text:
- 126.96.36.199 Introduction
- 220.127.116.11 Developing the Facts
- 126.96.36.199 Special Case Development Procedures
- 184.108.40.206 Evidence
- 220.127.116.11 Collecting and Recording the Facts
- 220.127.116.11 Arriving at Conclusions
- 22.214.171.124 Proposing Changes in Tax or Status
- 220.127.116.11 Specific Issues - Special Considerations and Procedures
- 18.104.22.168 Inactive Organizations
- 22.214.171.124 Researching an Issue and Citing the Law
- Exhibit 4.75.13-1 Restricted Interest Examples
Manual Transmittal
July 02, 2014
(1) This transmits revised Table of Contents and text for IRM 4.75.13, Issue Development.
This manual merged with IRM 4.75.14, Concluding The Examination, dated August 16, 2006. Subsequently, IRM 4.75.14 became obsolete.
Material Changes
(1) With the sole exception of IRM 220.127.116.11.9, the authors converted this manual to plain English, to comply with Public Law 111–274, the Plain Writing Act of 2010. At the request of Chief Counsel, IRM 18.104.22.168.9 is specifically worded to ensure clarity in how to process the IRC 6707A penalty.
(2) The authors revised and rearranged this IRM in order to conform with the structure of related IRM 4.10.7, Issue Resolution, while maintaining consistency with EO audit instruction. Some of the information previously contained in this IRM is updated, modified, deleted or moved to other subsections and EO IRMs. The authors removed detailed information regarding research and citing tax law to avoid risk of error and duplication with IRM 18.104.22.168.
(3) The table below provides a listing of old sections and new sections. Where a section is removed, the table identifies where to go to find the information previously contained in that section.
|Old Section:
|New Section:
|IRM 220.127.116.11, Introduction
|IRM 188.8.131.52, Introduction
|IRM 22.214.171.124, Developing and Documenting the Facts
|IRM 184.108.40.206, Developing the Facts
|IRM 188.8.131.52.1, Collecting and Recording the Facts
|IRM 184.108.40.206, Collecting and Recording the Facts
|IRM 126.96.36.199.2, Preparing and Issuing a Summons
|IRM 220.127.116.11.1, Summons
|IRM 188.8.131.52, Sharing the Issues
|IRM 220.127.116.11, Proposing Changes in Tax or Status
|IRM 184.108.40.206, Burden of Proof
|Removed. See IRM 220.127.116.11, Burden of Proof Shifts to the Service
|IRM 126.96.36.199.1, Documenting the Case File
|Removed. See IRM 220.127.116.11.1.3 , Documentation of Case Files
|IRM 126.96.36.199.2, Assessment of Penalties
|Removed. See IRM 18.104.22.168.3, Assessment of Penalties Burden of Proof—Overview of New Procedures
|IRM 22.214.171.124, Specific Issues - Special Considerations and Procedures
|IRM 220.127.116.11, Specific Issues - Special Considerations and Procedures
|IRM 126.96.36.199.1, Modification of Exemption - IRC § 501(c)(3) Organizations
|IRM 188.8.131.52.4, Modification of Tax-Exempt Status
|IRM 220.127.116.11.2, Examination of Current Year Records
|IRM 184.108.40.206.2, Examination of Current Year Records
|IRM 184.108.40.206.3, Effective Date of Revocation or Modification
|IRM 188.8.131.52.5, Revocation/Modification/Reclassification Effective Dates
|IRM 220.127.116.11.4, IRC § 7805(b) Technical Advice Requirement
|IRM 126.96.36.199.6, IRC 7805(b) Technical Advice Requirement
|IRM 22.214.171.124.5, Identifying Issues Requiring Technical Advice
|IRM 188.8.131.52.5, Requests for Technical Advice. See also IRM 4.75.36, Procedures For Processing Technical Advice Cases
|IRM 22.214.171.124.6, Terminations
|Removed. See IRM 220.127.116.11.10, Terminations
|IRM 220.127.116.11.7, Inadequate Records
|Removed. See IRM 22.214.171.124.6, Inadequate Records
|IRM 188.8.131.52.8, Issues Subject to Declaratory Judgment Under IRC § 7428
|IRM 188.8.131.52.9, Issues Subject to Declaratory Judgment Under IRC 7428
|IRM 184.108.40.206.9, Procedures When the Examiner is Unable to Locate a Taxpayer
|Removed. See IRM 22.214.171.124.11, Unable to Locate
|IRM 126.96.36.199.10, Identifying Technical Advisor Issues
|Removed. IRM 4.75.33, Exempt Organizations Technical Advisor Program is obsolete.
|IRM 18.104.22.168.11, Identifying and Processing Suspended Issues
|IRM 188.8.131.52.10, Group Suspense
|IRM 188.8.131.52, Researching an Issue and Citing the Law
|IRM 22.214.171.124, Researching an Issue and Citing the Law
|IRM 188.8.131.52.1, Internal Revenue Code
|Removed. See IRM 22.214.171.124.1, Internal Revenue Code
|IRM 22.214.171.124.2, Committee Reports
|Removed. See IRM 126.96.36.199.2, Committee Reports
|IRM 188.8.131.52.3, Code of Federal Regulations
|Removed. See IRM 126.96.36.199.3, Code of Federal Regulations
|IRM 18.104.22.168.4, Internal Revenue Bulletin
|Removed. See IRM 22.214.171.124.4, Internal Revenue Bulletin
|IRM 18.104.22.168.5, Cumulative Bulletin
|Removed. See IRM 220.127.116.11.5, Cumulative Bulletin
|IRM 126.96.36.199.6, Revenue Rulings and Procedures
|Removed. See IRM 126.96.36.199.6, Revenue Rulings and Procedures
|IRM 126.96.36.199.7, IRS Publications
|Removed. See IRM 184.108.40.206.8, IRS Publications
|IRM 126.96.36.199.8, Court Decisions and Case Law
|Removed. See IRM 184.108.40.206.9, Court Decisions and Case Law
|IRM 18.104.22.168.9, Private Letter Rulings and Technical Advice Memorandums
|Removed. See IRM 188.8.131.52.10, Private Letter Rulings and Technical Advice Memorandums
|IRM 184.108.40.206.10, General Counsel Memorandums
|Removed. See IRM 184.108.40.206.11, General Counsel Memorandums
|IRM 22.214.171.124.11, Technical Memorandums
|Removed. See IRM 188.8.131.52.12, Technical Memorandums
|IRM 126.96.36.199.12, Engineering Citator
|Removed. See IRM 188.8.131.52.13, Engineering Citator
|IRM 126.96.36.199.13, Other Research Sources
|IRM 22.214.171.124.2, Other Research Sources
|IRM 188.8.131.52.14, Electronic Tax Research
|IRM 18.104.22.168.3, Electronic Tax Research
|IRM 22.214.171.124.14.1, IRM On-Line
|IRM 18.104.22.168.3.1, IRM On-Line
|Removed. Information presented was obsolete.
|IRM 126.96.36.199.14.3, Public Records
|IRM 188.8.131.52.3.3, Public Records
|IRM 22.214.171.124.14.4, Guidestar
|IRM 220.127.116.11.3.4, Guidestar and Foundation Center
|IRM Exhibit 4.75.13-1, Draft Termination Letter IRC § 501(c)(3)
|Removed. See IRM 4.75.16-15, Draft Examination Termination Letter IRC 501(c)(3)
|IRM Exhibit 4.75.13-2, Draft Termination Letter IRC § 501(c)(other)
|Removed. See IRM 4.75.16-16, Draft Examination Termination Letter IRC 501(c)(other)
|IRM Exhibit 4.75.13-3, Draft Examination Closing Letter Termination
|IRM Exhibit 4.75.13-4, Notice of Inadequate Records
|Removed. See IRM 4.75.16-20, Modified Letter 4095, Inadequate Records Notice
|IRM Exhibit 4.75.13-5, Closing Procedures for "Unable to Locate" Situations
|Removed. See IRM 4.75.16-17, Closing Procedures for Unable to Locate Situations
|IRM Exhibit 4.75.13-6, Form 4844, Request for Terminal Action
|Removed. See IRM 4.75.16-19, Form 4844, Request for Terminal Action
|IRM Exhibit 4.75.13-7, Court of Appeals Jurisdictions
|Removed. See IRM 4.10.7-1, Court of Appeals Jurisdictions
(4) IRM 126.96.36.199, Introduction, was updated to include verification of foundation classification as an examiner's responsibility.
(5) IRM 18.104.22.168, Developing and Documenting the Facts, was retitled, Developing the Facts, and was updated to include reconciliation of return amounts to books as part of a comprehensive examination.
(6) Added paragraph 188.8.131.52(2) defining "organization status."
(7) Added paragraph 22.214.171.124(4) regarding "transactions." Added types of reportable transactions.
(8) Added new IRM 22.214.171.124, Special Case Development Procedures.
(9) Revised IRM 126.96.36.199.1, Summons to add new paragraphs to reflect updated delegation order, and summons implications on churches and political organizations, and summons that requires pre-issuance review from Area Counsel.
(10) Added IRM 22.214.171.124.2 through IRM 126.96.36.199.4, to provide information regarding sampling techniques, referrals, and requests for collateral examinations.
(11) Added IRM 184.108.40.206.5 through IRM 188.8.131.52.9, regarding requesting tech advice, requesting assistance, special case development rules for churches and credit counseling organizations, and processing IRC 6707A penalties.
(12) Added IRM 22.214.171.124.10 to introduce the IRC 45R credit for small employers.
(13) Added new IRM 22.214.171.124, Evidence, based on IRM 4.10.7, suitable for Exempt Organizations (EO) examinations.
(14) Added new IRM 22.214.171.124.1, Evidence Defined, based on IRM 4.10.7, suitable for EO examinations.
(15) Added new IRM 18.104.22.168.2, Oral Statements, based on IRM 4.10.7, suitable for EO examinations.
(16) Added IRM 126.96.36.199.3, regarding documentary evidence, based on IRM 4.10.7 and suitable for EO examinations.
(17) Updated content of IRM 18.104.22.168, Collecting and Recording the Facts, to require consistent workpaper index numbering between Forms 5772 and 5773 and to include information regarding Fast Track.
(18) Deleted IRM 188.8.131.52.10, Identifying Technical Advisor Issues, because the Technical Advisor position as discussed no longer exists. Added information about Technical Specialists and Coordinators in section IRM 126.96.36.199.7.
(19) Removed most of the previous IRM 18.104.22.168, Researching an Issue and Citing the Law, including all subsections, to eliminate duplication and risk of update error. Readers must now refer to IRM 126.96.36.199, Researching Tax Law, for this topic. EO relevant content remains in this IRM at IRM 188.8.131.52, of the same title.
(20) Added IRM 188.8.131.52, Arriving at Conclusions, to mirror portions of IRM 18.104.22.168, Arriving at Conclusions.
(21) Added IRM 22.214.171.124, Proposing Changes in Tax or Status, to provide procedures for concluding the examination.
(22) Added IRM 188.8.131.52.1 through IRM 188.8.131.52.4, formerly in obsolete IRM 184.108.40.206.
(23) Modified IRM 184.108.40.206.1, Revocation of Tax-Exempt Status. Clarified that organizations described in IRC 501(c) and (d) are subject to revocations within the meaning Section 12 of Rev. Proc. 2012-9 because they are subject to an application and determination letter process in IRM 188.8.131.52.1 and IRM 220.127.116.11.1.
(24) Modified IRM 22.214.171.124.3, Disqualification from Tax-Exempt Status, in order to address those organizations under EO jurisdiction that declare tax-exempt status under IRC 501(c) without receiving a ruling or determination letter, as well as IRC 501(c)(12) and IRC 501(c)(15) organizations.
(25) In IRM 18.104.22.168.4, Modification of Tax-Exempt Status, clarified restrictions to proposing a modification based on types of exempt organizations.
(26) Added IRM 184.108.40.206.7, Converted Returns, to include information regarding the conversion of returns after revocation, and to add a reference to IRM 4.75.31. Formerly located in obsolete IRM 184.108.40.206.
(27) Restored IRM 22.214.171.124.11 from obsoleted IRM 220.127.116.11.4, to include information regarding foreign grants and terrorism, IRC 501(p) and employee protection, in order to provide guidance to examiners.
(28) Added IRM 126.96.36.199.12, Restricted Interest Cases.
(29) Added IRM 184.108.40.206.12.1, Processing Restricted Interest Cases Requiring a Form 2285.
(30) Updated IRM 18.104.22.168.1 to identify citator research sources.
(31) Updated IRM 22.214.171.124.3 to reflect Accurint, which replaces Choicepoint.
(32) Added IRM 220.127.116.11.3.5, On-Line SEIN.
(33) Added new Exhibit 4.75.13-1, Restricted Interest Examples.
Effect on Other DocumentsThis material supersedes IRM 4.75.13, Issue Development, dated March 14, 2006 and obsoletes IRM 4.75.14, Concluding The Examination, dated August 16, 2006. This manual incorporates the Interim Guidance Memorandum dated July 22, 2013, Guidance for Using AIMS Status Code 39, and Interim Guidance Memorandum IRC 45R Credit for Small Tax Exempt Employers (currently pending publication).
AudienceTax Exempt and Government Entities
Exempt Organizations
Effective Date(07-02-2014)
Tamera L. Ripperda
Exempt Organizations
Tax Exempt and Government Entities
This manual focuses on an agent's audit responsibilities in developing the issues present in the audit. Agents assigned to work the case may be in the GS-512, GS-526, or GS-987 series.
Agents: you are responsible for determining whether the organization under audit:
Meets the requirements for exemption.
Has the proper foundation classification (IRC 501(c)(3) organizations only).
Filed all required tax and information returns.
Reported information and tax liabilities correctly and accurately.
Issue identification and resolution are vital attributes to a quality audit. See IRM 4.75.26 for Tax Exempt Quality Measurement System (TEQMS) standards. Agents: when identifying a potential issue:
Determine if there are any unique considerations or procedures applicable to the issue.
You identify a prohibited tax shelter transaction (PTST), which may require imposition of IRC 4965 excise tax.
Develop and document thoroughly all of the facts pertaining to the issue.
Conduct research to identify the applicable law, as needed, to interpret its meaning in light of congressional intent.
Apply the law based on the facts and circumstances in a fair and impartial manner.
"Issue resolution" : The identification of material issues throughout the audit, and the development of the issue to the point that pertinent facts and data gathered support the conclusions reached. Issue resolution includes correctly interpreting and applying tax law.
Thus, a well-developed audit is one where:
Technical positions are well thought out.
The facts are appropriately developed.
Audit conclusions are well supported.
The case file is well documented.
This IRM addresses:
Development and documentation of the facts
Rules of evidence
Special considerations or procedures for specific issues
Arrival at a conclusion of the audit
Research of tax law
A quality audit includes obtaining evidence bearing upon the organization's status or tax liability by:
Inspecting its premises.
Examining its books and records.
Questioning directly the organization's representatives and management.
Contact third parties to corroborate taxpayer statements and obtain information the taxpayer fails to provide.
Collect information, if possible, directly from the taxpayer to whom it relates. However, you may need to contact a third party for the purpose of collecting or determining a tax liability. See IRM 22.214.171.124, Third Party Contacts.
Office/Correspondence Examination Program (OCEP) cases do not include inspections of the premises.
The term "organization's status" refers primarily to exempt status, but also includes:
Foundation status, including type of public support status (for IRC 501(c)(3) organizations)
Operating foundation status under IRC 4942(j)(3) (for private foundations)
Type of supporting organization (for IRC 509(a)(3) organizations)
Deductibility status
Filing requirement status
A comprehensive audit of an organization's books and records includes, but is not limited to, the following:
Determining whether the books reflect and explain the organization's activities, income, expenditures, assets, and liabilities.
Identifying and documenting the purpose of large, unusual and questionable transactions (or return items).
You may obtain this information from the adjusting entries in the general journal or from the minutes of meetings.
Commenting on large, unusual and questionable transactions (or return items).
You list several highly compensated employees of an organization in your workpapers along with their salaries. Your listing of questionable salaries is not relevant by itself in developing facts unless you also analyze the duties and responsibilities of the salaried individuals. Perform this analysis on a facts and circumstances basis.
Reconciling amounts reported on returns to amounts totaled in the books and records.
Testing the organization's books and records for reliability and documenting these tests in the workpapers.
Evaluating how the organization is using its assets and resources.
Determining the source and nature of the organization's gross receipts.
Determining on a case by case basis, the relationships of persons doing business with the exempt organization.
Determining whether private interests are being served at the expense of the organization's exempt purposes.
Evaluating transactions, such as purchases, sales, gifts, grants, leases, investments, loans, expense reimbursements, and sharing arrangements.
Securing an accurate valuation of property included in these transactions.
Identify transactions that result in:
Inurement (Treas. Reg. 1-501(c)(3)-1(c)(2)). See IRM 188.8.131.52, Inurement, Excess Benefit Transactions, Private Benefit.
Impermissible private benefit (Treas. Reg. 1-501(c)(3)-1(d)(1)(ii)). See IRM 18.104.22.168, Inurement, Excess Benefit Transactions, Private Benefit.
Excess benefit transactions (IRC 4958). See IRM 7.27.30, Taxes on Excess Benefit Transactions.
Self-dealing transactions (IRC 4941). See IRM 220.127.116.11.2.2, IRC 4941: Self-Dealing, and IRM 7.27.15, Taxes on Self-Dealing.
Determine whether a transaction is also a listed or reportable transaction. Such transactions warrant specialized audit procedures. A single transaction can transcend the various types of transactions below:
Reportable Transactions. See IRC 6707A(c) .
Listed Transactions. See Treas. Reg. 1.6011-4, IRC 4965(e)(2).
Abusive Tax Avoidance Transactions. See IRM 4.32, Abusive Transactions, and IRM 4.75.35, EO ATAT Committee Operating Procedures.
Prohibited Tax Shelter Transactions. See IRC 4965.
Foreign grants. See the TE/GE intranet site, Foreign Grants and Anti-Terrorism . See IRM 18.104.22.168, Forensic Investigation Unit.
Prohibited Transactions. Applicable to IRC 501(c)(17) organizations, IRC 501(c)(18) organizations, and IRC 4948 foreign private foundations. See IRC 503 and IRC 4948.
Large unusual or questionable transactions (LUQs).
For general audit guidelines for all audits, refer to IRM 4.75.11, On Site Examination Guidelines.
For audit guidelines applicable to specified audit types, refer to the following IRMs:
IRM 4.76, Exempt Organizations Examination Guidelines, for audits of specific types of organizations.
IRM 4.75.27, Office/Correspondence Examination Program (OCEP).
IRM 4.75.29, Exempt Organizations Team Examination Program Procedures.
IRM 4.23.5, Technical Guidelines for Employment Tax Issues.
You may need to apply special procedures not normally conducted in all audits in order to confirm an exempt purpose (or a tax liability) for activities and transactions. Special case development procedures are listed and described below.
Attempt to obtain information voluntarily from taxpayers and third parties. However, in certain circumstances you may need a summons to obtain the records or testimony needed to conduct a quality audit. See IRM 25.5, Summons for summons procedures.
Delegation Order 25-1, Summonses, Oaths, Certifications, and Related Functions provides the delegated authority to issue a summons. See IRM 184.108.40.206, Delegation Order 25-1 (formerly DO-4, Rev. 23). The group manager or other supervisory official above that level must authorize the issuance of the summons in advance.
Consult with your group manager when considering the need to issue a summons. Refer to IRM 25.5, Summons.
Consider all surrounding circumstances before issuing a summons. Analyze each situation in the light of its particular facts and circumstances, and then weigh the importance of the desired information.
Consult with Area Counsel regarding any questions relating to a summons. See IRM 22.214.171.124.2, Issues to Bring to Counsel's Attention.
Not all summonses require consultation with Area Counsel. The following types of summonses require pre-issuance review from Area Counsel:
Any summons involving a church or church records.
Any "John Doe" summons, or "dual purpose" summons. See IRM 220.127.116.11.1, Relevancy and Materiality of Summoned Information.
Summons issued in connection with a promoter investigation.
Summons issued in connection with Abusive Tax Avoidance Transactions (ATAT) or Listed Transactions.
Any summons issued to another federal agency or Indian Tribal Government (ITG must also be consulted).
FBAR Title 31 Summons. See IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.
Requests for audit or tax accrual workpapers, tax reconciliation workpapers, or any other document that might be considered privileged information.
Summons involving potential trade secrets, protected information, software codes, and international transactions.
Any summons where the audit group is unsure whether it was prepared properly.
Counsel is required to review all non-routine summonses (usually means all non-bank summonses) that the IRS issues on behalf of treaty partners. See CCDM 184.108.40.206.6 for further explanation of this process.
Refer to IRM 4.75.11, On Site Examination Guidelines, for more information regarding summonses.
The process of auditing the taxpayer's books and records can be substantially enhanced and improved through the appropriate use of sampling techniques. See IRM 188.8.131.52.1, Sampling Techniques.
See IRM 184.108.40.206, Requesting Assistance from Specialists, (05-01-2004) for procedures for requesting referrals and using the Specialist Referral System (SRS). For TEP cases, see IRM 18.104.22.168.1. This includes requests for engineers, economists, financial products specialists, computer audit specialists, and other specialists. Referrals to specialists such as engineers or economists may be necessary in order to confirm the value of property and business enterprises.
See IRM 220.127.116.11, Employee Benefit Plan Returns, for referrals regarding employee benefit plans.
See IRM 188.8.131.52, EO Fraud Referral Procedures, for fraud referral procedures.
If a proposal to revoke an IRC 501(c)(3) organization is imminent, and if it is an organization that issued tax-exempt bonds, a referral to Tax Exempt Bonds (TEB) is required. See IRM 126.96.36.199.4.1, Referral to Tax Exempt Bonds (TEB).
See IRM 126.96.36.199.1, Examination Activities by Other Operating Divisions, regarding referrals for audits within the jurisdiction of other operating divisions.
See IRM 4.75.35, EO ATAT Committee Operating Procedures, regarding referrals relating to abusive tax avoidance transactions (ATAT).
See IRM 18.104.22.168, Collateral Examination, for procedures for requesting a collateral audit.
When an issue is identified, determine whether the issue is subject to mandatory technical advice, or otherwise warrants a request for technical advice. Refer to IRM 4.75.36, Procedures For Processing Technical Advice Cases.
Technical advice means advice or guidance in the form of a memorandum furnished by Exempt Organizations Technical, in response to any technical or procedural question that develops during any proceeding on the interpretation and proper application of tax law, tax treaties, regulations, revenue ruling, notices, or other precedent, to a specific set of facts. Such proceedings include the audit of a taxpayer's return, the consideration of a taxpayer's claim for refund or credit, or any other matter involving a specific taxpayer.
The authority for technical advice procedures is Rev. Proc. 2014-5 (updated annually).
Review the list of mandatory technical advice issues in IRM 4.75.36, and review interim guidance memorandums issued after the IRM published date to determine if any additional technical advice issues have been identified.
Given a specific set of facts, request technical advice when:
The law and regulations are not clear on the issue under consideration, and there is no published precedent for determining the proper treatment of the issue.
There is a lack of uniformity regarding the disposition of an issue.
A doubtful or contentious issue is involved in a number of cases.
The issue is unusual or complex.
Securing technical advice would be in the best interest of the Service.
A revocation or modification involving the types of organizations in IRM 188.8.131.52.4 at a minimum requires consultation with Exempt Organizations (EO) Technical over the prospect of requesting Technical Advice.
Do not request technical advice on frivolous issues. A "frivolous issue" is one without basis in fact or law, or that espouses a position, which has been held by revenue rulings, case law, or the courts to be frivolous or groundless.
If you determine that technical advice should be requested, discuss the issue with your group manager and the taxpayer as soon as possible.
Submit inquiries regarding technical and procedural matters to the EO Examinations Mandatory Review mailbox at *TEGE EO Review Staff. Mandatory Review provides a response to agents within three business days. Before presenting questions to the mailbox:
Seek answers to questions from your group manager or from senior agents.
Identify the research already conducted. State the research materials used, and the tax law considered. See IRM 184.108.40.206, Researching Tax Law.
Provide only relevant information to furnishing a reply. Avoid excessive distracting information.
There is no need to reveal taxpayers identities.
Ask questions about a specific case directly of the reviewer assigned to the case.
Seek assistance from EO Technical regarding difficult issues not clearly settled by tax law. Obtain approval from your group manager before contacting EO Technical. See a list of Subject Matter Experts by code section at http://counsel.web.irs.gov/etools/phone_directory/csmd.asp.
Other business operating divisions have Technical Specialists. Technical Specialists assist the field with domestic, international, industry-specific, and crossindustry issues. Refer to http://lmsb.irs.gov/TAHome.asp.
Consult or refer to Area Counsel those instances in which legal advice is needed to properly interpret and apply the Code. Refer to IRM 18.104.22.168, Referral to or Consultation with Counsel. Formal legal advice involves a taxpayer specific matter, where a TIN and address is required in the written request. Informal requests are generally non-taxpayer specific.
For church audit procedures, see IRM 4.76.7, Churches.
For development and issue resolution procedures for credit counseling organizations, see IRM 126.96.36.199, Procedures for Resolution of Credit Counseling Cases, and IRM 4.75.21-1, Credit Counseling Core Analysis Tool (CAT).
IRC 6707A provides for a monetary penalty for failing to include on any return or statement, any information required to be disclosed under IRC 6011 and associated regulations regarding "reportable transactions." (Currently a taxpayer's participation in a "reportable transaction," including a "listed transaction," is disclosed on Form 8886.) This penalty may be imposed in addition to any other penalty that may be imposed (e.g., IRC 6662, accuracy related penalties) and applies without regard to whether the transaction ultimately results in an understatement. Refer to IRM 184.108.40.206, Penalty Handbook, Preparer, Promoter, Material Advisor Penalties, and IRM 4.32.4, Abusive Transactions, IRC 6707A Penalty for Failure to Include Reportable Transaction Information with Return. Refer to IRM 22.214.171.124 for information regarding rescission of the IRC 6707A penalty for failure to disclose participation in a "reportable transaction" that is not a "listed transaction."
A reportable transaction is any transaction with respect to which information is required to be included with a return or statement under IRC 6011 because the IRS and the Treasury Department have determined that the transaction has the potential for tax avoidance or evasion.
Technical information about the IRC 6707A penalty, including how to identify reportable transactions, the grounds for imposing the penalty, and the statute of limitations, is contained in the associated technical guidance. For additional information please refer to http://mysbse.web.irs.gov/exam/tip/ajca/default.aspx. You should request assistance from SB/SE Counsel to determine if a transaction should have been disclosed pursuant to Treas. Regs. 1.6011-4, 53.6011-4, or 56.6011-4.
If the normal statute has expired under section 6501(a), written approval from SB/SE Counsel is required for support of the extended statute for a "listed transaction" under IRC 6501(c)(10).
The Affordable Care Act (March 23, 2010), Public Law No. 111-148 added IRC 45R to the Internal Revenue Code. The law provides a tax credit to eligible small employers, including tax-exempt organizations that provide health insurance coverage to their employees. Find definitions and background information in Proposed Regulations sections 1.45R-0 through 1.45R-5 (78 FR 52719; 2013-38 IRB 211); Notice 2014-06, Rev. Proc. 2013-35, Notice 2010-82, Notice 2010-44, and Rev. Rul. 2010-13.
For tax-exempt employers, the tax credit under IRC 45R is a refundable credit based on premiums paid. If a tax-exempt employer appears to be eligible for the tax credit, you must inform the employer of its potential eligibility. If the employer wants to claim the tax credit it can file with you Form 990-T, Exempt Organization Business Income Tax Return, and attach Form 8941, Credit for Small Employer Health Insurance Premiums. If Form 990-T has already been filed, the tax-exempt employer must file an amended Form 990-T with Form 8941 attached.
You can refer tax-exempt employers to the online Estimator in order to allow them to get an estimate of the tax credit. This tool, developed by the Taxpayer Advocate Service , is located online at: http://www.taxpayeradvocate.irs.gov/calculator/SBHCTC.htm#StartCalculator.
This calculation will only provide an estimate of the credit. Neither you nor tax-exempt employers may rely on the correctness of this calculation. To determine the exact amount of the Small Business Healthcare Tax Credit, tax-exempt employers must complete the Form 8941 and attach it along with the other appropriate forms and file it together with Form 990-T.
In order to ensure accuracy in verifying eligibility and computation of the credit, do not propose allowance, disallowance or adjustment of the tax credit without first obtaining technical consultation. Consult with Mandatory Review by submitting an e-mail to the mailbox at *TEGE EO Review Staff. Include the following information in the e-mail:
A preliminary number of full-time equivalent employees (FTE) during the tax year.
A preliminary estimate of the average annual wages.
For tax years beginning on or after 2014, whether the health insurance was offered through a Small Business Health Options Program (SHOP) Marketplace.
Mandatory Review will then provide further instructions to you on how to proceed and whom to contact. Use principal issue code (PIC) 24E for any case where the issue of applicability of the tax credit is raised in an audit.
According to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain automatic sequestration reductions to credits began March 1, 2013. These required sequestration reductions include a reduction to the refundable portion of the IRC 45R credit for small tax-exempt employers. The sequestration reduction rate for the refund portion of this credit is 7.2% for refunds processed in the fiscal year ending September 30, 2014. This sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester.
Gather facts to correctly determine an organization's status and tax liability. Make this determination on the basis of all available facts, including facts supporting the taxpayer's position. For this reason, you should determine all the facts supporting both sides of an issue.
Conduct the audit to a point where you can make a reasonable determination of the organization's status and tax liability.
For more detailed information regarding evidence, see IRM 188.8.131.52, Evaluating Evidence.
Evidence is something which tends to prove a fact or point in question.
Evidence is distinguished from proof, in that proof is the result or effect of evidence.
When you interview the taxpayer or a third party, and you learn information that is pertinent to your case, summarize the interview in writing, and send the memorandum of interview to the interviewee for his/her comment. The written interview memorandum should include the names of all persons present, the date and place, and a full description of what was said. If the interviewee is later a witness in the case, and denies having made the oral statement, this document can be used to impeach the witness.
If the interviewee was not the taxpayer, after the interviewee confirms the accuracy of the memorandum, send the written memorandum of interview to the taxpayer. Doing so ensures that it will become part of the administrative record. If not, the memorandum of interview likely will not be admissible evidence in court.
If an interviewee provides helpful information in an oral interview that you think may not be entirely accurate, attempt to corroborate that information from other sources, such as public records, a third party, etc.
See IRM 22.214.171.124, Initial Interview and IRM 126.96.36.199.1, Interview Techniques.
Documents are another form of evidence. Send documents you obtain from a source other than the taxpayer to the taxpayer for comment, so that those documents become part of the administrative record.
In litigation, the court likely will admit both documentary evidence and oral testimony (in addition to the administrative record). To the extent possible, getting both documents and memoranda of interviews into the administrative record will ensure that the court sees the relevant evidence
Use judgment when gathering facts to support a given position. Case file weight and thickness are not indicative of effective fact development.
Every document appearing in the file should have some relevance or it should be omitted.
If you find a document that shows the taxpayer is not operating in accordance with exempt purposes, request a copy of the document for the case file. Such a copy may include copies of minutes, financial statements, leases, newsletters, etc. Also secure:
The annual report and/or brochures describing the activity.
Copies of checks, contracts and agreements directly relating to the exemption issue.
Index secured documents to the Form 5773, EO Workpaper Summary Continuation Sheet. Include an analysis or statement in the workpapers showing how the documents support a specific issue or conclusion. Indexing should be consistent with indexing on Form 5772, EP/EO Workpaper Summary.
The degree to which you collect and record facts depends on the facts and circumstances of each case.
You discover an organization engaging in substantial legislative activity through its publications and must defend an unagreed issue. Secure copies of all newsletters, minutes, or publications reflecting the legislative activities, regardless of the volume. Keep in mind, that should the case reach Appeals (or if Fast Track Settlement is requested), the Appeals Officer must have adequate documentation to uphold the Service's position.
Fact gathering comes to an end after:
Interviewing taxpayers and third parties, if needed
Auditing the books, records, and supporting documents
Touring facilities (unless performing an OCEP audit)
Researching questionable items
From the facts that you've gathered, use your professional judgment to arrive at a conclusion.
Your professional judgment should include a balanced and impartial evaluation of all of the evidence. Recommend the proper disposition of all identified issues, as well as any issues raised by the taxpayer. Demonstrate fairness by:
Making decisions impartially and objectively based on consistent application of procedures and the applicable tax law.
Treating organizations and their related persons fairly.
Being open-minded and willing to seek out and consider all relevant information, including opposing perspectives.
Correcting mistakes made by the Service.
Refusing to take unfair advantage of taxpayer mistakes or ignorance.
You seldom have all of the information you would like to resolve an issue. Therefore, decide when you have substantially enough information to make a determination. The sooner this point is reached, the more timely you can complete the case and the less burdensome the audit is on the taxpayer.
Once you reach your conclusion(s) for an issue, discuss it with the taxpayer and/or the taxpayer's authorized representative. Provide copies of workpapers to the taxpayer and/or the taxpayer's authorized representative, if requested. Attempt to resolve issues as the audit progresses.
For more detailed information on arriving at conclusions within the context of income tax audits, see IRM 18.104.22.168, Arriving at Conclusions.
Find tolerances observed for deficiencies in IRM 18.104.22.168.1, Large Unusual Questionable Items (LUQs) Defined. For tolerances relating to converted returns, see IRM 220.127.116.11. Tolerances for IRC 4962 abatements require special disposal codes 18 (301) and 54 (304), unless higher disposal codes apply, and are subject to Mandatory Review.
The definition of "significant" or "material" depends on your evaluation of a return as a whole and the items on the return. There are several factors to consider when determining whether an item is significant. These factors include:
Comparative size of the item
Absolute size of the item
Inherent character of the item
Evidence of intent to mislead
Beneficial effect of the manner in which an organization reports an item
A taxpayer reports an item as a program service expenditure rather than a fund-raising expenditure in Part IX of Form 990.
Relationship to/with other item(s) on a return
Do not take collectibility into consideration when determining:
The continuation of tax-exempt status.
The appropriate foundation status.
Tax-exempt status and foundation status are based strictly on the laws that govern qualification for those statuses. Consider collectibility for certain types of tax audits, such as the audit of a converted return. See IRM 18.104.22.168. For collectibility guidelines on income tax audits, see IRM 184.108.40.206.6, Collectibility.
Communication with the taxpayer or the taxpayer's authorized representative on an on-going and continuous basis is a critical part of the audit process. Generally, the taxpayer and the taxpayer's authorized representative should feel involved in the audit process and informed of the status of the audit. Discuss the progress of the audit and proposed issues with the taxpayer and/or the taxpayer's authorized representative at frequent intervals as the audit continues. This can lead to an early resolution of both the issues and the case.
In field audits, discuss issues upon conclusion. This allows the resolution process to begin as the audit continues. Discuss each issue upon completion and resolution so that at the conclusion of fieldwork the taxpayer and the taxpayer's authorized representative knows the status of each issue. Then take the appropriate steps to close the case.
Consider providing the taxpayer and the taxpayer's authorized representative with a written summary of potential issues on Form 5701, Notice of Proposed Adjustment. Form 5701 should include the issues, facts, law, and your position.
Providing the taxpayer or the taxpayer's authorized representative with a summary of the issues on Form 5701 does not relieve you of the responsibility for discussing the potential issues with the taxpayer or the taxpayer's authorized representative.
With respect to potential revocation cases, keep the taxpayer and the taxpayer's authorized representative informed of the issues encountered that jeopardize its tax-exempt status, and the income tax consequences resulting from a loss of tax-exempt status.
Use tact when explaining proposed changes to the taxpayer (and the taxpayer's authorized representative) and/or pointing out errors in the taxpayer's books or records.
Be patient in explaining the provisions of the law, bearing in mind that what is clear to you is not readily understandable by one who does not deal with exempt organizations in his/her occupation.
Generally, propose and discuss substantive issues with the taxpayer and/or the taxpayer's authorized representative in a face-to-face meeting. In some circumstances, a telephone conference or call may suffice.
Solicit a tentative agreement from the taxpayer or the taxpayer's authorized representative on issues that require a change in tax or status. You may use Form 5701 for this purpose.
Accurately calculate any deficiency or overassessment on the appropriate basic report forms. However, if there is an error, you may mail a revised report of audit (RAR) to the taxpayer and the taxpayer's authorized representative rather than present the report in a face-to-face meeting.
In the audits of complex tax returns, numerous issues are commonly proposed. Fully develop adjustments before presenting them to taxpayers and the taxpayers' authorized representatives for review. Maintain records of proposed adjustments, and take every effort to secure taxpayers' or the taxpayers' authorized representatives responses in a timely manner.
In all change cases, provide the taxpayer and the taxpayer's authorized representative with a written explanation of all changes as soon as you fully develop the issues. Prepare a summary of each issue in the initial RAR. However, the initial RAR should contain sufficient information to allow the taxpayer and the taxpayer's authorized representative to understand the issues. See IRM 4.75.15, EO Closing Letters and Reports of Examination, for further instructions on the initial and formal report procedures.
If proposing an alternative position or approach in an unagreed case, discuss this alternative position or approach with the taxpayer and/or the taxpayer's authorized representative, and present it to the taxpayer and the taxpayer's authorized representative . This includes any additional basis or reasons for the proposed adjustment(s).
If Form 990-T for an affected tax year is open for audit and a proposed revocation is imminent, incorporate the unrelated business income tax issue in the revocation report as an alternative issue. The proposed revocation letter will include Forms 990-T at the heading. See IRM 22.214.171.124, Effect on Form 990-T and Other EO Tax Examinations.
Normally, present the alternative position on the report forms that are appropriate for the alternative position. If the alternative position or approach results in a different income tax computation, prepare an alternative computation of tax on Form 4549-A, Income Tax Examination Changes (Unagreed and Excepted Agreed). See IRM 4.75.15, EO Closing Letters and Reports of Examination.
Mark on the top of the forms "ALTERNATIVE ISSUES" and insert them in the report of audit after the conclusion of the primary issue.
You discover an excessive amount of unrelated business income which places the main purpose of the taxpayer into jeopardy . Propose revocation as the primary issue and UBI as an alternative issue in the report. If the revocation position fails in Appeals, the Service can pursue the UBI issue.
Your responsibilities do not end when the audit of the books and records is completed. Conclude the audit in a manner that protects not only the interests of the Service, but also assures the taxpayer and the taxpayer's authorized representative a fair and factually supported finding. Carefully protect the taxpayer's rights while following the intent of the law. Hold a closing conference. See IRM 220.127.116.11.3, Closing Conference.
Generally, do not mail a formal report of audit to the taxpayer and the taxpayer's authorized representative prior to discussing findings and proposed issues with the taxpayer and/or the taxpayer's authorized representative. Exceptions to this rule would be for the following:
No-show/ no-response appointments.
Uncooperative taxpayers.
The taxpayer provides additional records for your consideration.
Refer to IRM 4.75.15, EO Closing Letters and Reports of Examination, for instructions on preparing reports of audit and closing letters.
If the amounts on a signed waiver form are incorrect due to an error in computation, rewrite the RAR to reflect the corrected amounts and reissue it to the taxpayer. Enter the explanation on the revised basic report form (or the attached Form 886-A). Secure a newly signed waiver form reflecting the corrected amounts. If unable to secure the new waiver, treat the case as unagreed.
The Form 870-E you signed on March 31, 2012, lists an additional tax of $5,000 for the tax year ended 12/31/2010. We have corrected an error in the computation of the additional tax. The recomputed tax is $10,000. This report reflects the corrected tax.
If the signed Form 870-E shows an overassessment, use the same paragraph by substituting "overassessment" for "additional tax" .
For further directions on corrected reports, see IRM 4.75.15, EO Closing Letters and Reports of Examination.
This subsection provides procedures and other information for identifying and properly resolving specific issues you may encounter during an audit.
The term, "revocation of tax-exempt status," for purposes of EO audits, means revocation of a ruling or determination letter granting tax-exempt status because an organization failed to meet the statutory requirements for continued recognition of tax-exempt status. See Section 12 of Rev. Proc. 2014-9 (updated annually). This includes revocation by issuance of a proposed (30-day) adverse determination letter (non-501(c)(3) cases) and the final adverse determination letter (501(c)(3) cases).
A termination of tax-exempt status is not a revocation. A termination for purposes of audit is a voluntary dissolution of an entity, effectively terminating its existence. See IRM 126.96.36.199.10, Terminations for procedures to recognize a proper termination.
Organizations can also automatically lose exemption. IRC 6033(j) provides that failing to file annual EO information returns or Form 990-N, e-Postcard, for three consecutive tax years results in automatic revocation. For more information, see IRM 126.96.36.199.2, Auto Revocations Under IRC 6033(j).
Automatic revocations do not confer appeal rights. Automatic revocation is an operation of law, not a determination made by the IRS.
Treat examined organizations described in IRC 508(c) that don't apply for tax-exempt status and fail to qualify for exemption as revocations for disposal code purposes. Refer to IRM 184.108.40.206.3, Disqualification from Tax-Exempt Status, for information on these cases.
Special rules apply for IRC 527 political organizations and IRC 4947 trusts.
Organizations described under IRC 501(c)(12) and IRC 501(c)(15) can either be revoked or disqualified. If proposing a revocation, seek technical advice. See IRM 4.75.36, Procedures For Processing Technical Advice Cases. See IRM 4.76.20 for more information on IRC 501(c)(12) organizations and IRM 4.76.23 for more information on IRC 501(c)(15) organizations.
Seek technical advice for any organization in receipt of an EO Technical issued exemption ruling letter if the case meets technical advice criteria.
Regarding revocations involving organizations in a group ruling, see IRM 220.127.116.11, Revocations.
When proposing revocations, perform the following:
Keep the taxpayer informed of activities or transactions encountered that jeopardize tax-exemption.
Advise the taxpayer of their appeal rights. See IRM 4.75.15, Closing Letters and Reports of Examination, Pub 3498, The Examination Process, and Pub 892, How to Appeal an IRS Decision on Tax Exempt Status, for more details on taxpayer appeal rights.
Estimate income taxes for all affected tax years (audited years and non-audited subsequent tax years).
Secure your group manager's approval to propose a revocation.
Establish annual EO information returns for all subsequent tax years not barred for assessment (including the current year if necessary).
Create the administrative record for proposed IRC 501(c)(3) revocations. See IRM 4.75.32, Declaratory Judgment Cases And The Administrative Record.
Prepare and issue an initial report. See IRM 126.96.36.199, Initial Reports of Examination. Present this during the closing conference.
Do not issue an initial report for church cases, subject to IRC 7611. See IRM 4.76.7, Churches.
Determine the course of action based on the taxpayer's reply to the initial report. See IRM 18.104.22.168, Initial Reports of Examination.
Close all proposed revocation cases to Mandatory Review (except TEP cases).
See IRM 188.8.131.52, Revocation Case for guidance concerning subsequent years.
Agreed revocations become final upon Mandatory Review concurrence. Protested revocations become final when sustained by Appeals.
For revocations resulting from inadequate records, see IRM 220.127.116.11.6.3, Revocation Due to Inadequate Records or Failure to Provide Requested Information.
For revocations resulting from inability to locate a taxpayer, see tables at IRM 4.75.16-17, Closing Procedures for Unable to Locate Situations.
When proposing a revocation, establish annual EO information returns for all subsequent tax years. If necessary, this includes the current uncompleted tax year during which the audit is taking place. You do not need to wait for taxpayer to file the current year's return before establishing that tax year on AIMS. There is no statutory requirement to have a posted return prior to the audit of the current year. See IRM 188.8.131.52, Revocation Case.
Disqualification (or denial) of tax-exempt status applies to certain organizations under EO audit jurisdiction who have:
Not applied for tax-exempt status.
Not received a ruling or determination letter granting such status.
Treat disqualification of IRC 508(c) organizations as revocations for all purposes:
Churches, their integrated auxiliaries, and conventions or associations of churches.
Subordinate organizations in a group exemption ruling. See Treas. Reg. 1.508-1(a)(3).
Other organizations not required to apply for tax-exempt status under IRC 508(c).
Status 36 organizations are IRC 501(c) organizations (other than IRC 501(c)(3), IRC 501(c)(9), and IRC 501(c)(17)) that declare tax-exempt status by filing Form 990 or Form 990-EZ. If they fail to meet the qualifications of tax-exempt status, disqualify them for the audited tax years for which they declared exemption. See IRM 22.214.171.124.9, Status 36 Cases, and IRM 4.75.16-12, Status 36 Case Scenarios, IRM 4.75.16-13, Status 36 Case: Form 6018-A Instructions, and IRM 4.75.16-14, Status 36 Case: Form 2363-A Instructions.
Use the closing tables in IRM 4.75.16-12, Status 36 Case Scenarios to identify the appropriate closing letters and disposal codes. Status 36 cases are not subject to Mandatory Review unless they are unagreed with a valid formal protest. Treat these disqualifications as revocations for business master file purposes only (EO BMF Status 22).
Disqualification also applies to IRC 501(c)(12) and IRC 501(c)(15) organizations (whether or not granted tax-exempt status by ruling or determination letter). Disqualification occurs when they fail computational tests to qualify for exemption for specified tax years.
Use DC 13 (501), Referrals to Other Operating Divisions, for agreed disqualifications unless a higher priority disposal code applies. IRC 501(c)(12) and IRC 501(c)(15) disqualifications are not subject to Mandatory Review unless they are unagreed with protest. Never treat these disqualifications as revocations.
Revocations of IRC 501(c)(12) and IRC 501(c)(15) organizations require technical advice. See IRM 4.75.36, Procedures For Processing Technical Advice Cases.
The term, "modification of tax-exempt status" means, for purposes of EO audits, modifying an existing ruling or determination letter. Modification occurs when an organization that no longer qualifies under one paragraph of IRC 501(c) qualifies for another, thereby preserving the continuity of tax-exempt status. See Section 12 of Rev. Proc. 2014-9 (updated annually).
The tax-exempt status of an organization described in IRC 501(c)(3) cannot be modified to another type of IRC 501(c) organization. If the organization does not meet the requirements of IRC 501(c)(3), its exempt status must be revoked. (Treas. Reg. 1.501(c)(3)-1(a)(1)) Similarly, an organization that wants tax-exempt status under IRC 501(c)(3) must apply by filing Form 1023. (IRC 508(a))
You can't modify a Status 36 organization because the organization has no ruling or determination letter to modify. The same applies to IRC 527 political organizations and IRC 4947 trusts.
You can't modify subordinate organizations in group exemption rulings that do not meet the requirements for tax-exempt status because there is no ruling or determination letter to modify. Also, note that all subordinates in a group ruling must be exempt under the same IRC 501(c) paragraph. Thus, modification of one subordinate in a group ruling is not permissible. If the non-qualifying organization qualifies for tax-exempt status under another IRC 501(c) paragraph, revoke its exemption. The former subordinate must apply for tax-exempt status with a user fee in order to secure its own ruling or determination letter.
The following types of organizations must apply for tax-exempt status. Modification to these types of organizations is not available:
IRC 501(c)(3), charitable, educational and religious organizations. See IRC 508(a).
IRC 501(c)(9), voluntary employees beneficiary associations (VEBA). See IRC 505(c).
IRC 501(c)(17), supplemental unemployment beneficiary organizations. See IRC 505(c).
IRC 501(c)(20), group legal services plan organizations. See IRC 505(c).
A modification only becomes final upon Mandatory Review concurrence. Protested modifications become final when sustained by Appeals.
The following types of actions require determining an effective date:
Exemption revocation
Code section modification
Foundation status reclassification
The effective date depends on whether the act triggering the revocation/modification is ongoing from a prior year, or an act (or set of acts) that occur during the audit year. For ongoing acts, the effective date is the first day of the first tax year under audit. For a specific act (or set of acts), the effective date is the date of the first act triggering the change.
Special rules apply to reclassifications of IRC 509(a)(1)/IRC 170(b)(1)(A)(vi) and IRC 509(a)(2) charities. (See IRM 7.26.3, Private Foundations Defined — IRC 509(a)(1) and 170(b)(1)(A)(vi) Exclusion, and IRM 7.26.4, Private Foundations Defined IRC 509(a)(2) Exclusion.)
A revocation or modification may qualify for relief from retroactive effect under IRC 7805(b). If the organization qualifies for relief under IRC 7805(b), the effective date of the revocation or modification is prospective. See IRM 184.108.40.206.5.2 below.
Attempt to establish the date the organization first fails to qualify for its particular status. Do so by:
Interviewing the officers, employees, or members of the organization.
Inspecting the prior year returns.
Reviewing the determination file, if available.
Determine whether the qualification failure is due to a single act or a continuing on-going activity. For single acts, document the date of the act. For on-going activities, determine when the activity first triggers the qualification failure. Document the nature of the act(s) causing the qualification failure.
If the organization probably ceased to qualify for exemption during a prior year, expand the audit to include the prior year.
In most instances, do not expand the audit to a prior year if the assessment statute expiration date (ASED) expired.
Secure your manager's approval before expanding the audit.
A revocation effective the date of inception precludes a reclassification of a IRC 501(c)(3) charity to a private foundation. A private foundation (other IRC 4947 trusts) must first be a IRC 501(c)(3) organization.
In all instances, substantiate the effective date of the revocation or modification. If not expanding the audit to prior years, the effective date of the revocation or modification is the date of the first act or the first day of the first tax year under audit, depending on whether the activity continued from a prior year.
Revocations effective for a date other than the first day of the tax year trigger a short return filing requirement. When preparing the converted return, compute the taxable income starting from the effective date. For this reason, obtain the electronic accounting records. After converting the records to MS Excel, identify all revenues and expenses occurring after the effective date. See IRM 4.75.31, Conversion of Returns Upon Revocation of Exemption.
When completing field 22 on Form 2363-A, input the status code followed by the year and month of the effective date of revocation.
For public charity reclassifications involving IRC 509(a)(1)/IRC 170(b)(1)(A)(vi) and IRC 509(a)(2), verify the amounts on Form 990 Schedule A, Public Charity Status and Public Support. If incorrect, redo the schedule. Determine whether the entity meets the various tests. If the entity fails the test for two successive years, the effective date of reclassification is the first day of the second tax year.
IRC 7805(b) provides discretionary authority to determine the extent to which any ruling may apply without retroactive effect. IRC 7805(b) relief applies to:
Determinations of liability for unrelated business income (UBI)
Determinations of liability for excise taxes
Private letter rulings
Technical advice issues
When an entity validly receives a determination letter or ruling, and later loses exemption due to a change in facts or law, revocation is effective the first day of the first tax year in which the change occurs. Under these circumstances, there is no need to request application of IRC 7805(b) relief.
When an entity erroneously receives a determination letter or ruling due to an omission or misstatement of material facts, the effective date of revocation is the first day of the first tax year. In such cases, do not recommend relief under IRC 7805(b). It's generally not available.
When an entity erroneously receives a determination letter or ruling due to a Service misinterpretation of the law, recommend IRC 7805(b) relief.
The following table recaps the situations described above:
Situation Revocation Effective Date IRC 7805(b) Applicability Change in tax law or organization alters its operation subsequent to initial recognition of exemption First day of first tax year in which organization altered its operations or the law changed Not necessary, but taxpayer may request a TAM if disputing whether it altered its operations. Omission or misstatement of material facts by the applicant organization Retroactive to the first day of the first tax year Not Available Misinterpretation of law by Service Determined by IRC 7805(b) relief Applies. Recommend requesting relief.
You or the organization may raise the question of IRC 7805(b) relief.
In revocation cases, advise the organization of the provisions of IRC 7805(b) as an appeal right, if only to relate why you are not recommending relief. In particular, explain that the organization can seek a TAM on whether IRC 7805(b) applies when determining the effective revocation date. For further information on IRC 7805(b), see http://www.irs.gov/file_source/pub/irs-tege/eotopice82.pdf.
Section 4.04 of Rev. Proc. 2014-5 (updated annually), provides that requests for IRC 7805(b) relief are mandatory technical advice memos with respect to all exempt organizations matters.
However, this section also states a "request for a TAM is not required if the Director, EO Examinations proposes to revoke or modify a letter recognizing tax-exempt status issued by the Service." See IRM 126.96.36.199.5.2 for situations where EO Examinations should request 7805(b) relief.
For appealed unagreed proposed revocations/modifications/reclassifications, the Appeals Office forwards the request for IRC 7805(b) relief to EO Technical.
EO Technical, after considering IRC 7805(b) relief, prepares a memo to the Area Office (or the Appeals Office) transmitting the technical advice memo. The TAM gives the effective date of the revocation/modification/reclassification and the reasons. The TAM normally excludes EO Technical's reasoning in cases where EO Technical agrees with the Area Office's recommendation for relief and effective date of revocation. The transmittal memo will include any differences of opinion between EO Technical and the Appeals Office or the Area Manager.
If the recommended relief under IRC 7805(b) is denied, EO Technical fully explains such decision in the memorandum to the Area Manager (or to the Appeals Office).
IRM 4.75.36, Procedures For Processing Technical Advice Cases provides complete processing instructions for technical advice requests. The IRM:
Defines technical advice.
Identifies issues subject to mandatory technical advice.
Lists items that must be included in the request for technical advice.
Describes how to initiate a request for technical advice.
Explains what to do when a taxpayer initiates a request for technical advice.
Discusses requests for a pre-submission conference.
Explains the process for a formal request for technical advice.
Discusses the effect of the technical advice memorandum.
Outlines procedures for a withdrawal of a technical advice request.
Provides instructions for receipt and management of the TAM.
Discusses what to do when EO Examinations concurs/does not concur with a TAM.
Outlines procedures for when mandatory review and the area manager disagree over whether to protest.
Provides instructions for concluding the case.
For proposed revocations, bring the taxpayer current by either:
Preparing Form 5666 for later enforcement by SB/SE or LB&I
Not applicable for private foundations
Securing substantially correct and complete converted income tax returns for all affected tax years.
Solicit converted returns only after the revocation is agreed or final.
Creating a converted return case file (NMF) for later EO enforcement of income tax.
Refer to IRM 4.75.31, Conversion of Returns Upon Revocation of Exemption, for specific procedures.
If the taxpayer fails to maintain adequate books and records, discuss the inadequacies with your group manager. Determine whether to pursue issuance of an "Inadequate Records Notice" . See IRM 126.96.36.199.6, Inadequate Records.
Revocations and foundation status reclassifications of IRC 501(c)(3) organizations are subject to declaratory judgment under IRC 7428. Refer to IRM 4.75.32, Declaratory Judgment Cases And The Administrative Record, for specific information.
For issues subject to declaratory judgment under IRC 7428, share all documentation of the issue with the taxpayer. The case may be decided solely on the basis of the Administrative Record.
We can't change a private foundation to a public charity, unless the initial classification was erroneous at the time of classification. The organization must terminate its private foundation status under IRC 507. See IRM 7.26.7, Termination of Private Foundation Status.
Examination groups may place certain cases in group suspense pending a needed administrative or judicial action or decision. Managers may place cases in AIMS Status Code 39, Suspense in Group, only under the following conditions:
Requests for Technical Advice Memorandum. See IRM 18.104.22.168, Formal Request For Technical Advice.
Examinations interrupted by federally declared disasters impacting the organization. IRM 25.16.1, Program Guidelines.
By agreement of the Manager, Examination Program and Review (EPR), in response to a request by the Area Manager. The written request must include a listing of all of the related cases to be placed in status 39, an explanation of reason the cases have been delayed, as well as an estimated closure date.
Do not place a case in Status 39 solely due to taxpayer delays.
Other reasons for group suspense include the following:
Cases transferred to Area Counsel. (AIMS Status Code 25)
Cases transferred to Joint Committee. (AIMS Status Code 21)
Criminal referral cases accepted by Criminal Investigations. (AIMS Status Code 18)
Grand Jury Suspense. (AIMS Status Code 36)
For any return placed in suspense, the group charged with the return is responsible for protecting the statute of limitations for assessment.
Cases involving issue(s) having nationwide ramifications or those within a particular judicial jurisdiction are, at times, suspended to ensure uniform and consistent treatment of the issue(s). This includes cases in which the issue is the same or similar to an issue(s) in a case awaiting final action by EO Technical or the Office of the Chief Counsel (Tax Exempt and Government Entities).
Mandatory Review places Form 1254, Examination Suspense Report, cases in suspense using AIMS Status Code 30.
Send to Mandatory Review cases involving issues which have been identified as Form 1254 suspense cases. Complete the audit with regard to all other issues prior to forwarding the case to Mandatory Review.
Advise the Manager, Mandatory Review of any statutes that expired prior to receipt of returns being suspended.
Follow the following procedures before forwarding the case to Mandatory Review:
Ensure the statute is protected for at least one year.
Prepare the Form 1254. (Change references to Examination to TE/GE using the Adobe Touch Up Text Tool.)
For a group of cases with an identical issue, prepare a Form 1254 for each one of the cases.
Prepare and mail Letter 3617, Letter to Taxpayer advising him of the reason for suspended action on his return.
Mandatory Review places the Forms 1254 in a special suspense file maintained and controlled in Mandatory Review. Until in receipt of advice, take no action to close the case, except as may be necessary to protect the Government's interest such as protecting the statute.
When a final decision arrives on any issue in suspense, Mandatory Review returns the case files to the originating Area. Mandatory Review prepares a synopsis of the decision and provides any other guidelines available at that time.
Refer to IRM 4.75.34, Procedures for Disposition of IRC 501(p) Cases, for specific procedures.
Regarding guidance on certain foreign grants and the potential support of terrorism, refer to the Foreign Grants - Anti Terrorism intranet website. See also IRM 188.8.131.52, Forensic Investigation Unit.
For information relating to employee protection, see IRM 25.4.1, Potentially Dangerous Taxpayer, and IRM 25.4.2, Caution Upon Contact Taxpayer.
Restricted interest situations involve those where the amount of interest charged (deficiencies) or paid (refunds) is limited by IRC 6601(d) or IRC 6611(f).
Restricted interest transactions include:
Net Operating Loss (NOL) Carrybacks under IRC 172(b)
Capital Loss Carrybacks under IRC 1212
Business Credit Carrybacks under IRC 39
Foreign Tax Credit Carryback IRC 904 as amended by P.L. 94-455 Sec. 1901(a)(114)
Prepare a Form 2285 when:
Loss and/or credit carrybacks from more than one year are carried back to the same year.
Current year adjustments result in more than $100 in tax and there is a carryback loss or credit from at least one subsequent year.
Current year adjustments are adjustments made to the year in which the carryback deduction(s) and/or credit(s) are allowed. Current year adjustments do not include any adjustments made to the carryback losses or credits. For examples, see Exhibit 4.75.13-1.
Do not prepare Form 2285 when:
A taxpayer protests an unagreed case to Appeals.
A taxpayer petitions tax court.
The only adjustment on the RAR is a single year carryback.
If after reviewing the examples in Exhibit 4.75.13-1, you can't determine whether a case requires a Form 2285, please contact the Restricted Interest Coordinator.
For further information on restricted interest, see IRM 20.2.8, Restricted Interest.
After deciding to survey a claim or completing an audit, process the case per Exhibit 4.75.13-1.
Secure current BMFOLT printouts for all years involved and include them in the case file with the restricted interest workpaper prepared in IRM 22.214.171.124.12.1 (3) below.
Prepare a restricted interest workpaper showing:
The taxable income before the specific deduction or carrybacks for each taxable year to which you allow a carryback loss or apply a credit.
The amount of each loss or credit being carried back by type and year of origination.
The computation of any remaining carryforwards by type and year of origination if there are carryforward losses and/or credits remaining after allowing the carrybacks.
Apply the carrybacks to the correct years as per the Internal Revenue Code or Treasury Regulation. See IRM 184.108.40.206.12 (2). Do not survey a claim if the losses or credits are not carried back to the correct years. Making this determination before surveying a claim or preparing an audit report.
Prepare the case for closing using the normal case closing procedures. See IRM 4.75.16, Case Closing Procedures.
Prepare a Form 5599, TE/GE Examined Closing Record, for surveyed claims.
Contact the Restricted Interest Coordinator for mailing instructions.
Prepare Form 3210, Document Transmittal.
When closed, the manager updates the case to Special Review on RCCMS.
Fax a copy of the Form 3210 to Special Review, attention Systems Analyst. (On the fax cover sheet, note "Restricted Interest Case Closed to Special Review" .)
Mail the case as instructed.
If there are any questions, contact the Restricted Interest Coordinator.
Inactive organizations do not currently conduct activities. Whether or not the lack of activity is immediately apparent rests on facts and circumstances. Frequently, you determine the extent of inactivity only in the course of an audit or a compliance check.
While many inactive organizations fail to file Form 990 series returns, some classes of organizations are not required to file such returns. As such, determining whether or not they are inactive requires making contact with the organization.
Inactive organizations present unique processing challenges. Depending on the situation, you may have:
An organization subject to IRC 6033(j) auto revocation. See IRM 220.127.116.11.2, Auto Revocations Under IRC 6033(j) .
A terminated organization. See IRM 22.214.171.124.10, Terminations.
An unable to locate organization. See IRM 184.108.40.206, Unable to Locate.
Determine whether the inactive organization is subject to an operational test, such as Treas. Reg. 1.501(c)(3)-1(a)(1). For those subject to such operational tests, propose revocation if the organization has no concrete plans to resume operations in the near future. For those not subject to such operational tests, recommend dissolution/termination to the organization's officers if there are no plans to resume operations. Failure to operate for exempt purposes constitute grounds for revocation and a failure to satisfy such operational tests.
If the inactive organization will retain exemption, pursue securing any delinquent returns. IRM 126.96.36.199.5, Inactive Organizations.
If proposing revocation for the inactive organization (not terminated) and the organization:
Is described under IRC 170(b)(1)(A)(vi) or IRC 509(a)(2).
Is in existence for more than five years.
Has failed the public support test for two consecutive tax years (including zero public support).
Does not otherwise qualify for one of the other exclusions from private foundation status.
Reclassify it as a private foundation. Revoked private foundations become taxable private foundations.
If unable to close the inactive organization as an auto revocation, revocation, or termination, close the case as a no change or no change with advisory.
Refer to IRM 18.104.22.168, Researching Tax Law, for information on researching and citing federal tax law. The profiles of various tax authorities in IRM 18.104.22.168 are intended to help you become familiar with the most common, but by no means all, sources or available research techniques. The sources presented include:
IRM 126.96.36.199.1, Internal Revenue Code
IRM 126.96.36.199.2, Committee Reports
IRM 184.108.40.206.3, Code of Federal Regulations
IRM 126.96.36.199.4, Internal Revenue Bulletin
IRM 126.96.36.199.5, Cumulative Bulletin
IRM 220.127.116.11.6, Revenue Rulings and Procedures
IRM 184.108.40.206.7, Bulletin Index-Digest System
IRM 22.214.171.124.8, IRS Publications
IRM 188.8.131.52.9, Court Decisions and Case Law
IRM 188.8.131.52.10, Private Letter Rulings and Technical Advice Memorandums
IRM 184.108.40.206.11, General Counsel Memorandums
IRM 22.214.171.124.12, Technical Memorandums
For those using the http://tax.westlaw.com or http://www.westlaw.com services (in lieu of Lexis-Nexis,) review a citation list through http://www.westcheck.com (same password and username). Use Westcheck to verify the citations, and identify those that have been modified, made obsolete, or overruled. Refer to IRM 126.96.36.199.9.7, Citators: Researching Case History, for general information on citators.
A wide range of tax literature is available to EO Examination personnel. Monthly publications such as The Exempt Organization Tax Review, published by Tax Analysts, provide articles pertaining exclusively to tax matters relating to exempt organizations.
A number of tax services are available from commercial publishers that provide explanations and annotations on a variety of exempt organization as well as other tax issues. Well known examples include CCH "Exempt Organization Reports" , Bloomberg BNA "Tax Management Portfolios" , and the RIA "Federal Tax Handbook" .
Although these services may not be available in office libraries, they may be available through other library systems, i.e. public libraries or universities. You can also research these using Lexis-Nexis or Westlaw as described below.
The primary means of research is electronic, either through compact discs or online services. Using such services provides quick access to relevant information.
The Service contracts with commercial vendors such as Reed Elsevier (Lexis Nexis, Accurint), Thomson Reuters (Westlaw) and Wolters Kluwer (CCH). These vendors supply electronic access to databases containing extensive legal research libraries.
Access Lexis through both the Internet site at http://www.lexisnexis.com or though the IRS intranet site at http://www.lexisnexis.com/clients/irshome/. These two addresses access the same Lexis Nexis database, use the same customer ID number, and have the same basic features. The main difference is the IRS intranet site provides quick links to commonly used sources.
Access Westlaw through either the Internet site at http://www.westlaw.com, or http://tax.westlaw.com. These two addresses access the same Westlaw database, use the same customer ID number, with a slightly different emphasis in the search features provided. The main difference is the tax website provides a search feature that searches multiple commonly used separate databases at the same time.
Employees who require Lexis Nexis, Westlaw, or other electronic research must receive a user profile in order to use the service(s).
Obtain user profiles by contacting the ID Administrator by selecting the appropriate research service at http://rnet.web.irs.gov/.
Access the following web site for training and other assistance at http://rnet.web.irs.gov/Training/.
Direct general questions about the electronic research contracts to email@example.com.
The IRS Office of Servicewide Policy, Directives and Electronic Research (SPDER) teamed with Lexis Nexis to provide employees with a complete IRM in an easy to research electronic format.
Find additional tutorials and help using the on-line version of the IRM at http://irm.web.irs.gov.
Westlaw provides access to electronic databases that includes many of the major newspapers, magazines, news wires, and reference works. Access requires obtaining a user-profile at http://rnet.web.irs.gov/Westlaw/id.asp.
Accurint, a Lexis Nexis product, is available to EO agents. It provides online access to asset/locator information through an easy to use interface. The product provides customized reports with:
Real and personal property data
Motor vehicle information
State corporation data
Personal credit header data
Business credit reports
Other information
Accessing Accurint requires an ID and password. Request an Accurint® ID by completing an "Accurint ID Request Spreadsheet" and submitting it to your manager for approval.
A variety of low cost and no cost training methods and educational handouts offer agents numerous options to obtain training on Accurint. Any one of these courses provides enough information to successfully use Accurint.
The Accurint® ID Request Spreadsheet and training materials are available on the IRS Intranet at http://rnet.web.irs.gov/Accurint/id.asp.
The GuideStar web site provides the Form 990, 990-PF, and other useful information about the operations and finances of nonprofit organizations.
Access GuideStar at http://www.guidestar.org/index.html.
GuideStar access to Forms 990 requires a user profile and a password. Access is limited to the three most recently filed returns.
The Foundation Center web site also provides the Form 990 and Form 990-PF images as PDF documents. Images are available as far back as 2001, when Ogden Service Campus began scanning the Form 990 series.
Access the Foundation Center search engine at http://dynamodata.fdncenter.org/990s/990search/esearch.php.
The On-Line SEIN system, an internal web site provided by the Statistics of Income Division, provides the original, unredacted images of the Forms 990, 990-EZ, 990-PF, 990-T , 1120-POL, 4720, 8871, and 8872.
Do not provide the unredacted copies to anyone outside the IRS other than an authorized officer or representative of the organization whose imaged return you are auditing. The public may request copies through the regular disclosure channels for redacted copies of the returns. Certain fields and schedules, such as Schedule B are not open to public inspection in an unredacted format. (IRC 6103)
Due to site license limitations, access to On-Line SEIN may be limited. Access to the system requires an approved request via Online 5081.
For those groups where only one or two people may access the system, research requests require management approvals. Management forwards the approved requests to those with access for document retrieval. Print retrieved images directly to PDF, by setting the default printer to PDF before accessing the system. Transmit the files within the groups by secure e-mail.
PACER (Public Access to Court Records) provides case and docket information from Federal Appellate, District and Bankruptcy courts, and the U.S. Party/Case Index. PACER is a product of the Administrative Office of the U.S. Courts.
Access PACER at https://pacer.login.uscourts.gov/cgi-bin/login.pl. To obtain an ID and password, submit a request via Online 5081.
|Example 1
|Organization X timely filed a Form 990-T, Exempt Organization Business Income Tax Return, for the taxable year ended 12/31/2012 reporting $15,000 taxable income with taxes due of $2,250.
|As a result of an audit of the Form 990-T for the taxable year ending 12/31/2012, you reduce deductible expenses by $20,000. You compute corrected taxable income as follows:
|Income as shown on the return
|Plus decrease in expenses
|Corrected taxable income
|The audit results in a deficiency of $3,000.
|This is not a restricted interest case. The reduction in expenses is a current year adjustment.
|A Form 2285 is not required.
|You are not required to enter any statements regarding interest on a Form 3198-A, TE/GE Special Handling Notice.
|Example 2
|Organization X timely filed a Form 990-T, Exempt Organization Business Income Tax Return, for the taxable year ended 12/31/2012 reporting $15,000 taxable income with taxes due of $2,250.
|As a result of an audit of the Form 990-T for the taxable year ended 12/31/2012, you allow a NOL carryback of $4,000 from the year ended 12/31/2013. You make no other adjustments. You compute corrected taxable income as follows:
|Income as shown on the return
|Minus the NOL carryback from 2013
|Corrected taxable income
|The NOL carryback adjustment results in an over-assessment of $600.
|This is a restricted interest case.
|A Form 2285 is not required because the NOL carryback was from a single subsequent year and there were no current year adjustments or other carrybacks.
|Form 3198-A is required. Prepare a Form 3198-A and notate in bold letters in the "Other Instructions" section "Restricted Interest IRC §6611(f). No Form 2285 is required."
|Example 3
|Organization X timely filed a Form 990-T, Exempt Organization Business Income Tax Return, for the taxable year ended 12/31/2011 reporting $15,000 taxable income with taxes due of $2,250.
|As a result of an audit of the Form 990-T for the taxable year ended 12/31/2011, you allow NOL carrybacks of $4,000 and $6,000 from the years ended 12/31/2012 and 12/31/2013, respectively. You make no other adjustments. You compute corrected taxable income as follows:
|Income as shown on the return
|Minus the NOL carryback from 2012
|Minus the NOL carryback from 2013
|Corrected taxable income
|The adjustments result in an over-assessment of $1,500 in taxes, a decrease of $600 from the NOL carryback from the year ended 12/31/2012 and a decrease of $900 from the NOL carryback from 12/31/2013.
|This is a restricted interest case.
|A Form 2285 is required because there are carrybacks from 2 succeeding years.
|Form 3198-A is required. Prepare a Form 3198-A and notate in bold letters in the "Other Instructions" section "Restricted Interest IRC §6611(f). Form 2285 is required."
|Example 4
|Organization X timely filed a Form 990-T, Exempt Organization Business Income Tax Return, for 201212 reporting $15,000 taxable income with taxes due of $2,250.
|As a result of an audit of the Form 990-T for the taxable year ended 12/31/2012, you reduce deductible expenses by $20,000 and allow a NOL carryback of $4,000 from the year ended 12/31/2013. You compute corrected taxable income as follows:
|Income as shown on the return
|Plus decrease in expenses
|Minus the NOL carryback from 2013
|Corrected taxable income
|The adjustments result in a deficiency of $2,400 in taxes, a $3,000 increase from the decrease in expenses in the audit year and a decrease of $600 from the NOL carryback from 12/31/2013.
|A Form 2285 is required because there is a current year adjustment and a restricted interest adjustment from a succeeding year.
|In restricted interest cases, like the one in this example, involving current year adjustments and a restricted interest adjustment, prepare a Form 3198-A and notate in bold letters in the "Other Instructions" section "Restricted Interest IRC 6601(d). Form 2285 is required."
|Example 5
|Organization X timely filed a Form 990-T, Exempt Organization Business Income Tax Return, for the taxable year ended 12/31/2012 reporting no taxable income.
|As a result of an audit of the Form 990-T for the taxable year ended 12/31/2012, you reduce deductible expenses by $20,000 and allow a NOL carryback of $20,000 from the year ended 12/31/2013. You compute the corrected taxable income for the year ended 12/31/2012 as follows:
|Income as shown on the return
|Plus current year adjustments
|Minus the NOL carryback from 2013
|Corrected taxable income
|The current year adjustment, the decrease in expenses, is offset by the NOL carryback from 12/31/2013 so there is no tax as a result of the adjustments. However, the current year adjustments create a phantom tax until the NOL is available for carryback. Interest is due on this phantom tax even though there is no tax deficiency.
|A Form 2285 is required because there is a current year adjustment and a carryback loss from a succeeding year.
|Form 3198-A is required. On the Form 3198-A notate in bold letters in the "Other Instructions" section "Assess restricted interest only - no tax deficiency. See Form 2285."


text:
By Angela Cutrer
- When
the "World's Largest Brain" balloon inflates for the first
time early March 26 on the campus of The University of Southern
Mississippi, it will be only the beginning of an exciting and fun
two days of learning for community members.
Sponsored by
Hattiesburg Clinic, as well as Forrest General Hospital, Wesley
Medical Center and Dr. Charles Brent, the event, which investigates
brain science and health, will include tents on Pride Field with
ongoing activities for children and adults, students and faculty,
professionals and retirees.
"I invite
everyone to come to see the balloon and learn about the brain in
the many displays that will surround the balloon," said Rex
Gandy, dean of Southern Miss' College of Science and Technology,
whose college partnered with the College of Health to bring the
balloon to Hattiesburg - the only Mississippi site it will visit.
"Not only
will this event help educate students and community members, but
it will allow fun activities while learning to keep safe,"
said Dr. Joan Exline, interim dean of the College of Health. "And
the balloon's going to be a lot of fun to see, too."
The nine-story,
anatomically correct hot-air balloon is a way to attract community
members to a common site to learn about brain health importance.
The two-day event will have a little something for everyone, with
more than 1,000 students on site Friday for scheduled fun opportunities,
and adults invited Saturday for blood pressure screenings and other
healthy activities. A schedule of events will be available in the
Hattiesburg American beginning March 20.
Julie Smith,
the event's coordinator, said, "A lot of rural school districts
don't have science programs and we do, so this is a fantastic opportunity
for students to learn about the brain."
On Friday evening,
Dr. Mark J. Morrow, a Hattiesburg Clinic neurologist, will discuss
dizziness and how to cope with the problem. The lecture begins at
7 p.m. in the Polymer Science Center auditorium.
From 1 to 6
p.m. Saturday, an educational health fair will consist of six tents
that will host a series of 15- to 20-minute educational seminars
and interactive activities.
Dr. Geoffrey
B. Hartwig, a neurologist with Hattiesburg Clinic, will speak on
"Advances in MRI Technology in Neurological Diseases."
Other Hattiesburg Clinic neurologists involved include Dr. Jose
P. Fernandez Jr., Wendell R. Helveston, Dr. C. Scott Lynn, Dr. Keith
W. McLarnan, and Dr. Ronald L. Schwartz, as well as neuropsychologist
Andrew L. Dickson, Ph.D., and clinical health psychologist Marcia
Hartwig, Ph.D.
The Head Injury
Association of Mississippi will distribute 500 free helmets and
Southern Miss police officer Charmaine Hill will do a bicycle safety
presentation. AAA ambulance service will provide on-site education
and simulations of automobile crashes.
The federal
Centers for Disease Control and Prevention in Atlanta, conducting
the broadest investigation to date of U.S. sports and recreational
injuries, found that about 7 million people per year seek medical
advice or treatment related to physical activities, according to
a Sept. 4, 2003, article in the Los Angeles Times. "Injuries
in all age groups cost an estimated $500 million annually in medical
services," the article noted. "The injuries translated
into at least one lost school day for students in about a fifth
of the cases and one or more work absences for adults"
Those numbers
are part of what prompted Hattiesburg Clinic's Sports Medicine department
to get involved with the balloon event and the accompanying health
fair. "Sports medicine is often only associated with knee and
shoulder injuries; however, sports medicine encompasses all sports-related
injuries, including concussions, strains and sprains that occur
in any sporting event, from football to rodeos," said Mike
Williamson, director of Sports Medicine at Hattiesburg Clinic. "We
hope this event will heighten awareness in our community."
Dr. Kevin B.
Clement, a primary care sports medicine physician at Hattiesburg
Clinic, agreed. "It is crucial for Sports Medicine at Hattiesburg
Clinic to be involved in community education," he said. "Everyone,
regardless of age, is susceptible to a sports-related injury. This
event will allow us to focus on the prevention of head injuries,
many of which can be prevented."
Dr. Brent Bevard,
a physical medicine and rehabilitation physician at Hattiesburg
Clinic, added that "the Hattiesburg Clinic Sports Medicine
team focuses on prevention and education as well as treatment, evaluation
and rehabilitation. This event gives us the opportunity to educate
our community on measures that can be taken to avoid head injuries.
Education is the key to decreasing the number of head injuries our
athletes experience."
Members of
Hattiesburg Clinic's department of neurology are excited to be participating
in this extraordinary program, said Michael Sims, manager of the
department. "We continually try to educate our patients, as
well as the community, on health issues, so when we were invited
to participate in this program, we saw it as a great opportunity
to educate and have some fun at the same time."
Wesley Medical
Center representatives will be on hand to offer information, pass
out goody bags, and help answer any questions attendees have about
brain injury. Dr. Todd Sitzman, a fellowship-trained pain management
physician, is speaking on painful CNS conditions. Dr. Charles Brent's
office staff, including Beverly Tinnon, R.N., will sponsor an educational
experience utilizing actual human brains to explore the parts and
functions of the brain.
Gloria Smalley,
R.N., and Serina Carpenter, R.N., of Forrest General will lecture
on "Traumatic Brain Injury." Carpenter, a clinical nurse
from Forrest General Hospital and a specialist for the Neuro Center
of Excellence, will lecture on the frame model of the spinal cord.
community outreach is all about education and prevention,"
said Smalley, who is the trauma registrar at Forrest General and
guides the Dare-to-Care program on drinking and driving. "It
only takes a second (to incur an injury) that you have to live with
forever. So, participating in this event is the right thing to do.
The only way to prevent brain injury is to make sure it never happens
(in the first place)."
from Pine Grove Recovery Center, a leader in addiction medicine,
will give lectures on chemical dependency. Thomas Tullos, therapy
manager at Pine Grove, will speak on "Where Addiction Can Take
Other lectures
and presentations include Roy Stringer, a physical therapist at
Hattiesburg Clinic, who will speak on "Protecting your Head
while Playing Sports." Clement of Hattiesburg Clinic, fellowship
trained in primary care sports medicine, will speak on "Football...the
Force of Impact."
David Freeman,
ATC, of Hattiesburg Clinic will give a talk on "Protective
Headgear." Dr. Ellen Ovson of Forrest General will lecture
on "Drugs: What's the Harm?" Bevard, fellowship trained
in nonoperative spine care and sports medicine, is a certified athletic
trainer who will speak on Case Assessment: Collision and Head Trauma
in Sports."
Dr. Raymond
Whitehead, a Hattiesburg Clinic orthopedic surgeon fellowship trained
in sports medicine and arthroscopy, will present "Using Your
Head: Repetitive Head Trauma in Soccer."
On Saturday,
Kimberly C. Ryder, a physical therapist at Hattiesburg Clinic who
is also a certified athletic trainer and a certified Pilates instructor,
will explain "Pilates - How it Helps Prevent Injuries."
Clint Hudson, a physical therapist at Hattiesburg Clinic, is certified
for Isernhagen Functional Capacity Evaluations, work hardening-conditioning,
and job-site analysis system. He will talk about "The Prevention
of Slips, Trips and Falls."
This small
sampling of what the health fair will include relates how a healthy
brain is a subject for young and old alike. Protecting the brain,
understanding its functions, and being knowledgeable about potential
problems are important to every community member.
"As we
age, it becomes increasingly important to protect the brain and
keep it functioning as well as it can for as long it can,"
said Schwartz, of Hattiesburg Clinic. "There are treatments
available to help the brain function better and perhaps even protect
it from degrading further down the road. Stay aware of your memory
and other brain functions so that you can treat problems as soon
as they occur.
treatment leads to enhanced function for years down the road."
page is maintained by the Department of Marketing and Public Relations
The University of Southern Mississippi at http://www.usm.edu.
Comments and suggestions are welcome; direct them to email@example.com.
URL for this page is http://www.usm.edu/pr/prnewsmar04/brainsponsors18.htm
April 20, 2004 4:09 PM

subset: commoncrawl


text:
To embed, copy and paste the code into your website or blog:
A recent decision resolving an advertising dispute between Campbell Soup Company and Tropicana Products, Inc. reinforced what we know to be empirically true: simply claiming to be the "best" really doesn't mean much at all. See Tropicana Products, Inc., NAD Case Report No. 5610 (July 3, 2013). It's usually just hyperbole, a tool in the advertiser's toolbox too vague to put a competitor at a disadvantage, mere "puffery" in legal parlance.
The Challenged Commercial
The dispute, which was brought by Campbell before the National Advertising Division, a self-regulatory program administered by the Better Business Bureau, challenged a commercial stating
"If you want the world's best fruit and vegetable juice, look in the cooler. Introducing Tropicana Farmstand, a deliciously chilled fruit and vegetable juice."
Contemporaneous with the claim of being the "world's best" juice, the commercial features an entire section of non-refrigerated juices falling to the floor only to reveal Tropicana's refrigerated juices in the background.
Campbell's Arguments
Campbell argued that the commercial as a whole suggested that all non-refrigerated fruit and vegetable juices (including Campbell's V8 V-Fusion) were inferior. To bolster that theory, Campbell pointed to statements by Tropicana's Chief Marketing Officer emphasizing the positive connotations of refrigeration—"high quality," "premium" and "freshness." Campbell also pointed to the results of a consumer perception survey it commissioned that concluded a majority of respondents believed that the commercial conveyed the superiority of Tropicana Farmstand juices over other juices.
NAD's Decision
NAD conceded that calling a product the "best" could be actionable depending on the context. But Campbell failed to make the case that the commercial conveyed the message that Tropicana was better than all other fruit juices. NAD rejected Campbell's survey evidence as unreliable. The survey evidence also failed to link any specific attribute of Tropicana's juice to the juice's supposed superiority. Moreover, according to NAD, the collapse of the shelves holding non-refrigerated juices did not denigrate those products, but was a humorous ploy to show where the consumer could find Tropicana's juice. Tropicana's Chief Marketing Officer's statements were irrelevant since they were not part of the commercial, and even if they were somehow relevant, at most they showed only that Tropicana's commercial played on preconceptions about the freshness and premium quality of chilled juices, not on any factual claim that chilled juices are necessarily fresher or healthier.
Advertisers and challengers can both learn from this decision. In general, merely designating one's product the "best" is puffery, not false advertising. To be actionable, something else in the context of the advertisement must convey the message that the product is objectively superior. From an advertising perspective, advertisers should steer clear of emphasizing specific product attributes (such as efficacy or health impact) and asserting the product is the "best" in the same advertisement. From a challenger's point of view, a challenge is unlikely to prevail if an advertisement simply invokes preconceptions about a product's attributes. Survey evidence or a review of the advertisement as a whole must establish that the advertisement conveys an unsubstantiated claim of superiority based on a particular product attribute.
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Foley Hoag LLP - Trademark, Copyright & Unfair Competition
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text:
Nirvana is a secure, cloud-based GTD® task manager accessible from your desktop web browser and mobile devices.
If you have more to do than you can manage in your head, or if you want greater clarity of mind and focus in life, Nirvana is for you.
Nirvana frees your mind to focus on actually getting things done. If you've had enough of generic to-do lists, it's time for Nirvana.