DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

WASHINGTON, DC 20224

TAX EXEMPT AND May 16,2006

GOVERNMENT ENTITIES
DIVISION
Correspondence Control Number: T:EO:E 18 - 2006

MEMORANDUM FOR ALL EO EXAMINATIONS EMPLOYEES

FROM: Marsha A. Ramirez /a/ % ~ & L L @. %

Director, EO Examinations

SUBJECT: EO Project Guidelines

The Director, EO has approved the procedures for proposing, developing and
implementing Exempt Organizations (EO) and cross-functional projects, including:

Critical Initiatives (CI),

Issue Management Team (IMT) projects,
Abusive Tax Avoidance Transaction (ATAT) projects,
Compliance projects,
Market Segment Studies (MSS),
Educational initiatives, and
Information Gathering projects

These procedures are contained in the attached EO Project Guidelines. They have
been designed to provide comprehensive guidance to EO employees on all aspects of
creating, implementing and closing EO projects. The Guidelines contain:

Definitions of various types of projects

Roles and descriptions of key units involved in projects
Procedures for the Strategic Planning process
Procedures for initiation and processing of submissions to the Trends,
Issues and Problems system (TIPS)
Roles and responsibilities of members appointed to project teams
Step-by-step procedures for all phases of project development and
implementation
The Project Guidelines will be incorporated into the IRM no later than one year from the
date of this memorandum. The Guidelines are subject to periodic review and revision
as appropriate. Should any deviation from these procedures be necessary, advance
approval of the Director, EO will be required.

The final procedures for compliance contact letters and questionnaires will be issued
shortly. Please contact Debra Petersen at (626) 312-3616, extension 5525 for
additional information.

Attachments: (9)

EO Project Guidelines document

Project Proposal form
EO Projects and Critical Initiatives Monthly Status Report form
Action Plan Form
Flowchart for Project Development and Implementation
Project Team Checklist
Final Report Template
Final Report for Public Distribution Template
Project Case Closing Procedure Memorandum
 Attachment 1

Exempt Organizations Project Guidelines and

Procedures

Table of Contents
Part 1 - Project Overview
I. Introduction
II. Types of Projects
A. Critical Initiatives
B. IMT Projects
C. ATAT Projects
D. Compliance, Educational or Information Gathering Projects
E. Market Segment Studies
Ill. Other Terms and Definitions
A. Functional Director
B. Executive Steering Committee
C. Compliance Strategy and Data Analysis
D. Exempt Organizations Contact Area
E. Strategic Planning Working Group
IV. General Procedures
A. Suggesting a Project
B. CSDA Responsibilities
C. Strategic Planning Process
D. Project Teams
E. Approval Process to Charter a Team

Part 2 - EO Project Team Procedures

I. Introduction
II. Team Member Responsibilities
A. Team Leader
B. Other Team Member
C. CSDA Member (Project Analyst)
D. TEGE Counsel Member
E. CE&O Member
Ill. Project Phases
A. Development Stage
B. Implementation Phase
C. Analysis Phase
 Attachment 1

Part 1 - Project Overview

I. Introduction

This document establishes procedures for proposing, developing and

implementing Exempt Organizations (EO) and cross-functional projects. These
may include:

Critical lnitiatives (CI),

Issue Management Team (IMT) projects,
Abusive Tax Avoidance Transaction (ATAT) projects,
Compliance projects,
Market Segment Studies (MSS),
Educational initiatives, and
Information Gathering projects

EO will deploy the Strategic Planning Process to select unique projects for
inclusion in each year's workplan. Projects serve several functions in TEGE. A
project may be used to address areas of known noncompliance through
enforcement or education. A project may gather information about an emerging
issue for the purpose of developing a strategy to address the issue. Projects are
also used to measure overall levels of compliance or they may be designed to
answer specific questions about a market segment. Projects allow us to extend
our limited resources in an efficient, effective manner. These are distinguishable
from general casework by their targeted purpose and finite duration. Projects
may involve a single function or multiple functions. For example, one project
may involve determinations, examinations and EOCA work.

These procedures are subject to periodic review and revision as appropriate.

Should any deviation from these procedures be necessary, advance approval of
the Director, EO will be secured.

Eight exhibits supplement these guidelines.

II. Types of Projects

A. Critical Initiatives (CI)

Each year, EO will determine which of various issues will be deemed critical
initiatives. Critical lnitiatives may be selected from the following types of
projects: IMTs, ATATs, compliance projects and market segment studies.
Critical Initiative projects will typically be implemented by teams whose members
are employees of EO Examinations, Rulings and Agreements, and TEGE
Counsel.
 Attachment 1

I. Definition

The term Critical lnitiative refers to any project that deals with an
issue that is critical to maintaining and promoting compliance within
EO. Critical issues are those that have a high risk of non-
compliance, a high degree of visibility, affect a significant number
of taxpayers, or are costly to the public and/or the IRS. In general,
all ATAT projects and IMT projects are critical initiatives, but
compliance projects and MSS may be elevated to the level of
Critical lnitiative by the Director, EO, if a critical aspect becomes
evident in the development of the project. Critical Initiatives that
are not ATAT or IMT projects are given a priority status that is
second to ATAT and IMT projects, but is higher than standard
compliance, MSS, educational and information gathering projects.

B. IMT Projects

I. Definition

An IMT is a small, high-powered team that focuses on a specific

issue or transaction. It is typically cross-functional, integrated with
other Business Operating Divisions (BODS)and Counsel, although
EO may utilize an IMT that is not cross-functional for purposes of
its own projects. An IMT most often works on a critical initiative,
usually an ATAT issue, but an IMT may also be devoted to a
standard compliance project. Members include a management
team of Executives; Area or Territory Managers and Group
Managers; Counsel Attorneys; SBSE Taxpayer Education and
Communication (TEC) and/or EO Communication, Education and
Outreach (CE&O). The IMT will play a key role in creating
alternative resolution strategies, monitoring field participant /
promoter inventories, and coordinating with campus activities.

2. Relationship to ATATs

Most lMTs are formed in response to the identification of an ATAT.

If an ATAT referral is made to the EO ATAT Committee that
results in the initiation of an IMT by EO, EO will act as the
sponsoring BOD and will take a leading role. If an IMT has been
formed by a BOD other than TEGE and is already in operation,
EOs participation will be determined by the ATAT referral screening
process described below in Section C2. lMTs that are formed to
address ATAT issues will also be given the highest priority.
 Attachment 1
C. ATAT Projects

1. Definition

An abusive tax avoidance transaction is a specific tax

transaction/scheme that reduces tax liability by taking a tax position
that is not supported by tax law or manipulates the law in a way
that is not consistent with the intent of the law (tax evasion).
Abusive Tax TransactionslSchemes may be applicable to either a
large number of taxpayers or a limited number of taxpayers. These
strategies may be organized and marketed, and if so are often
referred to as an Abusive Tax Shelter.

2. Referrals

ATAT issues may be identified by any one of a wide range of

sources, including employees of any IRS BOD, the Lead
Development Center (LDC), the Office of Tax Shelter Analysis
(OTSA), Treasury, Congress, practitioners, informants, media
articles and press releases. In general, referrals involving ATAT
issues are submitted to EO Classification for screening and.
research. Positively identified ATAT referrals are submitted to the
EO ATAT Committee who will determine the disposition of the
referral and the resource commitment associated with the
disposition.

3. Referral Disposition

If significant resources will be needed, the EO ATAT Committee

will prepare a formal memorandum containing its
recommendations, which the EO ATAT Program Manager will
forward to the Executive Steering Committee (ESC) for approval.
The ESC will respond promptly with notification that the referral is
approved, not approved or should be deferred. An ATAT referral
may be addressed in a number of ways. It may result in a project
within EO, a cross-functional project or a disposition that does not
call for the initiation of a project. ATAT referrals may result in:

An Issue Management Team

A Critical Initiative or compliance project
Regular examination work
A Market Segment Study
Promoter exams worked under the direction of the SBSE LDC
A referral to the LMSB OTSA
A listed transaction
4
 Attachment I
A guidance project
A recommendation for legislation

Projects initiated to address ATAT issues within EO will be

designated as ATAT projects, and will be given the highest priority.

D. Compliance, Educational, or Information Gathering Projects

Compliance initiative projects may be included in the work plan each year.
These projects may be conducted locally or nationally, or through the EO
Contact Area (EOCA), and will serve to effectively target our examination
program. Educational projects may also be initiated.

1. Definition

A compliance project is designed to address an identified issue,

which may or may not be associated with a particular market
segment. This type of project is intended to correct a known area
of noncompliance through examinations, compliance checks,
educational programs, and/or other activities that may not involve
the examination of books and records. These projects are
frequently the product of a strategy development team. Those that
involve examinations typically include returns screened for the .
presence of the targeted issue. Often, the targeted issue has been
identified through an earlier market segment study.

2. Strategy Development

A team will be formed to develop a strategy to address the issue, if

a method to address the issue is not readily apparent. The
appointed team leader (TL) will submit a request to the Functional
Director to solicit team members from Exam, R&A, CE&O, TEGE
Counsel, Campus staff or other EO personnel, as needed for the
identified issue. A CSDA project analyst will be assigned to work
with each team. Possible strategies may include:

Educational initiatives
Compliance examinations
Compliance checks
Internal training recommendations
Procedural improvements
Technical guidance to both the field and/or market
segment members, as well as
Other strategies unique to the issue in question
 Attachment 1
The team will gather information from all internal and external
sources for consideration in the development of the strategy. Each
team will consider seeking stakeholder input in the development of
strategies to address noncompliance. The level of stakeholder
involvement will vary depending upon the project. It is also
important to involve CE&O in the development of any strategies
that entail educational initiatives or outreach activities.

3. Project Design

Because a compliance, educational, or information gathering

project addresses a known or suspected area of noncompliance,
the nature of the issue and information available on the issue will
necessarily frame how the project is designed. Some issues may
be addressed best through an educational initiative while others
may require involve compliance checks or examinations. The issue
may be one that is directly identifiable in a review of the return.

Generally, RlCS will be used for all compliance projects that base
selection on return information or generic population criteria.
Compliance projects that rely on entity lists provided by outside
sources will use RlCS only for printing returns. Other identification
and selection methods/sources will be utilized when they are
available and appropriate. These outside sources may include
SBSE, W&l, Housing and Urban Development, the Federal
Election Commission, the Securities and Exchange Commission,
other federal, state and local agencies, and external stakeholders.
For example, if a high rate of noncompliance in gaming is detected
in a particular location. Organizations included in the project may
be identified via a list of gaming licensees obtained from the local
county.

E. Market Segment Studies (MSS)

The purpose of market segment studies is to determine a realistic profile

of the EO population. This profile will include a risk assessment of
noncompliance, identification of educational and outreach needs, and
assist in future compliance planning.

1. Definition

A market segment study is a project designed to gather information

about a particular segment of the exempt organizations community.
The information gathered through the study is used to build a
 Attachment 1
compliance profile of the market segment in question. Market
segment projects are typically used to determine a compliance
baseline and to develop recommendations to address any
identified areas of noncompliance. The development of
compliance baselines will enable the effectiveness of compliance
improvement strategies to be determined.

For example, a market segment study of social clubs might show

that compliance for filing Form 990-T on investment income is X%.
The study shows that the root cause of non-compliance is lack of
awareness, so an educational program is implemented to increase
awareness of filing requirements among social club officers. A
subsequent study shows a Y% increase in compliance in this issue,
allowing us to gauge the effectiveness of the educational program.

Two key features characterize market segment projects. The

organizations selected for the study are chosen using statistical
sampling techniques. The success of the project is measured by
completion of the project and by arriving at an accurate
determination of the compliance level, rather than traditional audit
result measurements.

Completed market segment studies become part of the EO Market

Segment Profiles, a compendium of the market segments in the
EO community. Each segment profile consists of a description of
the types of organizations that comprise the segment, population
size, relevant compliance elements, and a list of interested
stakeholders. Additional information, such as compliance levels,
issues and trends, and demographic data, is added as it becomes
available. . As the market segment profiles are updated, the
revisions will be periodically posted on the EO Website. Redacted
summaries of the Market Segment Study reports are posted the
EO Website upon approval. See Exhibit F for a template of the
summary report.

2. Project Design

CSDA will generate market segment projects when a need is

indicated by the compliance environment.

These projects normally consist of examinations of a random

sample of organizations from within the identified market segment.
The projects generally include examinations of filed returns, as well
as examinations of non filers and small organizations not required
 Attachment 1
to file returns. Market segment projects can also include
compliance checks

A statistical sampling plan will be developed and documented. The

formula used to determine sample size must follow known
statistical theory. At minimum the documented sampling plan must
contain the sample size, the population to be sampled, the method
of selection, and the use of stratification or sub-samples if any. No
specific sampling software need be used, as the sampling
parameters will differ from project to project. However, the name of
the software and the functions used must also be documented in
the sampling plan. TEGE Research and Analysis staff may be
consulted for assistance with statistical sampling.

Market segment projects have historically required 21-33 months:

6-12 months for the development phase,
12-18 months to examine cases or implement
compliance/educational initiatives, and
3 months for analysis and report writing.

Ill. Other Terms and Definitions

A. Functional Director

The Functional Directors are the Director, EO Exams, the Director, R&A,
and the Director, CE&O. Any reference to a Functional Director refers to
the Director with oversight over the program, project or employees under
discussion.

B. Executive Steering Committee (ESC)

The ESC is the oversight body for all EO project activities. Members are
the Director, EO, and the Functional Directors. The ESC meets at least
quarterly to review items submitted for approval, such as project
proposals, strategies, checksheets, action plans, and final reports.

C. Compliance Strategy and Data Analysis (CSDA)

CSDA provides research support to the ESC and to the teams. CSDA will
use EO projects to identify levels of noncompliance and compliance
issues and to develop strategies to address these concerns. These
strategies may involve additional enforcement efforts, educational
initiatives, and technical guidance to both the field and external
stakeholders. Part of CSDA is the Data Analysis Unit (DAU), which
conducts research for use in developing the EO Strategic Plan and the
 Attachment 1
EO Exam workplan. A CSDA analyst is a member of each project team,
and provides project-specific research and procedural guidance.

D. Exempt Organization Contact Area (EOCA)

The EOCA conducts a variety of correspondence and telephone contacts

to increase compliance and support the EO Exam program in a cost
effective manner by effectively leveraging limited EO resources. . The
EOCA conducts educational correspondence initiatives, compliance
checks, and correspondence audits, usually on behalf of a project team.
A part of the EOCA is the Review of Operations (ROO), which contacts
organizations during the foundation follow-up period (the first three years
of operation) to ascertain compliance concerns and affect early
corrections where needed. The ROO activities may also be carried out in
support of a project team.

E. Strategic Planning Working Group (SPWG)

The SPWG is responsible for creating the Strategic Plan for each fiscal
year. As part of the process, their activities include requesting and
reviewing input from a variety of sources, analyzing monitoring reports,
determining projects to be initiated or continued, and making
recommendations to the ESC on the scope and direction of the EO work
plan. Members of the team are selected by the ESC.

IV. General Procedures

A. Suggesting a Project

Suggestions for projects may come from various sources. Within EO,
they may be initiated by EO Examinations (Exam), EO Rulings and
Agreements (R&A), EO Customer Education and Outreach (CE&O), or
the Director, EO. Projects may involve collaborative efforts among the EO
functions and TEIGE Counsel.

All employees are highly encouraged to be alert to potential

noncompliance and to submit ideas for potential projects. Employees
should submit ideas for projects through the TIPS submission process.
TIPS are submitted electronically through the EO Home Page website.
See TIPS Procedures. TIPS submitted through the system will be
forwarded to CSDA.

Project suggestions may come from a variety of external sources as well.

For example, they may form the EO portion of a cross-functional project
initiated by one of the other business operating divisions, or they may
 Attachment 1
come from the SBSE Lead Development Center, Criminal Investigations,
or any other external organization. Suggestions from external sources
may come through the Director, EO, the Functional Directors, or EO Exam
Classification. Recipients may submit the suggestion as a TIP through
the EO Home Page website, or they may forward the suggestion directly
to CSDA.

All projects, regardless of the source, are carried out under the auspices
of the Director, Exempt Organizations.

B. CSDA Responsibilities

TIPS analysis
TIPS submitted through the EO Home Page will be collected at least once
a month by the CSDA TIPS analyst following the CSDA TIPS Processing
Procedures.. To ensure full TIPS documentation, tracking and monitoring,
the TIPS analyst will complete a TIPS form through the EO home page for
suggestions received directly from the Director, EO, other members of the
ESC, or from outside TEGE. Once the TIPS are entered into the TIPS
database, the TIPS analyst will screen for TIPS having to do with EO
technical issues. Selected TIPSwill go to TIPS Triage Committee made
up of the CSDA Manager and project analysts. The TIPS Triage
Committee will meet monthly. The CSDA Manager will assign each TIP to
a project analyst. The project analyst will contact the TIP submitter to
discuss the issue and secure any additional information available from the
submitter. The project analyst will also contact the Manager EPP, and the
Manager, EOCA to determine whether there are projects related to the
issue in development or in process in the field, the EOCUs or in the ROO.
The project analyst will complete preliminary research. Research
assistance may be requested through the Manager, DAU, as needed. The
CSDA project analyst will prepare a feasibility report which will include the
following items:

1. A detailed description of the issue

2. Research findings - Size of the population, number of entities at risk,
estimated size of potential adjustments, magnitude of trends, etc.
3. Impact of the issue -severity of the non-compliance (does it lead to
revocation?)
4. Impact on resources
5. Recommendations - These will address:
Whether a project should be initiated
 Attachment 1
What type of project best addresses the issue (e.g., field
exams, EOCU compliance checks, ROO contacts, etc.)
Whether a team approach is recommended
Whether alternative treatments are advised if a project is not
recommended

A fact-based justification must be given for any project or study under

consideration. The rationale for pursuing a particular project must be
properly documented so internal and external stakeholders, including
those with oversight responsibility, have an understanding of our process.

The feasibility report will be prepared within 60 days of assignment to the

CSDA project analyst. The report will be presented to the TIPS Triage
Committee at the next monthly meeting. The TIPS submitter may be
asked to participate in the monthly meeting when the TIP is presented to
the Triage Committee. The TIPS Triage Committee will review each
report and make a joint recommendation to the Manager, CSDA for
approval. TIPS approved for development and/or implementation as a
project will be cataloged in the EO Project Library database, and will be
submitted to the SPWG during the yearly Strategic Planning Process.
Proposed EO projects that are not accepted will also be catalogued with
an explanation for the rejection

In general, the TIPS process will follow the procedures outlined above.
However, in some instances issues may be identified that require urgent
action. These may be implemented immediately at the discretion of the
Director, EO, without being held for consideration in the Strategic
Planning Process. Fast tracking procedures will apply to urgent issues.

Fast tracking
An urgent issue may be identified for fast tracking by the Director, EO, the
ESC, or the TIPS Triage Committee. If an issue or TIP is identified for fast
tracking by the ESC or the Director, EO, the Manager, CSDA will assign a
project analyst to document all available information for inclusion in the
EO Project Library database. If a TIP or an urgent issue is selected for
fast tracking by the Triage Committee, the Manager, CSDA, will forward
an abbreviated feasibility report directly to the ESC for immediate
consideration.

C. Strategic Planning Process

Each year the ESC will initiate the Strategic Planning Process for the
subsequent fiscal year. The process begins with the initial meeting of the
ESC during the second week in September, preceding the planning year.
 Attachment 1
The Strategic Planning Process then proceeds through the following
steps:

1. The ESC will review and set target dates within 30 days of the
initial meeting.
2. The Strategic Planning Working Group (SPWG) will hold its Initial
meeting within the first two weeks of October. At that time, the SPWG
and DAU will analyze the reports prepared by DAU and EPP during
the previous fiscal year. The SPWG will advise DAU and EPP on any
modifications needed to the scope, format, direction of research, etc.
The DAU will begin research and preparation of reports for use in the
upcoming planning year. A first draft of the reports package will be
due to the SPWG within 30 days of the initial meeting.

During the initial meeting, the SPWG will also request TIPS
recommendations from the Manager, CSDA. TIPS recommendations
will be provided to the SPWG within 30 days of the request.

3. The SPWG will request input from the following entities no later
than October 31 of the planning year:
Project team leaders will provide estimates of project activities
planned for the coming fiscal year
ROO will provide information on its project activities planned for
the coming fiscal year and trends identified by the ROO
Financial Investigations Unit (FIU) will provide information on
identified trends and promoters
R&A will furnish information on issues and trends identified
through the ruling process.
TEGE and EO ATAT Committees will be asked to provide
information on issues, trends, and promoters they have
identified
Touch and Go (TAG) units will provide information on trends,
issues and promoters they have identified.
TEGE Call Center will provide information regarding trends they
have identified.
Classification will provide information on trends identified
through referrals.

Input will be due during the first week in December of the planning year.

4. By October 31, the SPWG will forward a request for input through
the Director, EO, to the Advisory Committee for TEGE (ACT). ACT will
be asked to provide descriptions of issues or trends seen in the EO
community. ACT input will be due during the second week in January.
 Attachment I
5. Within one week of submission by the DAU, the SPWG will provide
feedback, proposing any needed revisions to the draft reports
package.
6. By December 31, the ESC will hold a meeting to review the
progress of the planning process. The SPWG will begin analysis of
input from all sources as soon as it is received. The analysis should
be completed no later than January 31. Within one week, the SPWG
will forward its workplan recommendations to the ESC.
7. The ESC will then hold its final planning meeting to review the
SPWG recommendations. The review should be completed by
February 28.
8. During the first week in March, the ESC will forward the final
recommendations for the workplan to Exam Programs and Review
(EPR) for preparation of Form 5440.

If the ESC approves a project, they will determine preliminary work

needed and resource allocations. The Areas may assist with these tasks.

D. Project Teams

Most approved EO projects will be developed and implemented by a

team. Teams may consist of representatives from Exam, R&A, CE&O,
TE/GE Counsel, and other divisions/segments as appropriate. Various
team members will be responsible for securing data, preparing monitoring
reports, collecting data, analyzing data, and preparing reports of findings
and recommendations.

For Exam projects, a member of the Compliance Strategies and Data

Analysis (CSDA) staff will serve as a project analyst for each team. In
addition, one member, usually a manager from Exam or a CSDA project
analyst will serve as the Team Leader (TL). Detailed team procedures
can be found in Part 2.

E. Approval Process to Charter a Team

Depending on the nature of the recommendation, it may come fully

developed or it may need further development by a team. The ESC will
make the following determinations:

Whether a project is ready for direct implementation

Whether to charter a team to develop the project
When a team should be chartered or a project directly
implemented
 Attachment 1
Within 30 days of approval for project development, the Functional
Director will submit the name of the nominated TL. The ESC will then
select the TL. The TL will discuss the project with hislher manager, the
submitter of the project proposal, the Functional Director and others for
guidance on the concept of the project. For Exam, the Exam Programs
and Review (EPR) managers may also participate in the initial concept
discussion.

The ESC will determine the functional make-up of the team. The
Functional Director is responsible for soliciting EO team members. The
ESC will determine if members will be needed from outside EO. The TL
will draft a memorandum for the signature of the Director, EO, soliciting
members from outside EO within TEGE, or from outside TEGE as
indicated by the ESC. The TL will forward the memorandum through the
chain of command. Once the team is formed, it will prepare a preliminary
action plan, perform preliminary research, and prepare a project proposal
form detailing their strategy for conducting the project. An approved
project proposal is required for all projects and approved initiatives.

The ESC must approve the project proposal when more than one function
is impacted. A conference call to discuss the proposal will be scheduled
with the Functional Director and the team prior to the meeting with the
ESC. Other second level managers may be asked to participate in the
conference call as appropriate. For example, if the project involves EO
Exam, the call will be scheduled with the Director, EO Exam, the team
and the EPR managers. Prior to the TL scheduling a conference call with
the ESC, the project proposal should be sent to all Functional Directors for
review. Once the ESC approves the proposal, the project action plan will
be updated for the implementation phase.

Part 2 - EO Project Team Procedures

I. Introduction

The purpose of an Exempt Organization Project Team is to oversee an approved

Exempt Organization Project. A project may encompass ATAT issues, critical
initiatives, market segment studies, educational initiatives, and information
gathering. An EO Project Team may also be part of a larger, cross-functional IMT.
The key activities of each team are development and planning, implementation,
assistance and monitoring, analysis and report writing, and follow-up.

The composition of the team will depend on the type of project and expertise
needed. A Functional Director will nominate the TL and will also be responsible for
soliciting members from other functions. The need for a member of Compliance
Strategies and Data Analysis (CSDA) to serve as a team member will be
 Attachment 1
determined on a project-by-project basis. Suggested members may include
Examinations (Exam), Rulings and Agreements (R&A), Customer Education &
Outreach (CE&O), and TEIGE Counsel. An Exam reviewer will be assigned to each
team as a resource person. Additional members or ad hoc members may be
added as needed.

II. Team Member Responsibilities

This section describes the responsibilities of the various team members,

recognizing that each member has a responsibility to provide input, ideas, and
expertise; conduct research; establish contacts; secure and analyze data;
recommend strategies to address noncompliance; prepare written reports; and
serve as liaison to their Functional Directors. All team members are responsible for
properly accounting for their time on projects so that compliance activity can be
effectively monitored and planned.

A. Team Leader

The TL is the official team champion and liaison to his or her Functional Director,
the ESC, and the Director, EO. The team leader:
1 Makes appropriate decisions on team issues; elevates to Functional
Director for decision and coordination of all major strategy or legal issues.
2. Responsible for securing necessary approval at key steps in the project
process.
3. ~esponsiblefor ensuring all coordination and approval is received for
training, budget, NTEU issues etc., and discussed with Functional
Director.
4. Coordinates all major actions on individual cases, i.e. settlements,
concession etc. to ensure all appropriate processes and actions are
taken.
5. Responsible for elevating all barriers to moving project towards
completion.
6. Responsible for ensuring appropriate coordination among different offices
on the team as well as timely coordination with other IRS divisions.
7. If the project is an IMT, serves as the EO liaison to the IMT team.
8. Appoints an alternate team leader to serve as back-up to the TL
9. Assigns duties and responsibilities to team members and ensures they
are done timely and appropriately.
10. Plans and leads meetings, via teleconference when possible.
11. Ensures minutes are prepared and shared in monthly briefings.
12. Ensures an action plan is prepared by the second meeting and that it is
timely updated.
13. Ensures all reports and briefings are timely met.
 Attachment I
14.Assists in conducting training via CENTRA or other means for
examinations or compliance checks.
15. Coordinates the team's activities, monitors applicable timeframes, and
oversees the progress of project development and implementation.
16. Maintains on-going communication as needed with EOCA, EO
Determinations, TEIGE Customer Account Services (CAS) andlor the field
during any examination or compliance check phase.
17. Makes recommendations to terminate a project, for example, if
noncompliance has been addressed, results don't justify time spent,
resources are no longer available, or other circumstances indicate that the
project is no longer viable.
18. Keeps taxpayer data secure as required under IRM 1.16.13-15.
19. Ensures the maintenance of a historical binder with all required
information, including project proposals, RlCS queries, sampling data,
correspondence and documentation of all other project-related
communication, checksheets, monitoring reports, etc.
20. Works with the team to prepare and finalize the project final report and
recommendations
21. Contacts Research and Analysis, or appoints designee to make the
contact, to ensure that the team's methodology, analysis of data and final
report are statistically valid and accurate.
22. Provides feedback quarterly on the performance and contributions of
team member to his or her respective manager.

B. Other Team Member (E.g., R&A member, Exam member, other BOD
member, etc.)

A team member will be designated by the Functional Directors of each of the

supporting functions participating in the project. The team member will act as a
liaison to his or her Functional Director. This team member:

1. Is responsible for providing technical input during the planning phase of

the project.
2. Serves as technical resource to examiners during the implementation
phase of a project.
3. Carries out other team member duties.
4. Is responsible for briefing his or her Functional Director.
5. Works with the team to prepare and finalize the project final report and
recommendations.

C. CSDA, Project Analyst Member

One analyst in CSDA will be assigned to each team. The analyst:

 Attachment 1
1. Serves as liaison to the Manager, CSDA.
2. Advises the team on procedural aspects of implementation, feasibility of
identifying the subject population, securing applicable returns, processing
timeframes, workplan issues, coordination with EPR functions, etc.
3. Secures needed information from various sources: RlCS (profiling data,
statistical samples, exam status reports, etc.), EOlC (project case
monitoring), ETS (time applied to open project cases), and other sources
of data available within CSDA.
4. Provides data and special assistance (for example, developing measures,
developing methodology, providing statistical or other analysis, etc,).
5. Assists the team in determining if the project may impact another
operating division.
6. Carries out other team member duties.
7. Provides the TL with monthly monitoring reports - Retrieves ETS reports
and prepares Status 10112-Closed Case Reports based on RlCS data.
8. Prepares the monthly status report when the TL is unavailable.
9. Monitors the quality of checksheets as they are submitted. Coordinates
with employees to secure corrections to checksheets when necessary.
Involves TL, group managers and area managers as appropriate. Ensures
checksheet information is consistent with AIMS data.
10. Works with the team to prepare and finalize the project final report and
recommendations.

D. TEIGE Counsel Member

A TEIGE Counsel member appointed to a team may often be an ad hoc

member.

1. Serves as liaison to Chief Counsel for TEIGE.

2. Provides advice on legal matters that may arise during the development of
the project. Such matters may include, but are not limited to: IRC 7611
procedures as they relate to the project; statute issues; language in
project-specific correspondence; current court cases that impact the
project issue in question; the scope of compliance checks; etc.

E. CE&O Member

A CE&O member serves as a liaison to the Director, CE&O.

1. Serves as a resource for potential educational initiatives or outreach
strategies.
2. Fonvards draft letters for Notice Clarity Review.
3. Carries out other team member duties.

Ill. Project Phases

 Attachment 1

A. Development Phase

The first phase, the development phase, begins the date the EO project is
assigned to the team. This phase ends when a strategy has been developed
and approved, and the project is ready for implementation (e.g., when
examination cases are sent to the field by Classification, compliance check
letters are mailed, the project is abandoned, etc.). For example, in a compliance
strategy, a team goal could be for Counsel to render an opinion on a specific
issue to determine if the team will either abandon the project or pursue a
compliance project. The end of the development phase of the strategy is the day
the response is received from Counsel and the decision is made to abandon the
project. Alternatively, if Counsel's opinion leads the team to propose a
compliance project involving examinations, the development phase ends the day
the exam cases are mailed by Classification.

The TL will coordinate with the Functional Directors to resolve any differences in
positions held by team members representing different functions

Exhibit D is a detailed flowchart of steps to take from the initiation of the EO

project through the ESC's approval of the proposed process. Definitions of these
steps follow:

I. Prepare Preliminary Action Plan

The preliminary action plan represents an outline of the project, and lists
all the generic steps to be taken to develop and implement the project.
Actions need not be carried out consecutively. Whenever possible,
actions should be scheduled to occur simultaneously. See Exhibit B, Page
3 for the action plan format. Exhibit C shows a sample action plan with
typical action items. It should include at a minimum a timeline reflecting
the start and completion dates for:

Pre-planning - gathering and analyzing information available,

determining the project approach, etc.
Define project population
Determine methodology - examination, compliance check,
educational, activity, information gathering, focus group, surveys, etc.
Obtaining approvals
Implement methodology
Analysis of information obtained
Report of findings and recommendations

The team must manage time effectively and stay within the timeline. The
preliminary action plan must be prepared by the team's second meeting.
 Attachment 1
The TL will update the action plan and submit it with the monthly status
report. The TL is ultimately responsible for ensuring the report is timely
and accurate. TLs will submit the monthly status report and action plan
with their monthly briefings through their chains of command. For
example, R&A TLs will submit the monthly status report and action plan to
the Director, R&A, through their immediate manager, with a copy to the
Director, Examinations. In Examinations, reports will be forwarded to EPP
through the Director, Examinations.

2. Gather lnformation -. The team will gather information from available

sources:
• Databases maintained within TE/GE and by other operating
divisions
• TEIGE management reports, historical information
a CSDA
• Statistics of Income (Sol), Research and Analysis
• External publications and trade journals
• Other federal, state and local agencies
• Conferences and seminars on related EO topics
• Information available on the Internet
• Advisory groups and oversight groups
• External stakeholders

3. Consider Outside Stakeholder Input

External stakeholder involvement is an important consideration in the

development of any project. Each team will consider seeking outside
stakeholder input in the development of strategies to address their project.
The level of stakeholder involvement will vary with each project. The ESC
can assist teams in this area. External stakeholders may include other
IRS BODS;federal, state and local agencies; practitioners; tax exempt
organizations; and the public. Stakeholder input from within EO will be
gathered by the applicable team member acting as liaison with hislher
respective Functional Director. The TL will request stakeholder input from
EP or GE as needed by memorandum through the Director, EO. The EO
Implementing Guidelines, identifying the planned projects, will be posted
annually on the EO website inviting external stakeholders to submit their
comments. The TL will coordinate with the office of the Director, EO, to
secure input from stakeholder groups outside the IRS.

4. Determine the Size, Scope and Methodology of the Project

Creativity should be used in approaching each project based on its

merits. Each team should utilize an individual approach that addresses
their specific project needs. This will vary as to the type of project:
19
 Compliance examinations
o Field
o Correspondence
EOCA compliance checks - Compliance check projects involve a
range of strategies including the issuance of information notices or
other educational material on a given issue; issuance of targeted
compliance notices to noncompliant organizations; associated
follow up contacts; and future correspondence examinations.
ROO contacts
Educational initiatives
Development of pilot training material
Test of procedural improvements
Drafting recommended technical guidance to both the field and the
public

Data gathering methods must be clearly spelled out in the project

proposal.

5. Communication Plan

The project proposal will contain a plan for communication. The team
should consult with the Director, CE&O to develop the communication
plan for the project and to determine timeframes for development. The
communication plan will include: who needs to know about the initiative,
what message needs to be conveyed, and how.
Audience - Internal, EO, TEGE, IRS Leadership, other IRS
employees; external, public, media, Congress, practitioners,
stakeholders, state and federal agencies
Message - What is the specific message to be conveyed (for
example, we are contacting over 200 organizations regarding their
compensation practices).
Communication Vehicles - Press releases, fact sheets, talking
points, revenue rulings, publications, mailings, IRS.gov postings,
lntranet postings, TEGE Times article, speeches, interviews, press
briefings.

6. Product Preparation

The team is responsible for preparing any unique products used in the
project. A wide range of products may be used, including products for use
by field personnel, R&A specialists, Campus employees, etc. The team
must prepare all documents to be used, aside from standardized products
already in use. For example, if EOCA assistance is requested, the team
will need to draft all the following products:
 Attachment 1
A message for Customer Account Services (CAS) that explains the
purpose of the project and provides a script that the telephone
assistors will use to answer any calls received on the toll-free line
Specific procedures for administering the project - for example, for
scripts for telephone compliance checks, a checksheet (if desired)
for the EOCA Revenue Agentsrrax Compliance Officersrrax
Examiners to complete and return to the team, specific IDRS
commands to be utilized, etc.
A flowchart that described the steps to be taken in the project
Letters to be mailed to taxpayers (approved through Notice Clarity)
A training package to be utilized to train EOCA personnel assigned
to work the project
Directions regarding data (taxpayers) to be selected, or a
spreadsheet of contacts designed by the team

7. Determine Resource Needs

When planning the methodology to be used, the team will prepare an

estimate of the resources needed for implementation of the project. The
team will then consult with the manager of the functional program that will
be implementing the project, to determine that necessary resources will
be available. For example, the team will consult with the Manager, EOCA
regarding resources that may be available for a proposed EOCA project.

8. Requests for Assistance from Other Divisions

In some situations, assistance from other operating divisions may be

needed. If technical assistance is needed (from an LMSB subject matter
expert, for example), the TL will make the request via memorandum
through the Functional Director to the Director, EO. Consideration should
be given to whether the request will require detail-in staffing. The
memorandum will describe the type of expertise or assistance requested,
the approximate length of any detail-in and the estimated number of hours
needed.

9. Run RlCS Queries for Analysis

The CSDA member will run any needed RlCS queries and secure data for
the TL to share with the team. All team members are responsible for
ensuring that data is given high security treatment as required under IRM
1.16.13-15 and kept from any unauthorized disclosure. See IRC 6103.
When the project is finished, the documents will be properly disposed of
as provided in IRM 1.15.3.
 Attachment I
The team may determine through their analysis that the project should
include statistical sampling of the entire population. In a market segment
project, the information learned through examinations will be true for the
entire subject population if the sample is done correctly. Sampling
software must be used to identify the returns for audit or study. The level
of confidence in the results is dictated by the size of the sample,
regardless of the size of the population. Smaller samples decrease the
confidence level and/or increase the margin of error. Research & Analysis
should be consulted regarding the sample selections and the computation
of applicable margins of error. Historically, returns selected from the RlCS
system based on EOMF data have experienced an error rate in selection
of approximately 24-28%.

The population from which the sample is selected will determine how far
the conclusions can be applied. If the sample is drawn from returns filed
in one State or Area, the results will be true only for that State or Area,
and cannot be applied nationwide. A number of small, local samples will
create a patchwork of conclusions that will be difficult to apply broadly,
and may cause a duplication of efforts. To be the most cost-effective,
samples should be taken from the largest possible population, and should
generally be national is scope.

The team may also determine that due to the nature of a compliance
initiative, for example, a selected or stratified sample may be more
appropriate. For example, selection of the top 20% of entities with assets
and high compensation levels could be appropriate. Another project may
have three different statistically valid samples, one for filers, one for non
filers, and a third for small organizations with no filing requirements. The
project proposal must include a discussion of the methodology for the
samples selected.

These examples are informational only. TEGE Research and Analysis

will be consulted in all projects for assistance to draw a random sample;
determine an appropriate sample size; analyze results; and ensure
statistical findings are presented in a clear, concise manner at the
completion of the project.

10. Submit Customized Project Correspondence Letters for Notice Clarity

Review

If a team prepares customized letters or notices for taxpayers, they will

first submit the letters to the Functional Director or designee for technical
review. Exam Mandatory Review is the designee for EO Exam. The TL
will then forward the draft letter to CE&O for Notice Clarity review.
 Attachment 1
Correspondence should be submitted to CE&O no less than six weeks
prior to planned use.

11. Update Action Plan

The action plan will be updated to list all of the steps to be taken to develop
and implement the project. This action plan will be submitted to the
Director, Exam, prior to project implementation. It should include at least
the following items:
A projected start date for each phase of the project
(development, implementation, analysis)
A projected completion date for each phase of the project
A short narrative describing the current phase
A short description of each necessary action, the person
responsible and the expected completion date for each action
A timeline of the project from startup to final report presentation.

12. Prepare Project Proposal and Brief Functional Director

All projects are required to secure an approved project proposal. For

Examinations projects, the CSDA member, along with the TL and the rest
of the team, will prepare the project proposal. (See Exhibit A.) The TL
will contact the Director, Exam's secretary to schedule a conference call
with the Director, Exam and the rest of the team, and will email the project
proposal and the preliminary action plan to the Director, Exam for review
prior to the call. Appropriate second level managers, such as the CSDA
Manager, the EOCA and EPR managers, should also be invited to the
call.

13. Brief Executive Steering Committee

The TL will schedule a conference call with the ESC to discuss the project
proposal. Prior to the conference call, the TL will email the project
proposal and preliminary action plan to all ESC members. The team
members will summarize the proposal, address the ESC comments,
questions, and discuss any recommended revisions. The Director(s) will
either orally approve the Project Proposal or advise changes needed for
subsequent approval.

14. Order Returns from Classification

Once a Project Proposal is approved by the ESC, processing instructions

are complete, and the checksheet(s) has been forwarded for review, the
TL should notify the Manager, EPP and Manager, Classification that the
team is ready to order returns. The TL will coordinate with the Manager,
 Attachment 1
Classification, to determine the source of the returns (Guidestar, RICS,
original returns from the Campus) and the timeframes for delivery.
Processing time must be taken into account when ordering returns, to
ensure that returns can be assigned within planned timeframes. The
processing time is dependent on the type of returns, the source of the
returns, and the number of returns ordered for the project. Larger orders
will increase the timeframe proportionally. If the returns are held by
Statistics of Income (Sol), an additional 10 days will be needed to the
processing time. The TL will send a request to Classification to order
project returns using the RICS Request Form. The request must include
the exact selection criteria, the tax year of the returns to be selected, the
number of returns, and whether the selection will be a random sample. If
the CSDA analyst has developed a RICS query containing the sample
criteria, the TL will electronically transmit the RICS query with the RICS
request form. Classification will retain an electronic copy of all project-
related RICS queries run by EPR.

15. Approval of Project Proposal

The TL will route the project proposal through the CSDA Manager, to
secure the signatures of the Manager, EPR, and the Functional Directors.
The CSDA Manager will be responsible for any follow up with the
Functional Directors for the signed project proposal.

16. Develop Project Processing Procedures and Written Instructions

Any special procedures or instructions needed will be prepared by the

team and coordinated with Exam review and ESS for concurrence.
Compliance checks will require special instructions as they are not in the
IRM. If a checksheet is used to gather data for a market segment study
project or a compliance project, refer to Exhibit H for Project Case Closing
Procedures. The team should also consider in the project processing
procedures a reminder to the field groups to forward copies of any closed
project checksheets. This will avoid the necessity of reordering a closed
case and sending it back to an examiner to reconstruct a checksheet.

17. Address Specialized Training Needs

The team will determine if specialized training is needed for project

participants. If needed, the team will either develop the training, request
other resources to assist in development, and notify the Functional
Directors of potential resource needs and costs. The Manager, Exempt
Organization Compliance Unit, (EOCA) will also be contacted if EOCA
employees need to be included in specialized training.
 Attachment 1

18. Determine Data Collection Method

The team will identify the type of data to be analyzed and determine how
study data will be collected. Although most of Exam's market segment
projects are conducted as examinations using checksheets to collect data,
this is not a requirement. The team will consider methods for collecting
compliance and demographic data, based on available data sources,
resource limitations and external stakeholder input.

For market segment studies, the team should collect as much information
as necessary to provide a complete profile of the market segment

Note: Checksheets are not required for all projects. Teams majl use any
reasonable data collection method approved by the ESC. Data collection
methods must be clearly spelled out in the project proposal, and must be
in electronic form. Input and accumulation of collected data must be
automated. For example, checksheet data may be transmitted to the
analyst for direct download to the data analysis tool (Excel spreadsheet,
Access database, etc.), or it may be downloaded directly to a file on a
specified shared server.

19. Preparation of Checksheet Questions

The team is responsible for development of checksheet questions for the

project. Pro forma questions are available on EO Exam's shared public
folder. However, the team should carefully design the checksheet to
address any unique issues, compliance levels, as well as the traditional
organizational and operational tests. The CSDA member will coordinate
with DAU and Research and Analysis staff to obtain guidance on the
statistical development of questions. The checksheet is required to be in
an electronic format, whether it is an MSWord document, fillable PDF
document, spreadsheet, database, or UFIL, but should be compatible with
resources available in the field. Once the team has completed their draft
checksheet, the TL will forward the draft to the Manager, Technical
Guidance and Quality Assurance, R&A and to the Manager, Exam
Mandatory Review for approval, with copies to the Manager, CSDA.
These checksheets should generally be approved before returns are sent
to the field. The TL will be responsible for any needed follow up for
approval of checksheets. The TL will meet with the reviewers together via
conference call to resolve any differences in reviewer recommendations.
Unresolved issues will be elevated to the Directors, EO Exam and R&A.

20. Classification Orders Returns

 Attachment 1
Classification establishes project returns on AlMS and EOIC.

Once the project returns are ordered, Classification will send the listing of
taxpayers, by grade and by location, to the TL and to both the TEP
Program Manager and TEP Case Identification Specialist (CIS) to
determine if any identified cases are currently in the TEP universe. If any
returns are TEP, the TL will coordinate the assignment of any TEP
examinations through the TEP CIS.

21. Determine Which Groups and Examiners Will Receive Project Cases

For examinations, the TL will contact the Area Managers and EOCA to
request examiners names and groups to work the examinations and/or
compliance checks. A listing of taxpayers, by grade and by location, will
be included with the request. The Manager, EPP will coordinate with the
Area Managers based on workload priorities and accomplishments.
Consider limiting the number of agents assigned to a particular project in
order to develop expertise in a particular area.

22. Assign Returns

The TL will notify Classification of the designated groups and examiners

and if returns should be assigned as received or until all returns are
available. Assignment of the returns is based on work plan priorities.
Manager, Classification, in coordination with the Manager, EPP, will notify
the TL the approximate date the returns will be shipped to the groups.

Classification will update the AlMS accounts and EO records and create
return case files to send to the designated groups. A copy of the approved
checksheet will be in each file unless the team sends an electronic file to
each examiner involved in the project.

23. Project Returns Surveyed Before Assignment or Surveyed After

Assignment

The CSDA team member must approve all non-examined closures of

returns selected for studies or projects.

B. Implementation Phase

This phase is defined as the date proposed project activities begin. (For
example, the date cases are sent to the field; the date of initial taxpayer contact
letter; the date initial action is taken that requires a response directly related to
the team's goal, etc.) This phase ends when the project's core activities are
 Attachment 1
concluded. (For example, the conclusion of data collection, the end of the exam
period, the due date of a response, etc.)

1. Schedule Opening Conference Call with Frontline Employees

(Specialists, Agents, Tax Examiners, etc.)

Once the approval process is complete, the TL will contact the employees
who are working project cases or collecting data for a preliminary
discussion about the project purpose and priority as soon as they are
assigned to the project. The TL will be notified by Classification, EOCA,
R&A, etc. when cases, letters or other project products are shipped to the
frontline employees. The TL will then schedule a formal conference call
with the team and designated employees within 7 to 10 days after cases
or letters are shipped to the groups. The TL will introduce the team to the
employees and provide an overview of the study. Special processing
instructions and checksheet instructions will be provided, if applicable.
The R&A member will answer technical questions and address technical
matters. The CSDA member will discuss timeframes and processing
matters. The TEIGE Counsel member will address any matters applicable
to Counsel. It is strongly recommended that the employee's group
manager attend all conference calls to gain a better understanding of the
project.

2. Oversee Delivery of Any Specialized Training

The TL will ensure that specialized training is given by qualified individuals

(team members, ISPs, Corporate Education staff, experienced field
instructors, outside experts, etc.). This can be conducted as part of the
initial conference call. Exam Mandatory Review should always be
consulted and invited to attend. Training costs need to be identified and
approved as soon as possible in the planning process.

3. Maintain Contact with Employees

The team will maintain contact with frontline employees working the
project and their managers throughout the project. Periodic
teleconferences will be held to share information, assess progress,
identify emerging issues or problems, share examination techniques, etc.
to ensure consistency in examination approaches and issue resolutions.

4. Provide Back-up to Employees

The team will be available to the frontline employees to answer technical

and procedural questions. The team will refer employees to appropriate
specialists. The team is responsible for documenting all requests
 Attachment 1
submitted by agents, specialists, etc. for technical assistance or guidance
on issues stemming from study cases. The team will track each request
through resolution, and is accountable for ensuring that responses are
provided to the agents in a timely manner. The team is responsible for
providing full technical and procedural support for agents throughout the
course of the study.

5. Requests for Assistance from Other Divisions

If assistance is needed from another division (E.g., exam assistance from

LMSB non-specialist agents), Form 6229, Collateral Examination, should
be completed per IRM 4.75.23, and submitted the TL. Note: the form
does not cover situations other than collateral examinations. Specialists'
assistance should be requested under the Specialist Referral System.

6. Inventory Reports for Open and Closed Cases

For examination projects, the CSDA member will notify EPP monitoring
section when the examination phase has started. The CSDA member will
provide to the team monthly reports reflecting AIMS status for all study
cases, group number, and examination start and closed date. These will
be used to monitor the progress of the project as well as to monitor receipt
of the checksheets on closed cases. At the group level, managers must
also monitor project inventory and be involved in the development and
processing of the case, to ensure timely closure.

7. Collect Checksheets

Electronic checksheets will be e-mailed to the project analyst. A copy of

the email confirmation will be included in the case file as verification of
submission to the project analyst. Managers must account for all
checksheets for cases assigned to their groups, and must assure that
they are submitted timely. The CSDA analyst will monitor receipt of
checksheets to ensure that project timeframes are met ratably. The
analyst will follow up with group managers for missing checksheets and
incorrectly completed checksheets to ensure complete quality of the data
collected.

8. Input Checksheet Responses to Spreadsheet or Database and Begin

Analysis

The CSDA member will input the'data as received and will lead initial
analysis of the responses as received from the groups, with assistance
from the team. Preliminary results could potentially indicate a project
needed to be expanded, go in a different direction, or shut down. If
 Attachment 1
preliminary results indicate that the project is unproductive, the project
should be terminated. The applicable Review function should be called
on to validate findings before terminating a project. Market segment
projects must not close prematurely as that would invalidate the
study.

9. Monthly Monitoring Reports

The TL is responsible for preparing and submitting the monthly monitoring

reports, with the assistance of the CSDA member. Reports will cover all
activity, including determination work, examinations, EOCA actions, etc.
All TL's are responsible for sending a copy of their monthly status report
with their monthly briefing to their Functional Director through their
manager. A simultaneous copy will be submitted to the other Functional
Directors by the end of each calendar month. Minutes of any meetings
should also be included with the report. Exhibit B, Monthly Action
PlanlReport has been revised as a word document and includes key
dates to be completed. Monthly status reports will be forwarded by the
' Functional Director to a CSDA senior analyst for inclusion in the Director,
EO's monthly business performance report.

In monitoring the progress of a project, the ESC or the Director, EO, may
schedule oral briefings with the TL as deemed appropriate.

11. Historical Project Binder

As an organization, we receive many inquiries relative to IRS activity on

specific types of EO organizations. These inquiries come from Congress,
the press, external stakeholders, and TIGTA. It is extremely important
that all actions and decisions of the Teams be well documented. The TL is
responsible for ensuring maintenance of a historical binder for the project
by the CSDA analyst. The following sections are required to be
maintained and will be sent to CSDA when the project is completed:
Project Proposal - Original and amended
SQL-RICS - Original query describing the sample, generally a
market segment
Sample Listings - Examination cases or compliance checks
Project Log - Actions taken for the project, minutes of meetings,
action plans
Checksheets and instructions including cover sheets
Internal Correspondence - to agents, managers, memorandums
Monitoring Reports
Final Approved Executive Summary, Approved Final Report, and
Approved Communication Plan
 Attachment 1
Documentation of memoranda, e-mail, and other correspondence
or communication related to the project

C. Analysis Phase

The third phase is defined as the date examinations are expected to be

completed; the date subsequent returns are pulled to begin compliance analysis;
or the date the response to the requested action is completed.

1. Analyze Study Results

The team is responsible for analyzing results to identify trends and make
recommendations. This analysis may take considerable time. The team
will review and analyze all data received to identify trends and
recommend courses of action on items that need be addressed.

2. Write Draft Report

The CSDA member, the TL, and all other team members are responsible
for analyzing the results and preparing the report. An Executive Summary
is also required. A template for a report is attached as Exhibit F.

The report will generally be prepared within three months of the

conclusion of the project unless the Functional Director approves an
extension. The report should address the project's objectives; data
gathering methods; data analysis; limitations and deviations ;findings;
impact on resources; project critique (what worked, what didn't work); and
recommendations. It is important to include travel and staff days in the
Impact on Resources section. Any specific taxpayer information may be
included only in attachments to the report. Recommendations may call for
a range of activities such as: issuance of guidance, changes in the
application process, educational letters, re-examinations in future years,
follow-up studies to measure increases in compliance, proposed law
changes, additional training, etc., or they could recommend no actions if
issues were not found, etc. The team will coordinate with Research and
Analysis to ensure that the draft report presents findings, margins of error
and confidence levels that are statistically valid.

Once the first draft is written, the team should discuss their results and
recommendations with the Functional Director for the project, appropriate
second level managers, and possibly the ESC. The first draft will be
submitted up through the TEGE chain of commend for review and any
additional recommendations. It will then be submitted to CE&O for final
review.
 Attachment I
Once the report is prepared, the team will hold a conference call with
respective review managers to discuss the report. If changes are
necessary, the revised report will again be shared with the respective
managers who, after approval, will forward it through the proper channels.

3. Submit Final Report to ESC for Approval

The TL will submit the final report via email to the ESC. A conference call
should be scheduled to discuss with the ESC. The discussion should
address how to implement recommendations, the feasibility of
implementation and possible alternatives. Once all the approvals are
secured, the report will be forwarded to the Director, Exempt
Organizations for signature, together with a memorandum from the team
responding to the ESC's recommendations. The Director, EO, will provide
feedback indicating whether recommendations should be implemented
and the method for doing so. The report and the feedback will be routed
to the Functional Director for response. Within 30 days the Functional
Director will submit a response with a plan of action to address all
approved recommendations. Implementation of action items will begin
within 60 days of approval by the Director, EO.

4. Post Final Report on lnternet

If the Director, EO determines the final report or a redacted report should

be shared with the public, it will be routed through the Functional lnternet
Coordinator to CE&O for posting on the lnternet website. In general,
redacted summaries of Market Segment Study reports will be posted to
the EO website, with all comments from the public forwarded to the TL.
Law enforcement criteria and examination tolerances should not be
included in any report that is to be made public. Exhibit G contains a
template of the Market Segment Study Report Summary.

5. Update Market Segment Profile with Final Report Findings

Upon the completion of an Exam Market Segment Project, CSDA will

maintain and update the Market Segments Profile book.

6. Final Communication with Employees on Project Results

The team should meet with the employees who worked on the project via
teleconference or CENTRA session to share the final report and
recommendations. An article for the TEGE Times Newsletter should also
be submitted summarizing the initiative and thanking all employees for
their participation.
 Attachment I
Attachments:

Exhibit A - Exempt Organization ProjectIStudy Proposal

Exhibit B - EO Critical InitiativeIProject Monthly Status Report
Exhibit C - Action Plan
Exhibit D - Flowchart for Project Development Phase through Project
Implementation Phase
Exhibit E - Project Team Check List
Exhibit F - Final Report Template
Exhibit G - Final Report for Public Distribution Template
Exhibit H - Project Case Closing Procedures Memorandum
 I Exhibit A I
Attachment 2

Exempt Organization Project Proposal

Project Title:

Project Number:

Planned for Fiscal Year(s):

Contact person Phone:

Expected start date: Expected completion date:

This will be a: Critical Initiative Compliance Project

C]Market Segment Study Educational Initiative

This project addresses an ATAT issue Yes No

This is an Issue Management Team project Yes No
Team Leader Phone:
(if different than contact person)

1. Objective of the project:

II. Describe how this project meets TEGE Strategic Goals and the program goals of
the annual work plan for the applicable fiscal year(s):

Ill. Information available:

IV. Describe how the project will be conducted:

V. Is Exempt Organizations Compliance Area (EOCA) assistance requested 0,

or is
this project designed specifically for EOCA a?
Revised 1211812006 1
 If the answer to either question is yes, please see EO Project Guidelines and
Procedures, Part 2, Section Ill, A, 5

What assistance is required? q Case Building q Compliance Checks

q Educational letter q Other
VII. Resource Needs:

A. Staffing: Estimate number of staff days and grades of employee needed for project
activity

B. Training: Estimate length of training, number of participant, number of instructor, etc.

C. Estimated Cost: Estimate travel costs, printing costs, etc.

D. Other:

VIII. Describe how the objectives of the project will be measured:

Signature Page

Initiator Date

n~pproved
Manager, CSDA Date O N o t Approved

n~pproved
Manager, EO EP&R Date O N o t Approved

U~pproved
Director, Customer Education & Outreach Date O N o t Approved

n~pproved
Director, Rulings and Agreements Date U N o t Approved

O~pproved
Director, EO Examinations Date U N o t Approved

O~pproved
Director, EO Date O N o t Approved

Revised 1211812006
: 88836
 Attachment 3 Exhibit B

Exempt Organizations
Key Projects and Critical Initiatives
Month

Proiect Description Team Leader/Contact Maior Milestones Status Issues/Risks

Project Name John Smith Example: Example: Example:
Bnef description of project issue (202) 123-4567 All exams assigned and Total population of exam Technical issue is not
and how it will be conducted started. returns is 1000 resolved. May need
(e.g. compliance check letters).
Interim report completed = As of 2/15/06,600 of out formal guidance.
Press release issued 800 checksheets Need to look at good
End-game strategy approved accepted and bad practices
by Director, EO = Project Final Report due = Need to consider for
9130106 next year's workplan

.,
Q
8 -
I%)
W
-4
 I
-1 pasiAaN
.pa[oJd aql JOJ ale!~do~dde
se sway Jaqlo alalap Aew noA .ploq u! sway alalap lou oa .u~oqs
j ppv .sa6ueq:, papalo~d~ oSuoseaJ
Apea~leIOU J! palo~daqlol anb!un sway uo!pe Jaqlo ~ osau!l j sluawwo:, u! apnpul .app anp leu!6!~oaBueq3 IOU oa :aloN 43
qaM uo yoda~$sod 0
le~o~dde JOJ poda~J!wqng 64
p0daJ UeJp aJ!JM 8
AbaJeJjs awebpua dola~aa
8
.*
synsaJ azAleuy
aseqmep 01 slaaqsy3aq~~ndul
6u!u!e~)-laA!laa
s~61.u9 slua6e y y ~le=,
~ a3ua~ajuo3
slunlaJ u6!ssv
slua6e p l o s
suJnlaJ JapJo
qaM 01 laaqsy3ay3 pa~o~dde lsod
slaaqsy3ay~dola~aa
poqqalu uo!palloa ejep au!uuaJaa
spaau 6u!u!e~lssaJppy
suo!pnJlsu! 3 saJnpa30~ddolahaa
les0d0~dJOl le~o~dde aJnaag
3S3 w a
I ~ ~ S O pa[oJd
~ O J ~ a~eda~d
b!Je13 a3!loN 01 SJaUalUUqnS
sa!JanD S31H UnH
saog Jaqlo UOJJ a3ue~s!sselsanbay
ueld uo!jequnwwoa dola~aa
spaau aa~nosa~ au!wJaJaa
ABolopoyjaw 'adoas 'aqs au!wJajaa
~ndu!JaployayeJgapiqno Japisuo3
uo!JewJojulJaqJeg
uo!jelndod auyaa
ueld uo!pe fieu!UJ!laJd aJedaJd
-
sAelaa lo4 uo!~eueldxa s~ualuwo3 a~ea a ~ e aaria WaJI UO!JaV alq!suodsau
uo!~aldluo3 UOSJad
.p(oq u! aJe s J ~ ~ [Ileo OJJ ~uowuro~sayJu3
(podad snjejs /C/yjuofl ayj U! pun01 A / s ~ o ! Aue/d
~ J ~UO!j3B ayj a3elda~//!M s!~L)
ueld uo!VV A6aleJls/IDa!oJd 03 - 3 l!q!qx3
 Flowchart for Project Development and lmplementation
Exhibit D

Initial Project Development Process

through Project lmplementation

Recieve Project
Assignment
rDevelop strategy

Determine project
scope
functions?
Concept
Discussion with-
Team Leader's
Manager,

I
Functional
Director, Submitter Prepare products
& EPR Managers
Schedule meeting
with Executive
Steering
Committee (ESC)
Request team
Drafl project
members
proposal

Present to ESC (If

necessary)

2
Assemble Team Present proposal
to Functional
Director, CSDA

9
Manager& EPR

1 1
Manager
Establish Ground
iules N o - Approved?

Project
Proposal
Develop
Preliminary Action
Plan

Prepare final

L-
project propsal
and update action
plan
Assign
Responsibilities Modify proposal

Implement
Do necessary project
research and Forward to ESC
information through CSDA
gathering
 Attachment 6 Exhibit E

EO Project Check List

- Project is recommended (generally via the TIP process) to CSDA for

research and feasibility assessment.

- CSDA reviews and forwards to the Executive Steering Committee (ESC)

for consideration. If the ESC approves the project, it will be considered in
the Strategic Planning process, or forwarded for immediate
implementation via the Fast-tracking process. .

- Projects approved through the Strategic Planning process will appear in

the Implementing Guidelines.

- ESC selects a Team Leader (TL) for the project. The Functional Director
discusses the project's origination and expectations with the TL, their
manager, and any others the Director chooses to invite.

- ESC recommends to the Director the functions, segments, or divisions

that should provide team members. The Functional Director secures the
team members. Team members for outside EO are solicited through the
Director, EO.

- Team meets to:

discuss purpose of project,
prepare ground rules,
prepare preliminary action plan (due by second mtg.),
assign responsibilities.
Meetings should be held via conference call unless approved otherwise by
the Director.

Status Reports
TL submits monthly:
Status report on activities
Updated action plan
Status report on assistance requests
For Exam, EPP provides:
Status 10,12, and 80 or higher reports for each project to Area
Managers quarterly for cases in their area
Workplan accomplishment report showing time charged to each
project
CSDA provides:
Case listing status report for CSDA analyst to track checksheet
receipts and case status
 Attachment 6 Exhibit E

- Data gathering phase (RICS can assist for some of these)

research all available resources related to the project,
determine size, scope, and methodology,
determine which data collection method to use,
prepare a Project Proposal form

- Approval - the team should present their Project Proposal and Action
Plan as a group
discuss with TL's manager for approval;
schedule appointment to discuss with the project's Director -if project
involves only one function, this Director's approval is the only one
required;
if multiple functions are involved, the team members from the other
functions will submit copies of the Project Proposal and Action Plan to
their Directors for review prior to an ESC conference call;
schedule an appointment for the ESC call for several weeks in
advance at the same time as the Director's meeting is scheduled - it is
easier to cancel a meeting if adjustments are needed after the project
Director's discussion, than it is to schedule a last minute meeting with
the ESC;
when oral approval is given, the Directors will either sign the Project
Proposal as submitted, or ask the team to make agreed upon revisions
if revisions are requested, the revised Project Proposal need only be
resubmitted and signed by the project's Director.

Implementation
Update the action plan to include more definitive explanations,
assignments and deadlines and for the various steps approved by the
Director or ESC
Approved steps will be implemented to run the project
For examinations this would entail:
do RICS runs and IDRS research as necessary to pull
project cases,
immediately send the Area Managers the list of cases in
their area with their case grade and location so they can
select agents to be trained as specialists to work these
cases
manually classify copies of selected returns pulled by
Classification to cull out obvious erroneous selections
order returns - instruct Classification to either hold cases to
mail as a group, or mail as received to the identified agents
processing procedures and other instructions - need to be
prepared and either given to Classification to associate with
case or sent to examiners electronically. Variances in
closing procedures from approved process (Exhibit H) must
be developed in conjunction with ESSIESP
 Attachment 6 Exhibit E

train examiners as needed

maintain contact through regular meetings and provide
backupsupportas needed
Data Collection method(s)
If checksheets are involved:
Checksheets must be in electronic format
Check database for approved questions (if all selected from
here, no approval needed)
If new ones added, highlight to separate from database
questions and must be approved by Exam and R&A
Directors' representatives
If wish to solicit input from external stakeholders, may post
on web for 30 days. Submit to EO Functional Internet
coordinator for this purpose.
If solicit and receive comments, can revise checksheet
without reposting to web, but substantial changes must go
through Exam and R&A reps. Again

- Finalize Project
Analyze data received from study
Discuss results with Director and ESC as needed (In Exam include
Mgr., EPP)
Prepare draft report (Exhibit F) and discuss with first level reviewers
Prepare final report, should be routed to Directors through proper
channels
Conference call to discuss report with ESC
After report is accepted, post a redacted copy to the Web if posting is
approved by Director, EO
If a market segment project, update the profile
 Attachment 7 Exhibit F

FINAL REPORT

PROJECT #
XXX Final Report
Month Day, Year

Your report will be read by a range of interested parties, including internal stakeholders
such as IRS executives, field personnel and members of other operating functions; and
external stakeholders such as members of the market segment, related associations
and special interest groups, and the general public. Language used in the report must
be appropriate for &users. Avoid jargon and spell out acronyms if they are used. Be
honest and objective in reporting findings. A redacted copy will be prepared for public
release. Use a different color font for items that need to be redacted. Use small tables
to present numerical data within the text. Put large complex tables in the appendix.
Charts and graphs to illustrate important points will enhance your report.

The final report will ultimately reside in a Project Binder or Binders. The binders should
contain tabs with the following headings:

Project Proposal - lnsert original project proposal and any amendments

SQL-RICS - lnsert the original query that describes the sample, written as an
SQL query in a Word document. Also include the sampling query used by
Classification. The RlCS queries should be burned to a CD-ROM for the file.
Master List - lnsert a list of the organizations selected for the original sample.
Show exclusions and any additional sampling. The master list will include all
those organizations on which the project data and findings are based. The list
should include the name, EIN and tax period of the selected organizations.
Project Log - This will be similar to a Case Chronology Record and will contain a
record of the actions taken and decisions made relative to the project. lnclude
dates, actions and names of those taking the action. Also include in this tab:
minutes of meetings, action plans, and timelines.
Checksheets - lnclude a master copy of each checksheet used, plus instructions
and cover sheets. If checksheets are not used, include a copy of the data-
gathering tool used. The checksheets completed by the agents must be retained
as well. lnclude them behind this tab, or if voluminous, place them in a second
separate binder.
Internal correspondence -Include any memos, e-mails, etc. issued to agents,
group managers, area managers, etc.
Monitoring Reports - lnsert monthly or quarterly monitoring reports. In addition
to information identifying the cases, these will record AIMS status dates (10, 12,
90, etc), agent names and group numbers, and checksheet receipt.
Final Report

The following is an outline of the final report, with descriptions and comments for pertinent sections.
Additional subheadings may be used depending on the structure of the project and the data received.
 Attachment 7 Exhibit F

Introduction
Discuss the purpose of the project. lnclude objectives and timeframes (expected start
and end dates). Generally these will be as shown in the original project proposal. If
objectives or expected dates have been amended, provide both.

Population and Data Used:

Include description of the population subject to the project (original and amended if applicable). Provide
size of full population when sample was pulled, and document the number and type of exclusions taken
into account in adjusting the sample. If you were not able to collect data from some of your sample (E.g.,
from organizations that could not be located), provide data on the number of these "unknowns". Also
include other factors if significant (E.g., size of sub-populations if stratification was contemplated or
conducted - income levels, filerslnon-filers, etc.)

Data Gathering Method:

Describe method or mechanism used, (E.g., checksheets, audit reports, monthly briefings, AlMS data,
etc.) Actual checksheet questions or other source data should be attached as an appendix to the report. It
is critical that data be secured on each organization included in the adjusted sample in order to be able to
project finding over the full population.

Data Analysis Method:

Describe how findings were arrived at (E.g., data entry in spreadsheet, database, etc.) Resolve any
discrepancies between sources of data before the entering data into the databaselspreadsheet.
Document how the discrepancies were resolved in the appendix.

Limitations and Deviations:

Limitations are things that delayed or impeded the conduct of the project (E.g., lack of travel funds, short
statutes, change in priorities, lack of resources, etc.). Discuss deviations from the original proposal, such
as change in sample size, population description, timeframes, data gathering methods, etc.

Findinas
What did you find out? Put your findings in plain language. Findings for individual
questions or issues considered in the project will be based on the percentage of
organizations in the adjusted sample that meet the project criteria. Provide the margin
of error for each finding. If "unknowns"exist in the adjusted sample, findings must be
computed both assuming "unknowns"do not meet the criteria and again assuming
"unknownsJ'meetthe criteria. Findings may include data gathered from a range of
sources, such as checksheets, AlMS closing data, return information, audit reports, etc.

Do not discuss any speczfic organization, even if the name is not disclosed. Uniquefact patterns
may result in identzjkation of the organization and an unauthorized disclosure.

Relate thefactualfindings back to the whole population. Include the margins of errorfor each
 Attachment 7 Exhibit F

overallfindingpresented,'as margins will differ due to variations in the applicable percentage of

organizations and sample size. Include the margins in the appendix for each speczfic question or
issue considered.

Compliance Measurements:
I f the project is measuring compliance in a given population, provide compliance measurements
for each question or issue considered. Measurements for each issue are based on an average of
the ratings for all cases, excluding thosefor which the issue is not applicable. Show the overall
percen Cage

Demographic Profile:
Ifan objective of the project was to build a demographic profile, include any descriptive data
you collected on the population - Breakdowns of the types of organizations, organizational
structures, percentage verzfied active, etc. Also include any profiling data you pulled from RICS,
SOI, Guidestar or other sources. This may include average revenue and asset amounts, or
speccfic line items that relate to identiJied areas of non-compliance, as well as other relevant
information about the population

Exam Results:
If applicable to the project, include exam results or assessment amounts captured from
the Forms 5599 and/or extracted using RICS. Data extracted via RICS from Forms
990-T, 941, 940, etc., may be useful in determining true compliance levels.

Impact on resources:
Give staffdays from MIR tables. Also, include travel costs, mailing expenses and any other costs
involved in conducting the study, if available.

Compliance Rating: (Optional)

Ifdesired, the average ratings may be expressed in terms of a corresponding compliance rating
- Fully Compliant to Fully Non-compliant for the population:

91-100% = Fully Compliant

81-90% = Substantially Compliant
71-80% = Generally Compliant
61- 70% = Substantially Non-compliant
Under 6 1% = Fully Non-compliant
Conclusions
Summarize the findings in plain language and discuss what they mean. Were you able to measure
compliance? What does any non-compliance mean to the whole population? Were the areas of non-
compliance trivial or egregious? Was the non-compliance widespread or involving a relative few
 Attachment 7 Exhibit F

organizations? Was it limited to a specific subpopulation? Were the adjustments significant in term of
assessment amounts? Can you identify the non-compliant organizations from the return information?

I f the project was designed strictly to learn about some aspect of a population or to build a
profile, rather than to measure compliance, discuss the signzJicance of what was learned.

Project Critique:
Discuss lessons learned - what went wrong, what steps have been taken or should be
taken to correct the problem(s). How could the project process be improved?

Recommendations

Consider the scope of the problem and the cost of solution when forming
recommendations. You may not have a recommendation for each area. Discuss how
any non-compliance should be addressed (E.g., targeted examination project,
compliance checks, educational program, etc.)

Legal Recommendations: To Counsel and R&A, for changes generated by theprojectflndings to the
Code or Regs., new Rev. Rulings, or Rev. Procs.
Technical Recommendations: To the Field for compliance projects needed to
address problems cited in the project, and for case related improvements such as
training needs or guidance needs (E.g., on issue identification or development
techniques, etc.)
Procedural Recommendations: To the Field anaYor support stafJ Campuses, etc.

Educational Recommendations: To CEBO

Approved:

Director, Exempt Organizations Date

 Attachment 8

Exhibit G - Final Report for Public Distribution (Template)

XXX Project Final Report

Month Day, Year

This is a redacted version of the full final report. It should be prepared only if approval
is given by the Director, € 0 , to post it to the € 0 website for public viewing. Use plain
language and laymen's terms. Avoid IRS jargon. Use acronyms sparingly and always
spell them out for reference the first time they are used. Keep tables to a minimum.

Introduction

Explain the purpose of the study - the goals and objectives. Give the time period over
which the study was conducted.

Methodology

Population and Data Used:

Briefly describe the types of organizations in the population, and how you sampled
them. Provide size of full population when sample was pulled, and the number and type
of exclusions. Also include other factors if significant (E.g., size of sub-populations if
stratification was contemplated or conducted - income levels, filers/non-filers, etc.)

Data Gathering Method:

Briefly describe how you gathered your data (checksheet, exam results, info from
external source, etc.)

Data Analysis Method:

Briefly describe how you analyzed the data (Excel spreadsheet, Access database, SAS
database, etc.)

Limit findings to those that address the project objectives. Do not include background
material from the full report about how the project was conducted. Do not discuss
incidental findings that refer to internal IRS processes or practices. (See Final Report
Template for details on quantifying findings.)

Do not discuss any specific organization, even if the name is not disclosed. Unique fact
patterns may result in identification of the organization and an unauthorized disclosure.

Compliance Measurement:
If the project is measuring compliance in a given population, provide compliance
measurements for each question or issue considered. Provide only those findings that
relate directly to compliance. Measurements for each issue are based on an average of
the ratings for all cases, excluding those for which the issue is not applicable. Show the
overall percentage.
 Attachment 8

Demographic Profile:
If an objective of the project was to build a demographic profile, include any descriptive
data you collected on the population - Breakdowns of the types of organizations,
organizational structures, percentage verified active, etc. Also include any profiling data
you pulled from RICS, SO/, Guidestar or other sources. This may include average
revenue and asset amounts, or specific line items that relate to identified areas of non-
compliance, as well as other relevant information about the population.

Examination Results:
If applicable, provide the adjustment and assessment data that have a bearing on your
conclusions. Do not include information related to tax administration, such as AIMS
data, processes or procedures, codes, etc.

Compliance Rating: Optional)

If desired, the average ratings may be expressed in terms of a corresponding
compliance rating - Fully Compliant to Fully Non-compliant for the population:

9 1- 100% = Fully Compliant

8 1-90% = Substantially Compliant
71-80% = Generally Compliant
61-70% = Substantially Non-compliant
Under 6 1% = Fully Non-compliant

Customer Education and Outreach:

Provide information you collected on educational needs and outreach preferences.

Conclusions

Briefly summarize the overall findings and key issues observed in plain language and
discuss what they mean. Were you able to measure compliance? What does any non-
compliance mean to the whole population? Were the areas of non-compliance trivial or
egregious? Was the non-compliance widespread or involving a relative few
organizations? Was it limited to a specific subpopulation? Were the adjustments
significant in term of assessment amounts? Discuss how the compliance level impacts
the assessment of risk in the €0population as a whole.

If the project was designed strictly to learn about some aspect of a population or to
build a profile, rather than to measure compliance, discuss the significance of what was
learned.

Recommendations

Consider the scope of the problem and the cost of solution when forming
recommendations. You may not have a recommendation for each area. Discuss how
any non-compliance should be addressed (E.g., targeted examination project,
compliance checks, educational program, etc.) Tie recommendations to findings.
Provide only recommendations that directly affect the public. Recommendations for
internal actions should be included only in the full report.
 Attachment 8

Legal Recommendations:
Briefly discuss proposals for changes generated by the project findings to the Code or
Regs., new Rev, Rulings, or Rev. Procs.

Technical Recommendations:
Briefly describe compliance projects needed to address problems cited in the project,
and case-related improvements such as training needs or guidance needs (E.g., on
issue identification or development techniques, etc.)

Procedural Recommendations:
Briefly describe proposed changes to procedures that impact the field and/or support
staff, Campuses, etc.

Educational Recommendations:
Briefly describe proposals for educational or outreach actions that were suggested by
your findings.

Approved:

Director, Exempt Organizations Date

 Attachment 9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, DC 20224

TAX EXEMPT AND October 10,2003

GOVERNMENT ENTITIES
DIVISION
Correspondence Control Number: T:EO:E - 14 - 2003

MEMORANDUM FOR ALL EO EXAMINATIONS MANAGERS

FROM: R.C. Johnson /b/ %. e. $&

Director, EO Examinations

SUBJECT Project Case Closing Procedures

This memo provides interim guidance for closing project cases. These procedures
supercede all previously issued procedures, including case processing instructions
distributed with the returns. These procedures apply to all market segment study
projects and all compliance projects where a checksheet is used. (See Exhibit 1 for a
list of projects requiring checksheets.) Please ensure that this memorandum is
distributed to all agents working project cases and to clerical employees responsible for
case transit.

1. When the checksheet is complete, the agent will fax the checksheet to the project
coordinator. (See Exhibit 2 for a list of project coordinators and fax numbers.)

2. The agent will staple the fax transmittal to the checksheet and place it in the file on
top of all other papers.

3. The agent will attach Form 3198, Special Handling Notice, to the front of the case
file, indicating the Project Code, and alerting ESSIESP to the presence of a
checksheet.

4. Depending on the location of the case, the case will be sent to one of the following:

ESS ESP
Mail Code 4980 DAL or 625 Fulton St.
1100 Commerce St 10 Metrotech Center
Dallas, TX 75242 3rdFloor Suite 506
Brooklyn, NY 11201

Revised 1211812006
4
 5
Do not send the case to a local closinq unit or Classification in Dallas.

5. The case will be updated to Status 53 on AIMS, and updated to APU7 on EOIC.

6. Upon receipt, ESSIESP will inspect the case file to confirm that a faxed checksheet
is in place. ESSIESP will then take one of the following actions:

a. If a checksheet is in the file, along with a fax transmittal confirming that the
checksheet was faxed to the project coordinator, ESSIESP will release the
freeze code and close the case.

b. The agent must insure that the checksheet is in the case file. Cases received
without a checksheet will be returned to the group manager.

c. If the completed checksheet is present but the fax transmittal is missing,

ESSIESP will extract the checksheet and foward it to the Dallas EPP staff.
ESSIESP will then release the freeze code and close the case.

7. In the event that a case has been erroneously selected for a project, the case may
be closed Survey After Assignment (SAA) with the completion of the following steps:

a. The agent will complete Form 1900 describing the reason for the SAA.
Note: Project cases may be surveyed only if the return was selected due to erroneous
information and the organization and/or the return do not meet selection criteria for the
project.

b. The agent will fax the Form 1900, together with the appropriately completed first
page of the checksheet, to the assigned Project Coordinator. The Project
Coordinator will confirm that the selection was erroneous. If so, the Project
Coordinator will sign the Form 1900 and return it to the agent by fax. The Project
Coordinator will retain a copy of the signed Form 1900.

c. The agent will staple the signed Form 1900 to the fax transmittal from the Project
Coordinator and place it in the file on top of all other papers. The agent will then
follow Steps 3 through 5 above.

8. Upon receipt of the SAA case, ESSlESP will inspect the case file to confirm that a
faxed signed Form 1900 is in place. ESSIESP will then take one of the following
actions:

d. If a signed Form 1900 is in the file attached to a fax transmittal, ESSIESP will
release the freeze code and close the case.

e. If a signed Form 1900 is missing, or if an unsigned Form 1900 is present and the
fax transmittal is missing, ESSIESP will update the case back to the originating
group on AIMS and EOIC, and ship the file back to the group manager.

If you have any questions, please let me know; or you may contact Debra Petersen, EPP
Senior Analyst, at (626) 312-3616, extension 5525.

Rev. 0611 312003

EXHIBIT 1 - Market Segment Study and Compliance Project Cases Requiring
Checksheets

Cases with the following project codes should contain a checksheet.

FY2002
Proiect Code Proiect Name
205 Social Clubs
206 Business Leagues
207 Labor Organizations
208 Community Foundations
209 Social Services
210 Religious Organizations
250 Debt-Financed Property

FY2003
Proiect Code Proiect Name
213 Fraternal Organizations
214 509(a)(3) Supporting Organizations
215 Private Foundations
216 Arts & Humanities
218 Elder Housing

Rev. 0611 312003

: am853
 EXHIBIT 2 - Project Coordinators Contact Information

Project coordinators are identified below:

Project 205 Leslie Kulick Phone: (410) 962-9565

Project 206 lnternal Revenue Service Fax: (410) 962 -0132
Project 213 TEGE, Room 1520
Project 214 31 Hopkins Plaza,
Baltimore, MD 21201

Project 207 Ray Dunlop Phone: (203) 781-3051

Project 209 lnternal Revenue Service Fax: (203) 781-3055
Project 2 10 TEGE
Project 2 18 150 Court Street
New Haven, CT 06510

Project 250 Debra Petersen Phone: (626) 312-3616 x5525

lnternal Revenue Service Fax: (626) 312-2926
TEGE
9350 Flair Dr. 2ndFloor
El Monte, CA 91731-2885

Project 215 Kevin Williams Phone: (718) 488-2231

Project 216 lnternal Revenue Service Fax: (718) 488-2358
TEGE
625 Fulton
10 Metrotech
Brooklyn, NY 11202

Rev. 0611312003

: Bd2)8?5al
Form 4564 Department of the Treasury Request #I
Internal Revenue Service
lnformation Document Request
To: (Name of Taxpayer and Company. Division or l ranch) Subject: Intervention in Political Campaign -
Submitted to:
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
1 I
Description of Documents Requested:

Issue: Whether vour oraanization has intervened in a political campaian.

We have received information that on f s ~ e c i f vdate), your organization may have taken out an advertisement in
the lspecifv newspaDer or other publication) taking a position in support of or in opposition to (s~ecifvcandidate)
in his or her political campaign for the office of (specify public office - i.e. mayor). We have attached a copy of
that advertisement for your information. Organizations exempt under Internal Revenue Code (IRC) section
501(c)(3) are expressly prohibited from intervening in any political campaign for public office.

We need your response to the questions shown below, in order to evaluate the information we have received.
Please provide a written response that addresses, at a minimum, the following items and includes the
documents requested:

1. Did your organization participate in preparing, arranging for the publication of, or paying for the
advertisement?

a. If so, who authorized the preparation, publication, or payment of the advertisement?

b. Who drafted the advertisement copy? What is the relationship between the person(s) and the
organization? Volunteer? Paid staff? Paid contractor? Other?

c. What was the cost of publishing the advertisement? (Provide a copy of the invoice and a copy of
the cancelled check.)

d. How did you record the expenses of the advertisement in your accounting records, such as your
general ledger?

e. Please provide an accounting of expenditures associated with the advertisement(s), including

allocations of overhead.

f. If you believe that the advertisement described above does not constitute intervention in a
political campaign within the meaning of IRC 501(c)(3), please explain and provide any
documentation that supports your view.

2. Describe in detail any other advertising identifying candidates prepared and/or published by your
organization between {January 1, [year of election] and [Date of IDR of date of election, whichever
comes first)

3. Please describe in detail any other instances in which your organization may reasonably be considered
to have engaged in activities in support of (or opposition to) one or more candidates for public office
between {January 1, [year of election] and [date o f IDR, or date of election, whichever comes first) In
Information Due By At Next Appointment 0 Mail In 0
Name and Title of Requestor Date:

FROM I Office Location:

Page 1
Form 4564
 Form 4564 Department of the Treasury Request #I
Internal Revenue Service
Information Document Request
To: (~ame of Taxpayer and Company, Division or ranch) Subject: Intervention in Political Campaign
Submitted to:
Taxpayer Name

I Address Line 1
City, ST ZIPCODE
Dates of Previous Requests: None

- -

Description of Documents Requested:

identifying activities in response to this question, please include (but do not limit your response to) all
instances in which you distributed written or oral communication identifying one or more candidates, all
instances in which one or more candidates or campaign representatives appeared on the premises of
your organization or at an event sponsored by your organization, and all instances in which the
organization made resources or facilities available to one or more candidates or campaigns.

a. If you believe that one or more of the activities described in response to the question above
does not constitute intervention in a political campaign within the meaning of IRC 501(c)(3),
please explain and provide any documentation that supports your view.

b. Please include with your description of each activity, an account of the costs associated with the
activity, including allocable overhead.

4. Does your organization have any policies or procedures regarding political campaign intervention? If so,
please provide a copy of all policies and procedures and all documents that authorizedlimplemented
those policies or procedures, such as minutes of board meetings.

Please provide the above information and/or documents as soon as possible but no later than [enter response
period of between 7-75 days, depending upon the volume of information requested (7 days for Type C cases)]
days from the date of this letter. If you need additional time to respond, call me at [insert phone number] to
discuss a mutually-agreeable response date. If we do not hear from you within (insert response period) days,
we will assume that you do not intend to reply and will proceed accordingly.

Information Due By At Next Appointment 0 Mail In

( Name and Title of Requestor 1 Date:

FROM Office Location:

Page 2
Form 4564
I Form 4564 I Department of the Treasury 1
Request #1
1 I Internal Revenue Service I I
I Information Document Request
To: (Name of Taxpayer and Company, Division or ranch) Subject: Intervention in Political Campaign
I 1 Submitted to: I
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
I - I I
Description of Documents Requested:

Issue: Whether vour organization has contributed (directlv or indirectlv) to a political campaian.

We have received information that on (s~ecifv date), your organization may have made a contribution of $ (s&
amount) to the campaign of (specify candidate) for the office of (specjfy public office souaht bv candidate).
Organizations exempt under Internal Revenue Code (IRC) Section 501(c)(3) are expressly prohibited from
intervening in any political campaign for public office.

In order to evaluate the information we have received, we need your response to the questions shown below.
Please provide a written response that addresses the following items and includes any of the documents requested:

1. Did your organization make a contribution to the campaign of [candidate]? If so, please answer the
following questions.

a. Who authorized the contribution? What is the relationship between the person(s) and the
organization? Board member? Volunteer? Employee? Other?

b. Was the contribution made in connection with an event conducted either by your organization or by
the campaign? If yes, please describe.

.c. How did you record the contribution in your accounting records, such as your general ledger?

d. If you made the contribution by check, provide a copy of the cancelled check (front and back) or
other evidence that you paid the funds (bank statement).

e. If you made the contribution in some other form, please describe it and provide any associated
documentation.

f. Please provide any documentation you received from [candidate], [candidate's campaign] or [PAC]
acknowledging receipt of the contribution or otherwise discussing the contribution.

g. Have you recovered these funds? If so, please provide documents confirming the funds were
recovered, including the date and amount recovered.

h. If not, have you attempted to recover the funds? Please describe your efforts to recover the funds.
Provide all documents substantiating your attempts to recover the funds.

i. Please provide an accounting of expenditures associated with the contribution, including allocations
of overhead.

j. If you believe that the contribution described above does not constitute intervention in a political
campaign within the meaning of IRC 501(c)(3), please explain and provide any documentation that
supports your view.

Information Due By At Next Appointment ) Mail In I

l
Name and Title of Requestor Date:

FROM I Office Location:

Page 1
Form 4564 : 80857
 Form 4564 Department of the Treasury Request #I
Internal Revenue Service
Information ~ocumentRequest I
To: ( ~ a r n eof Taxpayer and Company, Division or Elranch) Subject: Intervention in Political Campaign
Submitted to:
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
I I I
Description of Documents Requested:

2. Describe in detail any other campaign contributions, including contributions to PACs, made by your
organization between {January I , [year of election], or date of IDR, or date of election, whichever comes
first).

3. Please describe in detail any other instances in which your organization may reasonably be considered to
have engaged in activities in support of (or opposition to) one or more candidates for public office between
{January 1, [year of election] and [date of IDR, or date of election, whichever comes first). In identifying
activities in response to this question, please include (but do not limit your response to) all instances in
which you distributed written or oral communication identifying one or more candidates, all instances in
which one or more candidates or campaign representatives appeared on the premises of your
organization or at an event sponsored by your organization, and all instances in which the organization
made resources or facilities available to one or more candidates or campaigns.

a. If you believe that one or more of the activities described in response to the question above does
not constitute intervention in a political campaign within the meaning of IRC 501(c)(3), please
explain and provide any documentation that supports your view.

b. Please include with your description of each activity, an account of the costs associated with the
activity, including allocable overhead.

4. Does your organization have any policies or procedures regarding political campaign intervention by the
organization? If so, please provide a copy of all policies and procedures and all documents that
authorized/implemented those policies or procedures, such as minutes of board meetings.

Please provide the above information and/or documents as soon as possible but no later than [enter response
period of between 7-15 days, depending upon the volume of information requested (7 days for Type C cases)] days
from the date of this letter. If you need additional time to respond, call me at [insert phone number] to discuss a
mutually-agreeableresponse date. If we do not hear from you within (insert response period) days, we will assume
that you do not intend to reply and will proceed accordingly.

Information Due By At Next Appointment 0 /ail ln El

Name and Title of Requestor Date:

-
FROM Office Location:

Page 2
Form 4564
88858
 Form 4564 Department of the Treasury Request #I
Internal Revenue Service
Information Document Request I
To: (Name of Taxpayer and Company, Division or ranch) ( Subject: Intervention in Political Campaign
I I Submitted to: 1

I
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
L I I

Description of Documents Requested:

-
Issue: Whether your organization engaged in an activity that constitutes participation in, or intervention
in, any political campaign on behalf of (or in opposition to) any candidate for public office.

We have received information describing activities your organization may have conducted in support of, or in
opposition to candidates for public office. Specifically, [cite the publicly available source(s), for instance, " The
Big City Herald reported in their June 3, 2004 edition that you distributed ratings of candidates for the November
7, 2004 election for judicial ofiices in ABC County as 'approved', 'not approved' or 'approved as highly qualified'".
] Organizations exempt under Internal Revenue Code (IRC) section 501(c)(3)are expressly prohibited from
intervening in any political campaign for public office.

In order to evaluate the information we have received, we need your response to the questions shown below.
Please provide a written response that addresses, at a minimum, the following items and includes the
documents requested:

1. Please indicate whether you did in fact distribute any material that identified candidates at any time
between [January 1, [election year] and [date of the article containing the allegation][year]. Candidates
can be identified not only by name but also by picture, nickname, party affiliation, or other identifiers. If
so, please answer the following questions.

a Please provide a copy of the material you distributed.

b. Who drafted the material? What is the relationship between the person(s) and the organization?
Volunteer? Paid staff? Paid contractor? Other?

c. Who from your organization authorized the distribution of the material?

d. If the material contained candidate ratings, describe in detail how you derived the ratings.

e. What method of distribution did you use (mail, in person, e-mail, internet) for distributing the
material?

f. For each method of distribution, state the number of items distributed.

g. If the material was distributed in person, did volunteers or paid staff distribute it?

h. Where did the distribution(s) occur? When?

i. Was this information posted on your website? If so, when was it posted and by whom? Who
approved the posting of the material on the website and when was it approved?

j. If the information was posted and then removed from your website, when was the material
removed from your website?

Information Due By At Next Appointment ( Mail In a

Name and Title of Requestor Date:

FROM Office Location:

Page 1
Form 4564
Form 4564 Department of the Treasury Request #I
Internal Revenue Service
lnformation Document Request
To: ( ~ a m eof Taxpayer and Company, Division or ranch) Subject: Intervention in Political Campaign
Submitted to:
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE

Description of Documents Requested:

k. If you believe that your involvement in the preparation andlor distribution of material identifying
candidates does not constitute intervention in a political campaign within the meaning of IRC
501(c)(3), please explain and provide any documentation that supports your view.

2. Describe in detail any other instances in which your organization has prepared and/or distributed
material identifying candidates for public office between {January 1, [year of election] and [date of IDR
or date of election, whichever comes first].

3. Please describe in detail any other instances in which your organization may reasonably be considered
to have engaged in activities in support of (or opposition to) one or more candidates for public office
between {January 1, [year of election] and [date of IDR, or date of election, whichever comes first) In
identifying activities in response to this question, please include (but do not limit your response to) all
instances in which you distributed written or oral communication identifying one or more candidates, all
instances in which one or more candidates or campaign representatives appeared on the premises of
your organization or at an event sponsored by your organization, and all instances in which the
organization made resources or facilities available to one or more candidates or campaigns.

a. If you believe that one or more of the activities described in response to the question above
does not constitute intervention in a political campaign within the meaning of IRC 501(c)(3),
please explain and provide any documentation that supports your view.

b. Please include with your description of each activity, an account of the costs associated with the
activity, including allocable overhead.

4. Please provide an accounting of expenditures associated with the development andlor distribution of
any material identifying candidates, including allocations of overhead.

5. Does your organization have any policies or procedures regarding political campaign intervention by
the organization? If so, please provide a copy of all policies and procedures and all documents that
authorizedlimplemented those policies or procedures, such as minutes of board meetings.

Please provide the above information andlor documents as soon as possible but no later than [enter response
period of between 7-15 days, depending upon the volume of information requested (7 days for Type C cases)]
days from the date of this letter. If you need additional time to respond, call me at [insert phone number] to
discuss a mutually-agreeable response date. If we do not hear from you within (insert response period) days,
we will assume that you do not intend to reply and will proceed accordingly.

Information Due By At Next Appointment 0 Mail In 0

Name and Title of Requestor Date:

FROM Office Location:

I Page 2
Form 4564
 Form 4564 Department of the Treasury Request #I
lnternal Revenue Service
lnformation Document Request
To: ( ~ a m eof Taxpayer and Company, Division or ranch) Subject: Intervention in Political Campaign
Submitted to:
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
L I 1

Description of Documents Requested:

Issue: Whether vour oraanization enaaged in fundraisina for the oolitical cam~aianof a candidate for
public office:

We have received information that on (s~ecifvdate), your organization may have engaged in fundraising for
(s~ecifv public office sousht bv candidate). (Revenue Agent: Describe the
candidate) for the office of (s~ecifv
alleged fundraising activity specifically, for example: Specifically, the organization conducted a pancake
breakfast with the proceeds designated to go to the campaign of John Doe for Mayor. Be as specific as
possible). Organizations exempt under Internal Revenue Code (IRC) section 501(c)(3) are expressly prohibited
from intervening in any political campaign for public office.

In order to evaluate the information we have received, we need your response to the questions shown below.
Please provide a written response that addresses, at a minimum, the following items and includes the
documents requested:

1. Did your organization conduct the activity alleged above? If so, please answer the following questions
and provide the requested information.

a. Provide a copy of any agreement or correspondence between the organization and the
candidate andlor the candidate's representative that discusses the organization's intent to remit
the proceeds of the fund-raising event to the candidate's campaign.

b. Who authorized this fund-raising event?

c. How did you publicize the fund-raising event?

d. If your organization publicized the event, please provide copies of each promotional item (e.g.,
flyer, invitation, poster, etc.), along with invoices for each.

e. If the organization publicized via broadcast media, provide that invoice and a copy of the
broadcast.

f. How did you record the gross receipts of the fund-raising event in your accounting records, such
as your general ledger?

g. How did you record the expenses for the event in your accounting records, such as your general
ledger?

h. In what form did the candidate or the candidate's campaign organization or representative
receive the proceeds? If by check, provide a copy of the cancelled check (front and back).

Information Due By At Next Appointment 0 Mail In 0

Name and Title of Requestor Date:

FROM Office Location:

Page 1
Form 4564
 Form 4564 Department of the Treasury Request #1
Internal Revenue Service
lnformation Document Request
TO: ( ~ a m eof Taxpayer and Company, Division or Branch) . Subject: Intervention in Political Campaign
Submitted to:
Taxpayer Name
Address Line 1 Dates of Previous Requests: None
City, ST ZIPCODE
I I 1
Description of Documents Requested:

i. If you believe that the fund-raising event stated above does not constitute intervention in a
political campaign within the meaning of IRC 501(c)(3), please explain and provide any
documentation that supports your view.

2. Describe in detail any other events conducted by your organization, by itself, or in association with
others, between [January 1, [year of election] and date of IDR or date of election, whichever comes firstn
in connection with which funds were raised for one or more candidates for public office.

3. Please describe in detail any other instances in which your organization may reasonably be considered
to have engaged in activities in support of (or opposition to) one or more candidates for public office
between {January 7, [year of election] and [date of IDR, or date of election, whichever comes first) In
identifying activities in response to this question, please include (but do not limit your response to) all
instances in which you distributed written or oral communication identifying one or more candidates, all
instances in which one or more candidates or campaign representatives appeared on the premises of
your organization or at an event sponsored by your organization, and all instances in which the
organization made resources or facilities available to one or more candidates or campaigns.

a. If you believe that one or more of the activities described in response to the question above
does not constitute intervention in a political campaign within the meaning of IRC 501(c)(3),
please explain and provide any documentation that supports your view.

b. Please include with your description of each activity, an account of the costs associated with the
activity, including allocable overhead.

4. Does your organization have any policies or procedures regarding political campaign intervention by the
organization? If so, please provide a copy of all policies and procedures and all documents that
authorizedlimplemented those policies or procedures, such as minutes of board meetings.

Please provide the above information andlor documents as soon as possible but no later than [enter response
period of between 7-15 days, depending upon the volume of information requested (7 days for Type C cases)]
days from the date of this letter. If you need additional time to respond, call me at [insert phone number] to
discuss a mutually-agreeable response date. If we do not hear from you within (insert response period) days,
we will assume that you do not intend to reply and will proceed accordingly.

Information Due By At Next Appointment 0 Mail In 0

Name and Title of Requestor Date:

FROM Office Location:

Page 2
Form 4564
 Internal Revenue Service Department of the Treasury

Taxpayer Identification Number:

Tax Period(s) Ended:

Date:
Contact PersonllD Number:

Contact Telephone Nurnber(s):

Dear Sir or Madam:

We are conducting an examination of your organization. At this time, the focus of our examination is limited
to determining whether your organization intervened or participated in a political campaign on behalf of, or in
opposition to, a candidate for public office. The information we have that lead to this examination is described
in the attached Form 4564, Information Document Request.

Organizations exempt under Internal Revenue Code (IRC) section 50 1(c)(3) are prohibited from directly or
indirectly participating or intervening in any political campaign on behalf of, or in opposition to, any candidate
for public office. This means, for example, that they cannot (1) endorse any candidate, (2) contribute money,
goods, or services to a candidate's campaign, (3) raise funds for or against a candidate, (4) distribute statements
for or against a candidate, or (5) conduct any other activity that favors or opposes a candidate for public office.
Even activities that encourage people to vote for or against a candidate based on nonpartisan criteria violate the
political campaign prohibition of section 50 1(c)(3).

Whether a charitable organization has engaged in prohibited political campaign activity depends on all the
facts and circumstances. If the IRS determines that a section 501(c)(3) organization engaged in prohibited
campaign intervention, depending on the gravity of the violation, the organization could lose its tax-exempt
status and be subject to an excise tax on the amount spent on that activity.

IRC 4955(a)(1) imposes an initial tax on an organization of 10 percent of each political expenditure.
Section 4955(b)(l) imposes an additional tax on the organization of 100 percent of each political expenditure
previously taxed and not corrected within the taxable period. Section 4955(d)(l) defines political expenditure
as "any amount paid or incurred by a section 50 1(c)(3) organization in any participation in, or intervention in
(including the publication or distribution of statements), any political campaign on behalf of (or in opposition
to) any candidate for public office." For more information about the political campaign prohibition for
section 501(c)(3) organizations, please see the enclosed Fact Sheet 2006-17 and our website at www.irs.gov/eo.

In limited situations involving cases of flagrant violation of the law, IRC section 6852 provides specific
statutory authority for the IRS to make an immediate determination and assessment of tax. Also, in very

Letter 39344 (Rev. 3-2006)

Catalog Number 47555Q

: a8863
limited situations, under section 7409, the IRS can ask a federal district court to enjoin the organization from
making further political expenditures. The IRS views repeated interventions as a type of conduct that warrants
immediate action.

We have recieved informaiton alleging that you may have engaged in a pattern of repeated acts of political
campaign intervention. Accordingly, in order to evaluate the validity of the information, we will be conducting
the examination of your organization on an expedited basis.

We realize organizations may be concerned about an examination. We hope we can relieve any concerns you
may have about the examination by briefly explaining the examination process and what your appeal rights are
if you do not agree with the results. This letter notifies you that our examination has begun. The attached
Forrn 4564 seeks certain information for our review. Depending on your response to this request, we may need
additional information, in which case we will issue one or more additional Information Document Requests.
When we complete the examination, we will explain our recommendations and how they may affect your
exempt status or tax liability. You should fully understand any recommended changes and their ramifications.
Please do not hesitate to ask us about anything that is not clear to you.

If we recommend changes involving your tax liability and you agree with the changes, we will ask you to sign
an agreement form. By signing the form, you will indicate your agreement to the proposed change, including
any additional tax owed. You do not have to agree with our recommendations. You may request a conference
at a higher level as explained in the appeal procedures that we will provide you. Section 501(c)(3)
organizations are entitled to seek a declaratory judgment if they disagree with a proposed revocation of their
status. General instructions about exempt organization appeal procedures for unagreed issues are described in
the attached Publication 892, Exempt Organizations Appeals Procedures for Unagreed Issues.

Please provide us the name and telephone number of an officer with whom we can discuss this matter. If you
wish us to discuss this matter with your representative, you must file a power of attorney in order for your
representative to receive or inspect confidential information. You may use Form 2848, Power ofAttorney and
Declaration of Representative, for this purpose.

If you have any questions, please call the contact person at the telephone number shown in the heading of this
letter. If you write, please tell us the most convenient time to call if we need to contact you.

Thank you for your cooperation.

Sincerely,

Revenue Agent

Enclosures:
Publication 1, Your Rights as a Taxpayer
Fact Sheet 2006-17, Election Activities and the Prohibition on Political Interventionfor 501(c)(3)
Organizations
Publication 892, Exempt Organizations Appeals Proceduresfor Unagreed Issues
Form 4564, Information Document Request, with attached News Release

Letter 39344 (Rev. 3-2006)

Catalog Number 47555Q
 Internal Revenue Service Department of the Treasury

Taxpayer Identification Number:

Tax Period(s) Ended:

Date:
Contact PersonIlD Number:

Contact Telephone Number(s):

Dear Sir or Madam:

We are conducting an examination of your organization. At this time, the focus of our examination is limited
to determining whether your organization intervened or participated in a political campaign on behalf of, or in
opposition to, a candidate for public office. The information we have that led to this examination is described
in the attached Form 4564, Information Document Request.

Organizations exempt under Internal Revenue Code (IRC) section 501(c)(3) are prohibited from directly or
indirectly participating or intervening in any political campaign on behalf of, or in opposition to, any candidate
for public office. This means, for example, that they cannot (1) endorse any candidate, (2) contribute money,
goods or services to a candidate's campaign, (3) raise fbnds for or against a candidate, (4) distribute statements
for or against a candidate, or (5) conduct any other activity that favors or opposes a candidate for public office.
Even activities that encourage people to vote for or against a specific candidate based on nonpartisan criteria
violate the political campaign prohibition of section 501(c)(3).

Whether a charitable organization has engaged in prohibited political campaign activity depends on all the
facts and circumstances. If the IRS determines that a section 50l(c)(3) organization engaged in prohibited
campaign intervention, there are several possible outcomes the IRS may pursue. The IRS may impose an
excise tax on the amount spent on the activity or may, depending on the gravity of the violation, revoke the
organization's tax exemption. Often, these cases are resolved short of revocation.

IRC section 4955(a)(l) imposes an initial tax on an organization of 10 percent of each political expenditure.
Section 4955(b)(l) imposes an additional tax on the organization of 100 percent of each political expenditure
previously taxed and not corrected within the taxable period. Section 4955(d)(1) defines political expenditure
as "any amount paid or incurred by a section 50 1(c)(3) organization in any participation in, or intervention in
(including the publication or distribution of statements), any political campaign on behalf of (or in opposition
to) any candidate for public office." For more information about the political campaign prohibition for section
501(c)(3) organizations, please see the enclosed Fact Sheet 2006-17 and our website at www.irs.aov/eo.

We realize organizations may be concerned about an examination. We hope we can relieve any concerns you
may have about the examination by briefly explaining the examination process and what your appeal rights are

Letter 3934 (Rev. 3-2006)

Catalog Number 38970X
if you do not agree with the results. This letter notifies you that our examination has begun. The attached
Form 4564 seeks certain information for our review. Depending on your response to this request, we may need
additional information, in which case we will issue one or more additional Information Document Requests.
When we complete the examination, we will explain our recommendations and how they may affect your
exempt status or tax liability. You should fully understand any recommended changes and their ramifications.
Please do not hesitate to ask us about anything that is not clear to you.

If we recommend changes involving your tax liability and you agree with the changes, we will ask you to sign
an agreement form. By signing the form, you will indicate your agreement to the proposed change, including
any additional tax owed. You do not have to agree with our recommendations. You may request a conference
at a higher level as explained in the appeal procedures that we will provide you. Section 501(c)(3)
organizations are entitled to seek a declaratory judgment from a court if they disagree with a proposed
revocation of their status. General instructions about exempt organization appeal procedures for unagreed
issues are described in the attached Publication 892, Exempt Organizations Appeals Procedures for Unagreed
Issues.

Please provide us the name and telephone number of an officer with whom we can discuss this matter. If you
wish us to discuss this matter with your representative, you must file a power of attorney in order for your
representative to receive or inspect confidential information. You may use Form 2848, Power ofAttorney and
Declaration of Representative, for this purpose.

If you have any questions, please call the contact person at the telephone number shown in the heading of this
letter. If you write, please tell us the most convenient time to call if we need to contact you.

Thank you for your cooperation.

Sincerely,

Revenue Agent

Enclosures:
Publication 1, Your Rights as a Taxpayer
Fact Sheet 2006- 17, Election Activities and the Prohibition on Political Intervention for 501(c)(3)
Organizations
Publication 892, Exempt Organizations Appeals Procedures for Unagreed Issues
Form 4564, Information Document Request, with attached News Release

Letter 3934 (Rev. 3-2006)

Catalog Number 38970X
 Political Activity Compliance initiativei
Procedures for 501(c)(3) Organizations
Purpose
These procedures are designed to expeditiously address instances of potential political activity
by 501(c)(3) organizations in violation of the Code. The goal is twofold: first, to educate
50 1(c)(3) organizations of the prohibition on political activity and put them on notice of the
enforcement program in order to prevent violations, and second, to address noncompliance
while the issue remains prominent, so that there are no reoccurrences and so correction could
occur prior to the relevant election.

Project Scope
The Political Activity Compliance Initiative (PACI) addresses all referralsiiwhich allege that a
50 1(c)(3) organization has participated in, or intervened in, a political campaign on behalf of,
or in opposition to, any candidate for public office (referred to hereinafter as "political
intervention referrals," or "referrals"). In addition to acting on referrals, the PACI will
leverage available resources to identify other areas of potential noncompliance, and take action
to prevent violations.

The Exempt Organizations' Implementing Guidelines will identify PACI as a program

requiring allocation of resources.

Program Leader and Team

The Director, EO Examinations, will designate a manager as the Program Leader by November
1st prior to each new election period (see definition on page 2). The Team Leader will oversee
and coordinate all aspects of the initiative, beginning with convening a team and conducting a
preliminary planning conference.

The Program team will include members from Area Counsel, Classification, Compliance
Strategies & Data Analysis, Customer Education & Outreach, Examinations, Mandatory
Review, and Rulings & Agreements. It is the responsibility of the team to schedule, implement
and monitor the procedures in this document. This includes but is not limited to:

Identifying and discussing resource needs, including additional Classification and

Review personnel, with the Director, EO Examinations for the purpose of allocating
resources in the EO Implementing Guidelines.

Reviewing the results of prior election period initiatives and identifying necessary
changes to procedures.

Coordinating with EO Examinations Area Managers to identify designated agents for

working cases.

Coordinating mandatory training for all employees involved in the compliance

initiative on political activity. Training will emphasize to the agents and managers the
sensitive nature of these cases and that we respect taxpayer's constitutional rights to
fieedom of speech and religion.

Coordinating examination activity and ensuring the consistency of our approach and the
outcomes on a national basis.
1
 Measuring results and preparing reports, including a report summarizing findings and
recommendations after the election period.

Coordinating publicity and outreach with CE&O.

Election Period
For purposes of this program, an election period will begin no later than January 1st of even
numbered years, and end November 30th of that year. The program may begin earlier than
January 1"" with the concurrence of the Director, EO Examinations, if Classification receives a
significant increase of referrals alleging prohibited political activity. Outreach activities should
begin prior to the election period.

General Case Processing Procedures

The following case processing procedures apply both during non election periods and election
periods. All program cases will be tracked using a special project code, check sheet and other
data gathering tools.

Classification Procedures
Classification will treat political intervention referrals separately from other referrals
and process them on a priority basis, per the Classification fast track procedures (IRM
4.75.5, Exempt Organizations Examinations Procedures - Information Items). The
initial classifier of the information should not propose whether or not the referral should
be examined.

Classification will forward all referrals involving allegations of political intervention to

the Referral Committee. The ~dmmitteewill independently review the information in
the file to decide whether a case is selected for assignment. Decisions will be made by
majority vote and will be documented in the case file.

The Committee will categorize referrals as "Type A," "Type B" or "Type C" as
described below:

Type A (single-issuelnon-complex) cases are those which are relatively non-

complex and are expected to be resolved via correspondence. Such cases typically
would involve only the political intervention issue and only one organization.

Type B (multiple issue/complex) cases are more complex and are expected to
require a review of the organization's books and records. Such cases would involve
multiple related organizations andlor multiple issues, in addition to the political
intervention issue.

Type C (egregious/repetitive) cases are those that involve egregious andlor

repetitious violations (generally), during an election period of the political activity
prohibition and require immediate action by the IRS. For example:
 o situations where the activity was egregious, such as ongoing political
contributions that were depleting the charity's assets,

o situations involving continual widespread advertising or supporting named

candidates,

o clear and continuing support or opposition of a candidate, etc..

During non election periods, the regular Classification referral committee will review
political referrals, and will identify the ones selected for assignment as Type A, Byor C.
During non election periods Classification will process Type A and Type B political
intervention referrals within the standard Classification timefiames; however, for Type
C referrals, Classification and the groups will follow the Election Period Expedited
Procedures. Referrals identified for assignment will be established with a skeletal
account on AIMS/EOIC as appropriate.

If Classification receives a referral on any previously examined program case they will
provide the name of the organization to the Review of Operations (ROO) group
manager so ROO does not conduct duplicative research on that entity. (See section on
Researching Compliance by Organizations Examined in Previous Election Periods).

Immediately upon identification of a Type C referral by the referral committee,

Classification will coordinate with the Area Manager and the Team Leader for
coordination of assignment. The Director, EO Examinations will be notified of the
basis of the case and why it is a Type C case, and that the letter 3934-C will be used on
the case. The Area Manager will identify an available agent with experience in
political activity compliance issues and respond to Classification within 4 calendar
days. Classification will convert Type C referrals to electronic format for electronic
transfer of the file to the assigned agent as appropriate.

Type A and Type B referrals will be assigned to Type A and Type B designated agents
as appropriate. If a Type A or B case is identified as a Type C case after assignment to
the field, the group manager will immediately contact the PAC1 team leader.

Churches
When a referral selected by the referral committee for assignment to an agent involves
a church, Classification will notify the Area Manager and the Counsel project manager.
Additional review by Classification will ensure that the rules of section 761 1 are met.

Group Procedures

Examinations resulting from political intervention referrals will be processed as priority

cases.

The scope of Type A and (generally) Type C PACI-initiated examinations are single
issue exams and will be limited to the political intervention issue(s) identified by
Classification and/or the agent. Agents should still look for large, unusual, and
questionable items and pursue as appropriate and after consulting the Team Leader.
However, these examinations are exempt from the requirements of limited scope
examinations (IRM section 4.75.1 1.4.2), which require the agent to review the
organizing documents to determine the exempt purpose, and to establish that the
organization filed all other required Federal returns.

Revenue agents will follow normal procedures during non-election periods. However,
the agent will not wait for a return to be filed or the tax year to end in order to initiate
an examination of the organization and its activities. [IRC Section 7602(a)] In
instances where no return has been filed or the tax year has not ended since the alleged
violation occurred, the initial contact letter will list only the relevant tax period, and not
the form number.

Initial Contact Letters (Non churches)

The agent will send an initial contact letter (Letter 3934 for Type A and B cases, Letter
3934-C for Type C cases) with an Information Document Request (IDR) attachment to
the organization. (Examples attached) The IDR, tailored to fit the facts of the particular
case, will provide the details of the alleged conduct/activity of the organization and
request that the organization provide an explanation of the conduct/activity. The agent
will also enclose copies of referral information from publicly available sources (e.g.,
newspaper articles), if available, along with an IRS notice... explaining the rules
regarding political activity by tax-exempt organizations."' Type A cases are
correspondence examinations and Type B cases are expected to require field contact.

Type C Cases (Non churches)

Type C cases will have expedited procedures even during non election cycles. Type C
letters (Letter 3934-C) will be sent within 5 calendar days of receipt in the group of the
referral from Classification. The letter will be sent either by certified mail, or overnight
mail with signature required for delivery, with a seven calendar day response period.

Just because a case is determined to be a Type C case does it mean that Section 6852 or
7409 will be used or even considered. Special procedures apply if termination
assessment or injunctive relief is warranted, and these provisions are extraordinary. See
I.R.C. 8 6852 and/or 7409. In those cases, the agent should immediately contact the
Team Leader, their Area Manager, and the Counsel project manager for assistance.
Uses of the provisions in sections 6852 andlor 7409 require elevated approvals prior to
taking any action.

Churches
Agents must follow Section 76 1 1 inquiry/examination procedures and the Director, EO
Examinations must personally review the complete case file to determine if a
reasonable belief exists, and must personally approve and sign church inquiry and
examination letters involving churches.

Special Procedures for TEP Cases

If the referral committee selects a case for examination, Classification will determine if
the taxpayer meets the Team Examination Program (TEP) criteria and if so, TEP
project code 8012 should be used and TEP procedures must be followed, including:
 (1) Classification should advise the TEP EPP Analyst of the selection and
inclusion of case in the project, the Type of case (A, Byor C), as well as any
project assumptions (i.e. required start dates and estimated time for the
examination).

(2) The TEP Analyst will add the case to the Area Running Workplan using the
known information about the case (taxpayer name, EIN, group1Area assigned,
estimated start date and estimated planned staff days).

(3) A TEP Case Selection Worksheet should be prepared and sent to the
Manager receiving the case as the case is assigned. The worksheet will be pre-
completed with the identified items, including the estimated start date and
estimated staff days.

(4) The Manager must complete and submit the Case Selection Worksheet
within 14 days of the receipt of the case in the group and, as necessary, update
any of the information pre-completed on the worksheet. The normal ninety day
processing period for Case Selection Worksheets does not apply to this critical
initiative.

(5) Once the Case Selection Worksheet has been approved, EPP will update, as
necessary the Running Workplan to reflect any revised information.

(6) The Manager must prepare and submit the TEP Quarterly Open Case and
the Closed Case reports to EPP.

A case may be a large church that may meet the criteria for classification as a TEP case.
If an examination letter has been issued on a large church, the manager should contact
the TEP Program Manager to discuss whether it should be included in the TEP
universe, which would require preparation and submission of a TEP identification
worksheet along with updating the case to the TEP project code, and the preparation of
a TEP Case Selection Worksheet.

Agreed Cases
A PAC1 case may be resolved with a written advisory if the taxpayer exhibits an
understanding of the IRS 's position that a prohibited activity occurred, the violation
was a one time, isolated, unintentional event, the organization corrected the violation
(e.g. recovered the funds), and the organization is not likely to violate the prohibition
again.

Taxpayers are not required to admit wrongdoing, just an understanding of the service's
position that prohibited activity occurred. The written advisory must state the facts and
law and include a warning that the organization risks possible revocation of tax-exempt
status should it become involved in political activities in the future. These cases should
be closed using disposal code 52 - Written Advisory - No 5666 required. Sample
advisory letters have been developed for use in these agreed situations.
 Unagreed Cases
Situations may arise in which taxpayers do not agree a violation of the prohibition
occurred. In these situations, depending on the nature of the violation, if it is clear the
organization intends to continue the activity, revocation and/or excise tax under section
4955 should be considered. However, if the organization does not agree a violation
occurred, the violation was minimal, or no excise tax is calculable, but it is possible a
violation may reoccur, the agent should consult with the PACI team and Counsel on
how to resolve the case.

If these cases result in a written advisory, they should be closed using disposal code 08
- Written Advisory - Form 5666 required. Sample advisory letters have been
developed for use in these situations. In addition, please refer to the section on
"Researching Compliance by Organizations Examined in Previous Election Periods".
The 5666s will be directed to the Review of Operations (ROO) group for public record
searches in order to determine if a fbture violation occurs. With respect to churches,
the Section 761 1(f) rules relating to "Limitations on additional inquiries and
examinations" must be considered.

Proposed Revocations
In any case in which revocation is an issue, prior to any discussions of revocation with
the taxpayer, the Director EO and Director EO Exams must be briefed by the Project
Leader and Area Manager. Division Counsel must be included in those conversations
if the organization is a church.

Mandatory Review Procedures

All cases are subject to Mandatory Review. Cases involving revocation or assertion of
tax liability must have immediate coordination with the Team Leader. In all cases, the
closing letter should include an explanation of the alleged political intervention issue,
the taxpayer's explanation, corrective action taken by the taxpayer, when applicable,
and resolution. To ensure consistency, Mandatory Review will designate specific
Reviewer(s) to handle all cases. Mandatory Review will close all cases and mail the
closing letter.

Election Period Expedited Procedures

During an election period, the following expedited processing procedures will apply.
The Director, EO Examinations, will notie the Area and Group managers, via
memorandum, of the timeframe for the expedited procedures. Expedited processing
procedures begin with the receipt of a referral and end with a closed case. All cases
and referrals in process at the beginning of an election period will become subject to the
expedited procedures.

Prior to initiation of the program for the election period, the Director, EO Examinations
will consider assigning additional staffing if needed to meet the expedited
Classification and Mandatory Review processing goals, including assigning one or
more revenue agents to conduct initial technical review of incoming referrals, in order
to identify political intervention referrals for immediate review by the PACI
Classification Committee (as described below).
 Training
Training for designated agents and managers will be conducted as needed no later than
February 1, of the election year. The team will hold a preliminary conference call with
designated agentsivand managers approximately 30 days prior to the beginning of the
election period and will schedule routine conference calls throughout the election
period to ensure consistency and quality.

Publicity
Prior to the beginning of an election period, the Team Leader will work with CE&O to
plan the programs education and outreach efforts. Before the start of the election
period, CE&O will publicize the program's expedited processing procedures.

Classification Procedures
A PAC1 Classification Committee, comprised of three experienced Exempt
Organizations agents and/or fiont-line managers, will screen all political intervention
referrals at least weekly. If a possible Type C case is identified before the referral
committee meets, the Classification manager should convene a referral committee
meeting immediately.

During an election period, the goal will be to complete classification processing of

Type A and Type B political intervention referrals within 14 calendar days of receipt,
and Type C referrals within 10 calendar days of receipt.

Group Procedures - Non Church Cases

Revenue agents will follow expedited procedures during election periods, even if a
return is not yet due, and/or the tax year has not closed. The agent will not wait for a
return to be filed or the tax year to end in order to initiate an examination of the
organization and its activities. [See IRC section 7602(a)] In instances where no return
has been filed or the tax year has not ended since the alleged violation occurred, the
initial contact letter will list only the relevant tax period, and not the form number.

Timeframes:
o Group manager assigns case to agent - within 1 workday of receipt

o Agent sends initial contact letter (Letter 3934 for Type A & B cases,
Letter 3934-C for Type C cases) to organization - within 14 calendar
days of assignment of Type A & B cases, and within 5 calendar days for
Type C cases.

o Letter sent either by certified mail, or overnight mail with signature

required for delivery, with a response period of between 7 to 15 calendar
days for Type A & B cases (depending upon the volume of information
requested), and with a 7 calendar day response period for Type C.
Agents may entertain requests for extension of the response time after
consulting their manager.
Group Procedures - Church Cases
Agents must follow Section 761 1 inquirylexamination procedures and the Director, EO
Examinations must personally approve and sign church inquiry and examination letters
involving churches. The scope of these cases is generally limited to the information in
the referral.

Timeframes:
o Agent provides the initial case referral information to the assigned Area
Counsel attorney and the Counsel project manager - within 4 calendar
days of assignment to group (Type C - next business day), allowing
Counsel to provide the agent with advice and assistance while drafting
the inquiry letter.

o Agent provides the draft inquiry letter to the assigned Counsel attorney
in electronic format - within 10 calendar days (5 calendar days for Type
C) of assignment

Inquiry letter will include two attachments:

specific inquiry questions designed to elicit the details of
the allegedly prohibited church activity and the church's
explanation of that activity;
copy of the IRS notice regarding political activity by tax-
exempt organizations.

o Counsel provides comments, in electronic format, - within 20 calendar

days (20 days for Type C) of receipt of the draft inquiry:
opinion regarding whether the "reasonable belief' requirements
of $7611 are met
any corrections needed on the draft letter or questions

o Agent makes the necessary corrections to the inquiry letter and forwards
the complete case file (including the inquiry letter, the Counsel opinion,
the referral information and other documentation) to Mandatory Review
by overnight mail within 6 calendar days (4 calendar days for Type C) of
receiving the memo from Area Counsel with the recommended changes
(if any)

(Agent may receive necessary approval on the $7611 cover sheet

from,the Counsel project manager and the Area Manager by
email or facsimile.)

o Mandatory Review reviews case and forwards inquiry letter package to

Director, EO Examinations, for issuance of the inquiry letter - within 8
calendar days of receipt (4 calendar days for Type C).

o Director, EO Examinations reviews the complete case file and if the

Director EO Examinations personally believes that a reasonable belief
exists, will sign the inquiry letter - within 6 calendar days of receipt (4
calendar days for Type C).
 Sends case file back to Mandatory Review for dating and mailing
of letter.

Reclassifying a Type A Case to a Type B Case

If a designated agent determines, either before or after initial contact with the
organization, that the case is more complex andlor involves more than a single issue
(and possibly requires a field examination), the agent will consult with the Group
Manager. The decision to convert will be made at the discretion of the Group Manager,
with the concurrence of the Area Manager(s), in coordination with the Team Leader.
All involved will consider whether reclassifLing the case is in the best interest of the
government and will consider taxpayer burden.

Reclassifying a Type A or Type B Case to a Type C Case

If, after assignment, a Type A or B case is identified as a Type C case, the Group
Manager will immediately contact the Team Leader. The Team Leader will determine,
based upon the definition of Type C cases, whether it should be converted to a Type C
case. If it is converted to a Type C case, the Team Leader will immediately determine
which Area should handle the case and will coordinate with that Area Manager, and
immediately notify the Counsel project manager and the Director, EO Examinations.

Retention of Information on Closed Cases

Closed PACI cases in which the organization was issued an advisory, assessed a 64955
tax, or revocation proposed, should be retained in Classification for five years. This
deviation from the normal three year period specified in IRM 4.75.5.9 Exempt
Organizations Examinations - Information Items, Record Keeping System, will ensure
that previous violations are considered on current referrals.

Researching Compliance by Organizations Examined in Previous Election Periods

The Review of Operations (ROO) Group will establish a system to research compliance
of designated organizations examined during the past two years under the PACI project.

EO Classification will provide ROO the list of the organizations and EINs, along with a
copy of the closing letter. The ROO will research the organizations' website, state
political contribution records (where available) and media databases (such as Lexis-
Nexis, Westlaw, and Google) approximately every three months during an election
period, (March 1, June 1, September 1, October 1, December 1). If research reveals
evidence of an organization's participation in prohibited political activities, ROO will
prepare Form 5666, Information Report, and submit the referral along with the previous
closing letter and research to the manager of Classification. This referral will then be
reviewed by the referral committee.

If the referral committee selects the case for examination, Classification will assign the
case to a field group afier determining whether it is a Type A, B, or C case. Special
approval may be required under section 761 1(f) with respect to beginning future
inquiries of churches, and Area Counsel must be consulted in these instances.

If Classification receives a referral on an organization which was previously examined

as part of the PACI Classification will provide the name of the organization to ROO so
new research is not conducted on that entity.
I These procedures supersede procedures issued March 3 1,2005, titled "Political Intervention Project Procedures."
ii
A referral is an information item received from the public or from within the Service alleging a violation of the
Internal Revenue Code by an exempt organization. Referrals received from the Executive Branch will be
immediately reported to TIGTA (Treasury Inspector General for Tax Administration) in accordance with IRC
$7217, which prohibits Executive Branch influence over taxpayer audits and investigations, in accordance with
IRM
... 4.75.5.3(1).
"' Information which might reveal the identity of a confidential informant will not be disclosed. If an individual
who refers information does not indicate with the referral that helshe wishes to remain anonymous, the agent and
Group Manager will decide whether to contact the individual to verify hisher wishes. If contact is made, the
agent will ask whether the individual fears reprisal.
" A limited number of revenue agents with experience in political intervention cases and the ability to allocate
their time to PACI cases quickly will be identified as "designated agents" for the PACI. This will: help to ensure
consistency in application of the law; allow agents to develop a level of expertise in resolving political activity
compliance issues; and, decrease taxpayer burden through efficiency gains.
 IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

CITIZENS FOR RESPONSIBILITY )

AND ETHICS IN WASHINGTON, )
)
Plaintiff, 1
1
VS. ) Case No. 1:06cv01811
1
INTERNAL REVENUE SERVICE, ) Hon. Judge Lamberth
)
Defendant. 1

NOTICE OF RELEASE OF DOCUMENTS TO PLAINTIFF

PLEASE TAKE NOTICE that the defendant, the Internal Revenue Service, is releasing to

the plaintiff document numbers 00001 - 00076. The documents are being released to the plaintiff

with the copy of this Notice being served on the plaintiff.

DATE: December 2 1,2006.

IS/ Michael J. Martineau

MICHAEL J. MARTINEAU
JOSHUA D. SMELTZER
Trial Attorneys, Tax Division
U. S. Department of Justice
Post Office Box 227
Washington, DC 20044
Telephone: (202) 307-6483

OF COUNSEL:
JEFFREY A. TAYLOR
United States Attorney
 CERTIFICATE OF SERVICE

IT IS CERTIFIED that the foregoing Internal Revenue Service's NOTICE OF RELEASE

OF DOCUMENTS TO PLAINTIFF was caused to be served upon plaintiffs counsel on the 21st

day of December, 2006, in accordance with the Court's ECF Procedures, and by depositing a

copy thereof in the United States mail, postage prepaid, addressed as follows:

Anne L. Weismann
Kimberly D. Perkins
Citizens for Responsibility and
Ethics in Washington
1400 Eye Street, N.W., Suite 450
Washington, D.C. 20005

IS/Michael J. Martineau

MICHAEL J. MARTINEAU