Examination Tips

(1) Review IDRS prints INOLES and BMFOLO to verify the organization’s

information. The prints include, among other things, the organization’s filing requirements, fiscal year end, exemption subsection, foundation status code, determination ruling date, status code, prior status code, and status code date. Review the information to determine whether the organization foundation status (from private foundation to a non-private foundation), tax-exempt status (terminated its tax-exempt status to operate as a taxable organization) or operating status has changed (has terminated or ceased operating).

(2) Determine whether the organization’s termination was voluntary or involuntary.

(3) Tour the organization’s facility, if applicable. Perform initial interview with

someone that is knowledgeable of the organization’s exempt activity.

(4) Review the organization’s intent to terminate submitted to the IRS to determine

how the foundation proposed to terminate.

(5) Verify the organization followed the submitted termination plan.

(6) If the organization terminates by distributing its assets to a public charity,

substantiate that the recipient is a qualified public charity and in existence and so described for a continuous period of at least 60-months. Review the recipient’s determination letter and internal tax-exempt status information via IDRS.

(7) If the organization terminates by distributing its assets to another private

foundation:

a. Substantiate that transferring foundation voluntarily gave notice of its intent to

terminate pursuant to Section 507(a)(1).

b. If the terminating foundation’s transfer will be counted toward the satisfaction

of its Section 4942 distribution requirements, verify adequate records are

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maintained to substantiate the assets transferred meet the requirements of Section 4942(g)(3).

c. Inspect the receiving foundation’s Form 990-PF for any Chapter 42 violations

involving any substantial contributor from the transferring foundation (any person who is a substantial contributor regarding the transferor foundation shall be treated as a substantial contributor regarding the transferee foundation, regardless of whether such person meets the $5,000-2% test with respect to the transferee organization at any time).

(8) If the organization terminates by operating as a public charity, perform typical

examination techniques to substantiate the organizational and operational requirements are met.

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