- 9.8.1 Scheme Development Center
- 22.214.171.124 Overview
- 126.96.36.199 The Scheme Development Center Functional and Organizational Structure
- 188.8.131.52.1 Mission Statement
- 184.108.40.206.2 Functional Responsibilities
- 220.127.116.11.3 Organizational Structure
- 18.104.22.168.4 Managerial Oversight
- 22.214.171.124 Role of the Resident Agent in Charge
- 126.96.36.199.1 Program Responsibilities
- 188.8.131.52.1.1 Managing Scheme Development Center Employees and Programs
- 184.108.40.206.1.2 Field Office Questionable Refund Program Referrals
- 220.127.116.11.1.3 Field Office Return Preparer Program Referrals
- 18.104.22.168.1.4 Controlling Taxpayer Accounts under Criminal Investigation
- 22.214.171.124.1.5 Program Reviews
- 126.96.36.199.1.6 Questionable Refund Program Restitution Program
- 188.8.131.52.1.7 Work Planning and Control Tracking System
- 184.108.40.206.1.8 Fraud Awareness
- 220.127.116.11.1.9 Referrals from IRS Campus Employees
- 18.104.22.168.1.10 Refund Inquiries
- 22.214.171.124.1.11 Task Force Participation
- 126.96.36.199 Training
- 188.8.131.52.1 Training Requirements For The Resident Agent in Charge
- 184.108.40.206.2 Training Requirements For Scheme Development Center Employees
- 220.127.116.11.3 Questionable Refund, Return Preparer Program and Corporate Refund Fraud (BMF) Fraud Awareness Training At IRS Campus
- 18.104.22.168.4 Field Office Visitations
- 22.214.171.124 Security
- 126.96.36.199.1 Automation
- 188.8.131.52.1.1 Computer Operations Administrators
- 184.108.40.206.2 Firearms
- 220.127.116.11.3 Informants
- 18.104.22.168.4 Physical Security
- 22.214.171.124.5 Records And Property
- 126.96.36.199.6 Sensitive But Unclassified Information
- 188.8.131.52 Informant Information
- 184.108.40.206 Court Witness and Certified Transcript Program
- 220.127.116.11.1 Court Witness Coordinator
- 18.104.22.168.1.1 Testimony of Court Witness
- 22.214.171.124.1.2 Responsibilities
- 126.96.36.199.1.3 Knowledge Required
- 188.8.131.52.1.4 Authority
- 184.108.40.206.2 Field Office Procedures to Request Court Witness
- 220.127.116.11.3 Seals And Certification
- 18.104.22.168.4 Request For Certification
- 22.214.171.124 Support of Field Operations
- 126.96.36.199.1 Undercover Support
- 188.8.131.52 Frivolous Return Program
- Exhibit 9.8.1-1 Map and Corresponding Table
Part 9. Criminal Investigation
Chapter 8. Scheme Development
Section 1. Scheme Development Center
May 25, 2012
(1) This transmits revised IRM Chapter 9.8, Scheme Development - Section 9.8.1, Scheme Development Center.
(1) IRM 9.8.1 is revised to reflect the new section title "Scheme Development Center" .
(2) Additional updates reflect new position titles that were effective with the October 1, 2011, reorganization of Criminal Investigation.
Terry Stuart for Richard Weber
Chief, Criminal Investigation
This section discusses the mission, structure, duties, and responsibilities of the Scheme Development Center (SDC). Topics include:
Scheme Development Center Function and Organizational Structure
Role of the Resident Agent in Charge
Scheme Development Center Training
Court Witness and Certified Transcript Program
Support of Field Operations
The following subsections provide a broad spectrum concerning the structure of the SDC. Each SDC reports to a Director, Field Operations and Policy and they in turn report to the Director, Refund Crimes. The SDCs are physically located within, or in close proximity to, each IRS Campus.
To support the CI mission by identifying and developing schemes for the purpose of referring and supporting high-impact criminal tax and related financial investigations. This mission will be achieved through the use of human and artificial intelligence and via collaboration with stakeholders.
The primary function of the SDC is to identify and develop schemes for the purpose of referring and supporting high-impact criminal tax and related financial investigations.
The SDC assists IRS Campus Directors and field offices in identifying and assembling information on individuals and entities involved in civil and criminal noncompliance with the Internal Revenue Code (IRC) and other related statutes.
The SDC is also the focal point at the IRS Campus for reporting suspicious criminal activity identified by other operating divisions.
Specific SDC responsibilities include:
maintaining controls on all taxpayer accounts under criminal investigation
coordinating the Questionable Refund Program (QRP), Return Preparer Program (RPP) and Corporate Refund Fraud Program (BMF)
developing questionable refund, return preparer fraud and Corporate Refund Fraud (BMF) referrals and submitting them to field offices
providing court witnesses for criminal tax trials
providing fraud awareness training to IRS Campus employees
training field office QRP and RPP coordinators in the SDC QRP and RPP processes
The Law Enforcement Manual (LEM) provisions of the Refund Fraud program are found in LEM 9.14, Criminal Investigation Official Use Only Procedures, Law Enforcement Manual.
There are SDCs servicing 26 CI field offices.
Each SDC is staffed by CI employees managed by a RAC.
A SDC is located at or in close proximity to the following IRS Campuses:
Kansas City Campus
IRS Campus locations are structured with at least the following functions:
Submission Processing Center (IMF), Austin, Fresno, and Kansas City
Submission Processing Center (BMF), Cincinnati and Ogden
Each SDC works closely with the IRS Campus functions.
The RAC is responsible for accomplishing the SDC's broad program objectives and procedural guidelines established by the Chief, CI.
The RAC will participate in the IRS Campus Councils to ensure successful SDC program operation.
The RAC's responsibilities include:
managing SDC employees and programs
field office QRP referrals
field office RPP referrals
field office Corporate Refund Fraud (BMF) referrals (Cincinnati and Ogden)
controlling taxpayer accounts under criminal investigation
restitution program (QRP and RPP)
work planning and control tracking system
fraud awareness education
referrals from IRS Campus employees
refund inquiries relating to accounts with CI controls
participating in Headquarters (HQ) office task forces
The RAC's span of control includes the SDC technical and clerical employees. These responsibilities include:
assigning and distributing work to subordinates
providing criminal fraud expertise for field office QRP/RPP referrals
managing the SDC budget
posting vacancies and selecting employees
recommending personnel actions
providing necessary training
practicing sound position management policies
taking positive steps in support of affirmative action programs
evaluating completed work and employee performance
The RAC is responsible for the following, relative to QRP referrals:
determining criminal potential on QRP fraud referrals developed by SDC employees
ensuring that an evaluation by the field office conforms with existing time frames and guidelines
when appropriate, referring returns in schemes with a primary investigation (PI) or subject criminal investigation (SCI) status to the proper business operating division for resolution
The RAC is responsible for the following, relative to RPP referrals:
determining criminal potential on RPP fraud referrals developed by SDC employees
ensuring that an evaluation by the field office conforms with existing time frames and guidelines
The RAC is responsible for the quality and timely input of CI transaction freeze codes per existing guidelines.
When appropriate, the CI freeze codes are input by the SDC control function. The freeze codes are discussed individually in LEM 9.14.
The RAC is responsible for establishing and maintaining a structured internal program review process for the following SDC programs:
Questionable Refund Program (QRP)
Return Preparer Program (RPP)
Corporate Refund Fraud Program (BMF)
Court Witness Program
A review of each program will be conducted by the RAC or his/her designee on an annual basis each fiscal year ending September 30.
A report detailing the findings will be prepared for the Director, Refund Crimes, within 45 days following the end of each fiscal year. A copy of the report will be maintained in the SDC administrative files.
See LEM 9.14.2, Questionable Refund Program (Document 12846), for information concerning the court ordered restitution program.
The RAC is responsible for tracking the time of SDC personnel.
Time worked on SDC programs is tracked using the CI Diary Program.
The RAC is responsible for the training of IRS Campus functional personnel in the recognition and referral of potentially fraudulent returns or other documents in connection with the Questionable Refund and Return Preparer Programs.
The volume of in-house referrals varies between IRS Campuses. Some of the principal reasons for this variance are the quality of the fraud awareness training, timeliness, encouragement, and interest by management. It is the RAC's responsibility to secure a commitment from the IRS Campus management to allow fraud awareness presentations during training sessions or as often as is deemed appropriate.
The SDC will receive referrals from various functions within the IRS Campus to evaluate for criminal potential. The referrals will primarily be from Submission Processing (SP) in Cincinnati and Ogden for the Corporate Refund Fraud Program (BMF) and SP in Austin for the International QRP and RPP.
Information may be referred via Form 2797, Referral Report of Potential Criminal Fraud Cases, or per the referring function's IRM instructions; however, some information may also be referred based on fraud awareness training given to IRS Campus tax examiners.
The referral evaluation should include:
determining criminal potential of fraud referrals from IRS Campus functions
notifying referring functions whether the referral was accepted or declined within time frames specified in existing guidelines
where possible, personally meeting with referring office to explain declinations
The SDC may receive information report referrals for QRP and RPP from Wage and Investment (W&I) Fraud Referral Hotline call sites to evaluate for criminal potential and/or scheme development. These call sites are not located at all IRS Campuses.
Information may be referred via Form 3949, Information Report Referral, or per the call sites' IRM instructions.
Referral evaluations should include:
Determine criminal potential.
The RAC, who is co-located within the W&I Fraud Referral Hotline call site, should notify the call site manager when the referrals do not meet existing guidelines.
Refund Inquiries are received from customer service representatives (CSR) or Taxpayer Advocate offices on those cases with CI freeze controls. The SDC personnel are responsible for coordinating the resolution of each refund inquiry.
The following sections provide information concerning the training of SDC employees.
The RAC is responsible for the training and orientation of IRS Campus functional personnel in the recognition and referral of potentially fraudulent returns.
The RAC will secure a commitment from IRS Campus management to allow fraud awareness presentations during functional training sessions or other group meetings conducive to fraud awareness training.
Whenever possible, the RAC should be personally involved in the training to ensure timeliness, quality, and a high level of management interest in the fraud referral program.
The RAC will maintain documentation on all fraud awareness training.
On an annual basis, the RAC should coordinate with the Special Agents in Charge (SAC) to attend an all-managers meeting and/or field office group meeting to discuss the following:
SDC services to field offices
CI controls maintenance
Questionable Refund Program
Return Preparer Program
Corporate Refund Fraud (BMF)
SDC fraud referrals to the field office
undercover shopping procedures
Travel expenses related to these meetings will be paid from SDC travel allocations.
This subsection provides an overview of security requirements within the SDC.
All systems are required to be accredited and certified per IRM 2.1.10, Information Systems Security, and the Computer Security Act of 1987.
The Internal Revenue Security Certification program is the technical evaluation of computer security, requirements, regulations, and standards used to assist in the accrediting system.
Under the direction of the National Operations Center (NOC), each SDC is assigned a Computer Operations Administrator (COA) who is responsible for systems administration and customer support. The COA provides day to day support for all of CI's specialized applications and commercial-off-the-shelf (COTS) software and is responsible for:
installing and maintaining hardware and software
installing and maintaining workstations for server images
diagnosis and recovery of failed systems
providing customer support associated with software and utility programs
maintaining CI and IRS security policies
conducting inventory of CI's automation equipment
network installation at new sites or on remodels
they may also be requested to setup CI task force sites outside of the CI network and site
Firearms for RACs are to be secured per IRM 9.10.1, Investigative Equipment.
Protection of informant information and identity is required. This protection includes:
disclosing to only those employees having a need to know
transmitting in double-sealed envelopes bearing instructions "To Be Opened by Addressee Only"
protecting per IRM 1.16.8, Emergency Planning and Incident Reporting
Physical security in the IRS Campus must conform to Protection Point Values (PPV) of IRM 1.16.8.
Criminal Investigation personnel are authorized to control all keys and combinations within their office per IRM 1.16.8.
"Sensitive But Unclassified" information (SBU) is information which, if lost, misused, inappropriately accessed or modified in any way, could adversely affect the national interest or the conduct of Federal programs or the privacy of individuals. For additional information regarding SBU see IRM 10.2.13, Information Protection and IRM 10.8.1, Policy and Guidance.
The following procedures will be followed when dealing with informants.
Customer Service is responsible for receiving, screening, and processing all telephonic informant communications.
Any telephonic informant communications received in the SDC will be redirected to Customer Service at 1–800–829–0433. However, if the informant is unwilling to call the 1–800 number or be transferred, the employee must document all of the information provided by the informant on Form 3949, Information Report Referral. The RAC will review for criminal potential and forward Forms 3949 to the Fresno Campus. The call sites will follow existing instructions for forwarding Forms 3949.
All walk-in informants will be encouraged to go to the CI field office. However, if the informant is unwilling to go to the field office, the employee must document all of the information provided by the informant on Form 3949. The RAC will review for criminal potential and forward Forms 3949 to the Fresno Campus.
All informant information forms will be forwarded in security envelopes that must be double sealed and labeled confidential.
If the informant indicates he/she wants a reward, the following actions should be taken:
Give the informant a Publication 733, Rewards for Information Given to the Internal Revenue Service, and a Form 211, Application for Reward for Original Information.
Instruct the informant to return the completed Form 211 to the IRS Campus that services the area where the alleged tax violator resides (addresses of the IRS Campuses are shown on the reverse side of the Form 211).
Forward a copy of Form 3949 or a copy of the written informant information to the Informant Claims Examiner (ICE) Planning and Special Programs (PSP) at the IRS Campus that services the state/area where the alleged tax violator resides.
If a Form 211 is received in the FDC with the written informant information, the original Form 211 and a copy of the written information should be forwarded to the Informant Claims Examiner.
The SDC Court Witness Program provides court witnesses, certified returns, certified transcripts, and other certified documents for criminal court and other judicial proceedings.
The Court Witness Coordinator coordinates the Court Witness Program for a cross-business unit campus, provides expertise in the area of judicial processes, and is assigned to the staff of a RAC. The Court Witness Coordinator is management's representative for cross-unit coordination among the various Directors at the IRS Campus sites and must make adjustments to meet the needs of several heads of office within a collaborative environment.
The court witness represents the Commissioner, in the Commissioner's role as custodian of returns and documents, in trials, pre-trial proceedings, and other judicial or quasi-judicial proceedings. The court witness testifies and presents evidence as to all matters within the scope of the Commissioner's custodial responsibility.
The quality of court witness testimony is crucial to law enforcement and to voluntary compliance. The expertise, competence, and decorum of the witness contributes significantly to the success of the prosecution case.
Among others, the duties of the court witness include but are not limited to:
securing all available original tax returns and documents, and obtaining certified copies where appropriate
securing other original documents and correspondence filed by the defendant with the IRS
securing current certified transcripts of accounts, certificates of assessments and payments, or certificates of Lack of Record
researching all IRS Campus areas and Federal Records Center for pertinent information to aid in trial (e.g., returns, correspondence, receipts, transcripts, organizational functions, and documentation procedures)
meeting with the attorney for the government prior to trial to discuss points of testimony and to review investigative files, exhibits, and any other documents to be presented as evidence during trial
assisting attorneys for the government and special agents as requested
The court witness must have extensive knowledge regarding:
all IRS Campus actions with respect to returns and documents under the custody of the Commissioner or his/her designee
complete processing procedures and functional responsibilities (past and present) of the IRS Campus, Field Office, and Federal Records Center (FRC)
all types of returns, due dates, filing requirements, and document systems (including the Electronic Filing System)
all laws and regulations relating to Disclosure, Freedom of Information Act (FOIA), Privacy Act, Federal Rules of Criminal Procedure (Fed. R. Crim. P.), and the Federal Rules of Evidence
proper introduction of tax returns, certificates of assessments and payments, Information Reporting Program (IRP) Records, Master File Transcript Request (MFTRA), and certificates of Lack of Record
coordinating and conducting periodic court witness training for IRS Campus personnel as needed
responding to interrogatories and providing depositions or affidavits
reviewing all completed certifications for accuracy and quality control
maintaining a current cadre of court witnesses as needed
In testifying as a court witness for the IRS, the following procedures must be adhered to:
Delegation Order 11-2 (formerly DO 156 (Rev. 17)) and Exhibit 1.2.2-2
Title 26 USC §6103(h)(1), (h)(4), and (k)(6)
The quality and credibility of a witness' testimony depends on answering only the questions asked and representing the IRS with the highest degree of integrity, efficiency, and fairness.
Requests for court witnesses by field offices will be made by memorandum from the SAC to the RAC who will be providing the court witness.
The RAC will follow the guidelines established by the IRS Campus Directors relative to requests for court witnesses from IRS Campus functional areas.
The SAC or his/her representative may telephonically request a court witness in exigent situations; however, a follow-up memorandum must be submitted to the RAC within two calendar days.
Field offices will pay for the travel expenses of a court witness that pertain to criminal investigations, e.g., trials, grand juries, etc.
If called to testify in a civil trial, funding for civil trials are to be paid from the Division Commissioner's Office for the area that originated the matter (SB/SE, W&I, LB&I, or TE/GE). The Planning and Analysis Office (or other office, if appropriate) will provide the travel codes for the voucher by working with their Budget Office for funding codes.
The primary purpose of certification is to satisfy the requirements of the rules of evidence and civil procedure. This is essential in authenticating a document for admission into evidence.
Certification is accomplished by attaching Form 2866, Certificate of Official Record, with a seal affixed. The court witness coordinator is responsible for ensuring that the transcript is accurate.
Transcripts and other documents are prepared for use in court per 28 USC §1733(b), Fed. R. Crim. P. R44 and Fed. R. Crim. P. R27:
26 USC §7514 - authorizes the seals of office
26 CFR 301.7514 - governs the use of seals
26 CFR 301.7622-1 - authorizes the Commissioner to designate persons to issue certifications
Delegation Order 11-5 (Formerly 198 (Rev.5)) - designates the persons who may issue certification and provide delegation of authority
CI Delegation Order 18, Seal of the Office of the Internal Revenue Service and Certification - designates the persons who may issue certifications as redelegated from the Chief, CI
Forms 4338 and 4338-A, IMF Information or Certified Transcript Request, will be used by CI personnel to request certified transcripts of accounts. Requests will include but are not limited to:
certification of original and copy of returns
certification of MCC and microfilm transcripts
certification of certificates and payments
certification of lack of record
All requests for transcripts of Automatic Data Processing (ADP) accounts will be forwarded to the SDC servicing the field office requesting the transcript.
Each request should cover the specific tax periods. Only information that is responsive to the request will be certified.
A minimum of four weeks is required to secure and certify all requested documents.
The court witness coordinator will establish expedited procedures.
This subsection provides an overview of how the SDC’s can provide support for the field offices.
Requests for undercover employer identification numbers (EINs) for the field offices must be handled through Special Investigative Techniques (CI:OPS:SIT).
Special Investigative Techniques works directly with the Ogden and Cincinnati Scheme Development Centers to establish EIN’s for undercover operations.
Taxpayer accounts that have TC 91X controls or a –T Freeze on the module will not have any Frivolous Return Program (FRP) action taken on them unless the special agent controlling the case gives consent.
A frivolous return/document is defined as being non-compliant based on unfounded legal or constitutional arguments. Internal Revenue Code §6702 contains criteria for determining if a return/document is frivolous.
Taxpayers filing a frivolous tax return and/or documents are assessed a $5,000 Frivolous Return Penalty.
A NEW STATE MAPPING IS REQUIRED FOR 3 SB/SE SITES FOR TELE-TIN, FAXTIN, PCFAX