation) only after a Form 2797, Referral Report of Potential Criminal Fraud Cases, is prepared, approved, and accepted by CI.

Use Activity code 155, Fraud/Fraud Related Activities, for all TE/GE fraud cases and fraud-related activities, along with the appropriate project codes. This activity code is used for approved fraud development of exam cases and assistance to CI. The TE/GE Fraud Specialist issues a naming convention code when an exam case is approved to move into status 17 or when a cooperating examiner is assigned.

The examiner must keep the manager and TE/GE Fraud Specialist apprised of the following:

The group manager:

When you become aware that one or more of the individuals involved in the TEB transaction may be subject to the promoter penalty described in IRC 6700, consult with your manager to determine whether the IRC 6700 penalty referral should be made to the Lead Development Coordinator (LDC). Notify the TE/GE Fraud Specialist if the IRC 6700 issue will be developed. The TE/GE Fraud Specialist is TE/GE’s liaison with the LDC and Office of Tax Shelter Analysis.

Refer to IRM 20.1, Penalty Handbook and specifically to IRM 20.1.6.13, Penalty for Promoting Abusive Tax Shelters - IRC 6700, for guidance on developing IRC 6700 penalties.

If it is determined that an IRC 6700 penalty referral should be made, consult:

Complete Form 14242, Report Suspected Abusive Tax Promotions for Preparers, and submit to the LDC and the Fraud Specialist.

Request specialist assistance, including questions and informal requests, through the Specialist Referral System (SRS) unless you cannot access the specialist group through that system. See Manual Referrals below.

The SRS is an on-line automated system that allows examiners to submit a request for specialist assistance. It automates the referral request process for LB&I, SB/SE, W&I and TE/GE field specialists. Access it from the Intranet at https://srs.web.irs.gov/.

Use the SRS for referrals (including questions and informal requests for assistance) to the following specialist groups:

When you submit an online request, SRS automatically notifies the specialist’s manager. The system is electronic and web-enabled to provide management with necessary information reports.

Use a manual request only when you cannot access a specialist group through SRS. See IRM 4.81.5.20.2.

The SRS maintains an archive of all referrals.

Make a manual referral to request specialist services or other support not available via SRS.

When a specialist is involved in a case, the examiner maintains control of the examined return.

Specialists assigned to exams should meet with the examiner and the taxpayer (if appropriate) to discuss:

Coordinating with the specialist ensures issues are material to the return and the time charged is commensurate with the issues.

Elevate disagreements between the examiner and specialist to their respective managers for resolution.

You may refer cases not originally accepted for specialist’s assistance again if substantial information is developed during the exam. If the case was rejected due to workload priorities, a specialist may be made available to consult for significant issues. For those specialist groups available through SRS, submit informal questions using SRS. For specialist groups not available through SRS, arrange for consultations with the approval of both managers.

LB&I Practice Networks (PNs) consists of teams of Subject Matter Experts (SMEs) who share knowledge, develop and maintain technical expertise and enhance collaboration on specific issue areas. PNs are a resource available to TEB examiners through the LB&I K-Net and may be helpful in the development of their case.

PNs provide:

LB&I has established PNs that are organized by practice areas and can be focused on a technical issue or procedural issues.

The PNs provide resources for examiners on complex tax issues and develop resources to enable examiners to address issues.

When a situation arises that may delay completion of an examination, the examiner is to complete the exam with regard to all other issues and required actions that can be continued prior to placing the case in suspense. In considering which issues can be continued, the examiner should watch for actions that could violate a federally declared disaster relief provision.

Before placing any case in suspense, notify the group manager via e-mail. Describe the circumstances that requiring that the exam be suspended and describe the open items remaining in the case.

When the group manager concurs with an examiner’s request to place the case in suspense, the examiner’s request as well as any manager-initiated requests will be submitted to the PM for approval. Upon approval, the group manager will notify the examiner to suspend examination activity on the case.

Send Letter 1014-A, Notification of Examination Delay, notifying the issuer that the case was placed in suspense. Use Selectable paragraph "C" to inform the issuer that you will make contact when you resume case activity.

Update the case to reflect the appropriate suspense status on RCCMS and AIMS.

Suspended cases are maintained at the group level and monitored by the group manager.

When the matter is resolved, update the case via RCCMS and AIMS to reflect that the exam is no longer in suspense (in other words, status code "12" to continue exam activity).

Prior to closing cases that were previously suspended, make a notation indicating the case was previously in suspense. (Notate RCCMS electronic and any paper files.) When submitting the case in RCCMS to the group manager for closing, provide comments in the RCCMS dialogue box indicating the case was previously in suspense.

Upon closure, the group manager notes the prior suspense status, including notations in the RCCMS dialogue box. This alerts the closing unit that the case was previously in suspense. Upon transfer from the group to the closing unit, update the case to status 55.

Confirm the issuer and, if applicable, the conduit borrower of tax-advantaged bonds subject to an exam is not located within a Federally Declared Disaster Area within the one-disaster year period per IRC 7508A. If the issuer or conduit borrower is located within a Federally Declared Disaster Area, suspend the exam in accordance with the rules and procedures in IRM 4.2.2, IRM 25.16.1, and IRM 25.16.9.

IRS Disaster Memo & Declarations by Calendar Year for all Federal disaster events can be found on the intranet at http://www.icce.irs.gov/fema/.

Process secured Delinquent Returns using the procedures in this section.:

Obtain BMFOLI for the taxpayer identification number (TIN) and the tax period to which the secured Delinquent Return relates. Delinquent Returns can include:

Select a report number to use to process a Delinquent Return. The report number should be a three- digit number within the appropriate range (see IRM 3.11.26.3.1(2) for an explanation of the report numbering system) which has not already been used for the applicable tax period. Review BMFOLI and verify that the report number selected does not duplicate any account module listed on the Master File for such period. See the Instructions for the Form 8038-CP for additional limitations on the report numbers for that form.

Complete these procedures for processing of the Delinquent Return:

Prepare Form 3210 to accompany the Delinquent Return package to the Service Center. Include information on the Form 3210, Document Transmittal, to alert the Service Center of the submission of an original return and payment, if any. Include the taxpayer’s name, EIN, tax form, MFT, tax period, and for submissions with payment, the amount of the payment, check number and any required Form 3244-A on Form 3210. Include the originator’s complete name, address, and mail stop to ensure timely acknowledgement of the Form 3210.

Include all required documents relating to each Delinquent Return. Multiple Delinquent Returns may be submitted on the same Form 3210. Include these items in the package, in the order listed:

For large payments of $100,000 or more, mail the Delinquent Return package overnight to:

An e-mail notification is required when submitting payments of $100,000 or more. Notify the teller unit at: &CTR ODN OGDEN TELLERS and include the following information in the e-mail:

For payments less than $100,000, the Delinquent Return package is to be mailed overnight to:

When there is no remittance with the submission, the Delinquent Return package must be mailed to:

The payment threshold is determined for each individual return submitted and not collectively.

Follow-up on any Form 3210 not acknowledged within 10 days of submission. Fax the Service Center to request acknowledgement of the submission and provide a copy of each transmittal requiring acknowledgement. See IRM 5.1.2.4.5.1. Fax requests to (855) 318-9148, ATTN: Field Office Clerks.

Late filing and other errors involving Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap, cannot be corrected through a late or amended filing. Determine whether a closing agreement or adverse determination is appropriate.

The exam group monitors the Master File to ensure the payment (evidenced by a transaction code (TC) 610) and the assessment (TC 150) post to the same module.

The assigned examiner is responsible for establishing the delinquent return on AIMS through RCCMS, whether the filing of the delinquent return occurs per the procedures of IRM 4.81.5.22 (the original filing secured by the examiner) or the issuer’s direct filing with the Service Center as a result of the exam. Following the TC 150 posting, information necessary to establish the delinquent return on RCCMS is available and the case must be established in status 12. After establishing the case on RCCMS and AIMS, request closure of the case using disposal code 208, Delinquent Return Secured.

When an issuer files a delinquent Form 8038-T return, whether under the procedures of IRM 4.81.5.22.1 or directly with the Service Center, consider applying penalties under IRC 148(f)(7) and Regulation §1.148-3(h).

If a delinquent Form 8038-T includes a request for the waiver of penalty under Reg. 1.148-3(h)(3), the examiner securing the return must make an appropriate determination.

For cases in which the examiner proposes to waive all or a part of the penalty in lieu of loss of tax exemption, submit the recommendation through the group manager and outline the basis for the proposed waiver

If all penalty amounts required under the provisions of IRC 148 (f)(7) and the applicable regulations thereunder were not paid at the time the delinquent return was secured, and no administrative relief is otherwise provided, the issuer must pay the required amounts or you must proceed with proposing that the bonds are arbitrage bonds.

When you determine that a return must be resequenced to correct erroneous Master File information for an examined return, notify your group manager and take the following steps:

Examiner: Complete the following responsibilities before you close a case file:

Unagreed exam with protest to Appeals:

Fraud referrals:

Group managers must:

A paper case file is required for those documents that cannot be included in the RCCMS case file or are otherwise required by management directive.

Identify the paper case file folder with the taxpayer name, TIN, MFT, tax period, and report number on the folder tab.

Staple Form 3198-A, Special Handling Notice, to the outside front cover of all paper case files. On the Form 3198-A, identify the taxpayer’s name, tax period, and any special handling instruction. Also note on the Form 3198-A the date the RCCMS case was closed to the examiner’s manager.

Enclose confidential informant documents in a confidential envelope and put the Sensitive But Unclassified (SBU) Cover Sheet, Catalog Number 56033J, on the outside of the envelope. Attach the envelope to the inside left of the paper case file. Confidential informant documents include:

All paper workpapers that are not in electronic format should be numbered and referenced to correspond with the workpapers in the related electronic case file.

Examiners and managers: Ensure that you close the case to comply with any applicable closing procedures of IRM 25.2, Information and Whistleblower Awards.

For cases transferred to Appeals, follow the case closing and case file assembly procedures in IRM 4.81.5.24 and IRM 4.81.5.25. As with other cases, generally the case will be closed “all electronic.” Consult with your manager on cases with unique circumstances that might justify closing with a paper case file.