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Part 7. Rulings and Agreements

Chapter 21. Exempt Organizations Automated Processing Procedures

Section 2. Processing User Fees

7.21.2  Processing User Fees

7.21.2.1  (01-01-2003)
Overview

  1. Procedures are provided on processing user fees that accompany applications for determination letters. These procedures establish minimum security requirements, provide instructions for processing applications and fees, and maintaining records of user fees remitted to TE/GE Determinations Processing.

  2. The user fee provision was enacted into law by section 10511 of Public Law 100–203. This law requires advance payment of a fee before determination, ruling, opinion or similar type letters can be issued. Public Law 100–203 was amended by section 743 of the Uruguay Round Agreement Act, Pub. L. 103–465, 1995–1 C.B. 230, 239, extending the legislation through September 30, 2000. Public Law 104–117, Tax Relief to Operation Joint Endeavor Participants Act, 1996–34 I.R.B. 19, extended the time period through September 30, 2003. See Rev. Proc. 2001–8, 2001-1 I.R.B. 239, (revised annually) for administrative procedures on user fees.

  3. Form 8718, User Fee for Exempt Organization
    Determination Letter Request, serve several purposes:

    1. document payments made in determination case files;

    2. help taxpayers understand the user fee program, and

    3. ascertain the correct fee.

  4. User fees are payable with each determination letter application. See Section 2.3.1 for user fee exceptions. Fees are not refundable except as provided in section 10 of Rev. Proc. 2001–8. Refund procedures are in Section 2.5.

  5. These procedures apply to the Adjustments Unit of TE/GE Determinations Processing in the Cincinnati and the Cincinnati Submission Processing Center (CSPC).

7.21.2.2  (01-01-2003)
Screening and Processing

  1. The Treasury Financial Manual requires that funds received in discharge of an obligation of the U.S. Government be deposited within 24 hours of receipt. All payments in the custody of TE/GE personnel must be protected against loss, theft, fire, destruction and alteration. To accomplish this function, TE/GE Determinations Processing must maintain a user fee processing area to process user fees.

  2. All applications and correspondence must be date-stamped to reflect the date received by the Service. Correspondence received in the Cincinnati Submission Processing Center will reflect two dates the postmark date and the received date. The adjustments unit within the TE/GE Determinations

  3. Give taxpayers every opportunity to obtain a determination letter once a user fee has been paid. Any reasonable request for extension of time to perfect an application should be granted.

7.21.2.2.1  (01-01-2003)
Adjustments Unit

  1. User fee processing areas within the Adjustments unit will be designated as "controlled areas."

  2. Use the following access controls in the controlled area:

    1. Control access to the area from other areas through the use of partitions, screens. walls, cabinets or other such devices.

    2. Post the area as a "controlled area."

    3. Post a list containing names of those employees who are allowed access without registering prominently at the entrance to the area. The unit manager will revise the list as necessary.

    4. Establish a register which contains the name of the visitor, date and time in and out, and the reason for the visit. This register must be completed by all visitors (not listed on the access list), who have received permission to enter the area from the manager.

    5. The unit manager will collect the register on a quarterly basis for audit trail purposes.

  3. Proper security over user fees must be maintained. For example, an address or post office box may be established for the exclusive use of TE/GE determination letter applicants. If necessary, security officers may assist in overseeing the required level of security.

    Note:

    EO applications mailed to an incorrect address should be forwarded to the Cincinnati Submission Processing Center, Extracting Stop 312.

  4. Safeguard remittances during nonduty hours in appropriate containers. Coordinate with local security officers to assure adequate security is maintained.

    1. Provide appropriate safeguards, i.e., a locked IRS perimeter and a locked container.

7.21.2.2.2  (01-01-2003)
Preliminary Sort

  1. User fees received must, to the extent possible, be processed within 24 hours of receipt.

  2. Determination letter requests will be immediately screened for user fee purposes according to the instruction in Section 2.3.

7.21.2.3  (01-01-2003)
Screening Applications

  1. Applications are initially screened to determine whether:

    1. The application is one for which a user fee is payable. See Forms 8718, User Fee for Exempt Organizations Determination Letter Request.

    2. The check or money order is sufficiently complete. See Section 2.4 for handling of applications received with incomplete checks and money orders.

    3. Form 8718, as appropriate, is submitted. If the correct form is not present, the screener will prepare it and attach the payment.

    4. Form 1023 or 1024, which is accompanied by a fee of $150, is also accompanied by the gross receipt certification on Form 8718. (Gross receipts are computed without consideration to any expenses, including cost of sales, cost of goods, etc.) If the certification is missing, the application is incomplete.

7.21.2.3.1  (01-01-2003)
User Fee Exceptions

  1. User fees are not required for the following applications:

    1. Applications previously submitted with full payment, but returned as incomplete, or closed for failure to submit necessary additional information (FTE cases). A resubmission is timely if it is received or post marked within 90 days from the date returned, plus any extension granted by the area office.

    2. Organization files Form 1024 to request 501(c)(4) status, for the period not covered under 501(c)(3), because the Form 1023 was filed late. This applies to organizations that submit Form 1024 while Form 1023 is under consideration by the EO specialist. Therefore, before requesting a user fee payment, check for an open Form 1023 case when a Form 1024 is received without attachments or user fee, or addressed to the attention of a specialist. If an open case is found, send the Form 1024 to the specialist who is assigned the Form 1023.

    3. Applications filed as a substitute for an application in process. These are normally addressed to the attention of a specialist, received without attachments and/or have a Letter 1312(DO/CG), 1313(DO/CG), 1314(DO/CG) or 1315(DO/CG) attached. Research to determine whether the original application is open in a group. If so, forward the application to the specialist.

    4. Applications from departments or agencies of the Federal Government that certify that their programs or activities are funded solely by federal appropriations. If the proper certification is not submitted, request written certification or the appropriate user fee. (This exemption does not apply to state and local government entities.)

7.21.2.4  (01-01-2003)
Processing Payments

  1. The sum of money must be expressed in numbers and in writing.

    Note:

    If the numeric amount does not agree with the written amount, or the written amount is absent, the check is incomplete and must be guaranteed.

  2. Checks and money orders should be payable to, or to the order of: United States Treasury. (See Section 9.01 of Rev. Proc. 2001–8).

    1. Checks and money orders made payable to Internal Revenue Service, I.R.S., or other variation clearly, indicating the IRS maybe accepted.

  3. If the payee line is blank, complete the check by imprinting it with a stamp that reads "United States Treasury" (without the quotation marks).

  4. The area office should decide whether to return checks or money orders that are not properly filled out. (See Rev. Proc. 2001–8).

7.21.2.4.1  (01-01-2003)
Reports

  1. The LINUS program will be used to facilitate the recording, tracking and reporting of user fees.

    1. Access to the user fee database program must be limited to the individuals responsible for the program and reviewers (who must verify payments on a sampling of all category of cases sent to review).

  2. The checks accepted in payment of user fees must be promptly and properly endorsed using Cincinnati Submission Processing Center endorsement.

  3. Before a check is endorsed it must be assign a document locator number (DLN).

    1. Enter the DLN on the front of the check, top right corner of application, and also in the "official use only" section of the corresponding Form 8718 in the event proof of payment is necessary.

  4. Form 2221, Schedule of Collections (or facsimile) must be prepared listing daily collections that are transmitted to the Federal Reserve Bank.

    1. The data base program generates an acceptable facsimile of Form 2221.

    2. Another format may be developed for transmitting this information to the regional accounting section but the information in Form 2221 must be included.

  5. Form SF 215, Deposit Ticket reflects the total checks and money orders to be delivered to the Federal Reserve Bank.

    1. Prepare a calculator tape to total the checks and money orders.

    2. Reconcile the total between the tape, Form 2221, and Form SF 215.

    3. Transmit indicated parts of Form SF 215 to the Federal Reserve Bank (or Regional Accounting Section if courtesy deposit procedures are not used) along with the corresponding checks which total the amount of the indicated deposit.

    4. Forward a copy of Form SF 215 to the Regional Accounting Section along with a copy of Form 2221. The user fee processing unit keeps a copy of each form.

7.21.2.5  (01-01-2003)
Refunding User Fee

  1. Section 10 of Rev. Proc. 2001–8 describes the circumstances under which a user fee may be refunded for overpayment of user fee by taxpayer.

  2. A refund may be initiated at any stage of processing where it is recognized that an excessive fee has been paid.

  3. To insure that no refund is written against a check that is subsequently dishonored, no refund will be made until the expiration of 30 days from the date the check is initially deposited. Refunds of overpayments made in cash should be processed and issued promptly.

  4. User fee processing clerks generate refunds by preparing a refund listing and memo for transmitting to the Cincinnati Submission Processing Center after approval by the Group Manager or his/her designee.

  5. User fee processing area must maintain a refund file for each refund case. The file should contain (at a minimum) a copy of the first page of the application, a copy of the check and a copy of the Form 8718.

  6. When a refund authorization is sent to the Cincinnati Submission Processing Center, enter the refund in the refund section of the LINUS user fee database.

7.21.2.6  (01-01-2003)
Processing Applications

  1. If an application is accompanied by a fee which exceeds that required, the user fee processing area will forward the case for processing to a revenue agent to determine the appropriate fee.

7.21.2.7  (01-01-2003)
Special Procedures

  1. Manual Deposit Unit should accept and process a check which serves as payment for several applications. However, if the check is insufficient to cover the cost of all the applications, TE/GE Determinations Processing may elect to return the entire application package, or identify and return the unpaid requests if this is possible.

  2. Cincinnati Submission Processing Center is responsible for notifying TE/GE Determinations Processing when a user fee check has been dishonored.

    1. Once the Division receives notification of the dishonored payment, action on the application must be suspended.

    2. If the application has been transferred to another Area Office or EO Technical, the transferee Area Office or EO Technical should be notified and the dishonored check forwarded immediately.

    3. The dishonored instrument should be returned to the applicant with Bounced Check Letter.

    4. The Area Office may elect to return the application to the applicant along with the dishonored check.

    5. If the application is placed in suspense and a payment in the form of certified check or money order is not received within 30 days, the application may be returned at that time with Bounced Check Letter.

  3. If the area office receives an EO letter request and user fee without an application or Form 8718, the revenue agent must determine if it is a group exemption determination letter request (which is processed at the Determinations Primary Office) .

  4. If the Area Office receives a ruling request that does not fall in (3) above, the revenue agent should seek technical assistance to determine if it is a ruling request that falls under the jurisdiction of the Examination Division in the Area Office.

  5. If an application is received from a service center and user fee payment is not attached; Form 2221 or other deposit document should be attached showing deposit of the user fee.

    1. If neither the payment nor evidence of deposit is attached, contact taxpayer immediately to ascertain if payment was sent with the application.

    2. If the payment was sent, request a copy of the canceled check or other evidence of payment. If, after receiving evidence of payment, it is determined that the funds were incorrectly deposited (e.g., to an IMF, BMF or unidentified payment account), the Area Office should immediately send a memorandum to the service center requesting a credit to the proper account.

    3. The application may be placed in process, but it should be flagged to verify the payment transfer before the case is closed.

    4. A copy of the memorandum to Cincinnati Submission Processing Center should be placed in suspense for 30 days to follow up on whether the payment has been transferred from the incorrect account to the user fee account. If it is found that the payment was refunded, the case should be treated as a balance due case.


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