26 U.S.C. § 7611 — Restrictions on church tax inquiries and

Page 3987 TITLE 26—INTERNAL REVENUE CODE § 7611 EFFECTIVE DATE OF 1982 AMENDMENT Pub. L. 97–248, title III, § 311(c)(2), Sept. 3, 1982, 96 Stat. 601, provided that: ‘‘The amendments made by subsection (b) [amending this section] shall apply to summonses served after December 31, 1982.’’ Pub. L. 97–248, title III, § 331(e), Sept. 3, 1982, 96 Stat. 621, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply to summonses served after December 31, 1982.’’ Pub. L. 97–248, title III, § 332(b), Sept. 3, 1982, 96 Stat. 622, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to sum- monses served after December 31, 1982.’’ EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–223 effective Jan. 1, 1979, see section 232(h)(2) of Pub. L. 96–223, set out as a note under section 6427 of this title. EFFECTIVE DATE OF 1978 AMENDMENTS Amendment by Pub. L. 95–600 effective Oct. 4, 1976, see section 703(r) of Pub. L. 95–600, set out a note under section 46 of this title. Amendment by Pub. L. 95–599 effective Jan. 1, 1979, see section 505(d) of Pub. L. 95–599, set out as a note under section 6427 of this title. EFFECTIVE DATE Pub. L. 94–455, title XII, § 1205(c), Oct. 4, 1976, 90 Stat. 1703, as amended by Pub. L. 94–528, § 2(b), Oct. 17, 1976, 90 Stat. 2483, provided that: ‘‘The amendments made by this section [enacting this section and section 7610 of this title] shall apply with respect to any summons issued after February 28, 1977.’’ § 7610. Fees and costs for witnesses (a) In general The Secretary shall by regulations establish the rates and conditions under which payment may be made of— (1) fees and mileage to persons who are sum- moned to appear before the Secretary, and (2) reimbursement for such costs that are reasonably necessary which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data required to be produced by summons. (b) Exceptions No payment may be made under paragraph (2) of subsection (a) if— (1) the person with respect to whose liability the summons is issued has a proprietary inter- est in the books, papers, records or other data required to be produced, or (2) the person summoned is the person with respect to whose liability the summons is issued or an officer, employee, agent, account- ant, or attorney of such person who, at the time the summons is served, is acting as such. (c) Summons to which section applies This section applies with respect to any sum- mons authorized under section 6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602. (Added Pub. L. 94–455, title XII, § 1205(a), Oct. 4, 1976, 90 Stat. 1699; amended Pub. L. 95–599, title V, § 505(c)(6), Nov. 6, 1978, 92 Stat. 2760; Pub. L. 96–223, title II, § 232(d)(4)(E), Apr. 2, 1980, 94 Stat. 278; Pub. L. 97–424, title V, § 515(b)(12), Jan. 6, 1983, 96 Stat. 2182; Pub. L. 98–369, div. A, title IX, § 911(d)(2)(G), July 18, 1984, 98 Stat. 1007; Pub. L. 99–514, title XVII, § 1703(e)(2)(G), Oct. 22, 1986, 100 Stat. 2778; Pub. L. 100–647, title I, § 1017(c)(9), (12), Nov. 10, 1988, 102 Stat. 3576, 3577.) Editorial Notes AMENDMENTS 1988—Subsec. (c). Pub. L. 100–647, § 1017(c)(12), made technical correction to language of Pub. L. 99–514, § 1703(e)(2)(G), see 1986 Amendment note below. Pub. L. 100–647, § 1017(c)(9), substituted ‘‘6421(g)(2)’’ for ‘‘6421(f)(2)’’. 1986—Subsec. (c). Pub. L. 99–514, as amended by Pub. L. 100–647, § 1017(c)(12), substituted ‘‘6427(j)(2)’’ for ‘‘6427(i)(2)’’. 1984—Subsec. (c). Pub. L. 98–369 substituted ‘‘6427(i)(2)’’ for ‘‘6427(h)(2)’’. 1983—Subsec. (c). Pub. L. 97–424 struck out ‘‘6424(d)(2),’’ after ‘‘6421(f)(2),’’. 1980—Subsec. (c). Pub. L. 96–223 substituted ‘‘6427(h)(2)’’ for ‘‘6427(g)(2)’’. 1978—Subsec. (c). Pub. L. 95–599 substituted ‘‘6427(g)(2)’’ for ‘‘6427(e)(2)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–514 applicable to gasoline removed (as defined in section 4082 of this title as amended by section 1703 of Pub. L. 99–514) after Dec. 31, 1987, see section 1703(h) of Pub. L. 99–514, set out as a note under section 4081 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–369 effective Aug. 1, 1984, see section 911(e) of Pub. L. 98–369, set out as a note under section 6427 of this title. EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 97–424 applicable with respect to articles sold after Jan. 6, 1983, see section 515(c) of Pub. L. 97–424, set out as a note under section 34 of this title. EFFECTIVE DATE OF 1980 AMENDMENT Amendment by Pub. L. 96–223 effective Jan. 1, 1979, see section 232(h)(2) of Pub. L. 96–223, set out as a note under section 6427 of this title. EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–599 effective Jan. 1, 1979, see section 505(d) of Pub. L. 95–599, set out as a note under section 6427 of this title. § 7611. Restrictions on church tax inquiries and examinations (a) Restrictions on inquiries (1) In general The Secretary may begin a church tax in- quiry 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 rea- Page 3988 TITLE 26—INTERNAL REVENUE CODE § 7611 sonably believes (on the basis of facts and cir- cumstances 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 sub- ject 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 Sec- retary 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 applica- ble— (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 au- thorize 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 exam- ination 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 ex- tent 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 con- ference 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 begin- ning 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 no- tice provided to the church under sub- section (a), (ii) a description of the church records and activities which the Secretary seeks to examine, (iii) an offer to have a conference be- tween 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 Rev- enue 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 sub- paragraph (A) shall not be provided to the church before the 15th day after the date on which the church tax inquiry notice was pro- vided to the church under subsection (a). (C) Opinion of regional counsel with respect to examination Any regional counsel of the Internal Rev- enue 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 examina- tion which (at the time the examination be- gins) 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 re- quirement of subparagraph (A) or (B) of para- graph (1) (whichever applies). (c) Limitation on period of inquiries and exami- nations (1) Inquiries and examinations must be com- pleted 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 re- spect to which there is no examination no- tice under subsection (b), the Secretary shall complete such inquiry (and make a final de- termination with respect thereto) not later than the date which is 90 days after the in- quiry 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 para- graph (1)(B) shall be suspended— (A) for any period during which— Page 3989 TITLE 26—INTERNAL REVENUE CODE § 7611 (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 offi- cial 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 ac- tions with respect to the church tax in- quiry 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 sta- tus, 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 writ- ing that there has been substantial compli- ance 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 examina- tion 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 ex- empt from tax under section 501(a) for any of the 3 taxable years described in clause (i), clause (i) shall be applied by sub- stituting ‘‘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 be- fore the examination notice date. (C) Exception where shorter statute of limi- tations 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 com- pliance 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 ex- amination, any proceeding to compel compli- ance 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 sen- tence. (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 re- quirements of this section. (f) Limitations on additional inquiries and ex- aminations (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 sig- nificant change in the operational practices of the church (including the adequacy of ac- counting practices), no other church tax inquiry or examination may begin with respect to such church during the applicable 5-year period unless such in- quiry or examination is approved in writing by the Secretary or does not involve the same or similar issues involved in the preceding in- quiry or examination. For purposes of the pre- ceding 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 ‘‘ap- plicable 5-year period’’ means the 5-year pe- Page 3990 TITLE 26—INTERNAL REVENUE CODE § 7611 riod 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 determina- tion of the Secretary under paragraph (1) of sec- tion 7428(a), and any church receiving such a re- port 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 examina- tion) 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 de- termination described in paragraph (2) of— (A) church records at the request of the In- ternal Revenue Service, or (B) the religious activities of any church. (4) Church records (A) In general The term ‘‘church records’’ means all cor- porate 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 ac- quired— (i) pursuant to a summons to which sec- tion 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 Rev- enue officer for an internal revenue region. (i) Section not to apply to criminal investiga- tions, 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 (relat- ing to termination assessments of income tax), section 6852 (relating to termination as- sessments in case of flagrant political expendi- tures of section 501(c)(3) organizations), or sec- tion 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. (Added Pub. L. 98–369, div. A, title X, § 1033(a), July 18, 1984, 98 Stat. 1034; amended Pub. L. 99–514, title XVIII, § 1899A(61), (62), Oct. 22, 1986, 100 Stat. 2962; Pub. L. 100–203, title X, § 10713(b)(2)(G), Dec. 22, 1987, 101 Stat. 1330–470; Pub. L. 100–647, title I, § 1018(u)(49), Nov. 10, 1988, 102 Stat. 3593; Pub. L. 101–239, title VII, § 7822(d)(1), Dec. 19, 1989, 103 Stat. 2425; Pub. L. 104–188, title I, § 1704(t)(59), Aug. 20, 1996, 110 Stat. 1890; Pub. L. 105–206, title I, § 1102(e)(3), July 22, 1998, 112 Stat. 705.) Editorial Notes PRIOR PROVISIONS A prior section 7611 was renumbered section 7613 of this title. AMENDMENTS 1998—Subsec. (f)(1). Pub. L. 105–206 substituted ‘‘Sec- retary’’ for ‘‘Assistant Commissioner for Employee Plans and Exempt Organizations of the Internal Rev- enue Service’’ in concluding provisions. 1996—Subsec. (h)(7). Pub. L. 104–188 substituted ‘‘ap- propriate’’ for ‘‘approporiate’’ in text. 1989—Subsec. (i)(3). Pub. L. 101–239 made technical correction to directory language of Pub. L. 100–203, see 1987 Amendment note below. 1988—Subsec. (i)(5). Pub. L. 100–647 substituted ‘‘this title’’ for ‘‘the title’’. 1987—Subsec. (i)(3). Pub. L. 100–203, as amended by Pub. L. 101–239, substituted ‘‘, section 6852 (relating to termination assessments in case of flagrant political expenditures of section 501(c)(3) organizations), or sec- tion 6861 (relating to jeopardy assessments of income taxes, etc.),’’ for ‘‘or section 6861 (relating to jeopardy assessments of income taxes, etc.),’’. 1986—Subsec. (a)(1)(B). Pub. L. 99–514, § 1899A(62), re- enacted subpar. (B) without change. Subsec. (i). Pub. L. 99–514, § 1899A(61), redesignated pars. (A) to (E) as (1) to (5), in par. (3), substituted ‘‘etc.)’’ for ‘‘etc)’’, and in par. (5), substituted ‘‘the title’’ for ‘‘the title’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1989 AMENDMENT Amendment by Pub. L. 101–239 effective as if included in the provision of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 7823 of Pub. L. 101–239, set out as a note under section 26 of this title. EFFECTIVE DATE OF 1988 AMENDMENT Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of Page 3991 TITLE 26—INTERNAL REVENUE CODE § 7612 the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. EFFECTIVE DATE Pub. L. 98–369, div. A, title X, § 1033(d), July 18, 1984, 98 Stat. 1039, provided that: ‘‘The amendments made by this section [enacting this section and amending sec- tions 7428 and 7605 of this title] shall apply with respect to inquiries and examinations beginning after Decem- ber 31, 1984.’’ PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989 For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title. § 7612. Special procedures for summonses for computer software (a) General rule For purposes of this title— (1) except as provided in subsection (b), no summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons to produce or analyze any tax-related computer software source code; and (2) any software and related materials which are provided to the Secretary under this title shall be subject to the safeguards under sub- section (c). (b) Circumstances under which computer soft- ware source code may be provided (1) In general Subsection (a)(1) shall not apply to any por- tion, item, or component of tax-related com- puter software source code if— (A) the Secretary is unable to otherwise reasonably ascertain the correctness of any item on a return from— (i) the taxpayer’s books, papers, records, or other data; or (ii) the computer software executable code (and any modifications thereof) to which such source code relates and any as- sociated data which, when executed, pro- duces the output to ascertain the correct- ness of the item; (B) the Secretary identifies with reason- able specificity the portion, item, or compo- nent of such source code needed to verify the correctness of such item on the return; and (C) the Secretary determines that the need for the portion, item, or component of such source code with respect to such item out- weighs the risks of unauthorized disclosure of trade secrets. (2) Exceptions Subsection (a)(1) shall not apply to— (A) any inquiry into any offense connected with the administration or enforcement of the internal revenue laws; (B) any tax-related computer software source code acquired or developed by the taxpayer or a related person primarily for internal use by the taxpayer or such person rather than for commercial distribution; (C) any communications between the owner of the tax-related computer software source code and the taxpayer or related per- sons; or (D) any tax-related computer software source code which is required to be provided or made available pursuant to any other pro- vision of this title. (3) Cooperation required For purposes of paragraph (1), the Secretary shall be treated as meeting the requirements of subparagraphs (A) and (B) of such paragraph if— (A) the Secretary determines that it is not feasible to determine the correctness of an item without access to the computer soft- ware executable code and associated data de- scribed in paragraph (1)(A)(ii); (B) the Secretary makes a formal request to the taxpayer for such code and data and to the owner of the computer software source code for such executable code; and (C) such code and data is not provided within 180 days of such request. (4) Right to contest summons In any proceeding brought under section 7604 to enforce a summons issued under the author- ity of this subsection, the court shall, at the request of any party, hold a hearing to deter- mine whether the applicable requirements of this subsection have been met. (c) Safeguards to ensure protection of trade se- crets and other confidential information (1) Entry of protective order In any court proceeding to enforce a sum- mons for any portion of software, the court may receive evidence and issue any order nec- essary to prevent the disclosure of trade se- crets or other confidential information with respect to such software, including requiring that any information be placed under seal to be opened only as directed by the court. (2) Protection of software Notwithstanding any other provision of this section, and in addition to any protections or- dered pursuant to paragraph (1), in the case of software that comes into the possession or control of the Secretary in the course of any examination with respect to any taxpayer— (A) the software may be used only in con- nection with the examination of such tax- payer’s return, any appeal by the taxpayer to the Internal Revenue Service Independent Office of Appeals, any judicial proceeding (and any appeals therefrom), and any in- quiry into any offense connected with the administration or enforcement of the inter- nal revenue laws; (B) the Secretary shall provide, in ad- vance, to the taxpayer and the owner of the software a written list of the names of all in- dividuals who will analyze or otherwise have access to the software; (C) the software shall be maintained in a secure area or place, and, in the case of com-