Ernst Young LLP EY Exempt Organization Tax Services

Ernst & Young LLP (EY) Exempt Organization Tax Services Future Tax Leaders Form 990 and tax controversy updates 21 March 2019

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Presenters ► Jennifer Rhoderick Executive Director, Ernst & Young LLP Indianapolis, IN ► Basir Mohammad Senior, Ernst & Young LLP San Diego, CA ► Kristen Farr Capizzi Staff, Ernst & Young LLP Chicago, IL Page 2 Form 990 and tax controversy updates

Objectives ► Identify the changes to the forms and instructions for Forms 990, 990 -T and 4720 ► Describe the reason for the various changes and the implications for tax-exempt organizations Recognize how tax reform has impacted these forms Identify relevant source material for IRS exam procedures and policies, and describe an overview of the IRS exam process Describe current trends, topics and developments in the IRS Exempt Organizations (EO) exam function, court rulings, and other current relevant administrative rulings and guidance ► ► ► Page 3 Form 990 and tax controversy updates

Agenda ► ► ► Page 4 Form 990 — form and instructions changes Form 990 -T — form and instructions changes Form 4720 — form and instructions changes Form 990 and tax controversy updates

2018 Form 990 significant changes Page 5 EY exempt organization tax services future tax leaders

2018 Form 990 changes ► Instructions to Form 990 updated to reflect financial statement reporting changes ► Instructions for Part X, Lines 27 -29 updated for FASB ASU 2016 -14, which changes the way notfor-profit organizations classify net assets. However, Form 990 has not changed ► Organizations may choose to leave Line 28 blank or report similar to prior years ► Glossary also updated to add definition for ASC 958 and remove SFAS 116 and 117 Page 6 Form 990 and tax controversy updates

2018 Form 990 changes ► Part I, Line 7 b ► ► Part V, Line 3 a ► ► Reference updated from Form 990 -T, Line 34 to Form 990 -T, Line 38 following changes to the 2018 Form 990 -T Instructions updated to check “Yes” on Line 3 a if the organization’s total gross income from all of its unrelated trades or unrelated business taxable income (UBTI) by Section 512 (a)(7) is $1, 000 or more for the tax year Part V, Lines 15 and 16 ► Two new questions added to Part V inquiring about executive compensation and net investment income excise taxes levied as part of the Tax Cuts and Jobs Act (TCJA) ► The instructions for Line 16 contain a worksheet and extensive instructions for determining whether the organization should answer question 16 Yes or No. Page 7 Form 990 and tax controversy updates

2018 Form 990 changes ► Part VI, Section C, Line 18 ► ► Added reference to new Forms 1024 and 1024 -A for 501(c)(4) organizations Part VII, Section A ► Instructions updated to include Form 1099 -MISC, Box 6 as part of reportable compensation ► Form 1099 -MISC Box 6 — medical and health care payments ► Payments of $600 or more to each physician or other supplier or provider of medical or health care services. Includes payments made by medical and health care insurers under health, accident and sickness insurance programs Page 8 Form 990 and tax controversy updates

2018 Form 990 changes ► Part XII, Lines 3 a and 3 b ► Page 9 The threshold for obtaining annual audit based on spending of federal award money increased from $500, 000 to $750, 000 Form 990 and tax controversy updates

2018 Form 990 Schedule A changes ► Schedule A ► Page 10 Part II, Line 5 instructions updated to clarify the aggregation of contributions by related parties when calculating the excess contributions over 2% public support threshold Form 990 and tax controversy updates

2018 Form 990 Schedule B changes ► Schedule B ► Rev. Proc. 2018 -38 reduced compliance burden for exempt organizations other than 501(c)(3) and 527 organizations by no longer requiring disclosure of names and addresses of donors. However, public charities and private foundations must continue to disclose such information to the IRS. ► Organizations impacted by this change should indicate “N/A” in Part I, Column B. ► Organizations impacted by this change must still maintain donor information in their records and must make the information available to the IRS upon request. Page 11 Form 990 and tax controversy updates

2018 Form 990 Schedule H changes ► Schedule H, Part V, Section B, Line 20 ► Page 12 The form and instructions have been expanded to require a narrative in Schedule H, Part V, Section C if any of the options in Line 20 are not checked, consistent with Schedule H instructions for current and prior years. Form 990 and tax controversy updates

2018 Form 990 Schedule K changes ► Schedule K, Part II, Lines 14 and 15 ► ► ► Page 13 Line 14 updated to include bonds issued after 2017 to refund tax-exempt bonds Line 15 updated to include bonds issued after 2017 to refund taxable bonds Changes to Lines 14 and 15 are due to the TCJA repealing tax-exempt advanced refundings for tax-exempt bonds Form 990 and tax controversy updates

Polling question ► The 2018 Form 990 incorporates changes as a result of the TCJA by adding questions relating to: ► Whether the organization is subject to the excise tax on excess compensation ► Whether the organization is subject to the excise tax on net investment income ► Whether the organization’s gross income from all of its unrelated trades or businesses and additional UBTI from transportation fringe benefits is more than $1, 000 ► All of the above Page 14 Form 990 and tax controversy updates

2018 Form 990 -T significant changes Page 15 EY exempt organization tax services future tax leaders

2018 Form 990 -T ► Separate UBTI calculation for each trade or business ► ► Highlights New Schedule M to report separate trades or businesses Net operating loss (NOL) calculated separately for each individual trade or business ► Eliminated NOL carryback option ► Increase in UBTI by disallowed fringe benefits ► New corporate tax rate of 21% ► Alternative minimum tax abolished for corporations ► ► Still in effect for trusts A portion of alternative minimum tax credit carryover may be treated as refundable Please note that as of 4 March 2019, the 2018 Form 990 -T instructions remain in draft form. Page 16 Form 990 and tax controversy updates

2018 Form 990 -T Block H and Part III ► Block H changed from description of primary unrelated business activity to the number of trades or businesses, and description of the first (or only) trade or business ► New Part III breaks out computation of total UBTI ► ► Page 17 Line 33 added for total UBTI from all unrelated trades or businesses Line 34 added for disallowed fringe benefits Line 35 added for pre-2018 NOL deduction Line 38 replaces Line 34 for computation of net UBTI Form 990 and tax controversy updates

2018 Form 990 -T ► Schedule M New Schedule M ► Duplicate of Form 990 -T, Parts I and II ► If the organization has more than one unrelated trade or business, it is required to complete a Schedule M for each unrelated trade or business ► ► UBTI on Line 32 of each Schedule M is aggregated on Form 990 -T, Part III, Line 33 ► ► Page 18 See Notice 2018 -67 for IRS guidance on how to identify and determine separate trades or businesses If Line 32 of any Schedule M is less than zero, do not include it in the aggregation NOLs incurred in 2018 or later must now be tracked separately for each unrelated trade or business for which a Schedule M is completed Form 990 and tax controversy updates

2018 Form 990 -T ► Line 31, Net operating loss ► ► Schedule M An organization that claims the deduction with respect to any NOL carried through taxable years for which the organization was not required to file Form 990 -T must show the amount of the deduction and how it was computed, but the organization need not file a Form 990 -T in order to preserve an NOL carryover. The amount of an NOL carryback or carryover is determined under Section 172. See Regulations Section 1. 512(b)-1(e). Attach a statement showing the computation of the NOL deduction Line 20, Charitable contributions ► Page 19 If more than one unrelated trade or business, charitable contribution deduction can be allocated using any reasonable method Form 990 and tax controversy updates

2018 Form 990 -T ► Qualified fringe benefits Report qualified transportation fringe (QTF) benefits from parking on the 2018 Form 990 T, Part II, Line 34 — Amounts paid for disallowed fringes. ► Enter the amount paid or incurred for disallowed fringes (as defined in Section 132(f)), or any parking facility used in connection with qualified parking (as defined in Section 132(f)(5)(C)), for which a deduction is not allowable by reason of Section 274. Do not include amounts directly connected with an unrelated trade or business which is regularly carried on. ► See Notice 2018 -99 for IRS guidance on calculating UBTI from qualified parking. ► It is important to remember that QTFs do not constitute a separate trade or business. ► Page 20 Additionally, if an organization has only one unrelated trade or business, it can reduce the UBTI from QTFs with a net loss from the trade or business. Form 990 and tax controversy updates

2018 Form 990 -T ► ► ► Qualified fringe benefits For organizations where QTF benefits are the only source of UBTI, only the following parts of Form 990 -T need to be completed: ► The heading (above Part I) except C, E, H and I ► Part III and IV (complete only the relevant lines) ► Signature area Estimated tax penalty relief is also available for organizations where the underpayment results from the tax on parking and transportation fringe benefits and the organization had not been required to file a 990 -T in the preceding year. See Notice 2018 -100. ► Example would be a church that never had to file a Form 990 -T prior to the tax reform ► “Notice 2018 -100” should be printed on the top of Form 990 -T for the applicable tax year Reminder: If total UBTI is less than $1, 000, there is no filing requirement. Page 21 Form 990 and tax controversy updates

2018 Form 990 -T ► New Part IV computes tax on net UBTI ► ► Part IV and AMT Line 39 added for “Organizations Taxable as Corporations” to compute the tax at the new 21% rate Alternative minimum tax abolished for corporations ► Still in effect for trusts ► A portion of alternative minimum tax credit carryover may be treated as refundable and reported on Line 45 d. See Form 8827 Credit for Prior Year Minimum Tax — Corporations Page 22 Form 990 and tax controversy updates

2018 Form 990 -T Other changes ► Business interest expense is now subject to new Section 163(j) limitations. ► Organizations will need to determine if they first meet the gross receipts test. ► If not, then the organization will need to fill out Form 8990 to compute its interest deduction limitation. ► See Proposed Treasury Regulations 1. 163(j) for more details Please note that as of March 4 th, 2019, the 2018 Form 990 -T instructions remains in draft form. Page 23 Form 990 and tax controversy updates

Polling question ► Which of the changes to the 2018 Form 990 -T will require the most time and resources from a compliance standpoint? ► ► ► Page 24 Separate unrelated trades or business/Schedule M Qualified transportation fringe benefits Other Form 990 and tax controversy updates

2018 Form 4720 significant changes Page 25 EY exempt organization tax services future tax leaders

2018 Form 4720 significant changes ► ► Form 4720 is used by tax-exempt organizations to calculate and report certain excise taxes ► Commonly used by private foundations to report self-dealing, failure to distribute income, excess business holdings, etc. ► Sponsoring organizations of donor-advised funds and certain supporting organizations ► Penalties for tax-exempt hospitals for failure to meet community health needs assessment requirements were added with the implementation of Section 501(r) 2018 significant changes to Form 4720 and instructions ► New Schedule N: Tax on Excess Executive Compensation (Section 4960) ► New Schedule O: Excise Tax on Net Investment Income of Private Colleges and Universities (Section 4968) ► Instructions: Section 4943(g): exception from the excise tax on excess business holdings for certain independently operated businesses (the “Newman’s Own” exception) Page 26 Form 990 and tax controversy updates

2018 Form 4720 significant changes Page 27 Form 990 and tax controversy updates

Schedule N: tax on excess executive compensation (Section 4960) ► Schedule N added to report Section 4960 excise tax if an applicable organization answered “Yes” on Form 990, Part V, Line 15 Page 28 Form 990 and tax controversy updates

Schedule N: tax on excess executive compensation (Section 4960) ► Draft 2018 Form 990 has a new question 15 in Part V: ► ► “Is the organization subject to the section 4960 tax on payment(s) of more than $1, 000 in remuneration or excess parachute payment(s) during the year? If ‘Yes, ’ see instructions and file Form 4720, Schedule N. ” Proposed regulations under Sections 6011 and 6071 have provisions regarding the Section 4960 excise tax ► Reported on the Form 4720, Schedule N ► Each employer liable for the tax is responsible for separately reporting and paying its share of the tax ► Payment is due generally on the 15 th day of the 5 th month after the end of the taxpayer’s taxable year (15 May for a calendar-year employer) ► No quarterly payments of estimated Section 4960 tax are required Page 29 Form 990 and tax controversy updates

Excise tax on “covered employee” compensation ► ► Summary: Section 4960 provides that, effective for taxable years beginning after 31 December 2017, an “applicable tax-exempt organization” is subject to a 21% excise tax on: ► Remuneration over $1 million paid to a covered employee (other than an excess parachute payment). ► Excess parachute payments paid to a covered employee. Notice 2019 -09 ► Until further guidance is issued, tax-exempt organizations and related organizations may apply a reasonable, good-faith interpretation of the statute in determining their liability for the “covered employee” compensation tax. ► The Notice sets forth positions that are considered reasonable and other positions deemed not to be reasonable or good-faith interpretation of the statute. ► Notice defines: ► ► ► Page 30 Covered employees (using common-law employee rule) Related organizations (include taxable organizations) Compensation (synonymous with “remuneration” — 3401(a) wages) Excess parachute payments (contingent on involuntary separation) Treasury and the IRS intend that future guidance will not apply to taxable years before the issuance of that guidance. Form 990 and tax controversy updates

Who are considered covered employees? ► Covered employee ► ► Any employee who is one of an applicable tax-exempt organization’s (ATEO’s) five highestcompensated employees in the current taxable year or a covered employee in any preceding tax year beginning after 31 December 2016 Determination of “remuneration” to identify covered employees ► Means wages within the meaning of Section 3401(a) (Form W-2 box 1 wages, with some significant and potentially consequential exceptions and modifications) paid in the calendar year ending with or within the employer’s taxable year ► Does not include amounts paid to licensed medical professional for medical services ► Teaching or research services are not medical services, unless they “relate directly to the diagnosis, cure, mitigation, treatment, or prevention of disease or affect a structure or function of the body” ► Includes amounts paid by a related organization that is the employer of the covered employee ► Takeaway — significant tracking and administration required to determine employees’ annual remuneration; employers cannot refer exclusively to Form W-2 box 1 wages Page 31 Form 990 and tax controversy updates

Polling question ► Do you expect your 501(c)(3) organization (or your clients’) will for the first time be monitoring excises taxes and filing Form 4720 due to excess executive compensation under Section 4960? ► We will monitor but the tax will likely not apply to my organization this year. ► We will probably be reporting and paying excise tax for the first time. ► My organization will likely never meet the threshold for excess compensation. Page 32 Form 990 and tax controversy updates

Schedule O: excise tax on net investment income of private colleges and universities (Section 4968) Page 33 Form 990 and tax controversy updates

Excise tax on certain colleges and universities ► Section 4968, added by the TCJA, imposes a 1. 4% excise tax for each tax year on the net investment income of an "applicable educational institution“ ► ► Net investment income for purposes of Section 4968 is determined using rules similar to the rules of Section 4940(c) that relate to the tax imposed on net investment income of private foundations ► ► Certain private colleges or universities with at least 500 full-time tuition-paying students (more than half of whom are located in the US) that have endowments of at least $500, 000 per student The amount by which the sum of the gross investment income (interest, dividends, rents, payments with respect to securities loans and royalties) and capital gain net income exceeds the investment deductions Notice 2018 -55 (interim guidance) ► ► ► Page 34 An applicable educational institution subject to the 1. 4% excise tax on net investment income on property that it sells for a gain may generally use the property's fair market value as of 31 December 2017 as its basis for calculating the tax on the gain IRS expects that the proposed regulations will allow losses to offset net gains, but that the proposed regulations will not allow capital loss carryovers or carrybacks Proposed regulations may also allow losses from property sales realized by one organization to offset gains realized by a related organization Form 990 and tax controversy updates

Steps for colleges and universities ► ► Need to develop accounting systems that will track the tax basis of investment assets. ► Monitor the tax basis of their investments, whether at cost or fair market value as of 31 December 2017 ► Monitor any investments made after that date Track net investment income as well as capital gains and losses Page 35 Form 990 and tax controversy updates

Form 990 threshold test ► Form 990, Part V, Line 16 instructions include a worksheet for determining whether a college or university meets the threshold under Section 4968 Page 36 Form 990 and tax controversy updates

Section 4943(g): the “Newman’s Own” exception ► Under Section 4943, a private foundation owning more than a 20% interest in a business enterprise is generally subject to an excise tax equal to 10% of the value of the excess business holding. ► ► This excise tax increases to 200% if a private foundation does not divest itself of the excess business holding by the end of the applicable tax period. The Section 4943 excise tax on excess business holdings will not apply to private foundations with holdings in any business enterprise that meet certain requirements for the tax year, including: ► An ownership requirement ► An “all profits to charity” distribution requirement ► Requirements regarding independent operation Page 37 Form 990 and tax controversy updates

Polling question ► Do you expect your 501(c)(3) organization (or your clients’) will for the first time be monitoring excises taxes and filing Form 4720 due to excise tax on net investment income of private colleges and universities under Section 4968? ► We will monitor but the excise tax will likely not apply to the organization. ► We will probably be reporting and paying excise tax for the first time. ► My organization is not subject to the Section 4968 excise tax. Page 38 Form 990 and tax controversy updates

Questions? Page 39 EY exempt organization tax services future tax leaders

Ernst & Young LLP (EY) Exempt Organization Tax Services Future Tax Leaders Tax controversy issues 23 March 2019

Presenter ► Mackenzie Mc. Naughton Senior Manager, Ernst & Young LLP Minneapolis, MN Page 41 Form 990 and tax controversy updates

Objectives ► Identify relevant source material for IRS exam procedures and policies, and describe an overview of the IRS exam process ► Describe current trends, topics and developments in the IRS Exempt Organizations (EO) exam function and other current relevant administrative rulings and guidance Page 42 Form 990 and tax controversy updates

Agenda ► ► Tax controversy and examination update ► IRS Tax Exempt and Government Entities (TE/GE) division ► Exempt organizations ► EO examination procedures ► EO examination issues Questions Page 43 Form 990 and tax controversy updates

Tax controversy and examination update

TE/GE division

IRS TE/GE division ► ► One of four IRS divisions Divided into three segments: 1. Employee Plans (EP) ► Retirement plans, IRAs and related trusts ► Plan participants and beneficiaries ► Employer sponsors of retirement plans 2. Exempt Organizations ► Organizations exempt from income tax under Internal Revenue Code (IRC) Section 501 (including private foundations and organizations described in IRC Section 170(b)(1)(A) (except clause (v)) ► Political organizations described in IRC Section 527 ► Organizations described in IRC Section 4947(a) ► Prepaid legal plans described in IRC Section 120 ► Welfare benefit funds described in IRC Section 4976 3. Government Entities/Shared Services (GE/SS) Page 46 ► Federal, state and local governments ► Indian tribal governments ► Tax-exempt bonds Form 990 and tax controversy updates

IRS TE/GE division ► Mission ► ► To provide our customers with top-quality service by helping them understand comply with applicable tax laws, and to protect the public interest by applying the tax law with integrity and fairness to all Customer profile ► Page 47 Customers include small local community organizations, municipalities, major universities and large pension funds, to small business plans, state governments and participants of complex tax-exempt bond transactions Form 990 and tax controversy updates

IRS TE/GE division ► Activities ► Education and communication to help customers understand their tax responsibilities ► Rulings and agreements to provide an emphasis on up-front compliance, such as the determination and voluntary compliance programs ► Examinations to identify and address noncompliance ► Customer account services to provide taxpayers with efficient tax filings, as well as accurate and timely responses to questions and requests for information ► Coordination with other IRS divisions and oversight entities, including the Department of the Treasury, Department of Labor, Pension Benefit Guaranty Corporation, Congressional committees and state governments ► Page 48 TE/GE Office of Chief Counsel responsible for private letter rulings, drafting guidance and regulations Form 990 and tax controversy updates

IRS TE/GE division Leadership team ► David Horton — Acting Commissioner ► Robert Choi — Acting Deputy Commissioner ► Justin Abold-La. Breche — Acting Director, Government Entities/Shared Services ► Catherine Jones — Acting Director, Employee Plans ► Christie Jacobs — Director, Indian Tribal Governments/Tax Exempt Bonds ► Margaret Von Lienen — Director, Exempt Organizations Page 49 ► Stephen A. Martin — Director of Rulings and Agreements ► Maria Hooke — Director of Exempt Organization Examinations ► Steven M. Martin — Director of Compliance Planning and Classification Form 990 and tax controversy updates

IRS TE/GE division Exempt organizations ► Director — Margaret Von Lienen ► Rulings and agreements ► Determinations quality assurance ► EO knowledge management ► Program management ► Examinations Page 50 ► Examination programs and review ► Five examination field areas ► Exempt organizations compliance area (EOCA) Form 990 and tax controversy updates

IRS TE/GE division 2017 reorganization ► Some exam-related functions consolidated across TE/GE division ► Exam functions still separate within each segment (EO, EP, GE) ► Consolidated the EO, EP and GE exam case identification and selection functions to one division under the GE/SS division ► Newly formed office of Compliance Planning and Classification (CP&C) ► Steven M. Martin, Director Page 51 Form 990 and tax controversy updates

IRS TE/GE division 2017 reorganization ► ► New CP&C office includes the former EO Compliance Strategies Critical Initiatives (CSCI) ► Analytics and issue identification ► Planning and monitoring, including EO annual workplan ► Former CSCI functions listed in Internal Revenue Manual (IRM) 4. 75. 8 Federal, state and local (FSL) functions moved from GE into EO ► Page 52 Important for employment tax exam implications Form 990 and tax controversy updates

Polling question ► Which of the following is not one of the main activities of the IRS TE/GE division? ► Education and communication ► Rulings and agreements ► Issuing Treasury regulations ► Examinations Page 53 Form 990 and tax controversy updates

EO examination function

EO examination function TE/GE’s EO group examinations ► Employment tax (ET) activities ► EO has jurisdiction over the employment tax returns filed by tax-exempt organizations. ► For an EO’s employment tax responsibilities, refer to: ► Page 55 ► IRM 4. 23. 2. 4. 3, TE/GE Employment Tax Program Responsibilities ► IRM 4. 75. 12. 5, Examination Jurisdiction Reorganization brought FSL function within EO to broaden employment tax knowledge (FSL/ET). Form 990 and tax controversy updates

EO examination function TE/GE’s EO group examinations ► International activities ► EO has jurisdiction over tax-exempt organizations that conduct activities outside the United States. ► Compliance responsibility includes identifying whether charities maintain adequate discretion and control over funds transferred overseas to determine that the funds are being used for exempt purposes. Page 56 Form 990 and tax controversy updates

EO examination function TE/GE’s EO group examinations ► Patient Protection and Affordable Care Act (ACA) activities ► ► EO oversees compliance by tax-exempt hospitals with the ACA. This oversight includes reviewing: ► Compliance with the ACA as described in IRC 501(r), Additional Requirements for Certain Hospitals ► Excise tax under IRC Section 4959, Taxes on Failures by Hospital Organizations See IRM 4. 75. 9. 3 for information on the ACA Review Group and identification of hospital facilities. ► Page 57 NOTE: 4. 75. 9 no longer publicly available on irs. gov Form 990 and tax controversy updates

EO examination function TE/GE’s EO group examinations EOCA — The purpose of the EOCA is to achieve the following: ► Address potential noncompliance primarily using correspondence contacts ► Perform an in-depth compliance review of an EO’s operations and activities ► Leverage EO examination resources to increase contacts in the EO community The EOCA manual contains the overview and functions, which include the following: ► Exempt Organizations Compliance Unit (EOCU) ► ACA hospital review groups Page 58 Form 990 and tax controversy updates

EO examination function EO examinations The EOCA performs a variety of work, including: ► Educational work streams ► Compliance checks ► Case building ► Office/Correspondence Examination Program (OCEP) ► Compliance reviews Page 59 Form 990 and tax controversy updates

EO examination function TE/GE’s EO group examinations EOCU audits are derived from the following sources: ► Compliance initiative projects ► Compliance checks with questionable entries; large, unusual or questionable (LUQ) items; and partial or no replies ► EOCA classification ► Service-wide programs and projects ► Case Selection and Delivery group at the EO examinations level Page 60 Form 990 and tax controversy updates

Polling question ► Over which of the following activities does TE/GE’s EO segment not have jurisdiction? ► Tax-exempt organizations that conduct activities outside the United States ► State unrelated business income tax returns filed by exempt organizations ► Employment tax returns filed by exempt organizations ► Compliance by tax-exempt hospitals with the ACA Page 61 Form 990 and tax controversy updates

EO examination issues

Current EO examination issues ► Discussion of recent taxpayer examination experiences ► Unrelated business income examinations ► Section 501(r) examinations ► Employment tax examinations ► Tax-exempt bond examinations Page 63 Form 990 and tax controversy updates

Current EO examination issues ► ► TE/GE FY 19 Program Letter ► Annual publication communicating the TE/GE division accomplishments and areas of focus (previously the annual “work plan”) ► Specific reference to areas of exam and compliance Current IRS-approved compliance strategies include: ► Section 501(c)(7) entities: focus on investment income, non-member income and non-filers of Form 990 -T, Exempt Organization Business Tax Return ► Section 4947(a)(1) non-exempt charitable trusts: focus on organizations that underreport income or overreport charitable contributions ► Previous for-profit: focus on organizations formerly operated as for-profit entities before their conversion to Section 501(c)(3) organizations ► Self-dealing by private foundations: focus on organizations with loans to disqualified persons Page 64 Form 990 and tax controversy updates

Current EO examination issues ► IRS Program Letter compliance strategies, continued: ► Early retirement incentive plans: determine whether federal, state or local governmental entities that provide cash and other options to employees as an incentive for early retirement have applied proper tax treatment to these benefits ► Forms W-2/1099 matches: compare payments reported on Form 1099 MISC, Miscellaneous Income, with wages reported on Form W-2, Wage and Tax Statement, and subject to Federal Insurance Contribution Act (FICA) tax and income tax withholding ► Notice CP 2100 (backup withholding): determine whether mismatched and/or missing taxpayer identification numbers on Form 1099 indicate failure to comply with backup withholding requirements ► Worker classification (misclassified workers): determine whether misclassified workers result in incorrectly treating employees as independent contractors Page 65 Form 990 and tax controversy updates

Current EO examination issues ► IRS Program Letter compliance strategies, continued: ► ► Cost of issuance (COI): determine whether the COI on private activity bonds exceeds 2% of the proceeds of the issue IRS Program Letter indicate priorities in data-driven approaches include the following: ► Continue to improve compliance models based on Form 990 -series returns ► Test the newly developed model for Form 5227, Split Interest Trust Information Return ► Identify returns of exempt organizations and government entities containing the highest risk of employment tax noncompliance ► In collaboration with Research, Applied Analytics and Statistics (RAAS), continue to review various items and activities, including private benefit/inurement, officer business partnerships, underreported credit card income, and related employees and for-profit partnerships. Page 66 Form 990 and tax controversy updates

Current EO examination issues ► IRS Program Letter indicate priorities, continued: ► Page 67 Continue to develop models for Form 8038, Information Return for Tax. Exempt Private Activity Bond Issuers, and Form 8038 -G, Information Return for Tax-Exempt Government Obligations, by sampling the results of data queries and models designed to test indicators of noncompliance Form 990 and tax controversy updates

General EO examination issues ► TE/GE FY 19 Program Letter: compliance checks ► Page 68 Compliance checks and soft letters are used to determine whether an exempt organization is adhering to various record-keeping and information reporting requirements, including: ► Combined Annual Wage Reporting (CAWR) Employment Tax: tax-exempt employers that had discrepancies between Form W-2 and either Form 941, Employer's Quarterly Federal Tax Return, or Form 944, Employer's Annual Federal Tax Return, and exempt organizations that are required to file, but fail to file, Form 940, Employer's Annual Federal Unemployment Tax Return ► Financial Assistance Policy (FAP): tax-exempt hospital organizations that did not comply with IRC Section 501(r)(4) ► Form 990 -T Non-Filer: IRC Section 501(c)(7) organizations that reported investment income on Form 990/990 -EZ but did not file Form 990 -T ► Form 1099 Stop-Filer: entities that were required to file, but failed to file, Form 1099 -MISC Form 990 and tax controversy updates

General EO examination issues ► TE/GE FY 19 Program Letter: compliance checks, (continued) ► IRC Section 501(c)(12) Mutual or Cooperative Telephone Companies: organizations that may have failed to meet the 85% member income test ► IRC Section 4947(a)(1) Non-Exempt Charitable Trusts (NECTs): exempt organizations that are required to file, but fail to file, Form 1041, U. S. Income Tax Return for Estates and Trusts ► Supporting Organizations: entities that state they are supporting organizations but have filed Form 990 -N, Annual Electronic Filing Requirement for Small Exempt Organizations Page 69 Form 990 and tax controversy updates

General EO examination issues ► Audit technique guidelines (ATGs) for exempt organizations ► ATGs recommend specific examination techniques, explain specialized business practices and terminology, and explore issues common to certain types of exempt organizations. ► The material in the ATGs is drawn from former IRM 4. 76, Exempt Organizations Examination Guidelines, which was removed from the IRM in September 2017. For uniformity and consistency with other parts of the IRM, the IRS moved the technical guidance information formerly found in this IRM to ATGs. ► https: //www. irs. gov/charities-non-profits/audit-technique-guides-atgs-forexempt-organizations Page 70 Form 990 and tax controversy updates

Section 501(r) examinations ► Section 4959(c). The Secretary of the Treasury or the Secretary’s delegate shall review at least once every three years the community benefit activities of each hospital organization to which Section 501(r) applies ► The IRS leverages these mandatory community benefit reviews to conduct discretionary 501(r) compliance reviews and to determine which hospitals to select for 501(r) examinations ► Section 501(r) compliance checks part of TE/GE FY 2019 Program Letter ► Per report of IRS TE/GE FY 2017 accomplishments: ► ► ► IRS completed 1, 193 reviews of hospitals for compliance with Section 501(r) in FY 2017 Referred 388 of these hospitals for field examinations Referrals for examinations were made for issues including: ► ► Lack of a CHNA No FAP and/or emergency medical care policy Issues related to billing and collection requirements As of September 11, 2018, the IRS had closed 475 Section 501(r) field examinations Page 71 Form 990 and tax controversy updates

Section 501(r) examination techniques ► ► Data reviewed in 501(r) reviews for determining exam selection ► Form 990, Schedule H answers ► 501(r)-related policies and related documents on hospitals’ websites ► State databases ► Other public information IRS Section 501(r) audit techniques training module ► A guide and basic road map for IRS agents ► Not a comprehensive audit manual ► Request policies, billing statements, board/committee meeting minutes ► Review websites to determine if required policies are posted ► On-site hospital facility tour ► Interviews with staff familiar with 501(r) policies, procedures, and operations Page 72 Form 990 and tax controversy updates

IRS Section 501(r) examination activity ► IRS agents currently conducting examinations are asking for: ► ► Page 73 Description of how the hospital facility informs and notifies its patients of the availability of financial assistance Translations of the FAP, FAP application and plain language summary into limited English proficiency languages and the methodology used to determine required translations “Amounts generally billed” workpapers and the basis for calculating amounts charged to FAP -eligible patients Records of charges to FAP-eligible individuals ► Verification of information reported on Form 990, Part V, Section B ► Copies of representative billing statements ► Description of “extraordinary collection actions” (ECAs) taken by the hospital facility ► Copies of notices sent to patients who were subject to ECAs ► Hospital facility contracts with collection agencies ► Complaints the hospital facility has received regarding collection actions or failure to comply with the FAP Form 990 and tax controversy updates

Other EO exam and IRS rulings ► PLR 201904016 ► ► IRS Form 8983 ► ► Partnership audits Losantiville Country Club v. Commissioner, No. 17 -2394 (6 th Cir. Oct. 15, 2018) ► ► Corporate practice of medicine denial IRC Section 501(c)(7) unrelated business income TAM 201837014 ► Page 74 IRC Section 501(c)(6) publishing income not unrelated business income Form 990 and tax controversy updates

EO examination procedures

EO examination procedures ► IRM 4. 75. 11. 3: Start of Field Audit (01 -18 -2017) ► Publication 1 is a two-sided document that encapsulates eight specific rights, as well as explanations of the examination, collections, appeals process and refund claims. ► Page 76 When Publication 1 is enclosed with the initial information document request, contacts to third parties for information not in the possession of the taxpayer can occur 10 calendar days after the letter was sent. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 4 (01 -18 -2017) Interview ► Under IRC Section 7602(a)(3), examiners are authorized to take testimony from persons concerned, under oath, as may be relevant or material to the inquiry. Interviews provide information about the taxpayer’s financial history, business operations, and books and records that are not available from other sources. ► Interviews should be used to obtain information needed to make informed judgments about the scope and depth of the examination and correctly resolve issues. Interviews are used to obtain leads, develop information and establish evidence. ► Interviews should be conducted with an individual having sufficient knowledge of the organization’s activities and operations. Page 77 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 4 (01 -18 -2017) Interview (continued) ► Page 78 IRC Section 7521(c) states that an examiner cannot require a taxpayer to accompany an authorized representative to an examination interview in the absence of an administrative summons. The examiner can request the taxpayer’s voluntary presence at the interview as a means to expedite the examination process. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 5. 1 (01 -18 -2017) Evaluation of Internal Controls ► Examiners should evaluate the existence and effectiveness of an organization’s internal controls and expand or contract the scope of the examination accordingly. ► Examiners should discuss internal controls with the organization’s officers or management early in the examination. This should generally be done during the initial interview. Examiners should explain the significance of internal controls in the context of tax-exempt organizations. In doing so, the examiner should emphasize the importance of proper stewardship of the tax subsidy afforded by the rest of the taxpaying public. Page 79 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 6 (01 -18 -2017) Tour of Facilities ► Regulation Section 301. 7605 -1(d)(3)(iii) states: “Regardless of where an examination takes place, the Service may visit the taxpayer’s place of business or residence to establish facts that can only be established by direct visit, such as inventory or asset verification. The Service generally will visit for these purposes on a normal workday of the Service during the Service’s normal tour of duty hours. ” ► The physical observation of the organization’s operation, or tour of business site, is an integral part of the examination process. Page 80 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 6 (01 -18 -2017) Audit of Books and Records ► Page 81 An examination of books and records will establish whether an organization is both organized and operated for tax-exempt purposes, what related returns have been or need to be filed by the organization, and whether any tax reported is reasonably correct. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 6 (01 -18 -2017) Audit of Books and Records ► While reviewing books and records, keep in mind the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), P. L. 114 -113 requirements. ► The PATH Act requires all revocations to be treated the same. Page 82 ► All revoked exempt organizations now have declaratory judgment rights. Therefore, the examiner is strongly encouraged to create an administrative record file or folder at the beginning of every Section 501(c) and (d) audit and to keep it up to date as the audit develops. ► While the examiner is not required to create an administrative record file or folder until there are indications of a proposed revocation or an adverse change in foundation status, the IRM indicates that it works to the examiner’s benefit to start one early. See IRM 4. 75. 32. 4. 1, Preparation of the Administrative Record, and IRM 4. 75. 32. 6, Examiner’s Responsibility. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 6 (01 -18 -2017) Governing Instruments ► For organizations exempt under IRC Section 501(c)(3), Section 501(c)(9) and Section 501(c)(17), a determination application that includes the organizing documents is required to be filed prior to the receipt of a determination letter. No other code section requires the filing of an application for exemption prior to filing the Form 990. Procedures for closing cases where no determination application was filed (and was not required) are found in IRM 4. 75. 16. 5. 9, Status 36 Cases. ► For organizations exempt under a group ruling (identified by the group exemption number), there will be no determination file for the specific entity. Page 83 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 6 (01 -18 -2017) Governing Instruments ► Page 84 The examiner should review the organization’s governing instruments to identify the following: ► Any amendments or changes that would jeopardize the organization’s exempt status ► Any committees with special responsibilities ► Who controls the organization, both ultimately and in day-to-day operations ► Duties of officers, especially noting which officials are authorized to disburse funds and make decisions affecting the operations of the organization Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 8. 3 (01 -18 -2017) Minutes ► The examiner should review minutes for the year under examination, prior years and subsequent years. At a minimum, coverage should include at least the year before and the year after the return under examination. The examiner will expand the review as circumstances warrant. ► When, or if, challenged over the ability to request the minutes of prior and subsequent years when auditing just a single year, notify the organization that the examination concerns any activities conducted in the year under examination that were started, carried on or concluded in a prior/subsequent year. Alternatively, obtain managerial approval to expand the examination into prior and subsequent years. Page 85 Form 990 and tax controversy updates

Polling question ► Which of the following is typically not one of the purposes of an interview as part of an examination? ► To obtain leads ► To develop information ► To establish evidence ► To identify any amendments or changes to governing documents that would jeopardize the organization’s exempt status Page 86 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 8. 7 (01 -18 -2017) Leases, Mortgages, and Loans ► ► Consider reviewing questionable leases, mortgages and loans, particularly those with officers or other related parties. Determine whether private individuals are receiving any form of inurement or whether the organization has executed any agreements not in furtherance of its exempt purpose. IRM 4. 75. 11. 8. 10 (01 -18 -2017) Financial Records ► Page 87 A review of the financial information generally reveals important information about the organization’s activities. Additionally, it verifies that the information reported on the tax return is correct. Sampling of the transactions also determines the strength or weakness of the internal controls. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 9 (01 -18 -2017) Reconciliation of Books and Records ► ► The examiner should reconcile the return to the organization’s books. This is necessary to verify all transactions reported on the return have been recorded in the books. IRM 4. 75. 11. 10 (01 -18 -2017) Comparison of Prior and Subsequent Year Financial Information ► Page 88 Compare the year under examination with prior and subsequent year income and expense statements to identify any large or questionable differences between years. Identification of amounts reported in only one year, but not other years, may indicate unusual one-time transactions. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11 (01 -18 -2017) Review of Chart of Accounts ► ► The examiner should review the chart of accounts for unusual accounts or accounts that should appear but are absent. IRM 4. 75. 11. 12 (01 -18 -2017) Review of Financial and Management Reports ► Page 89 Review audit reports (both external and internal), as well as the management letter from the exempt organization’s CPA. The latter report provides useful information on internal controls and the organization’s accounting procedures. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 13 (01 -18 -2017) Accountant’s Work Papers ► Request and review the accountant’s tax reconciliation workpapers. They provide a good starting point for reconciling the return to the books. ► Tax reconciliation workpapers, unlike audit workpapers, should be requested at the beginning of an examination. There is a need for these workpapers, since they include the final balance tying the return to the general ledger and other analyses necessary to complete the return. Page 90 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15 (01 -18 -2017) Analysis of Accounts ► The following procedures can be performed during the pre-examination phase or in the field. To perform these procedures prior to the field visitation, the general ledger and chart of accounts must be obtained in advance of the audit requested in the initial information document request. ► Identify certain accounts for further analysis to determine the source of the revenue or expenditures. An organization’s utilization of its resources and expenditures is an important indicator of an organization’s programs and activities. Page 91 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15 (01 -18 -2017) Analysis of Accounts ► Page 92 Look for any unusual or nonrecurring items. Items may be unusual by amount, source or nature. ► Unusual in amount — amounts which are much larger or smaller than typical entries to an account ► Unusual by source — source, as used here, means the journals from which the account was posted, as indicated in the folio column. There is a normal source pattern for most postings, and any deviations from the norm should be investigated, such as a payroll entry in the office supplies account ► Unusual by nature — such as credit entries in accounts usually containing only debits, or accounts which exist at the beginning of the year but do not exist at the end Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 1 (01 -18 -2017) Sampling Techniques ► With certain small organizations, there may be no need to sample documents, as the agent can review all of the records in the span of a day or two. All other organizations have far too many records to review in the limited time that an agent spends at an audit site. Sampling of the records provides an element of confidence in the amounts recorded on the books, assists in identifying issues to be addressed and aids in recognizing fraud. ► Statistical sampling is a procedure used to choose a portion of the whole to make a statement about the entire body of information, eliminating the examiner’s judgment on the items to be sampled. Page 93 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 2 (01 -18 -2017) Income Analysis ► The income of an organization should be reviewed to determine the size, extent and nature of the income, as well as verifying that the amount reported is reasonably accurate. ► There are several purposes for analyzing income, including determinations of whether the income: ► Page 94 ► Supports the exempt purposes of the organization ► Is subject to unrelated trade or business and/or excise taxes ► Is from related parties, potentially giving rise to inurement ► Is properly classified for purposes of various tests Using the LUQ items originally selected on the return during the preexamination phase, select the corresponding accounts from the trial balance for further in-depth review. At the same time, review the trial balance for any additional LUQ items not previously identified. Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 3 (01 -18 -2017) Expense Analysis ► The expenses of an organization should be reviewed to determine the size, extent and nature of the expenses, as well as to verify that the amount reported is not only reasonably accurate but also correctly classified as an expense and not an asset (such as prepaid expenses). ► Using the LUQ items originally selected on the return during the preexamination phase, select the corresponding accounts from the trial balance for further in-depth review. At the same time, review the trial balance for any additional LUQ items not previously identified. Page 95 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 3 (01 -18 -2017) Expense Analysis ► Page 96 There are several purposes for analyzing expense, including determinations of whether the expense: ► Is in furtherance of exempt purposes ► Gives rise to potential inurement ► Is for a political and/or legislative expenditure ► Gives rise to additional tax liabilities (Chapters 41 and 42) ► Triggers other filing requirements ► Is properly allocated against any unrelated business income Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 4 (01 -18 -2017) Balance Sheet Analysis ► Page 97 The purposes of analyzing the balance sheet include the following: ► Identifying potential inurement, private benefit or excess benefit transactions ► Identifying assets generating unrelated business income ► Analyzing the changes in net assets/fund balances and in net worth and reconciling any increases or decreases with the income and expense statements Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 5 (01 -18 -2017) Tax Liabilities ► Page 98 Determine if an exempt organization is liable for certain taxes and, if so, determine the correct amount relating to the following: ► Unrelated business taxable income, IRC Section 511 -514 ► Transactions by private foundations, IRC Section 4940 -4945 ► Lobbying activities, IRC Section 4911 -4912 ► Political activities, IRC Sections 527(f) and 4955 ► Excess benefit transactions, IRC Section 4958 ► Employment taxes, IRC Sections 3101, 3111, 3301, 3402, 3406 and 3509 ► Gaming activities, IRC Sections 4401 and 4411 ► Proxy tax on lobbying and political expenditures, IRC Section 6033(e)(2)(A) ► Black lung trust excise taxes, IRC Sections 4951 -4953 Form 990 and tax controversy updates

Polling question ► What is not a purpose of analyzing the organization’s balance sheet? ► Documenting that the item incurred is actually an expense and not an asset ► Identifying potential inurement, private benefit or excess benefit transactions ► Identifying assets generating unrelated business income ► Analyzing the changes in net assets/fund balances and in net worth and reconciling any increases or decreases with the income and expense statements Page 99 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 11. 15. 6 (01 -18 -2017) Accuracy of Return ► Even though many organizations filing Forms 990 -N, 990 -EZ or 990 are not subject to the various taxes identified above, the forms are subject to public inspection and are relied upon by the public for a variety of purposes. ► Due to this public scrutiny of the Form 990 series of returns, considerations must be given to verifying the correctness and accuracy of the return. Amended returns may be accepted in most situations. ► In instances where the organization has incorrectly calculated the proxy tax, resulting in an understatement of tax, no amended return will be accepted, as the period for rolling over additional legislative expenses to the subsequent year ends when the return is examined. Page 100 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 12. 3. 1 (03 -14 -2017) Filing Checks Always Required ► Page 101 A filing check is always required for the following: ► Form 990 in the case of any IRC Section 501(c) organization or IRC Section 4947(a)(1) trust, not a private foundation and not a black lung benefit trust ► Form 990 -EZ in the case of any IRC Section 501(c) organization or IRC Section 4947(a)(1) trust, not a private foundation and not a black lung benefit trust ► Form 990 -N in the case of any IRC Section 501(c) organization other than a private foundation, except those ineligible to file Form 990 -N listed in https: //www. irs. gov/charitiesnon-profits/form-990 -n-e-postcard-organizations-not-permitted-to-file ► Form 5578 in the case of any IRC Section 501(c)(3) organization not filing Form 990 or Form 990 -EZ that operates, supervises or controls a private school ► Form 990 -PF in the case of any private foundation or IRC 4947(a)(1) trust treated as a private foundation ► Form 990 -BL in the case of any black lung benefit trust exempt under IRC Section 501(c)(21) ► Form 1065 in the case of any religious or apostolic organization under IRC Section 501(d) ► Form 5227 in the case of any IRC Section 4947(a)(2) split-interest trust ► Form 990 -T in the case of any IRC Section 501(c) organization or government-owned college and university Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 12. 3. 1 (03 -14 -2017) Filing Checks Always Required ► Form 1120 in the case of any taxable private foundation that is a corporation or unincorporated association ► Form 1041 in the case of any IRC Section 4947 trust or any taxable private foundation that is a trust ► Form 940, Employer’s Annual Federal Unemployment Tax Return (not applicable to IRC Section 501(c)(3) organizations) ► Form 941, Employer’s Quarterly Federal Tax Return ► Form 944, Employer’s Annual Federal Tax Return ► Form 945, Annual Return of Withheld Federal Income Tax ► Prior and subsequent year returns for each of the above Page 102 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 15. 4 (07 -18 -17) Types of Audit Results ► Close each audited return under EO jurisdiction under one of the audit results listed below. Note that each change in tax or status must be either agreed or disagreed (except terminations and closing agreements). Disagreed changes are further classified as either “with” or “without” the taxpayer’s protest for appeal. ► ► ► Page 103 No change with advisory, Form 5666, TE/GE Referral Information Report, required No change with advisory, Form 5666 required — Inadequate Records Notice Revocation of tax-exempt status (IRC Section 501(c)(3) — IRC Section 7428 case) Revocation of tax-exempt status (Section 501(c) organizations other than (c)(3), and Section 501(d)) Modification of tax-exempt status (Section 501(c) organizations other than (c)(3)); see IRM 4. 75. 15. 8. 2 Reclassification of foundation status (Section 501(c)(3) organizations — IRC Section 7428 case) Disqualification of tax-exempt status (Status 40 organizations — IRC Section 7428 case) Disqualification of tax-exempt status (Status 36 and IRC Section 501(c)(12) or IRC Section 501(c)(15)) Closing agreement; see IRM 4. 75. 25, Exempt Organizations Examinations Closing Agreements Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 15. 4 (07 -18 -17) Types of Audit Results ► Termination of tax-exempt status; see IRM 4. 75. 16. 5. 10, Termination of Exempt Status ► Change in tax ► Allowance of a claim in full; see Exhibit 4. 75. 15 -2 ► Allowance of a claim in full — surveyed claim ► Disallowance of a claim in full or in part; see Exhibit 4. 75. 15 -2 ► Disallowance of a claim in full or in part, plus additional tax or penalty; see Exhibit 4. 75. 15 -2 ► Withdrawal of claim ► Allowance of an abatement request in full; see Exhibit 4. 75. 15 -2 ► Disallowance of an abatement request in full or in part, plus additional tax or penalty; see Exhibit 4. 75. 15 -2 ► Withdrawal of abatement request Page 104 Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 17. 1. 6 (06 -08 -2017) Introduction ► Mandatory review provides technical services for EO examination field agents to enhance the technical quality of their work. ► A specific list of cases subject to mandatory review are listed in IRM 4. 75. 16. 6. In summary, mandatory review handles the following types of cases: Page 105 ► Church tax audits ► Church tax inquiries ► Revocations (other than by IRC Section 6033(j)) ► Modifications of foundation status ► Disagreed issues with protest ► Disagreed issues without protest, in general ► Whistleblowers ► Worker classifications ► Joint Committee claim cases Form 990 and tax controversy updates

EO examination procedures ► IRM 4. 75. 17. 1. 6 (06 -08 -2017) Introduction ► Page 106 Mandatory review performs the final review of the case before closure to Appeals (in the case of protests) or to the EO closing unit (formerly Examination Special Support (ESS)). When necessary, mandatory review prepares and issues 90 -day letters (final adverse determination letters, statutory notices of deficiency and notices of determination of worker classification). Mandatory review also handles requests for the following: ► Closing agreements ► Continuing professional education presentations ► Forms 1254, Examination Suspense Report, suspense ► Published instructions (IRM and interim guidance memoranda) ► Redactions of final audit reports, 90 -day letters and corresponding cover letters ► Technical assistance ► Technical advice memoranda Form 990 and tax controversy updates

Questions

You should now be able to … ► Identify relevant source material for IRS exam procedures and policies, and describe an overview of the IRS exam process ► Describe current trends, topics and developments in the IRS EO exam function and other current relevant administrative rulings and guidance Page 108 Form 990 and tax controversy updates

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