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U.S. Code as of:
01/19/04
Section 7611. Restrictions on church tax inquiries and examinations
(a) Restrictions on inquiries
(1) In general
The Secretary may begin a church tax inquiry only if -
(A) the reasonable belief requirements of paragraph (2), and
(B) the notice requirements of paragraph (3), have been met.
(2) Reasonable belief requirements
The requirements of this paragraph are met with respect to any
church tax inquiry if an appropriate high-level Treasury official
reasonably believes (on the basis of facts and circumstances
recorded in writing) that the church -
(A) may not be exempt, by reason of its status as a church,
from tax under section 501(a), or
(B) may be carrying on an unrelated trade or business (within
the meaning of section 513) or otherwise engaged in activities
subject to taxation under this title.
(3) Inquiry notice requirements
(A) In general
The requirements of this paragraph are met with respect to
any church tax inquiry if, before beginning such inquiry, the
Secretary provides written notice to the church of the
beginning of such inquiry.
(B) Contents of inquiry notice
The notice required by this paragraph shall include -
(i) an explanation of -
(I) the concerns which gave rise to such inquiry, and
(II) the general subject matter of such inquiry, and
(ii) a general explanation of the applicable -
(I) administrative and constitutional provisions with
respect to such inquiry (including the right to a
conference with the Secretary before any examination of
church records), and
(II) provisions of this title which authorize such
inquiry or which may be otherwise involved in such inquiry.
(b) Restrictions on examinations
(1) In general
The Secretary may begin a church tax examination only if the
requirements of paragraph (2) have been met and such examination
may be made only -
(A) in the case of church records, to the extent necessary to
determine the liability for, and the amount of, any tax imposed
by this title, and
(B) in the case of religious activities, to the extent
necessary to determine whether an organization claiming to be a
church is a church for any period.
(2) Notice of examination; opportunity for conference
The requirements of this paragraph are met with respect to any
church tax examination if -
(A) at least 15 days before the beginning of such
examination, the Secretary provides the notice described in
paragraph (3) to both the church and the appropriate regional
counsel of the Internal Revenue Service, and
(B) the church has a reasonable time to participate in a
conference described in paragraph (3)(A)(iii), but only if the
church requests such a conference before the beginning of the
examination.
(3) Contents of examination notice, et cetera
(A) In general
The notice described in this paragraph is a written notice
which includes -
(i) a copy of the church tax inquiry notice provided to the
church under subsection (a),
(ii) a description of the church records and activities
which the Secretary seeks to examine,
(iii) an offer to have a conference between the church and
the Secretary in order to discuss, and attempt to resolve,
concerns relating to such examination, and
(iv) a copy of all documents which were collected or
prepared by the Internal Revenue Service for use in such
examination and the disclosure of which is required by the
Freedom of Information Act (5 U.S.C. 552).
(B) Earliest day examination notice may be provided
The examination notice described in subparagraph (A) shall
not be provided to the church before the 15th day after the
date on which the church tax inquiry notice was provided to the
church under subsection (a).
(C) Opinion of regional counsel with respect to examination
Any regional counsel of the Internal Revenue Service who
receives an examination notice under paragraph (1) may, within
15 days after such notice is provided, submit to the regional
commissioner for the region an advisory objection to the
examination.
(4) Examination of records and activities not specified in notice
Within the course of a church tax examination which (at the
time the examination begins) meets the requirements of paragraphs
(1) and (2), the Secretary may examine any church records or
religious activities which were not specified in the examination
notice to the extent such examination meets the requirement of
subparagraph (A) or (B) of paragraph (1) (whichever applies).
(c) Limitation on period of inquiries and examinations
(1) Inquiries and examinations must be completed within 2 years
(A) In general
The Secretary shall complete any church tax status inquiry or
examination (and make a final determination with respect
thereto) not later than the date which is 2 years after the
examination notice date.
(B) Inquiries not followed by examinations
In the case of a church tax inquiry with respect to which
there is no examination notice under subsection (b), the
Secretary shall complete such inquiry (and make a final
determination with respect thereto) not later than the date
which is 90 days after the inquiry notice date.
(2) Suspension of 2-year period
The running of the 2-year period described in paragraph (1)(A)
and the 90-day period in paragraph (1)(B) shall be suspended -
(A) for any period during which -
(i) a judicial proceeding brought by the church against the
Secretary with respect to the church tax inquiry or
examination is pending or being appealed,
(ii) a judicial proceeding brought by the Secretary against
the church (or any official thereof) to compel compliance
with any reasonable request of the Secretary in a church tax
examination for examination of church records or religious
activities is pending or being appealed, or
(iii) the Secretary is unable to take actions with respect
to the church tax inquiry or examination by reason of an
order issued in any judicial proceeding brought under section
7609,
(B) for any period in excess of 20 days (but not in excess of
6 months) in which the church or its agents fail to comply with
any reasonable request of the Secretary for church records or
other information, or
(C) for any period mutually agreed upon by the Secretary and
the church.
(d) Limitations on revocation of tax-exempt status, etc.
(1) In general
The Secretary may -
(A) determine that an organization is not a church which -
(i) is exempt from taxation by reason of section 501(a), or
(ii) is described in section 170(c), or
(B)(i) send a notice of deficiency of any tax involved in a
church tax examination, or
(ii) in the case of any tax with respect to which subchapter
B of chapter 63 (relating to deficiency procedures) does not
apply, assess any underpayment of such tax involved in a church
tax examination,
only if the appropriate regional counsel of the Internal Revenue
Service determines in writing that there has been substantial
compliance with the requirements of this section and approves in
writing of such revocation, notice of deficiency, or assessment.
(2) Limitations on period of assessment
(A) Revocation of tax-exempt status
(i) 3-year statute of limitations generally
In the case of any church tax examination with respect to
the revocation of tax-exempt status under section 501(a), any
tax imposed by chapter 1 (other than section 511) may be
assessed, or a proceeding in court for collection of such tax
may be begun without assessment, only for the 3 most recent
taxable years ending before the examination notice date.
(ii) 6-year statute of limitations where tax-exempt status
revoked
If an organization is not a church exempt from tax under
section 501(a) for any of the 3 taxable years described in
clause (i), clause (i) shall be applied by substituting "6
most recent taxable years" for "3 most recent taxable years".
(B) Unrelated business tax
In the case of any church tax examination with respect to the
tax imposed by section 511 (relating to unrelated business
income), such tax may be assessed, or a proceeding in court for
the collection of such tax may be begun without assessment,
only with respect to the 6 most recent taxable years ending
before the examination notice date.
(C) Exception where shorter statute of limitations otherwise
applicable
Subparagraphs (A) and (B) shall not be construed to increase
the period otherwise applicable under subchapter A of chapter
66 (relating to limitations on assessment and collection).
(e) Information not collected in substantial compliance with
procedures to stay summons proceeding
(1) In general
If there has not been substantial compliance with -
(A) the notice requirements of subsection (a) or (b),
(B) the conference requirement described in subsection
(b)(3)(A)(iii), or
(C) the approval requirement of subsection (d)(1) (if
applicable),
with respect to any church tax inquiry or examination, any
proceeding to compel compliance with any summons with respect to
such inquiry or examination shall be stayed until the court finds
that all practicable steps to correct the noncompliance have been
taken. The period applicable under paragraph (1) or subsection
(c) shall not be suspended during the period of any stay under
the preceding sentence.
(2) Remedy to be exclusive
No suit may be maintained, and no defense may be raised in any
proceeding (other than as provided in paragraph (1)), by reason
of any noncompliance by the Secretary with the requirements of
this section.
(f) Limitations on additional inquiries and examinations
(1) In general
If any church tax inquiry or examination with respect to any
church is completed and does not result in -
(A) a revocation, notice of deficiency, or assessment
described in subsection (d)(1), or
(B) a request by the Secretary for any significant change in
the operational practices of the church (including the adequacy
of accounting practices),
no other church tax inquiry or examination may begin with respect
to such church during the applicable 5-year period unless such
inquiry or examination is approved in writing by the Secretary or
does not involve the same or similar issues involved in the
preceding inquiry or examination. For purposes of the preceding
sentence, an inquiry or examination shall be treated as completed
not later than the expiration of the applicable period under
paragraph (1) of subsection (c).
(2) Applicable 5-year period
For purposes of paragraph (1), the term "applicable 5-year
period" means the 5-year period beginning on the date the notice
taken into account for purposes of subsection (c)(1) was
provided. For purposes of the preceding sentence, the rules of
subsection (c)(2) shall apply.
(g) Treatment of final report of revenue agent
Any final report of an agent of the Internal Revenue Service
shall be treated as a determination of the Secretary under
paragraph (1) of section 7428(a), and any church receiving such a
report shall be treated for purposes of sections 7428 and 7430 as
having exhausted the administrative remedies available to it.
(h) Definitions
For purposes of this section -
(1) Church
The term "church" includes -
(A) any organization claiming to be a church, and
(B) any convention or association of churches.
(2) Church tax inquiry
The term "church tax inquiry" means any inquiry to a church
(other than an examination) to serve as a basis for determining
whether a church -
(A) is exempt from tax under section 501(a) by reason of its
status as a church, or
(B) is carrying on an unrelated trade or business (within the
meaning of section 513) or otherwise engaged in activities
which may be subject to taxation under this title.
(3) Church tax examination
The term "church tax examination" means any examination for
purposes of making a determination described in paragraph (2) of
-
(A) church records at the request of the Internal Revenue
Service, or
(B) the religious activities of any church.
(4) Church records
(A) In general
The term "church records" means all corporate and financial
records regularly kept by a church, including corporate minute
books and lists of members and contributors.
(B) Exception
Such term shall not include records acquired -
(i) pursuant to a summons to which section 7609 applies, or
(ii) from any governmental agency.
(5) Inquiry notice date
The term "inquiry notice date" means the date the notice with
respect to a church tax inquiry is provided under subsection (a).
(6) Examination notice date
The term "examination notice date" means the date the notice
with respect to a church tax examination is provided under
subsection (b) to the church.
(7) Appropriate high-level Treasury official
The term "appropriate high-level Treasury official" means the
Secretary of the Treasury or any delegate of the Secretary whose
rank is no lower than that of a principal Internal Revenue
officer for an internal revenue region.
(i) Section not to apply to criminal investigations, etc.
This section shall not apply to -
(1) any criminal investigation,
(2) any inquiry or examination relating to the tax liability of
any person other than a church,
(3) any assessment under section 6851 (relating to termination
assessments of income tax), section 6852 (relating to termination
assessments in case of flagrant political expenditures of section
501(c)(3) organizations), or section 6861 (relating to jeopardy
assessments of income taxes, etc.),
(4) any willful attempt to defeat or evade any tax imposed by
this title, or
(5) any knowing failure to file a return of tax imposed by this
title.
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