Restrictions on church tax inquiries and examinations page 2
(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.
