Exempt Organizations Advisory - Amendments to Regulations Regarding Church Tax Inquiries

On July 31, the IRS released proposed regulations amending the definition of an "appropriate high-level Treasury official" for purposes of commencing an inquiry into a church's tax liability.  Special procedures apply to the audit of "churches," a term which includes synagogues, mosques, and similar religious entities.  Section 7611 requires an "appropriate high-level Treasury official" to approve tax inquiries of churches.  The current regulations provide that a Regional Commissioner is the appropriate official.  When the IRS was restructured in 1998, the position of Regional Commissioner was eliminated and the Service designated the Director, Exempt Organizations Examinations as the "appropriate high-level Treasury official" for purposes of section 7611.  Recent litigation challenged this interpretation of the term.  In United States v. Living Work Christian Center, Civil No. 08-mc-37, D.C. Minn. (Jan. 30, 2009) the Court ruled that the Director, Exempt Organizations Examinations is not an appropriate high-level Treasury official because the position does not have a breadth of responsibility comparable to a Regional Commissioner and is not as high a position within the IRS.  The new proposed regulations provide that the Director, Exempt Organizations replaces references to Regional Commissioner and makes various other changes to conform the regulations to current positions in the IRS.

The regulations can be accessed here.