On Feb. 24, 2006 the Internal Revenue Service (IRS) released procedures it will use to enforce the ban on partisan election activity by charities and religious organizations during the 2006 election season. This summary outlines the new process. Purpose 1. To educate charities and religious organizations and to give notice about the IRS’ enforcement program in order to prevent violations of the ban on partisan activities by charities and religious organizations 2. Address noncompliance "while the issue remains prominent, so that there are no reoccurrences and so correction could occur prior to the relevant election." Project Scope The PACI program will handle all referrals alleging intervention in elections by 501(c)(3) organizations, and will require allocation of resources. It will leverage resources when it identifies non-PACD related issues during an examination. Program Leader and Team At the beginning of each November before an election year the Director of the IRS's Exempt Organizations (EO) division will appoint a Program Leader to manage PACI, who will appoint team leadership and implement and monitor the program. The team will:

• Identify resource needs
• Review results from prior the election and identify necessary changes in procedures
• Coordinate with the EO Exams Area Managers to identify agents that will be assigned PACI cases
• Coordinate mandatory training for all employees involved. "Training will emphasize to the agents and managers the sensitive nature of these cases and that we respect taxpayer's constitutional rights to freedom of speech and religion." (emphasis added)
• Coordinate the examinations under the program and ensure the IRS approach and outcomes are consistent on a national basis
• Measure results and prepare reports
• Coordinate publicity and outreach with the Customer Education and Outreach (CE&O) division

Eletion Period The IRS defines an election period as January 1- November 30 of each election year. Outreach should begin prior to the beginning of the election period. General Case Processing Procedures The PACI procedures will apply to both election and non-election periods, and PACI cases will be separately tracked. The PACI program will have its own check sheet and other "data gathering tools." Classification Procedures The initial classifier at the IRS will not make any recommendation about how a case should be treated. Instead, the classifier will treat PACI cases separately from other "referrals" complaining about charities "on a priority basis" by sending it to a Referral Committee, which will decide whether to proceed after reviewing the information. A majority vote (2 out of 3 members) will be needed to continue the investigation. The decision of the Referral Committee is to be "documented in the case file." If an investigation is to proceed, the Referral Committee will assign on of three categories to it:

• Type A: single issue/non-complex, that the IRS expects to resolve through correspondence with the organization
• Type B: multiple issue/complex, that involve more than one organization and/or issue and will require site visits by IRS examiners
• Type C: egregious/repetitive: requires immediate action by IRS. Examples given for this category include widespread advertising supporting a candidate, political contributions that could drain an group's treasury, or "clear and continuing support or opposition of a candidate".

During non-election periods Type A and B cases will be processed within standard timeframes to be processed by agents designated to deal with Type A or B. Type C cases will follow Election Period Expedited Procedures (see below). When Type C cases are identified the EO Director will be notified of the basis of the basis of a case, including an explanation of why it is considered Type C. A special form letter will be used to notify the organization of the pending IRS investigation and an experienced agent assigned to the case within four days. Religious organizations will get additional review by the Area Manager and counsel to ensure compliance with the special procedures mandated by Section 7611. During the classification process the IRS Review of Operations (ROO) group will be notified if a referral involves a previous examination of a group. Group Procedures All PACI cases will be processed as priority cases. Although the focus of the examination will be possible partisan activity, the memo says "Agents should look for large, unusual, and questionable items and pursue as appropriate…" but will not be required to review organizing documents or "establish that the organization filed all other required Federal returns." The examinations will begin promptly and "agents will not wait for a return to be filed or the tax year to end in order to initiate an examination of the organization and its activities [IRC Section 7602(a)]." The initial contact letter will list the tax year. Initial Contact Letters (Non churches) Form letters and information document requests (IDRs) sent to groups to be examined will list details of alleged misconduct and request an explanation. Copies of referral information from public sources will be enclosed, along with a notice from the IRS explaining the rules prohibiting intervention in elections. Type A letters will indicate the IRS expects to handle the case by correspondence, and Type B letters will indicate that a visit from the IRS is anticipated. Type C Cases (Non churches) The IRS expects these cases to arise in both election and non-election periods. The initial contact letter will be sent by the agent assigned within five days of receipt from the Classification Unit. It will be send certified or overnight mail, require a signature, and give the organization seven days to respond. A Type C classification will not mean that the IRS will seek an injunction to stop the activity or to revoke the group's tax-exempt status. The law requires special procedures for these actions, and the procedure advise agents to immediately contact their Team Leader, Area Manager and counsel for assistance on compliance with Section 6852 and 7409 of the tax code. Churches In order to comply with Section 7611, "the Director, EO Examinations must personally review the complete case file to determine if a reasonable belief exists, and must personally approve and sign church tax inquiry and examination letters involving churches." Special Procedures for TEP Cases Team Examination Program criteria- if met, special procedures and forms. Agreed Cases A PACI case may be resolved by written advisory "if the taxpayer exhibits an understanding of the IRS's position that a prohibited activity occurred, the violation was a one time, isolated, unintentional event, t he organization corrected the violation (e.g. recovered funds), and t he organization is not likely to violate the prohibition again." The advisory must include a warning and state the facts and the organization need not agree or admit wrongdoing. Unagreed Cases Where an organization does not agree that a violation has occurred "depending on the nature of the violation, if it is clear the organization intend to continue the activity, revocation and/or excise tax under section 4955 should be considered." In cases where the violation was minimal but may reoccur, agents are advised to consult with the PACI team and counsel. The IRS has developed sample advisory letters for these situations and will refer to ROO in order to spot repeat violations. Proposed Revocations Before revocation can be discussed with an organization the EO Director and Direction of EO Exams must be briefed, and counsel included if the group is a church. Mandatory Review Procedures All PACI cases are subject to mandatory review [get more] and must contain a closing letter summarizing resolution of the case. Election Period Expedited Procedures During an election period the EO Director will notify managers of the timeframe for the expedited procedures, which will apply to all referrals made from the beginning of the election p period (January 1). The EO Director must also consider adding staff to the PACI effort, arrange training for designated agents and managers, and ensure the team holds regular conference calls, beginning 30 days prior to the beginning of the election period. The Team Leader will work with CE&O on education and outreach efforts and C E&O will begin to publicize the expedited procedures before the start of the election period. Classification Procedures A PACI Classification committee made up of three experienced agents will be established to screen all PACI referrals on a weekly basis. Special meetings can be convened to deal with Type C cases. The IRS's goal is to classify Type A and B cases within 14 days of receipt and Type C cases within 10 days. Group Procedures- Non Church Cases The expedited procedures are to be followed in election years, "even if a return is not yet due and/or the tax year has not closed." [IRC Section 7602(a)] The steps to be taken are:

• Case assigned to agent by Group Manager — within 1 day of receipt
• Initial contact letter sent by certified or overnight mail, with signature required, within 14 days for Type A and B cases and 5 days for Type C cases
• Organization has 7-15 days to reply in Type A and B cases, and 7 days for Type C cases.

Group Procedures — Church Cases The process conforms to the requirements of Section 7611 regarding church tax inquiries. The EO Director must approve any letter going to a church and the scope of the examination will be limited to PACI issues in the referral. The steps to be taken are:

• The agent sends the initial referral information sent to Area Counsel and project manager within 4 days of a Type A or B case and one day for a Type C case to get advice on drafting initial inquiry letter.
• The agent send the draft inquiry letter to the assigned counsel with ten days for Type And B cases and 5 days for Type C cases, including the specific questions to be asked and a copy of the IRS notice on political activity by 501(c)(3) organizations.
• Counsel makes comments with 20 days for all types of cases that address whether there is a "reasonable belief" and any corrections to the letter.
• Agent corrects letter and send the complete case file to Mandatory Review by overnight mail within 6 days for Type A and B cases and 4 days for Type C cases.
• Mandatory Review goes over case and forwards file to Director of EO Examinations of issuance of the letter with 8 days for Types A and B cases and 4 days for Type C cases.
• Director of EO Examinations reviews file and sings inquiry letter is he/she believes there is "reasonable belief" of violation with 6 calendar days for Types A and B cases and 4 days for Type C cases.
• Case sent back to Mandatory Review for dating and sending letter.

Reclassifying a Type A Case to a Type B Case If the designated agent finds a Type A case involves more than a single issue she/he will consult with the Area Manager and a decision to convert to a Type B case will be made by the Group Manager's discretion, with concurrence of the Area Manager and in coordination with the Team Leader. They must consider if reclassification is in the government's best interest, along with the burden on the organization. Reclassifying a Type A Case or Type B Case to a Type C Case If a Type A or B case is identified as a Type C case after processing begins, the Group Manager must contact the Team Leader immediately, who will make the determination if the case should be converted to a Type C. If that occurs, the Team Leader must immediately determine which area handles the case, and notify counsel and the Director of EO Examinations. Retention of Information on Closed Cases PACI cases that are closed with advisory letters, assessed excise tax or have revocation proposed will be kept in Classification for five years rather than the standard three years. This "will ensure that previous violations are considered on current referrals." Researching Compliance by Organizations Examined in Previous Election Periods Review of Operations (ROO) Group "will establish a system to research compliance of designated organizations examined during the past two years under the PACI project."