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7.20.6  Anti-Terrorism and Other Emerging Issues

Manual Transmittal

February 11, 2016

Purpose

(1) This transmits a complete revision to IRM 7.20.6, Exempt Organizations Determination Letter Program, Anti-Terrorism and Other Emerging Issues.

Material Changes

(1) This IRM is substantially revised to remove obsolete procedures and incorporate current procedures. All references to EO Touch-and-Go are removed as this program and related procedures are obsolete.

(2) This update removes procedures to transfer cases to EO Rulings and Agreements based on guidance provided in Interim Guidance Memorandum TEGE-07-0414-0009, Identification of Cases Transferred to EO Technical.

(3) This IRM clarifies procedures for identifying organizations suspected of involvement in terrorism or that are at a heightened risk of diversion of funds to terrorism.

(4) This IRM incorporates information from Interim Guidance Memorandum Procedures for TEGE-07-0914-0026, The EO Emerging Issues Committee.

(5) IRM section title changed to reflect current procedures.

(6) Editorial changes made throughout.

Effect on Other Documents

This IRM supersedes IRM 7.20.6 dated July 2, 2014, and incorporates Interim Guidance Memoranda TEGE-07-0914-0026, The EO Emerging Issues Committee and TEGE-07-0414-0009, Identification of Cases Transferred to EO Technical.

Audience

TE/GE (Exempt Organizations)

Effective Date

(02-11-2016)

Margaret A. Von Lienen
Acting Director, Exempt Organizations
Tax Exempt and Government Entities

7.20.6.1  (02-11-2016)
Overview

  1. As part of TE/GE’s mission to protect the public interest by applying tax law with integrity and fairness to all, Exempt Organizations (EO) employees will consider and address indicators of potential abusive transactions, fraud, terrorism, and other issues when reviewing determination letter requests.

  2. To ensure consistency in how these issues are addressed, EO has established procedures for:

    • Anti-terrorism

    • Announcement of IRC 501(p) suspension

    • Emerging issues

  3. IRM 7.1.2, Exempt Organizations Administrative Procedures, and IRM 7.20.1, Exempt Organizations Determination Letter Overview, provide guidance on requesting assistance on technical issues that are not raised in connection with the examination of a taxpayer’s return and do not relate to a specific case under consideration by an Examination Area Office or an Appeals Office.

  4. IRM 1.54.1, TE/GE Roles and Responsibilities, provides guidance on elevating issues other than as described in this IRM.

7.20.6.2  (02-11-2016)
Exempt Organizations’ Role in Anti-Terrorism

  1. In the aftermath of the 9/11 terrorist attacks, uncovering sources of terrorist financing has become one of the biggest challenges facing the United States. Terrorist supporters have used charities and non-profit organizations to raise money, move persons and materials, and provide logistical support for their operations.

  2. The Office of Foreign Assets Control (OFAC) administers and implements Executive Orders (E.O.) pursuant to a delegation of authority from the Secretary of the Treasury. OFAC has published comprehensive regulations implementing E.O. 13224 (31 CFR part 594) and E.O. 12947 (31 CFR part 597). It acts under Presidential national emergency powers as well as authority granted by specific legislation to impose controls on transactions and freeze assets under U.S. jurisdiction.

  3. As part of the comprehensive and sustained campaign against terrorist financing, all U.S. persons, including U.S.-based charities, are prohibited from dealing with persons (individuals and entities) identified as being associated with terrorism on OFAC’s Specially Designated Nationals and Blocked Persons List (OFAC SDN List). The OFAC SDN List is available at www.treasury.gov/ofac.

  4. EO employees will consider and address indicators of potential involvement in or a heightened risk of diversion of funds to terrorism in cases they review. These procedures provide guidance for considering and addressing these indicators.

7.20.6.2.1  (02-11-2016)
Identifying Organizations with Potential Involvement in or Risk of Terrorism

  1. Employees must review every case for potential indicators of involvement in terrorism and heightened risk of diversion of funds to terrorism. This includes all exemption applications (including Form 1023-EZ), foundation reclassification requests, and other miscellaneous determination requests.

  2. Indicators of potential involvement in terrorism or heightened risk of diversion of funds to terrorism may include:

    • Name or address matches against the Comprehensive List of Terrorists and Groups

    • Foreign grants or activities in a foreign country

    • Other facts and circumstances

  3. Employees complete Form 14503, Potential Terrorism Connection Checksheet, if they identify indicators of potential involvement in terrorism or heightened risk of diversion of funds to terrorism in a case (see IRM 7.20.6.2.2).

7.20.6.2.1.1  (02-11-2016)
Comprehensive List of Terrorists and Groups Match Identification

  1. EO Determinations maintains a Comprehensive List of Terrorists and Groups (CLTG) that includes terrorist designations from the OFAC SDN List. It may also include other individuals or groups identified as terrorists by other agencies. Employees check the request against the CLTG for any matching information. This check is required on all determination letter requests.

  2. A CLTG "match" can be an exact match or a near match due to alternative spelling, omission, or name order (e.g., some cultures place a surname first). A surname match is generally considered a match requiring further review.

    Note:

    A first name only match is generally not considered a match requiring review unless other facts and circumstances indicate a higher risk of terrorism or diversion of funds.

  3. Check the names and addresses of individuals and organizations listed in the request for matches on the CLTG.

  4. Document completing the CLTG review/check as well as the result of the check on the case chronology record (CCR).

    Example:

    "Completed CLTG review/check - found no matches" or "Completed CLTG review/check - found match."

  5. Request the following additional information as necessary to help in correctly identifying a match, as many people and organizations share the same or similar names.

    IF the match is THEN request
    A board member, officer, or employee Résumés for all board members, officers, and employees that include first and last names, residential addresses, and employment information.
    A contractor, individual grantee, or donor The address of the individual.
    An entity connected with the applicant The entity’s legal name, any acronyms or alternate names, names and addresses of principle officers, and any location(s) where it conducts activities.

    Note:

    Requesting the above information is not required if previously submitted information appears sufficient to correctly identify a match.

    Note:

    Tax examiners processing Form 1023-EZ will generally not complete this step. Instead, the request will be assigned to a specialist (see IRM 7.20.9, Processing Form 1023-EZ).

  6. Complete Form 14503, Potential Terrorist Connection Checksheet, for all matches following the procedures listed in IRM 7.20.6.2.2.

    Note:

    Document the CCR noting “Prepared Form 14503 per IRM 7.20.6.2.1.1 and sent to Anti-Terrorism Coordinator.”

  7. If the Anti-Terrorism Coordinator (ATC) or his or her manager determines the referral does not require further development, the ATC completes his/her section of Form 14503 and returns it to the employee (copying to the employee’s manager) along with any information developed during the consideration of the referral. If you or your manager disagree with the ATC, the manager may elevate the case to the Area Manager.

7.20.6.2.1.2  (02-11-2016)
Foreign Grants or Activities

  1. Cases involving grants or activities in foreign countries present a higher risk of terrorism, especially in countries where there is war and civil unrest. Also, in some foreign countries an organization’s assets are at higher risk for diversion to support terrorism regardless of the organization’s intent. For information on state sponsors of terrorism and safe havens for terrorists, see the US Department of State’s Country Reports on Terrorism, available at www.state.gov/j/ct/rls/crt/.

  2. See Rev. Rul. 63-252, Rev. Rul. 66-79, Rev. Rul. 68-489, and Rev. Rul. 75-65 for guidance on foreign grants and activities. See also Rev. Rul. 68-117, Rev. Rul. 71-460, and Rev. Rul. 74-229.

  3. The following facts may be helpful in ensuring the organization’s funds or goods are used for the intended purposes:

    1. Requiring written grant agreements that specify how grant funds may be used

    2. Requiring feedback reports from foreign grantees or agents

    3. Employing report verification procedures such as on-site visits (by U.S. personnel or independent persons) or documentation (such as photos or receipts)

  4. In cases where an organization will make foreign grants or conduct activities in foreign countries, request sufficient information (if not included in the taxpayer’s initial submission) to determine:

    1. In which countries the organization will operate or make grants

    2. Whether the organization will check the OFAC SDN List for names of individuals and entities with whom it is dealing to determine if they are included on the list

    3. Whether the organization has any other practices to ensure that foreign expenditures or grants are not diverted to support terrorism or other non-charitable activities

    Exception:

    Tax examiners processing Form 1023-EZ will not complete this step if foreign activities or grants are indicated on Form 1023-EZ (see IRM 7.20.9, Processing Form 1023-EZ).

  5. In cases where an organization will make foreign grants, also request sufficient information (if not included in the taxpayer’s initial submission) to determine:

    1. What funds or goods have been or will be distributed and for what purposes

    2. How the organization processes grant requests, including its application, review, and approval process

    3. How the organization ensures the funds or goods are used for the intended purposes

    Exception:

    Tax examiners processing Form 1023-EZ will not complete this step (see IRM 7.20.9, Processing Form 1023-EZ).

  6. Complete Form 14503 following the procedures listed in IRM 7.20.6.2.2 for all foreign activities or grant making (except if indicated on Form 1023-EZ, see IRM 7.20.9).

    Note:

    Document the CCR noting “Prepared Form 14503 per IRM 7.20.6.2.1.2 and sent to Anti-Terrorism Coordinator.”

7.20.6.2.1.2.1  (02-11-2016)
State Sponsors of Terrorism

  1. The US Department of State (State Department) maintains the official list of state sponsors of terrorism on its website. OFAC administers comprehensive sanctions programs against the State Department’s designated state sponsors of terrorism. OFAC lists these countries on its website, www.treasury.gov/ofac. An organization needs to apply to OFAC for a special license to conduct charitable operations in such countries if OFAC has not granted a general license. See www.treasury.gov/ofac for more information on the various sanctions programs.

7.20.6.2.1.3  (02-11-2016)
Other Facts and Circumstances

  1. Consider whether other facts and circumstances of an individual case suggest that an organization promotes terrorism or whether there appears to be a heightened risk of diversion of funds to terrorism.

  2. If facts and circumstances warrant completing Form 14503, Potential Terrorism Connection Checksheet, obtain manager concurrence before completing the form (following the procedures listed in IRM 7.20.6.2.2).

    Note:

    Document the CCR noting “Prepared Form 14503 with manager concurrence per IRM 7.20.6.2.1.3 and sent to Anti-Terrorism Coordinator.”

7.20.6.2.2  (02-11-2016)
Form 14503, Potential Terrorism Connection Checksheet

  1. Complete Form 14503 based on indicators of potential involvement in terrorism or heightened risk of diversion of funds to terrorism (see IRM 7.20.6.2.1).

    1. Indicate the reason(s) for completing the form.

    2. Enter relevant case details. Relevant details may include names, addresses, countries of activity, descriptions of activities, website information, any representations the organization makes regarding OFAC compliance (or other safeguards in place to ensure funds or goods are not diverted from their intended purposes), and other facts and circumstances of concern.

      Note:

      If completing the form based on a name or address match with the CLTG, include the matched information as entered on the CLTG as well as the information secured from the determination or additional information letter request.

  2. Email the completed form and any related documents to the ATC at *TE/GE-EO-Anti Terrorism.

    Note:

    The case remains in its current assigned status while awaiting a response from the ATC.

  3. Keep the form and any other supporting information as work papers in the non-disclosable portion of the administrative file and fully document actions in the CCR.

7.20.6.2.3  (02-11-2016)
Anti-Terrorism Coordinator (ATC)

  1. EO Determinations designates a Determinations specialist as its ATC.

  2. The ATC:

    1. Reviews Form 14503 and coordinates cases identified as having a risk of terrorism.

    2. Serves as the EO Determinations liaison for this issue with IRS Criminal Investigation Lead Development Center (CI-LDC).

    3. Updates and distributes the Comprehensive List of Terrorists and Groups.

7.20.6.2.3.1  (02-11-2016)
ATC Checksheet Review and Recommendations

  1. The ATC reviews the completed Form 14503 and:

    1. Evaluates the content.

    2. Completes additional research as necessary.

    3. Makes a recommendation or referral as follows:

      IF THEN the ATC recommends
      Additional information is needed to make a recommendation Returning the form to the originating employee for clarification or additional information before continuing the process.
      A CLTG match cannot be confirmed as a non-match to the identified CLTG person or entity Referring the form to CI-LDC for review and recommended action. See IRM 7.20.6.2.3.2.
      Neither of the above situations apply Taking other actions based on the facts and circumstances (consulting with TEGE Division Counsel as necessary).
    4. Submits the referral and recommendation to his or her manager for concurrence.

  2. Once a recommendation or referral is approved by the ATC’s manager, the ATC:

    1. Documents any findings, actions taken, and recommendations on the form.

    2. Returns the form to the originating employee by email with a copy to the employee’s manager.

    3. Provides the employee with information developed during the consideration of Form 14503 that may help resolve the underlying case.

    Note:

    If the employee and his or her manager disagree with the recommended actions from Form 14503, the employee’s manager may elevate the issue to the Area Manager.

  3. The ATC maintains an archive of all Forms 14503.

7.20.6.2.3.2  (02-11-2016)
ATC as Liaison with CI-LDC

  1. The ATC is responsible for coordinating Form 14503, as necessary, with CI-LDC:

    IF THEN the ATC
    CI-LDC confirms a match is an identified CLTG person or there are other terrorism concerns and requests the case Notifies the employee to transfer the case to CI (using Form 3210) copying the employee’s manager, the ATC’s manager, and the Area Manager.
    CI-LDC confirms a match is an identified CLTG person or there are other terrorism concerns but does not request the case Consults with CI-LDC and TEGE Division Counsel for case processing guidance.
    CI-LDC is unable to determine the match is an identified CLTG person If necessary, coordinates Form 14503 with TEGE Division Counsel for case processing guidance.
    CI-LDC does not respond within 60 days of sending the Form 14503
    1. Contacts CI-LDC to follow up on the status of the review.

    2. If no response is received within 5 business days from follow up, elevates the issue to the manager, who will follow up with the CI-LDC contact’s manager.

    3. The ATC’s manager will simultaneously elevate the issue to the Area Manager.

7.20.6.2.3.3  (02-11-2016)
The Comprehensive List of Terrorists and Groups and the ATC

  1. The ATC maintains the CLTG spreadsheet (see IRM 7.20.6.2.1.1).

  2. Once per month, the ATC:

    1. Accesses the OFAC website to secure updated information regarding the OFAC SDN List (for CLTG).

    2. Adds names and addresses to the CLTG at the request of other agencies (with management approval).

    3. Emails the spreadsheet to designated employees.

7.20.6.3  (02-11-2016)
Announcement of Section 501(p) Suspension

  1. Under IRC 501(p), if an exempt organization is designated as a terrorist organization as described in IRC 501(p)(2), its exempt status under IRC 501(a) is suspended. For a detailed discussion of IRC 501(p), see IRM 7.25.45, Suspension of Exempt Status Under IRC 501(p).

  2. EO Rulings and Agreements is responsible for monitoring terrorist designations and preparing announcements of IRC 501(p) suspensions.

  3. EO Rulings and Agreements will designate an employee to monitor changes to the OFAC SDN List (which includes the State Department’s Terrorist Exclusion List).

  4. The designated employee will:

    1. Check the names of organizations added to the list against the EO Business Master File (EO/BMF) to determine whether any of the designations involve an exempt organization.

    2. Consult with TEGE Division Counsel along with OFAC or the State Department to verify an apparent match and establish whether the designation is described in IRC 501(p)(2).

    3. Coordinate with Ogden Service Center, EO Examinations, and other offices within the IRS if he or she discovers that an exempt organization appears to be listed.

  5. If a match is verified and determined to be described in IRC 501(p)(2), EO Rulings and Agreements will prepare a draft announcement to include:

    1. A discussion of IRC 501(p)

    2. A description of the terrorist designation(s) under IRC 501(p)(2) underlying the suspension

    3. The name, city and state, and effective date of suspension of each organization whose suspension is being announced

    4. Federal tax filing information

    5. Contact information

  6. The designated employee will circulate the administrative file for ultimate approval by the TE/GE Deputy Commissioner and TEGE Division Counsel. The administrative file will include:

    1. The draft announcement

    2. Pertinent background materials

    3. A routing sheet

    4. Form 12971 and Form 12972

    5. The Request for Advance Release of IRB Items to the News Media

  7. Once approved, EO Rulings and Agreements will:

    1. Provide advance notice of the announcement to pertinent officials in CI and the Treasury Department.

    2. Coordinate publication of the announcement with Media Relations and Media and Publication’s Tax Forms and Publications.

    3. Forward the announcement to the National Association of State Charity Officials for circulation among state officials upon release to the media.

    4. Complete and submit Form 2363-A, Request for IDRS Input for BMF/EO Entity Change, to update the EO/BMF.

7.20.6.4  (02-11-2016)
Emerging Issues Overview

  1. In September 2013, EO expanded the size and responsibilities of the EO Abusive Tax Avoidance Transaction Committee and renamed it the EO Emerging Issues Committee (EIC). The EIC serves as the central intake point within EO for the consideration of elevated emerging issues (not case-specific) in a clear, consistent, and transparent manner.

  2. Emerging issues may include abusive transactions, fraud, or terrorism as well as other complex or sensitive issues.

  3. The EIC functions to ensure:

    • Potential issues are properly handled

    • Decisions (dispositions/resolutions) are documented

    • Employees are provided with sufficient guidance, procedures, and training to perform their duties

  4. The EIC also:

    • Develops overall strategy for emerging issues for EO and serves as a contact for other service areas

    • Identifies trends and issues

    • Assesses the effectiveness of the EO emerging issue process

  5. The EIC coordinates among EO, TE/GE, TEGE Division Counsel, and other IRS divisions. The EIC may also coordinate with federal and state agencies as necessary and allowable under IRC disclosure provisions.

7.20.6.4.1  (02-11-2016)
EO Emerging Issues Committee

  1. The Emerging Issues Committee (EIC) operates within the authority established by the EIC charter, issued under the authority of the Director, Exempt Organizations.

  2. The EIC is comprised of representatives from EO Examinations, EO Rulings and Agreements, EO Executive staff, TE/GE Executive staff, and TEGE Division Counsel. The EIC is overseen by EO Directors and TEGE Division Counsel.

  3. The EIC conducts in-depth subject matter technical reviews of the issues presented, recommends appropriate disposition, and documents why certain issues are chosen for further review based upon the issues considered and accepted.

7.20.6.4.2  (02-11-2016)
EO Emerging Issues Process

  1. If an employee identifies a potential emerging issue, the following process applies:

    1. The employee will discuss the issue with his or her group manager.

    2. If the employee’s manager concurs that consideration by the EIC is warranted, the manager (or the employee) prepares the EIC Issue Submission Form.

    3. The manager submits the EIC Submission Form via email to *TE/GE-EO-Emerging Issues and forwards a copy to the Area Manager.

  2. Any case that includes a potential emerging issue is to be processed without delay according to current applicable guidelines. Do not hold the case awaiting guidance from the EIC.

    Note:

    See also IRM 7.20.1.3, Technical Support, for other technical assistance options.

  3. The EIC posts the emerging issue and recommended guidance and procedures at TE/GE Connect, Exempt Organizations Emerging Issues.


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