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Part 4. Examining Process

Chapter 75. Exempt Organizations Examination Procedures

Section 5. Information Items

4.75.5  Information Items

4.75.5.1  (05-13-2005)
Introduction

  1. This IRM section establishes procedures to review, evaluate, and preserve information items received by Exempt Organizations (EO). These procedures are designed to ensure that EO operates in an unbiased and appropriate manner and to protect against impropriety and undue influence in its compliance programs.

  2. The Director, EO Examinations, has broad discretion to undertake coordination and to develop procedures to create an active and effective referral program.

4.75.5.2  (05-13-2005)
Information Items Defined

  1. An information item is either:

    1. A document or other communication, including an electronic communication, received by EO Classification from a source outside the Internal Revenue Service, which alleges possible noncompliance with a tax law on the part of an exempt organization, political organization, taxable entity, or individual; or

    2. An internal document (referral) prepared by an Internal Revenue Service employee and forwarded to EO Classification, which identifies current or potential noncompliance discovered during either the processing of an assigned case, or at any other time in the performance of official duties.

4.75.5.3  (05-13-2005)
Sources of Information Items

  1. Information items may come from a variety of sources including:

    1. EO employees conducting examinations or processing determinations;

    2. Other IRS functional areas;

    3. The media;

    4. Other Federal agencies, e.g., Department of Labor, Department of Housing and Urban Development, or Department of Justice;

    5. State and local government agencies and officials;

    6. Members of the exempt organization community;

    7. The general public; or

    8. Members of Congress.

      Note:

      IRC 7217 prohibits Executive Branch influence over taxpayer audits and other investigations, and requires the reporting of violations to the Treasury Inspector General for Tax Administration (TIGTA). Any employee receiving an information item originating from the White House or any Executive Branch office should immediately report the item to his or her supervisor or to the Director, EO Examinations, for a determination as to the applicability of IRC 7217 and necessary action. See IRM 1.54.1.9.1(3)c.

4.75.5.4  (05-13-2005)
General Procedures

  1. EO Classification will act promptly on information items. Classifiers will begin evaluating information items within 30 days of the date of their receipt in EO Classification. Information items classified as having examination potential will be established on AIMS and EOIC within 90 days of receipt.

  2. A 'fast-track' procedure has been implemented to identify and expedite those referrals determined to have priority. A classifier reviews all incoming information items daily and identifies those requiring expeditious handling. All Referral Committee cases are included in this expedite procedure, as well as allegations of fraud with supporting documentation and certain critical initiatives and projects. Referrals identified for 'fast-tracking' are assigned to a classifier immediately, and evaluated on a next-case basis.

  3. A classifier will determine whether an information item has examination potential, no examination potential, should be considered in a future year, needs additional information to make a decision, or should be referred to the EO Referral Committee. See IRM 4.75.5.6.

  4. Information items that should be referred to the EO Referral Committee are items:

    1. Containing evidence or allegations of political or lobbying activities;

    2. Containing evidence or allegations of financial transactions with, including contributions to, individuals or organizations with known or suspected terrorist connections;

    3. Containing evidence or allegations involving a church;

    4. Involving high-impact issues (e.g., the decision may result in media attention);

    5. Involving sensitive cases (e.g., the information was submitted by an elected official (other than Congress or Executive Branch);

    6. Submitted by a Member of Congress (or Congressional staff); or

    7. Involving other factors indicating that review by the EO Referral Committee would be desirable for reasons of fairness or integrity.

  5. Copies of information items subject to EO Referral Committee review will be accumulated and mailed to each member of the committee by the 5th of the month and the committee will meet by the 17th of the month to discuss and classify those receipts. Minutes of the meeting will be prepared, signed and faxed to the Manager, EO Classification within five workdays of the meeting. The minutes will document the issues and reasons for selection or non-selection for each information item. Classification will enter the information on the referral database.

  6. The EO Referral Committee reviews the referred information items on a monthly basis using the "reasonable belief standard." See IRM 4.75.5.7.

4.75.5.5  (05-13-2005)
EO Classification Procedures

  1. EO Classification will maintain a database of information items. All information items received by EO Classification will be entered in the database. The database is used to print an EO Information Item Tracking Sheet (Tracking Sheet), which will be attached to the original information item when it is received. The Tracking Sheet will remain attached to the information item until all actions are completed. Each person handling the information item will enter the appropriate information on the Tracking Sheet. ( see Exhibit 4.75.5-1) and will document the dates and actions taken on each information item on Form 5464–A, EP/EO Case Chronology Record.

  2. When an information item is initially received in EO Classification, the Management Assistant will

    1. Perform IDRS research (INOLES, BMFOL, AMDIS); and

    2. Establish the item on the Referral Database with, name and address of the referred entity, name and address of the informant, source code, IRS received date, and EO Classification received date;

    3. Prepare and mail an acknowledgement letter to third party informants;

    4. Assign the referral to a classifier;

      Note:

      The Referral Database automatically assigns a Referral Control Number in sequence of input.

  3. The classifier will review all information items and conduct appropriate research to determine whether the item has examination potential. It is imperative that qualification issues as well as return information be considered. In certain instances the classifier may determine that the referred entity should be considered for examination in a future year (e.g., a transaction has occurred in a tax year that has not ended, or a determinations specialist has recently granted exemption believing that the organization may not operate as their application stated). These referrals are closed from the database and filed by suspense date so that they may be considered at the designated time.

  4. If the information item includes an original Form 211, Application for Reward for Original Information, the classifier will make a copy and mail the original to the appropriate campus following the procedures in IRM 25.2.2.

  5. Copies of Information items subject to EO Referral Committee review will be accumulated and mailed to each member of the committee by the 5th of the month and the committee will meet by the 17th of the month to discuss and classify those receipts. Minutes of the meeting will be prepared, signed and faxed so the Manager, EO Classification within five workdays of the meeting. The minutes will document the issues and reasons for selection or non-selection for each information item. Classification will enter the information on the referral database.

  6. If an examination is warranted, the classifier will:

    1. Document the reasons for selection on the tracking sheet, and

    2. Prepare the source document to establish the return(s) on the Audit Information Management System (AIMS) and the Exempt Organizations Inventory Control (EOIC). If an organization filed Forms 990 and 990–T, both returns will be established on AIMS and EOIC. Note that this will be done regardless of whether the examination is a complete or limited scope examination.

  7. If an Examination is warranted, the Management Assistant will:

    1. Establish on AIMS and EOIC with a V freeze code on the AIMS account to ensure that the return is routed through EO Classification at closing;

    2. Either print a copy of the appropriate return(s) using the CDs provided by the Ogden Campus or, when the return(s) is/are not available on CD, request the original return(s) from the Ogden Campus;

    3. Update the information item in the referral database;

    4. Print the Tracking Sheet and attach it to the information item;

    5. Copy and retain a copy of the Tracking Sheet and information item and file these in"open examination files; and" ;

    6. Forward the established return(s) to the appropriate EO group.

    Note:

    In addition to the return(s), the information forwarded to the group will include current research, the referral Tracking Sheet, and the original information item.

  8. If an examination is not warranted, the classifier will document the reasons for non-selection on the tracking sheet.

  9. If an examination is not warranted, the Management Assistant will update the referral database using the information provided by the Classifier, and file the referral in 'Closed Referrals.

  10. The tasks necessary to process information items will be completed within the following timelines:

    1. Initial research, creation of database record, acknowledgement letter to known 3rd parties, and printing tracking sheet will be completed by the 21st day after receipt of the information item in EO Classification;

    2. The item will be assigned to a Classifier by the 30th day after receipt;

    3. The Classifier will make a determination and prepare appropriate guidance for establishing an examination case, if applicable, by the 60th day after receipt;

    4. The decision will be documented on the referral database by the 75 th day after receipt.;

    5. For items selected for examination, EOIC and AIMS accounts will be established and the item will be assignment ready by the 90th day after receipt.

    4 Receipt Stamp
    7 First Process Identify Entity and special process for Church
    Obvious committee
    Credit Counseling
    Fast-Track
    Future Year Project
    10 IDRS EIN/SSN
    INOLES-Is this and EO? If so, to a Classifier. If EO, then regular research
      Database Duplicate? If so, to Classifier.
    Enter on database
    Print tracking sheet
    7 Folder/Label Create file
    Place in Unassigned Or
    2   Mail
    30 Classify Assign to Classifier
    Classify
    Prepare green sheet
    Document tracking sheet
    3   Return to Anita
    10 DATABASE Update conclusion and any other items
    2 COPY Copy referral retention file
    15 RICS AIMS/EOIC
    Order/copy return
    Create examination file
    On the shelf

  11. Field groups or Mandatory Review, if applicable, will close all information item-generated cases to EO Classification after completion of the examination or survey action.

  12. EO Classification will capture examination results on the referral database, remove the freeze code, and forward to the closing unit on EOIC and AIMS. An updated tracking sheet will be printed, one copy filed with the return and one copy filed with the closed referral in Classification.

  13. EO Classification will forward Forms 5666, TE/GE Referral Information Report, not involving exempt organizations, to Planning and Special Programs (PSP) for the territory servicing the principal place of business of the taxpayer, i.e., Small Business and Self Employed (SBSE), Wage and Investment (W&I), and Large and Mid-Size Business (LMSB). EO Classification will maintain records of these referrals.

  14. Internal Revenue Operating Divisions should forward all EO information items to
    IRS - EO Classification
    4910 DAL
    1100 Commerce Street
    Dallas, TX 75242:

  15. Form 5666, or any other equivalent information report, may be used to forward the information item.

4.75.5.6  (05-13-2005)
EO Referral Committee

  1. The EO Referral Committee is composed of not less than three members. The members are experienced EO technical employees, e.g., senior examiners, return classification specialists, group managers, or area managers. Each member will serve for 12 months on a staggered schedule to maintain expertise and continuity within the committee. The Director, EO Examinations will issue a memo soliciting volunteers 30 days prior to the start of the assignments. The 12-month rotations will begin February 1, June 1, and October 1

  2. The EO Referral Committee’s responsibility is to consider, in a fair and impartial manner, whether information items referred have examination potential.

    Note:

    The EO Referral Committee may determine that additional factual information is required before a decision can be made about examination potential.

  3. In considering whether an information item has examination potential, the members of the EO Referral Committee will determine whether the information item establishes a reasonable belief that further action by the Service is warranted. If the EO Referral Committee determines:

    The information item Then
    Meets the reasonable belief standard The item will be referred for examination.
    Does not meet the reasonable belief standard The item will not be referred for examination.

4.75.5.7  (05-13-2005)
Reasonable Belief Standard

  1. "Reasonable belief," for these purposes, means the information item, when considered fairly and in light of other reliable information, if available, demonstrates that a violation of the Federal tax laws may have occurred or appears likely to lead to the discovery of a violation upon examination. In making this determination, EO Referral Committee members are expected to use their experience, judgment, and concern for fairness.

4.75.5.8  (05-13-2005)
Church Information Items

  1. The EO Referral Committee will review all information items pertaining to organizations claiming to be churches. The EO Referral Committee will determine if the information supports a "reasonable belief" that an organization may not be exempt as a church under IRC 501(a), may be carrying on an unrelated trade or business within the meaning of IRC 513, or may be otherwise engaged in activities subject to any IRC tax, or that IRC 4958 tax may be due from a disqualified person with respect to a transaction involving a church. See IRM 4.76.7.4.2 for detailed procedures on processing church referrals.

4.75.5.9  (05-13-2005)
Information Items Record Keeping System

  1. EO Classification will maintain a record keeping system for all information items within the jurisdiction of EO. The record keeping system will:

    1. Track the receipt and disposition of all information items received.

    2. Properly identify the source of all information items.

      Note:

      See Document 6379, Exempt Organizations Management Information Systems Codes, for the AIMS source codes.

    3. Ensure all decisions relating to examination case selection or non-selection, including the evaluation and disposition of all information items and source documents, regardless of merit, are documented and associated with the information item record file.

  2. The EO information item record keeping system will allow management to track all individual information items to:

    1. Determine the date the item was received by IRS and EO Classification, and

    2. Document its movement through the system, including the source of the item, who made the decision to examine or not to examine, the rationale for the decision, how the decision was implemented, and the present location of the item.

    3. Document the disposal codes, issue codes, survey actions after closure of examinations resulting from referrals/information items.

  3. EO Classification will retain all information items and source documents regardless of whether the information item results in an examination.

  4. The following items will be stored in a secure, systematic, and retrievable manner for three years from the last action date on the file (e.g., the date classified and closed as not selected, or the date the examined return closed through Classification):

    1. Information items and related documents, and

    2. EO Information Item Tracking Sheets.

Exhibit 4.75.5-1  (05-13-2005)
information Item Tracking Sheet

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