IRS audits of tax exempt organizations policies practices and procedures bruce r hopkins

IRS Audits of Tax-Exempt Organizations Policies, Practices, and Procedures Bruce R Hopkins John Wiley & Sons, Inc IRS Audits of Tax-Exempt Organizations IRS Audits of Tax-Exempt Organizations Policies, Practices, and Procedures Bruce R Hopkins John Wiley & Sons, Inc This book is printed on acid-free paper Copyright  2008 by John Wiley & Sons, Inc All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at 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other damages For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our Web site at www.wiley.com Library of Congress Cataloging-in-Publication Data: Hopkins, Bruce R IRS audits of tax-exempt organizations : policies, practices, and procedures / Bruce R Hopkins p cm Includes index ISBN 978-0-470-11516-9 (cloth) Nonprofit organizations–Taxation–Law and legislation– United States Charitable uses, trusts, and foundations–Taxation–United States Tax auditing–United States I Title KF6449.H66 2008 343.7305’266–dc22 2007043561 Printed in the United States of America 10 This book is dedicated to Scott C Syphax; he knows why About the Author BRUCE R HOPKINS is a senior partner with the firm Polsinelli Shalton Flanigan Suelthaus PC He is also the author of more than 20 books on nonprofit tax and law issues, including The Law of Tax-Exempt Organizations, 9th ed., Planning Guide for the Law of Tax-Exempt Organizations, Nonprofit Law Made Easy, Charitable Giving Law Made Easy, 650 Essential Nonprofit Law Questions Answered, The Law of Fundraising, 3rd ed., Private Foundations: Tax Law and Compliance, 2nd ed., The Tax Law of Charitable Giving, 3rd ed., The Law of Intermediate Sanctions, and The Law of Tax-Exempt Healthcare Organizations, 2nd ed., as well as the monthly newsletter Bruce R Hopkins’ Nonprofit Counsel, all published by Wiley Mr Hopkins received the 2007 Outstanding Nonprofit Lawyer Award (Vanguard Lifetime Achievement Award) from the American Bar Association, Section of Business Law, Committee on Nonprofit Corporations He is listed in The Best Lawyers in America, Nonprofit Organizations/Charities Law, 2007–2008 Ⅲ vii Ⅲ Table of Cases Afro-American Purchasing Center, Inc v Comm’r, § 3.13(b)(v) AHW Corp v Comm’r, § 3.13(b)(i) Aid to Artisans, Inc v Comm’r, § 3.13(b)(v) Airlie Found., Inc v United States, § 3.13(b)(iv) Alive Fellowship of Harmonious Living v Comm’r, § 3.13(b)(iv) Allen Eiry Trust v Comm’r, § 3.13(b)(i) Alpine Fellowship Church of Love & Enlightenment v United States, § 3.13(a) American Ass’n of Commodity Traders, The v Department of the Treasury, § 3.13(a) American Inst for Economic Research, Inc v United States, § 3.13(c) American New Covenant Church v Comm’r, § 3.13(b)(i) American Soc’y of Ass’n Executives v Bentsen, § 3.13(a) ‘‘Americans United’’ Inc v Walters, § 3.13(a) Anclote Psychiatric Center, Inc v Comm’r, § 3.13(b)(i) Animal Protection Inst., Inc v United States, § 3.13(b)(iv) Assembly of Yahveh Beth Israel et al v United States, § 6.8 Badman v Internal Revenue Service, § 1.8 Baptist Hosp., Inc v United States, § 3.13(b)(i) Basic Bible Church of America v Comm’r, § 3.13(b)(iv) Benjamin Price Genealogical Ass’n v Internal Revenue Service, § 3.13(b)(v) Beth-El Ministries, Inc v United States, § 3.13(b)(v) Big Mama Rag, Inc v United States, § 3.13(b)(v) Bob Jones Univ v Simon, §§ 3.13, 3.13(a) Bolton v Comm’r, § 3.13(c) Branch Ministries, Inc v Rossotti, § 4.4(a) Callaway Family Ass’n, Inc., The v Comm’r, § 3.13(b)(v) Ⅲ Caracci v Comm’r, § 3.11 Cattle Feeders Tax Comm v Schultz, § 3.13(a) Center on Corporate Responsibility, Inc v Shultz, §§ 3.13(a), 3.13(c) Centre for Int’l Understanding v Comm’r, § 3.13(b)(iv) Change-All Souls Hous Corp v United States, § 3.13(b)(i) Christian Manner Int’l, Inc v Comm’r, § 3.13(b)(v) Christian Stewardship Assistance, Inc v Comm’r, § 3.13(b)(v) Church in Boston v Comm’r, § 3.13(b)(iv) Church of the New Testament, The v United States, §§ 3.13(b), 3.13(c) Church of Spiritual Technology v United States, § 3.13(b)(iv) Church of World Peace, Inc v Internal Revenue Service, § 3.13(b)(i) Coastal States Gas Corp v Dep’t of Energy, § 1.11 Colorado State Chiropractic Soc’y, Inc v Comm’r, § 3.13(b)(iv) Consumer Credit Counseling Serv of Ala., Inc v United States, § 3.13(b)(v) CREATE, Inc v Comm’r, § 3.13(b)(i) Crenshaw County Private School Found v Connally, § 3.13(a) Danz v Comm’r, § 3.13(c) Dr Erol Bastug, Inc v Comm’r, § 3.13(b)(iv) Ecclesiastical Order of the ISM of AM, Inc v Internal Revenue Service, § 3.13(c) Enochs v Williams Packing & Navigation Co., § 3.13(a) est of Hawaii v Comm’r, § 3.13(b)(v) Fair Campaign Practices Comm., Inc v United States, § 3.13(b)(iv) Federal Land Bank Ass’n of Asheville, N.C v Comm’r, § 3.13(b) 389 Ⅲ TABLE OF CASES Federation Pharmacy Servs., Inc v Comm’r, § 3.13(b)(v) First Libertarian Church v Comm’r, § 3.13(b)(iv) Fondel v United States, § 3.13(b)(i) Found of Human Understanding v Comm’r, § 3.13(b)(i) Founding Church of Scientology of Washington, D.C., Inc., The v Director, Federal Bureau of Investigation, § 3.13(a) Founding Church of Scientology of Washington, D.C., Inc v United States, § 3.13(b)(i) Freedom Church of Revelation v United States, § 3.13(b)(iv) Friends of the Soc’y of Servants of God v Comm’r, § 3.13(b)(i) General Conference of the Free Church of America v Comm’r, § 3.13(b)(v) Glass v Comm’r, § 2.10 Golden Rule Church Ass’n v Comm’r, § 3.13(a) Goodspeed Scholarship Fund v Comm’r, § 3.13(b)(iv) Hessman v Campbell, § 3.13(c) Hickman v Taylor, § 1.11 High Adventure Ministries, Inc v Comm’r, § 3.13(b)(i) Houston Lawyer Referral Serv., Inc v Comm’r, § 3.13(b)(iv) Incorporated Trustees of the Gospel Worker Soc’y v United States, § 3.13(b)(iv) Industrial Aid for the Blind v Comm’r, § 3.13(b)(v) Infant Formula Action Coalition v United States, § 3.13(b)(iv) Int’l Tel § Tel Corp v Alexander, § 3.13(c) Investment Annuity v Blumenthal, § 3.13(a) Israelite House of David v Holden, § 3.13(a) J David Gladstone Found v Comm’r, § 3.13(b)(i) John Danz Charitable Trust v Comm’r, § 3.13(c) Jolles Found., Inc v Moysey, § 3.13(c) Jordan v United States Dep’t of Justice, § 1.11 Judicial Watch, Inc v Rossotti, § 3.13(a) Judicial Watch v United States Dep’t of Justice, § 1.11 Junaluska Assembly Hous., Inc v Comm’r, § 3.13(b)(iv) Krohn v United States, § 3.13(c) Kuper v Comm’r, § 3.13(c) Kyron Found v Dunlop, § 3.13(c) Liberty Ministries Int’l v Comm’r, § 3.13(b)(iv) Manning Ass’n v Comm’r, § 3.13(b)(v) Metropolitan Community Serv., Inc v Comm’r, § 3.13(b)(i) Michigan Early Childhood Center, Inc v Comm’r, § 3.13(b)(v) Miss Georgia Scholarship Fund, Inc v Comm’r, § 3.13(b)(v) Mitchell v Riddell, § 3.13(c) Music Square Church v United States, § 3.13 Nat’l Ass’n for the Legal Support of Alternative Schools v Comm’r, § 3.13(b)(v) Nat’l Council on the Facts of Overpopulation v Caplin, § 3.13(a) Nat’l Paralegal Inst Coalition v Comm’r, § 3.13(b)(ii) Nat’l Republican Found v Comm’r, § 3.13(b)(i) Nationalist Movement, The v Comm’r, § 3.13(b)(iv) New Community Senior Citizens Hous Corp v Comm’r, § 3.13(b)(i) New York County Health Servs Review Org., Inc v Comm’r, § 3.13(b)(ii) Ohio County & Ind Agric Soc’y v Comm’r, § 3.13(b)(i) Peoples Translation Service/Newsfront Int’l v Comm’r, §§ 3.13(b)(iv), § 3.13(b)(v) Point of Wisdom No v United States, § 3.13(b) Pulpit Resource v Comm’r, §§ 3.13(b)(iv), § 3.13(b)(v) Rochester Liederkranz, Inc v United States, § 3.13(c) San Francisco Infant School, Inc v Commissioner, § 3.13(b)(v) Schoger Found., The v Comm’r, §§ 3.13(b)(iv), § 3.13(b)(v) Schuster’s Express, Inc v Comm’r, § 3.13(b)(iv) Sense of Self Soc’y, The v United States, § 3.13(b)(i) Sound Health Ass’n v Comm’r, § 3.13(b)(v) Southwest Va Professional Standards Review Org., Inc v United States, § 3.13(b)(iv) Ⅲ 390 Ⅲ TABLE OF CASES St German of Alaska Eastern Orthodox Catholic Church et al v United States, § 6.8 State of Minn., Spannaus v United States, § 3.13(a) Synanon Church, The v United States, §§ 3.13(b), 3.13(b)(iii), 3.13(b)(iv) Tax Analysts v Internal Revenue Service, § 1.11 Tax Analysts v Internal Revenue Service & Christian Broadcasting Network, Inc., § 1.11 Teich v Comm’r, § 3.13(c) Trans-Pacific Policing Agreement v United States Customs Service, § 1.11 Unitary Mission Church of Long Island v Comm’r, § 3.13(b)(iv) United Cancer Council, Inc v Comm’r, § 3.13 United States v American Friends Serv Comm., § 3.13(a) United States v C.E Hobbs Found for Religious Training & Education, Inc., §§ 6.0, 6.3, 6.6(a), 6.7(b), 6.8 United States v Coates, § 6.8 United States v Church of Scientology Flag Service Organization, Inc., § 6.14 United States v Church of Scientology of Boston, Inc., §§ 6.0, 6.8, 6.14 United States v Church of Scientology Western United States, §§ 6.0, 6.7(b), 6.14 Ⅲ United States v Church of World Peace, §§ 6.8, 6.14 United States v Dykema, § 6.8 United States v Garden State Nat’l Bank, § 1.8 United States v Holmes, § 6.8 United States v Life Science Church of America, § 6.8 United States v Powell, §§ 1.8, 6.8, 6.14 United States v Rockwell Int’l, § 1.8 United States v Ryan, § 6.8 Universal Life Church, Inc v United States, § 3.13 Universal Life Church, Inc (Full Circle) v Comm’r, § 3.13(b)(i) Urantia Found v Comm’r, § 3.13(b)(i) Vietnam Veterans Against the War, Inc v Voskuil, § 3.13(a) Virginia Professional Standards Review Found v Blumenthal, § 3.13(b)(v) William F., Mabel E & Margaret K Quarrie Charitable Fund v Comm’r, § 3.13(b)(v) Wilson v United States, § 3.13(b)(v) Wingreen Co., In re, § 3.13(c) Wisconsin Psychiatric Servs v Comm’r, § 3.13(b)(iv) 391 Ⅲ Table of IRS Revenue Rulings Revenue Rulings Sections 59–95 69–247 2006–27 2007–41 § 5.26 § 5.4(g) § 4.1 §§ 4.1, 4.4(b), 4.4(d) Ⅲ 393 Ⅲ Table of IRS Revenue Procedures Revenue Procedures Sections 68–16 78–9 79–63 80–28 94–69 2007–2 2007–5 2007–52 § 1.10(b) § 3.13(a) § 3.13(b)(ii) § 3.13(c) § 3.7 § 1.9 §§ 1.9, 1.9(a)–1.9(k) §§ 2.2, 2.3(a), 2.11, 3.13, 3.13(b)(i), 3.13(b)(ii) Ⅲ 395 Ⅲ Index Accuracy of return, § 5.19(j) Advisory letters, §§ 5.32(a), 5.33(b) Agreed case: in general, § 5.32(a) in private foundation context, § 5.33(g) in unrelated business context, § 5.33(i) Agricultural organizations, IRS examinations of, § 7.1(l) Amateur athletic sports organizations, IRS examinations of, § 7.1(h) American National Red Cross Governance Modernization Act of 2007, § 3.1(o) Announcements, issuance of, § 2.10 Apostolic organizations, IRS examinations of, § 7.1(aa) Appeals function: in general, §§ 2.2, 2.11(a) IRS district office action, § 3.9(a) organization, priorities, and mission, § 2.11(a) proposed additional tax, § 3.9(c) regional office appeal, § 3.9(b) and tax-exempt organizations, § 2.11(b) Associate offices, definition of, § 1.9 Audit controversy, IRS, § 1.7 Audit lottery, winning of, §§ 3.2, 5.2 Audit unfolds: ongoing steps: documents, § 3.3(a) outcomes, §§ 3.3(c), 5.33 perspective, § 3.3(d) stay calm, things take time, § 3.3(b) Audit workpapers, defined, § 5.19(b) Audits of tax-exempt organizations by IRS: audit issues, introduction, § 1.3 audit procedures in general, § 1.4 controversy as to, § 1.7 current focus of, § 1.14 expansion of audit activity, § 1.13 future focus of, § 1.14 initial steps and reactions (see Winning audit lottery), § 3.2 issues, § 1.3 management of, § 3.0 pre-audit precautions (see Pre-Audit Precautions), § 3.1 procedures, introduction to, §§ 1.1, 1.4 reasons for, § 1.2 of returns, § rights, tax-exempt organizations’, § 1.5 types of, §§ 1.6, 1.12 Ⅲ unfolding of (see Audit unfolds: ongoing steps), § 3.3 Automated Information Management System, IRS, §§ 5.2(a), 5.2(b), 5.2(c), 5.3(b), 5.3(c), 5.4(g), 5.16, 5.18(a)(v) Balance sheet analysis, § 5.19(h) Black lung benefit trusts, IRS examinations of, § 7.1(y) Books and records: contracts, § 5.19(b)(vi) correspondence files, § 5.19(b)(viii) defined, § 5.19(b)(i) financial records, § 5.19(b)(ix) governing instruments, § 5.19(b)(ii) IRS examination of, §§ 3.1(a), 5.19(b)(i) minutes, § 5.19(b)(iii) operating manuals, § 5.19(b)(vi) publications, § 5.19(b)(iv) web sites, § 5.19(b)(v) Brown, Kevin M., §§ 1.13, 1.14 Burden of proof, § 5.20 Business leagues, IRS examinations of, § 7.1(m) Campus, IRS, § 5.3(c) Case Assignment Guide, IRS, § 5.4(b) Case chronology record, IRS, § 5.16 Cases (IRS classification of): agreed, § 5.32(a) excepted agreed, § 5.32(a) no change, § 5.32(a) no change with written advisory, § 5.32(a) partially agreed, § 5.32(a) unagreed, § 5.32(a) Cemetery companies, IRS examinations of, § 7.1(s) Change cases, § 5.33(c) Charitable organizations, IRS examinations of, § 7.1(b) Chief counsel advice memoranda, issuance of, § 2.10 Chief Counsel, Office of: in general, §§ 1.9, 2.2 and issue elevation, § 3.8(g) Church tax audit procedures: administrative remedies, exhaustion of, rule, § 6.15 church records, § 6.5 church tax examinations, § 6.7 church tax inquiries, § 6.6 397 Ⅲ INDEX Church tax audit procedures: (contd.) constitutional law background, § 6.1 inapplicability of procedures, § 6.4 intermediate sanctions rules, interaction with, § 6.16 limitations on additional inquiries and examinations, § 6.13 limited remedy for IRS violations of procedures, § 6.14 ninety-day completion rule, § 6.11 prototype scenario, § 6.9 special limitation periods, § 6.12 statutory law background, § 6.2 statutory law overview, § 6.3 summons enforcement, § 6.8 two-year completion rule, § 6.10 Classification unit, IRS Exempt Organizations (EO), §§ 5.2(a), 5.2(b), 5.2(c), 5.3(b), 5.3(c), 5.4(a) Claims: defined, § 5.34 filing for, § 5.34 informal, § 5.34 processing, by IRS, § 5.2(c) Closing agreements: authority and function, § 1.10(b) finality of, § 1.10(d) overall purpose of, § 1.10(a) scope of, § 1.10(c) in tax-exempt organizations context, § 1.10(e) Closing letters: examination reports, § 5.32(b) terminology, § 5.32(a) Commissioner of Internal Revenue, § 2.2 Commissioner, Tax Exempt Government Entities Division, § 2.3(a) Compliance check projects, IRS, §§ 1.6(d), Chapter Condition codes, IRS, § 5.2(b) Conflicts of interest, IRS, § 5.6 Contact person, §§ 3.2(b), 5.18(a)(ii) Cooperative organizations, IRS examinations of, § 7.1(r) Correspondence examinations, §§ 1.6(b), 5.4(b) Credit unions, IRS examinations of, § 7.1(t) Crop financing organizations, IRS examinations of, § 7.1(v) Cumulative Bulletin, § 2.10 Customer service, § 5.18(b)(iii) Data Analysis Unit, §§ 2.3(a), 2.3(d), 2.5 Declaratory judgment procedure, §§ 3.13(b), § 5.27, 5.33(g) Department of the Treasury, structure of, § 2.1 Determination file, IRS, § 5.14 Disbursement analysis, § 5.19(e) Documents to be provided (to IRS), §§ 3.6, 5.19(b) Educational organizations, IRS examinations of, §§ 7.1(b), 7.1(f) Everson, Mark W., §§ 1.1, 1.13, 4.0, 4.1 Examination case, § 5.4(b) Examination cycle, IRS, § 5.5 Examination, IRS, defined, §§ 1.1, 5.0 Examination, IRS, management of: initial steps, § 3.2 ongoing steps, § 3.3 pre-audit precautions, § 3.1 Examination outcomes: change cases, § 5.33(c) modification of exempt status, § 5.33(f) no change, §§ 5.9, 5.33(a) no-change, with written advisory, §§ 5.9, 5.33(b) nonexempt charitable trusts, § 5.33(l) non-private foundation excise taxes, § 5.33(k) private foundation excise taxes, § 5.33(j) private foundation status, reclassification of, § 5.33(g) private operating status, modification of, § 5.33(h) public charity status, § 5.33(g) revocation of exempt status, § 5.33(e) summary of, § 3.3(c) unrelated business issues, § 5.33(i) Examination Planning and Programs unit, IRS, §§ 5.2(b), 5.10, 5.18(c) Examination reports, § 5.32 Examination techniques, § 5.18(f) Examinations, IRS: balance sheet analysis, § 5.19(h) of books and records, §§ 3.1(c), 5.19(b)(i) classification procedures, § 5.3(c) commencement of, § 5.18 consecutive, § 5.8 contact person, § 5.18(a)(ii) of contracts, §§ 3.1(h), 5.19(b)(vii) controversy as to, § 1.7 correspondence, §§ 1.6(b), 1.12, 3.1(e), 5.19(b)(viii) customer service, IRS, and, § 5.18(b)(iii) cycle, § 5.5 defined, § 5.0 disbursement analysis, § 5.19(e) of documents, §§ 3.2(c), 5.19(b) exempt organizations–caused delays in, § 5.19(m) expense allocations, § 5.19(g) field, § 1.6(a) of financial records, § 5.19(b)(ix) of governing instruments, §§ 3.1(a), 5.19(b)(ii) group manager involvement, § 5.4(f) income analysis, § 5.19(d) initial interview, §§ 3.2(i), 5.18(g), 7.7(b) initial taxpayer contact, § 5.18(a) Ⅲ 398 Ⅲ INDEX internal controls, of, § 5.18(d) issue development, § 5.19(l) issues, sharing of, § 5.19(q) limited scope, IRS, § 5.18(c) of manuals, § 5.19(b)(vi) of minutes, § 3.1(f), 5.19(b)(iii) of nonexempt charitable trusts, § 5.33(l) objectives, IRS, §§ 5.4(d), 5.18(b)(ii) office, § 1.6(b) on-site, § 5.18(b) outcomes, §§ 3.3(c), 5.33 place of, §§ 3.2(b), 5.18(j) publications, §§ 3.1(j) 5.19(b)(iv) quality, §§ 5.18(b)(i), 5.19(n) process, §§ 5.2(b), 5.4(e) repetitive, § 5.9 reports of, §§ 5.32, 5.33(d) return surveys, § 5.10 returns, accuracy of, § 5.19(j) sampling techniques, § 5.19(c) scope of, §§ 5.11, 5.18(b)(v) tax liabilities, § 5.19(i) team, §§ 1.6(c), 5.4(c) techniques, § 5.18(f) third-party contacts, § 5.18(h) tours, §§ 3.5(b), 5.19(a) transfers of, § 5.18(a)(iv) types of, § 1.6 of web sites, §§ 3.1(k), 5.19(b)(v) Examiners, IRS: coping with, § 3.5(a) defined, § 5.4(b) documents, § 3.5(d) interacting with, § 3.5 internal controls and, § 5.18(d) office facilities for, § 3.2(h0 point person as to, § 3.5(c) research and, §§ 5.15, 5.31 tours for, §§ 3.5(b), 5.19(a) workpapers of, § 5.18(e) Excepted-agreed cases, § 5.32(a) Excise taxes: non-private foundation, § 5.33(k) private foundation, § 5.33(j) Executive Branch influence, prohibition on, § 5.7 Exempt Organization Case Assignment Guide, § 5.4(b) Exempt Organization Case Chronology Record, § 5.3(c) Exempt Organization Information Item Tracking Sheet, § 5.3(c) Exempt Organization Inventory Control system, IRS, §§ 5.2(a), 5.2(c), 5.3(b), 5.3(e) Exempt Organizations Compliance Unit, §§ 1.6(d), 2.3(d), 2.5, 4.0 Exempt Organizations Division: Business Systems Planning, § 2.4(e) Ⅲ Communications and Liaison, Office of, § 2.4(d) Customer Accounts Services, Office of, § 2.9 Customer Education and Outreach, Office of, §§ 2.3(a), 2.6 Customer profile, § 2.3(b) Data Analysis Unit, §§ 2.3(a), 2.3(d), 2.5 Director of, § 2.3(a) Electronic Initiatives, Office of, §§ 2.3(a), 2.5 Enforcement function, § 2.3(d) Examinations, Office of, §§ 2.5, 5.1 Executive Steering Committee, § 5.2(a) Exempt Organizations Compliance Unit, §§ 1.6(d), 2.3(d), 2.5, 4.0 Finance, Office of, § 2.4(c) Operations, § 2.3(c) Planning, Office of, § 2.4(b) Program Management, Office of, § 2.8 Research and Analysis, Office of, § 2.4(f) Returns Inventory and Classification System Advisory Board, § 5.2(a) Rulings and Agreements, Office of, §§ 2.3(a), 2.7 Senior Technical Advisor, §§ 2.4(a), 3.8(d), 7.1(d) Single Point of Contact position, § 5.2(a) Technical groups, § 2.3(a) Technical Guidance and Quality Assurance, Office of, § 2.3(a) Exempt Organizations Financial Investigations Unit, §§ 2.3(d), 2.5 Exempt Organizations Examinations, IRS Office of, §§ 1.1, 1.4, 2.5, 5.1 Exempt Organizations Examinations Programs and Review, § 5.1 Exempt Organizations Implementing Guidelines, §§ 1.1, 1.6(d), 2.3(a), 4.2 Exempt Organizations Information Item Tracking Sheet, § 5.3(c) Exempt Organizations Referral Committee, §§ 5.3(b), 5.3(d) Exempt Organizations Returns Inventory and Classification System, § 5.2(a) Exempt organization–caused delays in examinations, § 5.19(m) Expense allocations, § 5.19(g) Explanation of Items form (886-A), §§ 5.32(b), 5.33(d), 5.33(f), 5.33(h), 5.33(i), 5.33(k), 5.34, 5.35(a), 5.35(c), 5.35(d) Facts: collecting and recording, by IRS, § 5.19(o) developing and documenting, by IRS, § 5.19(n) Field examinations, § 1.6(a) Field office, IRS, definition of, § 1.9 Filing requirements, § 5.19(f) 399 Ⅲ INDEX Forms (IRS): 11-C, §§ 5.4(d), 5.18(b)(ii) 211, § 5.3(c) 730, §§ 5.4(d), 5.18(b)(ii) 843, § 5.34 870-E, §§ 5.32(a), 5.32(b), 5.33(j), 5.34 872, §§ 3.10, 5.10, 5.16 886-A, §§ 3.10, 5.32(b), 5.33(c), 5.33(d), 5.33(f), 5.33(h), 5.33(i), 5.33(k), 5.34, 5.35(a), 5.35(c), 5.35(d) 906, § 1.10(b) 940, §§ 5.4(d), 5.18(b)(ii), 5.33(b), 7.1(p) 941, §§ 5.2(a), 5.4(d), 5.18(b)(ii), 5.33(b), 7.1(p) 945, § 5.18(b)(ii) 990, §§ 1.13, 3.1(g), 4.5, 4.9(b), 5.2(a), 5.3(c), 5.4(d), 5.18(b)(ii), 5.18(e), 7.1(bb), 7.3(a), 7.4 990-BL, § 5.33(k) 990-EZ, §§ 5.2(a), 5.4(d), 5.18(b)(ii), 7.4 990-PF, §§ 3.1(g), 5.2(a), 5.4(d), 5.18(b)(ii), 5.33(j), 5.34 990-T, §§ 1.12, 3.1(g), 5.2(a), 5.3(c), 5.4(d), 5.4(g), 5.18(b)(ii), 5.18(e), 5.33(b), 5.33(i), 5.34 1024, § 5.21 1041, §§ 5.2(a), 5.33(l), 5.34 1041-A, § 5.33(l) 1065, § 3.1(g) 1096, §§ 5.4(d), 5.18(b)(ii) 1099, §§ 3.1(g), 5.18(b)(ii), 5.19(f), 5.33(b) 1099-MISC, §§ 3.1(g), 5.4(d) 1120-POL, §§ 3.1(g), 5.2(a), 5.4(d), 5.4(g), 5.18(b)(ii), 5.34 1139, § 5.34 1254, § 5.30 2297, §§ 5.32(b), 5.34 2807, § 5.25 2848, §§ 3.4, 3.10, 5.16 3363, §§ 5.32(b), 5.34 4549, §§ 5.32(a), 5.32(b), 5.33(c), 5.33(d), 5.33(i), 5.34, 5.35(a) 4549-A, §§ 5.32(b), 5.33(d), 5.33(i), 5.35(a) 4549-B, § 5.32(b) 4564, §§ 1.4, 3.10, 5.18(a)(v) 4620, §§ 5.32(b), 5.33(d), 5.33(f), 5.33(h), 5.34, 5.35(a), 5.35(b) 4621, §§ 5.32(b), 5.33(c), 5.33(d), 5.33(h), 5.33(k), 5.34, 5.35(a), 5.35(c) 4621-A, §§ 3.10, 5.32(b), 5.33(c), 5.33(d), 5.33(f), 5.35(d) 4720, §§ 1.13, 5.2(a), 5.4(g), 5.33(b), 5.33(j), 5.33(k), 5.34 4883, §§ 5.32(b), 5.33(d), 5.34, 5.35(a), 5.35(e) 5227, §§ 5.2(a), 5.4(d), 5.33(l) 5464, § 5.16 5464-A, § 5.3(c) 5546, §§ 5.4(g), 5.9, 5.13 5666, §§ 5.3(c), 5.25 5772, §§ 5.17, 5.18(e), 5.33(a) 5773, §§ 5.17, 5.18(e), 5.33(a) 5774, §§ 5.17, 5.18(e) 5788, § 7.1(d) 6018, §§ 3.10, 5.32(b), 5.33(e), 5.33(g), 5.33(h), 5.35(d) 6018-A, §§ 5.32(b), 5.33(e), 5.33(f), 5.35(d) 6069, § 5.33(k) 8282, § 4.9(g) 8283, § 4.9(g) 8821, § 3.4 8871, § 3.1(g) 8872, § 3.1(g) Letter 3602, § 5.34 Letter 3611, § 3.10 Letter 3618, § 3.10 Letter 4290 (CG), § 4.9(b) W-2, §§ 3.1(g), 5.4(d), 5.18(b)(ii), 5.33(b) W-2G, §§ 3.1(g), 5.33(b) W-3, § 5.18(b)(ii) Fraternal societies, IRS examinations of, § 7.1(o) Freedom of Information Act, §§ 1.11, 5.16, 5.18(e) Fundraising, issues as to: advertisements of fundraising activities, § 7.6(a) annual reporting, § 7.6(g) disclosure of nondeductible contributions, § 7.6(b) disclosure of quid pro quo contributions, § 7.6(c) Internet, use of, § 7.6(f) non-cash charitable contributions, § 7.6(e) unrelated business rules, § 7.6(d) Gaming, issues as to: bingo activity, § 7.7(c) exempt status, qualification for, § 7.7(f) initial contact interview, § 7.7(b) preexamination analysis, § 7.7(a) public charity status, qualification for, § 7.7(g) pull-tab activity, § 7.7(d) related entities, § 7.7(h) unrelated business activities, § 7.7(e) Good governance practices, IRS, § 3.1(o), App C Grassley, Charles E., § 1.14 Group managers, §§ 2.3(a), 5.4(f) Health maintenance organizations, § 7.1(cc) Horticultural organizations, IRS examinations of, § 7.1(l) Inability to locate organization, IRS, § 5.28 Inadequate records: in general, §§ 5.25, 5.26 revocation of exemption due to, § 5.26 Income analysis, § 5.19(d) Informal claims, § 5.34 Ⅲ 400 Ⅲ INDEX Information document requests, §§ 1.4, 3.2(c), 3.10, 5.4(c), 5.18(a)(v) Information, failure to provide, § 5.26 Information items: action on, by IRS, § 5.3(b) defined, § 1.2 sources of, § 5.3(a) types of, § 5.3(a) Initial taxpayer contact, by IRS: contact person, § 5.18(a)(ii) definition of, § 5.18(a)(i) examination transfers, § 5.18(a)(iv) initial contact, § 5.18(a)(iii) initial examination scope, § 5.18(b)(v) initial information document request, § 5.18(a)(v) initial interview, § 5.18(g) initial interview, planning of, § 5.18(a)(vi) Insurance companies, IRS examinations of, § 7.1(u) Integrated Data Retrieval System, IRS, §§ 5.2(c), 5.3(c), 5.15, 5.16, 7.1(a) Internal controls, IRS evaluation of, § 5.18(d) Internal IRS transmittal letter, § 5.35(b) Internal Revenue Bulletin, § 2.10 Internal Revenue Manual, thoughts on, § 1.0 Internal Revenue Service (IRS): administrative functions, § 2.10 Appeals function, § 2.2 Chief Counsel of, § 2.2 Commissioner of Internal Revenue, § 2.2 Exempt Organizations Division, § 2.3(a) National Office of, § 2.2 National Taxpayer Advocate, §§ 2.2, 2.12 organization of, in general, § 2.2 Oversight Board, § 2.2 practice before, § 2.13 Professional Responsibility, Office of, § 2.13 restructuring of, §§ 2.2, 2.3 Tax Exempt and Government Entities Division, §§ 2.2, 2.3 Interviews, IRS, §§ 1.4, 5.18(a)(vi), 5.18(g) Issue development, § 5.19(l) Issue elevation: Counsel, referrals to or consultation with, § 3.8(g) elevation, definition of, § 3.8(a) elevation to inform managers or executives, § 3.8(d) elevation to obtain decisions, § 3.8(e) in general, § 2.3(c) issue, definition of, § 3.8(b) issues that are candidates for elevation, § 3.8(f) why issues are elevated, § 3.8(c) Issues: elevation of, § 3.8 Ⅲ examination reports, presentation in, § 5.33(d) sharing of, § 5.19(q) suspended, § 5.30 Joint Committee claim cases, § 5.2(d) Joint Committee on Taxation, § 5.2(d) Labor organizations, IRS examinations of, § 7.1(k) Law of tax-exempt organizations: research of, by IRS examiners, § 5.31 sources of, App A summary of, App C Limited scope examinations, IRS, § 5.18(c) Litigation: declaratory judgment rules, § 3.13(b) general rules, § 3.13(a) other approaches, § 3.13(c) Local associations of employees, IRS examinations of, § 7.1(j) Mandatory Review, §§ 5.3(c), 5.25, 5.30 Market segment studies, §§ 1.13, 4.2 Miller, Steven T., §§ 1.14, 3.1(o) Multi-parent title-holding companies, § 7.1(z) Mutual organizations, IRS examinations of, § 7.1(r) National standard time frames, § 5.18(b)(iv) National Taxpayer Advocate, Office of: general rules, § 2.12(c) mission fulfillment, § 2.12(a) organization, §§ 2.2, 2.12(b) systemic advocacy, § 2.12(d) and tax-exempt organizations, § 2.12(e) News releases, issuance of, § 2.10 No-change cases, §§ 5.9, 5.32(a) No-change-with-written-advisory cases, § 5.32(a) Nonexempt charitable trusts, IRS examinations of, §§ 5.33(l), 7.3 Notice of proposed adjustment, § 1.4 Notices, issuance of, § 2.10 Office/Correspondence Examination Program, IRS, §§ 1.6(b), 5.18(b)(v) Office of Personnel Management, § 5.4(b) Office of Professional Responsibility, IRS, § 2.13 Office space, for IRS, § 3.2(h) Partially agreed cases, § 5.32(a) Penalties, § 5.19(k) Political Activity Compliance Initiative, IRS, §§ 1.7, 4.4 Political organizations, IRS examinations of, § 7.1(bb) Power of attorney, § 3.4 401 Ⅲ INDEX Practice before IRS, § 2.13 Pre-audit precautions: conflict-of-interest policy, § 3.1(i) employment taxes, § 3.1(l) governance, § 3.1(o) legal audit, § 3.1(p) media coverage, § 3.1(m) other documents, § 3.1(j) review books and records, § 3.1(c) review contracts, § 3.1(h) review correspondence, § 3.1(e) review federal returns, § 3.1(g) review governing instruments, § 3.1(a) review minutes, § 3.1(f) review operations, § 3.1(b) review publications, § 3.1(d) review web site, § 3.1(k) testaments, § 3.1(n) Preexamination processes, IRS: accompanying documents, IRS, review of, § Case Assignment Guide, § 5.4(b) examination objectives, § 5.4(d) guidelines, IRS, § 5.4(c) procedures, § 5.11 recordkeeping system, IRS, § 5.4(a) returns, review of, § 5.12 workpaper summaries, § 5.17 Private foundation status: in general, § 7.2 reclassification of, § 5.33(g) Private letter rulings, issuance of, § 2.10 Private operating foundation status, modification of, § 5.33(h) Private schools, IRS examinations of, § 7.1(d) Proof, burden of, § 5.20 Public charity status: in general, § 7.2 reclassification of, § 5.33(g) Public interest law firms, IRS examinations of, § 7.1(e) Publications, IRS: 1, IRS, §§ 1.5, 5.18(a)(vi), 5.18(g) 892, § 3.10 1035, § 5.4(g) 3498, § 3.10 Qualified amended returns, § 3.7 Quality examinations, IRS, § 5.18(b)(i) Records, see Books and records Referral Committee, IRS EO, §§ 5.3(b), 5.3(d) Regulations, promulgation of, § 2.10 Religious organizations, IRS examinations of, § 7.1(c) Reporting requirements, §§ 7.5, 7.6(g) Research, IRS, § 5.15 Retroactivity of: revocation of tax-exempt status, § 1.12 technical advice memoranda, § 1.9(j) Returns: accuracy of, § 5.19(j) review of, § 5.12 surveys, § 5.10 Returns Inventory and Classification System (RICS), IRS Exempt Organizations, § 5.2(a) Revenue agent’s report, § 5.33(c) Revenue procedures, issuance of, § 2.10 Revenue rulings, issuance of, § 2.10 Revocation of exemption: because of failure to provide information, § 5.26 because of inadequate records, § 5.26 following IRS examination, § 5.33(e) RICS Advisory Board, § 5.2(a) Rossotti, Charles, §§ 3.13(a), 4.0 Sampling techniques: judgment sampling, § 5.19(c) statistical sampling, § 5.19(c) Scientific organizations, IRS examinations of, § 7.1(g) Single-parent title-holding corporations, IRS examinations of, § 7.1(a) Single Point of Contact position, § 5.2(a) Social clubs, IRS examinations of, § 7.1(n) Social welfare organizations, IRS examinations of, § 7.1(i) Split-interest trusts, IRS examinations of, § 7.3 Statute of limitations, §§ 3.11, 5.4(f), 5.4(g), 5.10, 5.30 Stiff, Linda, § 1.13 Successor member interest contributions, § 4.9 Summons, IRS: authority for, § 1.8 enforcement in church audit context, § 6.8 preparation and issuance, by IRS, § 5.19(p) third-party, § 1.8 Supplemental unemployment benefit trusts, IRS examinations of, § 7.1(w) Suspended issues, § 5.30 Tax liabilities, § 5.19(i) Tax exemption: modification of, §§ 5.22, 5.33(f) revocation of, §§ 1.12, 5.21, 5.22, 5.26, 5.33(e) Taxpayer, definition of, § 1.9 Taxpayer Advocate Service, §§ 1.5, 2.12 Taxpayer confidentiality privilege, § 5.18(i) Tax Exempt Quality Measurement System, IRS, §§ 1.6(a), 5.4(b), 5.4(c), 5.18(b) Tax-exempt organizations: categories of, § 7.1 inability of IRS to locate, § 5.28 rights of, § 1.5 Ⅲ 402 Ⅲ INDEX Tax Exempt and Government Entities (TE/GE) Division: Commissioner, TE/GE, § 2.3(a) customer profile of, § 2.3(b) enforcement function of, § 2.3(d) headquarters mission, § 2.4 in general, §§ 1.4, 2.2, 5.2(c) operations of, § 2.3(c) overall organization of, § 2.3(a) priorities of, § 2.3(a) Teachers’ retirement fund associations, IRS examinations of, § 7.1(q) Team examination procedures, §§ 1.6(c), 5.4(c) TE/GE Executive Steering Committee, § 5.2(a) TE/GE Headquarters: Business Systems Planning, Office of, § 2.4(e) Communication and Liaison, Office of, § 2.4(d) Finance, Office of, § 2.4(c) Planning, Office of, § 2.4(b) Research and Analysis, Office of, § 2.4(f) Senior Technical Advisor, § 2.4(a) Technical advice: appeals of decisions to not seek advice, § 1.9(e) conference scheduling, § 1.9(g) defined, §§ 1.9, 1.9(a), 5.23 effect of, § 1.9(i) future use of, § 1.9(k) general procedures in exempt organizations context, §§ 1.9(a), 5.23 IRS use of, § 1.9(h) limited retroactive effect of, § 1.9(j) pre-submission conferences, § 1.9(b) requests, contents of, § 1.9(c) requests, handling of, § 1.9(d) requests, withdrawal of, § 1.9(f) Technical advice memoranda, issuance of, § 2.10 Ⅲ Technical advisor issues, § 5.29 Technical Guidance and Quality Assurance, Office of, § 2.3(a) Terminations, § 5.24 Third-party contacts, §§ 1.8, 5.18(h) Third-party recordkeeper, definition of, § 1.8 Tours, for IRS, §§ 3.5(b), 5.19(a) Treasury, Department of, § 2.1 Treasury Inspector General for Tax Administration, §§ 1.7, 2.1(b) Unagreed cases, § 5.32(a) Unemployment tax, § 3.1(l) Unrelated business issues, §§ 5.33(i), 7.4, 7.6(d), 7.7(e) Unusual items, defined, § 5.19(c) Unwanted outcome, § 3.12 Veterans’ organizations, IRS examinations of, § 7.1(x) Voluntary employees’ beneficiary associations, IRS examinations of, § 7.1(p) Web sites, tax-exempt organizations, §§ 3.1(k), 5.15, 5.19(b)(v) Winning audit lottery: initial steps and precautions: communications strategy, § 3.2(f) contact person, § 3.2(e) documents requested, § 3.2(c) first impressions, § 3.2(j) get organized, § 3.2(d) interviews, § 3.2(i) know the cast, § 3.2(g) notice of examination, § 3.2(b) office facilities for IRS, § 3.2(h) telephone call, § 3.2(a) Workpaper summaries, IRS, § 5.17 403 Ⅲ .. .IRS Audits of Tax- Exempt Organizations Policies, Practices, and Procedures Bruce R Hopkins John Wiley & Sons, Inc IRS Audits of Tax- Exempt Organizations IRS Audits of Tax- Exempt Organizations. .. audit procedures and practices Until recently, IRS exempt organizations audits were in decline, largely because of a lack of resources (funds and personnel) Also, in the aftermath of the IRS reorganization,12... of pertinent records to appear before a representative of the agency and produce books and The IRS s Tax- Exempt Organizations Examination Procedures, a part of the Internal Revenue Manual (IRM),