Attorney Protests IRS Church Audit Procedures

BNA's Daily Report for Executives [subscription required] this week reported on a July 17 letter to Internal Revenue Service Commissioner Mark Everson from attorney Marcus Owens who says that the IRS is acting illegally in promulgating a new policy on who should determine when a tax audit of a church should be instituted. A May 9 IRS issued Chief Counsel Advice Memoranda 200623061[LEXIS link] without an opportunity for public comment. It formalized delegation for determining when a church should be audited to the Director of Exempt Organization Examinations. Owens said that in a recently released memorandum dated March 31, 2005, the Director of EO Examinations made an explicit delegation of the "reasonable belief" decision even lower within the IRS as part of the procedures for the IRS's Political Intervention Project. Owens said this is a "clear violation" of Internal Revenue Code Section 7611, which provides that an appropriate "high-level Treasury Department official must reasonably believe (on the basis of facts and circumstances) that a church may not be tax-exempt." BNA makes the full text of the letter available to subscribers.