§ 7611. Restrictions on church tax inquiries and examinations
(a)
Restrictions on inquiries
(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—
(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—
(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—
(2)
Notice of examination; opportunity for conference
The requirements of this paragraph are met with respect to any church tax examination if—
(3)
Contents of examination notice, et cetera
(A)
In general
The notice described in this paragraph is a written notice which includes—
(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,
(d)
Limitations on revocation of tax-exempt status, etc.
(1)
In general
The Secretary may—
(B)
(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.
(e)
Information not collected in substantial compliance with procedures to stay summons proceeding
(1)
In general
If there has not been substantial compliance with—
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.
(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—
(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—
(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—
(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—
(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.
(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).
(i)
Section not to apply to criminal investigations, etc.
This section shall not apply to—