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4.81.11  Tax Exempt Bonds Referral Program

Manual Transmittal

February 14, 2017

Purpose

(1) This transmits revised IRM 4.81.11, Tax Exempt Bonds (TEB) Examination Program and Procedures, Tax Exempt Bonds Referral Program. Procedures for the Tax Exempt Bonds Referral Program include requirements for either internal or external referrals.

Material Changes

(1) The IRM reflects minor changes in procedures and personnel involved.

(2) Minor editorial changes, including plain language edits to comply with the Plain Writing Act, were made throughout the document.

Effect on Other Documents

This supersedes IRM 4.81.11, Tax Exempt Bonds Referral Program dated November 2, 2015.

Audience

Tax Exempt and Government Entities
Government Entities and Shared Services
Tax Exempt Bonds

Effective Date

(02-14-2017)

Imraan G. Khakoo
Acting Director, Tax Exempt Bonds
Government Entities and Shared Services
Tax Exempt and Government Entities

4.81.11.1  (02-14-2017)
In General

  1. This IRM section gives procedures for the TEB Referral Program for Tax Exempt Bonds. It offers instructions for referrals that TEB receives or develops specifically relating to compliance issues.

  2. References to "tax-advantaged bonds" in this section 4.81.11 are: tax-exempt bonds, tax credit bonds, and direct pay bonds.

4.81.11.1.1  (02-14-2017)
Purpose

  1. TEB Referral Program’s primary purpose is to administer referrals of tax-advantaged bond issuances, including their:

    • Initiation

    • Review

    • Evaluation

    • Tracking

  2. The TEB Referral Program focuses TEB’s resources on:

    1. Identifying and correcting noncompliance with fairness and the highest level of integrity.

    2. Resolving all violations of federal tax law applicable to tax-advantaged bonds at the transaction level instead of the bondholder level.

4.81.11.1.2  (02-14-2017)
Organizational References

  1. The following references defined below will be applicable throughout IRM section 4.81.11.

    Term Definition
    TEGE Tax Exempt and Government Entities
    TEB Tax Exempt Bonds
    CPM TEB’s Compliance & Program Management program made up of multiple CPM groups whose responsibilities include classifying and selecting returns for exam.
    FO Field Operations program made up of multiple groups whose primary responsibility is examining returns, including those classified as referrals.
    TEB Referral Subject Matter Expert (SME) The CPM senior tax law specialist CPM Manager assigned to coordinate the TEB Referral Program.
    Analyst CPM tax analyst or systems analyst responsible for IDRS, DINS and other research of internal and external databases required for the evaluation of referral information.
    Examiner FO revenue agent responsible for the examination of returns.
    WBO IRS Whistleblower Office
    Informant, Claimant and Whistleblower Used synonymously throughout this IRM to refer to persons who submit information under IRC 7623 to the IRS. However, don’t infer legal significance based solely on these terms’ use in this IRM.
    Issuer A state, local government, municipality, authority or an entity that can legally issue bonds on behalf of a state or local government.
    Classifier The SME or other person designated by the Manager, CPM to make a recommendation concerning the referral.
    Functional Division WB SME or TEB SME The CPM senior tax law specialist assigned to coordinate the TEB Referral Program is the WB TEB SME.
  2. CPM is responsible for the administering and overseeing the TEB Referral Program. The TEB Referral SME reviews and operates the program and reports to a CPM group manager. Analysts support the SME as necessary.

4.81.11.1.3  (02-14-2017)
General Referrals versus Whistleblower Referrals

  1. A general referral is a document prepared by a TEB or other IRS employee, which identifies a current or potential area of noncompliance pertaining to a tax-advantaged bond issuance. These referrals may result from an in process exam, news media item or from any other internal or external source. Referrals are submitted to the TEB Referral SME on Form 5666, TE/GE Referral Information Report.

  2. Form 5666 will be used to identify areas of noncompliance likely to occur in the future. Form 5666 referrals are:

    1. Assigned a tracking number and placed on the tracking spreadsheet.

    2. Annotated with the future audit beginning date.

    3. Established in RCCMS.

    4. Monitored monthly by the SME for future year referrals and placed in the referral exam stream as they reach their future dates.

  3. A Whistleblower Referral is a document or other communication (for example: telephone call, e-mail) from a source outside of the IRS which alleges potential noncompliance with the federal tax laws applicable to tax-advantaged bonds. These referrals are submitted to the IRS Whistleblower Office on Form 3949-A, Information Report Referral, with Form 211, Application for Award for Original Information, (optional). If you receive an Informant’s call or e-mail, follow the procedures for handling Whistleblower Referrals in IRM 25.2.1 and IRM 25.2.2.

4.81.11.2  (02-14-2017)
TEB Referral Committee

  1. This section describes the TEB Referral Committee’s (the "Committee" ) purpose, composition and responsibilities.

4.81.11.2.1  (02-14-2017)
Purpose

  1. The Committee’s purpose is to evaluate each referral’s (from the SME) exam or other compliance potential.

4.81.11.2.2  (02-14-2017)
Composition

  1. The Committee is made up of two primary members and two alternates. The members are tax law specialists appointed by the CPM Program Manager.

4.81.11.2.3  (02-14-2017)
Responsibilities

  1. Committee responsibilities:

    1. Evaluate TEB referrals fairly and impartially in an unbiased and appropriate manner.

    2. Receive the referral electronically: the Referral Memo (containing the referred information details and attachments) and the TEB Referral Control Sheet.

    3. Evaluate and recommend an action within 14 days from receipt (may either meet to discuss the referral or act independently to evaluate/recommend).

    4. Appoint an independent third reviewer (alternate member) to review the referral if the Committee members disagree on a recommendation. The third reviewer’s recommendation determines whether an exam or other compliance potential is initiated.

  2. Committee actions:

    1. Document recommended actions on the TEB Referral Control Sheet.

    2. Recommend a full or limited scope exam of the bond issuance, taxpayer education contact, or no further action be taken based on each referral’s facts and circumstances.

    3. Return the completed TEB Referral Control sheet to the SME.

4.81.11.3  (02-14-2017)
Case Classification Procedures

  1. This section describes the TEB Referral SME and Analyst responsibilities, general flow of a referral case, and establishment of a referral case on RCCMS and AIMS.

4.81.11.3.1  (02-14-2017)
Referral SME

  1. SME’s responsibilities and duties (not limited to):

    1. Prepare the Referral Control Sheet, assign a tracking number and log the referral into the referral logbook. The tracking number is: the year and month the referral was received followed by 001 for the first referral for that month (YYYY-MM-NNN). Succeeding numbers are 002, 003, etc. An example of a tracking number is 2016-06-001. This refers to the first referral received in June 2016.

    2. Conduct initial review of the referral to identify the Issuer and bond issuance in question.

    3. Coordinate with the Analyst to conduct additional research, identify the EIN of the Issuer and retrieve the DINS for the issuance.

    4. Establish the Referral on RCCMS using the Referral Tab.

    5. Prepare the Referral Memo: include your basis for recommending it and the Referral Control Sheet to send to the Committee.

    6. Upon the Committee’s agreement to go forward with the examination, close the referral and reestablish it as an exam case on RCCMS & AIMS.

4.81.11.3.2  (02-14-2017)
Analyst

  1. The Analyst(s)’ primary responsibility is conducting any additional research needed to clarify or augment the referral information received. Additional research may include retrieving the DINS return for the issuance, locating the official statement, and performing IDRS research on the Issuer of the bonds.

  2. The Analysts may also be required to establish the referral cases on RCCMS and AIMS.

4.81.11.3.3  (02-14-2017)
Classification

  1. The SME reviews and evaluates the information to determine whether any audit potential exists using these factors:

    • Whether there is a potential violation of the law.

    • Whether there are any indications of fraud.

    • Whether the information is new and credible.

    • Whether there has been a previous exam of the bond issuance and the results of that exam.

  2. After evaluating the referral information, the SME annotates his/her recommendation in the referral memo that is submitted with the Referral Control Sheet including reasons for recommending an action or disposition. Referral recommendations include: a full scope exam, limited scope exam, taxpayer education contact, or no action.

4.81.11.3.4  (02-14-2017)
Referral Case Flow

  1. This section describes how a referral goes through the TEB referral process. Whistleblower Referrals specific procedures are addressed in IRM 4.81.11.5, Whistleblower Procedures.

    Referral cases flow as follows:

    1. SME receives referral information from either internal or external sources.

    2. SME initially reviews the information, prepares a Referral Control Sheet and assigns the referral a tracking number.

    3. SME requests Analyst to pull IDRS to identify the EIN and DINS.

    4. SME establishes the referral on RCCMS.

    5. SME prepares the Referral Memo, updates the Referral Control Sheet and attaches any relevant documents.

    6. Committee reviews SME’s recommendations and documents decision on the Referral Control Sheet or as an attachment.

    7. If Committee approves opening an exam, SME closes the referral with the updated Referral Control Sheet and coordinates with an analyst to control the case as an exam case on RCCMS and AIMS. The case is then transferred to the RCCMS unassigned inventory folder for CPM Group 7212 in status 08 for subsequent assignment.

    8. If Committee members disagree with the SME’s recommendation, the SME closes the referral with the updated Referral Control Sheet.

4.81.11.3.5  (02-14-2017)
Form 5666

  1. Form 5666, TEGE Referral Information Report, may be used by TEB employees and employees of the other IRS operating divisions to refer a potential noncompliant bond issuance to TEB. See Exhibit 4.5.1-14 of the TEGE AIMS Processing IRM for instructions to complete the form.

  2. Complete Form 5666 by including:

    1. All available information about the Issuer of the bonds and the nature and size of the potential noncompliance issue.

    2. Information pertaining to the source of the referral and any news articles, correspondence or other documentation concerning the potential noncompliance issue.

    3. Optional research from IDRS, the internet and other sources used to gather additional information regarding the issuer and entity involved.

    4. Objective information to help the Classifier recommend compliance action.

  3. Send to the SME for action.

4.81.11.3.6  (02-14-2017)
AIMS Source Codes

  1. Properly code each referral to document its origin. Use the below referral source codes to correctly prepare Form 5666 or a referral on the Specialist Referral System. The SME verifies the source code’s accuracy and corrects errors prior to the case establishment.

  2. Use one of the following source codes for the types of referral items in this IRM as identified in the GE Computer Systems Codes Book.

    • Source Code 60 Information Report

    • Source Code 62 Director/CPM Referral

    • Source Code 63 Appeals Referral

    • Source Code 64 Pick-up Related to Other

    • Source Code 67 Other Referral (W&I, SBSE or LB&I)

    • Source Code 68 Congressional Referral

    • Source Code 69 Taxpayer Service Referral

    • Source Code 72 Informants Report

    • Source Code 74 Media Lead (News Media, i.e., Newspaper, TV, News Magazine, is the actual source of the lead)

    • Source Code 77 State Attorney General or other State/Local Government Agency Referral

  3. Refer to the GE Computer Systems Codes Book, Document 11308 for any other referral that doesn’t fit into the above categories.

4.81.11.3.7  (02-14-2017)
Referral Tracking and Reports

  1. All TEB referrals will be established and tracked in RCCMS. The TEB SME will establish all referrals and maintain the Referral Log. RCCMS documents the receipt of the referral information and its movement through the referral process, including the:

    1. Date and source of the referral.

    2. Evaluation of the referral.

    3. Decision and rationale regarding any audit potential.

    4. Implementation of the course of action recommended.

    5. Current location and status of the referral.

    6. Final disposition of the referral.

  2. The SME maintains the Referral Log. Each referral includes this information:

    1. Assigned tracking number.

    2. Receipt date of the referral.

    3. Name and EIN of the Issuer.

    4. Source code.

    5. Referral tracking number

  3. The Referral Control Sheet which documents the actions taken and progress will be attached to the RCCMS referral file.

    The Referral Control Sheet includes:

    1. Referral tracking number and date received.

    2. SME section for dates and action taken.

    3. Return Identification Coordinator section for research action taken and dates.

      Note:

      Analyst who researches completes this.

    4. Classifier section for the recommended course of action.

    5. Committee section for its concurrence or non-concurrence of recommended action and signature boxes.

    6. Group section for documentation of the exam results and disposition of the referral case.

4.81.11.4  (02-14-2017)
Referral Examination Group Procedures

  1. This section describes the actions and procedures for closing examined referral cases.

4.81.11.4.1  (02-14-2017)
Group Actions

  1. The Manager, Field Operations: Ensure that referrals are given priority assignment to Examiners.

  2. Group Manager/Examiner: After reviewing the case file, if you determine the case doesn’t warrant an exam, request the case be surveyed.

  3. Group Manager/Examiner: Prepare a memo explaining the reason for surveying the referral case and send it to the Committee for its concurrence prior to surveying the referral case on RCCMS and AIMS. Include a copy of the memo and concurrence action in the case file and attach it to the Referral Control Sheet.

  4. Examiner: When you complete an exam or decide to survey the referral case, use the general case closing procedures in IRM 4.81.5:

    1. Request case closure using the applicable disposal code for the type of compliance action you took.

    2. Update the Referral Control Sheet with your actions taken and exam results.

    3. Attach a copy of the Referral Control Sheet to the RCCMS case file and send the original electronic document to the SME via secure messaging.

4.81.11.5  (02-14-2017)
Whistleblower Procedures

  1. This section describes Government Entities (GE) procedures for processing Whistleblower Referral cases including those for when a TEB employee is contacted by an Informant.

  2. There are two categories of Whistleblower Informant claim cases:

    • Discretionary award IRC 7623(a) award cases often referred to as Category A cases.

    • Mandatory award IRC 7623(b) award cases often referred to as Category B cases.

  3. To be eligible for an award under IRC 7623(b)(5), the tax, penalties, interest, additions to tax and additional amounts in dispute must exceed, in the aggregate, $2 million, or in the case of an individual, that individual must have gross income of $200,000 or more for any taxable year at issue.

4.81.11.5.1  (02-14-2017)
In General

  1. This section explains TEB procedures to act on information received concerning an alleged violation of federal tax laws.

  2. TEB may receive an Informant’s information in two ways:

    1. Informant may call, write or e-mail an employee with information alleging a violation of the tax laws.

    2. The information may be received in a case file from the WBO via the GE Whistleblower Coordinator (GE Coordinator).

4.81.11.5.2  (02-14-2017)
TEB Employee Receipt of Information

  1. A TEB employee who receives an Informant’s telephone call or email should follow the procedures for handling Whistleblower Referrals outlined in IRM 25.2.1.

4.81.11.5.3  (02-14-2017)
WBO Cases Received in TEB

  1. Process WBO Category A cases as follows:

    • Whistleblower Office: Receive/accept Category A cases, then send them to the Ogden Informant Claim Examiner (ICE).

    • Ogden: Case builds and classifies the Form 211 claim. It is classified as to the value of the claim. Case building refers to IDRS printouts that are added to the claim file. An actual return is not classified.

    • Ogden: If you select the Form 211 claim, send the case to the TEB SME. Place the ICE indicator “1” on the AIMS module.

    • TEB SME: Follow regular referral procedures and if selected for exam, the Referral SME will have the case established on RCCMS.

    • Keep the Whistleblower file and all references to a whistleblower (informant) separate within the exam file. Don’t reveal to the taxpayer that a whistleblower exists.

    • Group: Complete the exam. Follow case closing procedures in IRM 4.81.11.5.5.

  2. See GE Memorandum, GE-2009-01 for procedures that apply to the flow of WBO Category B cases. See below for pertinent sections of the memo that apply to TEB

  3. WBO cases come via the GE WBO Coordinator. The cases are assigned to the TEB SME who initially analyzes and screens the case to ensure it relates to TEB.

  4. After the case is initially screened, the case is assigned for taint analysis and recommendation as to exam potential of Category A cases that are selected.

  5. Cases recommended for exam are then included in the TEB referral process.

4.81.11.5.4  (02-14-2017)
WBO Examination Procedures

  1. The memo from the GE Director titled "Category "B" Whistleblower Form 211 Claim Procedures" has an attachment titled "Attachment B" , "Form 211 Whistleblower Category "B" Claim Target Case Examination Instructions" . This document provides basic procedures and guidance for a group for the Whistleblower aspects of the exam as highlighted below.

    • Keep the Whistleblower file and all references to a whistleblower (informant) separate within the exam file. Don’t reveal to the taxpayer that a whistleblower exists.

    • Protect the Whistleblower file and keep it in a locked cabinet.

    • Complete Form 11369, Confidential Evaluation Report on Claim for Award, and send it with the claim case file to the Functional Division WB SME/TEB SME, when you dispose of the issues that arose out of the Whistleblower’s information. This may/may not be when you’re ready to close the case, but complete the form and send it with the file before you close the case. The Functional Division WB SME/TEB SME gives the completed Form 11369 to the GE WBO Coordinator.

    • You can’t close the return, whether examined or not off AIMS until you submit Form 11369 to the WBO and the ICE removes the indicator.

      Note:

      A freeze Code called an ICE Indicator Code 1 is placed on the primary return assigned.

  2. Don’t include whistleblower information, whistleblower files or any references to an informant or associate them with the target exam case files when you close the case to Appeals. Return the whistleblower Category "B" claim case file to the Functional Division WB SME/TEB SME, with the completed final Form 11369.

4.81.11.5.5  (02-14-2017)
WBO Case Closing

  1. The WBO exam case file contains:

    • An attachment outlining case procedures you should follow.

    • Form 11369, Confidential Evaluation Report on Claim for Award.

  2. See IRM 25.2.2.6 for additional case closing procedures. Follow the case closing procedures. Complete Form 11369 and include it in the case file when you forward it to the TEB WBO SME.

  3. Forward the award claim file in hard copy to TEB WBO SME when you close the case.

  4. See IRM 25.2.2.6 for general guidance on what items should be contained in the award claim file.

  5. The TEB SME reviews the claim case file for completeness. The TEB SME forwards the case to the GE WBO Coordinator, who records the closure and forwards the case file to the WBO. The WBO advises the ICE Unit to remove the ICE indicator.

4.81.11.5.6  (02-14-2017)
Reconsiderations

  1. If the WBO asks TEB to reconsider a Whistleblower Referral when TEB previously declined to open an exam, TEB will reconsider the Whistleblower Referral only if the WBO provides new information or documents.

  2. The TEB SME prepares a new recommendation based on:

    • Previously considered information.

    • New information or documents supplied by the WBO.

    • Additional research, if appropriate.

4.81.11.6  (02-14-2017)
Fraud and Section 6700 Cases

  1. This section describes how to handle referrals of bond issuances related to fraud cases and/or IRC section 6700 cases.

  2. Fraud and/or Section 6700 cases affect a particular issue, underwriter or other individual related to the bond deal:

    1. These types of actions are predominantly brought against individuals and not against the actual bond issuance.

    2. These actions may have resulted from information developed in a particular bond issuance but may not have any effect on related issuances from the same issuer.

    3. There may be instances where the Department of Justice or IRS Criminal Investigation may decide that there should be no contact with certain entities, issuers or individuals, which may preclude the opening of a related bond referral.

    4. In these special instances, related bond referrals would be held in abeyance until the fraud or Section 6700 case has been resolved.

  3. When the SME receives these referrals, conduct IDRS research to determine whether the issuance or related issuances are under exam and to see if there are any AIMS indicators placed on the AIMS file for the subject issuance. The SME periodically obtains an updated listing of fraud and section 6700 cases in process from the TEB Fraud Coordinator.

  4. The presence of a related Fraud or Section 6700 case will not always preclude opening a bond referral. The determining factors are the facts and circumstances relative to the issuances and outstanding actions in process.

4.81.11.7  (02-14-2017)
Restrictions on Examination of Bond Issue

  1. There may be instances when TEB previously examined the bond issue referral. TEB SME: Although you may consider information from a prior exam of the bond issue in determining whether an audit potential exists, don’t consider the limitations of IRC 7605(b) in making your Referral Program recommendations. However, the Committee may consider these limitations when deciding whether or not to concur with the SME’s recommendation.

  2. When a previously examined bond issue is assigned to a group for exam, the Examiner follows any current procedures before starting an exam of the bond issue.

4.81.11.8  (02-14-2017)
Reports

  1. Electronic reports will be generated by querying the assigned and unassigned inventory using the project code and source codes for referrals. Reports will be generated monthly or as needed.

  2. Manual reports will be generated separately by the TEB Referral SME for whistleblower cases. These will be limited reports and will contain no reference to the informant/whistleblower involved. Reports will be generated monthly or as needed.


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