7.1.4  Exempt Organizations Technical Advice Procedures  (12-16-2002)

  1. This section sets forth the applicable procedures for requesting technical advice. Technical advice may be requested on any issue in controversy. A case involving an unagreed issue may be submitted for technical advice by the—

    • EO Area Manager

    • Appeals Area Director, SBSE-TEGE (Appeals)

  2. This section does not include instructions on processing unagreed cases to Appeals, but covers only those cases which may be forwarded for technical advice.

  3. Administrative procedures for requesting technical advice on matters under the jurisdiction of the Commissioner (TEGE) are found in Rev. Proc. 2002-5, 2002-1 I.R.B. 173 (revised annually). Section 2 of the revenue procedure specifies the significant changes made to the prior year’s revenue procedure.  (12-16-2002)
Technical Advice

  1. For purposes of this IRM 7.1.4, technical advice is written guidance in the form of a memorandum furnished by Exempt Organizations, Rulings and Agreements (Washington POD) upon the request of an area manager or Appeals.

  2. Technical advice is issued in response to any technical or procedural question that develops during any proceeding on the interpretation and proper application of the tax laws to a specific set of facts, involving —

    1. the examination of a taxpayer’s return,

    2. consideration of taxpayer’s claim for refund or credit,

    3. a request for a determination letter,

    4. any other matter involving a specific taxpayer under the jurisdiction of the EO Area Manager or Appeals,

    5. processing and considering nondocketed cases in an appeals office.

  3. Where technical advice is adverse to the applicant, no further appeal is allowed within IRS on those issues. However, see IRM (concerning settlement authority).

  4. Local procedures provide specific guidance for requesting technical advice to a particular area office. Rev. Proc. 2002-5, 2002-1 I.R.B. 173, provides procedures that apply to all area offices. See IRM  (12-16-2002)

  1. Procedures for unagreed cases are described in the appropriate IRM sections for EO determination and examination programs.

  2. Many procedures involving the EO Examinations function are found in IRM 4.75 and IRM 4.76.  (12-16-2002)
Rev. Proc. 2002–5

  1. Rev. Proc. 2002-5, 2002-1 I.R.B. 173, provides the administrative procedures for submitting requests for technical advice to the Washington POD.  (12-16-2002)
Issues Covered by Other Rev. Procs.

  1. The following matters are covered by another revenue procedure,

    1. Procedures for requesting technical advice on employment tax issues are set forth in Rev. Proc. 2002-2, 2002-1 I.R.B. 82, as well as other issues under the jurisdiction of the Associate Chief Counsel (Corporate), Associate Chief Counsel (Financial Institutions and Products), Associate Chief Counsel (Income Tax and Accounting), Associate Chief Counsel (International), Associate Chief Counsel (Passthroughs and Special Industries), and the Associate Chief Counsel (Procedure and Administration).  (12-16-2002)
Mandatory Issues

  1. Technical advice is encouraged on any technical or procedural question that cannot be resolved on the basis of law, regulations, or a clearly applicable revenue ruling or other published precedent. However, technical advice must be requested on the following matters:

    1. Any request for relief under IRC 7805(b) of a ruling letter or technical advice previously issued to a taxpayer.

    2. Cases concerning qualification for exemption or foundation status for which there is no published precedent or on which nonuniformity may exist. (These cases can be simply transferred to the Washington POD for resolution.)

    3. Abatement of Chapter 42 first tier taxes when the taxes exceed $200,000; see IRM (concerning IRC 4962 abatements).

    4. If the Area Manager, after applying the rationale of U.S. v. American College of Physicians, 106 S. Ct. 1591 (1986) , determines that the conduct of advertising in an exempt organization’s journal, or other publication, is substantially related to the organization’s exempt purposes.

  2. This list is not necessarily inclusive. Review the current annual update of Rev. Proc. 2002–5 for an updated list.

  3. Technical advice cases may be referred to Chief Counsel for legal advice on issues within their jurisdiction. See Rev. Proc. 2002-2, 2002-1 I.R.B. 82 (annually updated).  (12-16-2002)
Private Schools

  1. Technical advice must be requested at the completion of examinations of private schools or organizations that support private schools in the following cases:

    1. A revocation or denial of tax-exempt status is proposed because the school has not adopted a racially nondiscriminatory policy as to students or because the school has not operated in a bona fide manner in accordance with a policy of racial nondiscrimination;

    2. Private elementary or secondary schools adjudicated or described as racially discriminatory in a tax or a nontax court action;

    3. Private elementary or secondary schools with few or no minority students that were formed or incorporated, or were expanded, at or about the time of public school desegregation in the community;

    4. Private elementary or secondary schools that all have the following characteristics: previously revoked or denied exemption for failure to operate in a nondiscriminatory manner; recognized exempt after adopting a nondiscriminatory policy as to students; and few or no minority students;

    5. Successor organizations formed to take over the activities of schools described in paragraphs (a) - (d); and

    6. Organizations that provide support to a private elementary or secondary school or schools that do not maintain documentation that all supported schools operate in accordance with a racially nondiscriminatory policy as to students or that support schools described in paragraphs (a) - (e).

  2. In any examination of a private elementary or secondary school, a request for technical advice is appropriate if the school has adopted and published a racially nondiscriminatory policy as to students, but there is a question whether the school operates in a bona fide manner in furtherance of that policy.

  3. The fact an organization is described in paragraph (1) is not conclusive that it does not qualify for exemption under IRC 501(c)(3). Thus, except for organizations described in subparagraph (1)(b), area offices are not required to propose adverse action when submitting private school cases for technical advice. Propose the action that is correct based on the applicable facts and circumstances.  (12-16-2002)
IRC 4962 Abatements

  1. Technical advice must be requested in cases where the taxpayer requests abatement of a tax amount under IRC 4962 and the sum of all qualified first tier Chapter 42 tax deficiencies (exclusive of interest, other taxes, and penalties) exceeds $200,000. (Deficiencies for which taxpayers are jointly and severally liable are summed only once in this computation.)

    1. Such substantial deficiencies may only be abated by the Director, Exempt Organizations.

  2. Carefully document cases to record any possible factual basis for allowing (or declining to allow) the requested abatement. The taxpayer is responsible for providing documentation and technical arguments in support of abating the tax.

    1. If it is clear the tax should be abated, do not contest abatement.

    2. Also, if the taxpayer is not represented or has overlooked an important argument in its favor, do not hesitate to raise issues favorable to the taxpayer’s side of the case.


    It is more important for IRC 4962 to be administered fairly and consistently than for IRS to "win" or "lose" any one of these individual Chapter 42 tax abatement cases.

  3. If the taxpayer requests consideration of an abatement of tax under IRC 4962 during the appeal process, the appeal process will be suspended pending technical advice.

  4. Appeals may rely on the case file and the examiner’s workpapers to state the TEGE position on IRC 4962 abatement on cases involving deficiencies of $200,000 or less even when the taxpayer did not raise IRC 4962 as an issue while the case was under TEGE’s jurisdiction.

    1. If the case file and workpapers are silent on IRC 4962 abatement issue, the Appeals office should return the case to the TEGE area manager to resolve this issue as it is solely within the jurisdiction of that office.  (12-16-2002)
Procedural Matters

  1. See section 10 of Rev. Proc. 2002-5 for instructions on preparing a request for technical advice. There is guidance on:

    1. Transmittal Form 5565, Request for Technical Advice-EP/EO,

    2. Statement concerning the statute of limitations concerns,

    3. Disclosure provisions under IRC 6104 and 6110,

    4. Submission of case files,

    5. Statement of the taxpayer’s position.

  2. Cases with less than 181 days remaining on the statute will require expedited handling (or may also require a statute extension). Form 3198 must indicate that special handling is required due to short statute. See IRM 121.2, Statute of Limitations.  (12-16-2002)
Additional Procedures

  1. See Rev. Proc. 2002-5 for further details. It covers such matters as the policy on pre-ruling conferences (which are strongly encouraged), how to withdraw a technical advice request, how the area offices and the Appeals offices use technical advice, and the IRC 7805(b) limitations on the retroactive effect of a technical advice memorandum.  (12-16-2002)
Appeals Settlement Authority

  1. Appeals is authorized to settle certain issues.

    IF the issue involves… THEN…
    a. tax exemption No settlement authority
    b. foundation classification No settlement appeal
    c. unfavorable ruling (other than a., or b.) The Appeals Office has settlement authority

  2. If the proposed disposition by Appeals is contrary to a previously issued technical advice or ruling as to qualification, exempt status, or foundation classification, submit the proposed disposition through the appropriate channels, to the—

    1. Commissioner (TEGE) , or

    2. Associate Chief Counsel (Passthroughs and Special Industries (P&SI)) in IRC 521 cases.

  3. If the Commissioner (TEGE) or the Associate Chief Counsel (P&SI) does not agree with the proposed disposition by Appeals, the decision of the Commissioner (TEGE) or the Associate Chief Counsel (P&SI) will be followed.  (12-16-2002)
Status Reports

  1. At a minimum, Washington POD is responsible for reporting on the status of technical advice requests more than 90 days old as of the end of each quarter.

    1. A separate status report is prepared for technical advice cases originating in area offices and Appeals, respectively.

    2. Status reports are not required for requests for technical assistance.

  2. At a minimum, the report will specify the—

    1. Name of Organization and EIN

    2. Date Received

    3. Issue Involved

    4. Estimated Completion Date

    5. Status of the case

    6. Name of the initiator and/or group manager assigned the case

    7. Telephone number of the person to contact  (12-16-2002)

  1. Washington POD will transmit the status reports to the appropriate area office.

Exhibit 7.1.4-1  (12-16-2002)
Technical Advice Memorandum—sample format

Technical Advice Memorandum

EO Area Manager:
(Name of Area Office)
or Area Director, Appeals Office
(Area Number)
Taxpayer’s Name:
Taxpayer’s Address:
Taxpayer’s EIN:
Years Involved:
Date of Conference:
  Through:  Director, Appeals – SBSE-TEGE

(OR No Conference Held)

 State the issues as presented by the area office or Appeals. Also, whenever appropriate, state in clear, precise language any additional issues that have been identified that were not specifically raised by the incoming correspondence. At times it may be necessary to restate the issue presented by the area office or Appeals in order to pinpoint the real question to be decided.

 The statement of facts incorporated in the technical advice memorandum should be set out concisely but without any sacrifice of clarity. The essential facts should be fully represented. Short quotations from the incoming statement may be used as an aid in definitely pinning down particular areas when the conclusion depends on the interpretation of such language. However, lengthy quotations from documents contained in the file are to be avoided whenever practicable.

Applicable Law
 This part of the document should set forth clearly and concisely the pertinent law, regulations, published rulings of the Service; case law or other precedent may be used. Care should be taken that all citations are directly on point. Helpful quotations may be used judiciously, but lengthy ones are to be avoided whenever practicable.

 Sufficient rationale must be provided to bridge any gaps between the issue, law, and conclusion reached.

 A specific statement as to the conclusion reached with respect to each issue is the final important step. These conclusions must be written to leave no doubt as to their meaning. Additionally, the conclusion should be clearly based solely on the facts presented.

(If a copy of the technical advice memorandum is not to be given to the taxpayer, that fact should be noted here.)

In summary, it is our function to promote uniformity, clarity, and responsiveness and, to the extent practicable, to insure an orderly method of approaching a technical advice problem. It is not intended in any way to restrict originality or ingenuity on the part of the writer, nor is it intended to prevent necessary or desirable deviation from the above model where proper.

Exhibit 7.1.4-2  (04/21/99)
Transmittal Memorandum—sample format

Internal Revenue Service
to:  (Area Office) Area Manager, EO Examinations T:EO:E:**
Thru: EO Mandatory Review Staff (Dallas) T:EO:E:PR:MR
from: (Chief, Branch and Division—and symbols) or (Director, Exempt Organizations)
subject: (Taxpayer’s Name, Address and
Identification Number)  Year(s) Involved:
Attached is our memorandum in response to your request for technical advice in the case described above.
Case returned for further development.
(Complete if it is necessary to provide the key district office or an Appeals Office with administrative information or other information, which under the nondisclosure statutes, or for other reasons, may not be discussed with the taxpayer).
Attachments: ( Check appropriate blocks )
Copy of this memorandum
Original and two copies of Technical Advice Memorandum
Copy of Technical Advice memorandum edited for IRC 6110 purposes
Copy of Technical Advice dating schedule
Undated Form 438, Notice of Intent to Disclose
Document 6919, Special Handling Notice
Area Office case file ( Copy of each memorandum to Director EO Examinations )
Appeals Office case files ( Copy of each memorandum to Director Appeals-SBSE-TEGE )
Distribution: Copy of each memorandum to: ( Check appropriate blocks )
Director, EO Examinations, Dallas Dir. of Appeals–SBSE–TEGE _____ Region
  T:EO:RA:T:P, Room 603e ____
Form M–6361 (Rev. 9–85) Dispose of all prior issues Department of the Treasury—Internal Revenue Service

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