This bill adds a new set of rules to the Internal Revenue Code about how the IRS may examine organizations that claim tax-exempt status under section 501(a) (other than churches). It requires the IRS to give written notice before starting an examination that explains why the group was selected, the topics and legal rules involved, which years are under review, and who the IRS examiner and supervisor are. The notice must also explain the organization's rights, offer an opening conference, and limit expanding the scope of an exam unless a new written notice is given.
The bill creates due process steps the IRS must follow during an examination. The IRS must keep a written record that shows the examination basis, each request it made, the organization's responses, the examiner's analysis, and the basis for any proposed determination. On written request, the IRS must generally give the organization the examination record within 30 days, with limited exceptions for privileged communications (summaries required if needed).
Information requests from the IRS must describe the documents sought and explain how they relate to the examination. Organizations must get at least 30 days to respond. If a request is unclear or incomplete, failing to answer that request cannot be used as the sole reason to revoke tax-exempt status.
The bill gives organizations the right to ask for a supervisory conference during the exam. The IRS must acknowledge such a request within 10 business days, hold the conference within 30 days (or a longer agreed period), and give a written summary within 15 business days after the meeting. Before issuing a proposed adverse determination to revoke tax-exempt status, the IRS must offer a closing conference that reviews findings, the legal and factual basis, and appeal rights, and then provide a written summary within 15 business days.
If the IRS proposes to revoke or otherwise adversely affect tax-exempt status, it must give a proposed adverse determination letter at least 30 days before any final action. That proposed letter must state clearly what is proposed, summarize findings and legal authority, state the proposed effective date, explain protest and appeal rights (including appeals to the Independent Office of Appeals and judicial options), and state applicable deadlines. The bill also amends rules that apply to church examinations and adds procedures for appeals to the IRS Independent Office of Appeals, including deadlines to acknowledge requests and to schedule conferences.
The bill says these changes apply to examinations begun after December 31, 2024. The bill was introduced by Representatives Lloyd Doggett and Terri Sewell and was referred to the House Committee on Ways and Means.
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