IRC 6104(c) Disclosures: Chapters 41 and 42 Assessments

In addition to disclosure of proposed and final revocations of IRC 501(c)(3) organizations, approved state tax and charity agencies are also eligible to receive notices of proposed and final deficiencies of tax imposed under IRC 507 or Chapter 41 or 42 against an organization, or its disqualified persons. See IRC 6104(c)(1)(B) and Treas. Reg. 301.6104(c)-1(c)(2). These assessments include:

Initial and second tier taxes on private foundations under IRC 4940 through IRC 4945 for net investment income, self-dealing, failure to distribute income, excess business holdings, investments that jeopardize charitable purpose, and taxable expenditures.

Initial tax on certain supporting organizations and donor advised funds for excess business holdings under IRC 4943.

IRC 4911 tax on excess lobbying expenditures by public charities that have elected to be subject to IRC 501(h) regarding expenditures to influence legislation.

IRC 4912 tax on excess lobbying expenditures that result in loss of IRC 501(c)(3) tax-exempt status.

IRC 4955 tax imposed on any amount paid or incurred by a IRC 501(c)(3) organization that participates or intervenes in any political campaign on behalf of, or in opposition to, any candidate for public office.

IRC 4958 initial taxes on disqualified persons and organization managers of IRC 501(c)(3) organizations that engage in excess benefit transactions.

IRC 4959 tax imposed on hospitals organizations for failing to meet the requirements of IRC 501(r)(3).

IRC 4965 taxes related to prohibited shelter transactions.

IRC 4966 taxes on taxable distributions by sponsoring organizations maintaining donor advised funds.

IRC 4967 taxes on advice to have sponsoring organizations make distributions resulting in more than incidental benefits.

If the case is located in one of the approved states, follow the procedures outlined below.

Prepare and send a package to *TE/GE-EO-Field Reports with copies of the following:

30-day letter.

Form 870-E, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment.

RAR.

Note on the case chronology IRC 6104(c) package for [state(s)] was sent to the *TE/GE-EO-Field Reports on MM/DD/YYYY).

Notify *TE/GE-EO-Field Reports either that:

Issue is agreed.

Issue is unagreed and being forwarded to EO Compliance & Review Mandatory Review. Include a Form 3198-A Special Handling checksheet in RCCMS to alert EO Compliance & Review Mandatory Review that this case is subject to the disclosure provisions of IRC 6104(c).

The EO Exam Director’s Staff sends the Chapter 41/42 deficiency package to the appropriate state agency using Letter 6402, Disclosure to State Agencies under IRC Section 6104 of Proposed Tax Deficiency. The EO Exam Director’s Staff keeps the appropriate records and notifies the Disclosure Office to account for the disclosure under IRC 6103(p)(3).

If the Chapter 41/42 issue goes unagreed, the EO Exam Director’s Staff coordinates with EO Compliance & Review Mandatory Review and Appeals and tracks the progress of the case.

For cases sent to the Appeals office, include a 3198-A Special Handling checksheet in the RCCMS case file to alert them that the case involves an unagreed issue in a state which is eligible to receive disclosures under IRC 6104(c).

The EO Exam Director’s Staff ensures the appropriate state agency is notified as to whether the proposed assessment is upheld using Letter 6399, Disclosure to State Agencies under IRC Section 6104 of Proposed Tax Deficiency – Follow-Up Status.