
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC7611]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
       CHAPTER 78--DISCOVERY OF LIABILITY AND ENFORCEMENT OF TITLE
 
                Subchapter A--Examination and Inspection
 
Sec. 7611. Restrictions on church tax inquiries and examinations


(a) Restrictions on inquiries

                           (1) In general

        The Secretary may begin a church tax inquiry 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 
    reasonably believes (on the basis of facts and circumstances 
    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 subject 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 
        Secretary 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 applicable--
                    (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 authorize 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 examination 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 extent 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 conference

        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 beginning 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 notice provided to 
            the church under subsection (a),
                (ii) a description of the church records and activities 
            which the Secretary seeks to examine,
                (iii) an offer to have a conference between 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 Revenue 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 subparagraph (A) shall 
        not be provided to the church before the 15th day after the date 
        on which the church tax inquiry notice was provided to the 
        church under subsection (a).

        (C) Opinion of regional counsel with respect to examination

            Any regional counsel of the Internal Revenue 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 examination which (at the time 
    the examination begins) 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 requirement of subparagraph (A) or 
    (B) of paragraph (1) (whichever applies).

(c) Limitation on period of inquiries and examinations

     (1) Inquiries and examinations must be completed 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 respect to which 
        there is no examination notice under subsection (b), the 
        Secretary shall complete such inquiry (and make a final 
        determination with respect thereto) not later than the date 
        which is 90 days after the inquiry 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 paragraph (1)(B) shall be suspended--
            (A) for any period during which--
                (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 official 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 actions with 
            respect to the church tax inquiry 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 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.

(Added Pub. L. 98-369, div. A, title X, Sec. 1033(a), July 18, 1984, 98 
Stat. 1034; amended Pub. L. 99-514, title XVIII, Sec. 1899A(61), (62), 
Oct. 22, 1986, 100 Stat. 2962; Pub. L. 100-203, title X, 
Sec. 10713(b)(2)(G), Dec. 22, 1987, 101 Stat. 1330-470; Pub. L. 100-647, 
title I, Sec. 1018(u)(49), Nov. 10, 1988, 102 Stat. 3593; Pub. L. 101-
239, title VII, Sec. 7822(d)(1), Dec. 19, 1989, 103 Stat. 2425; Pub. L. 
104-188, title I, Sec. 1704(t)(59), Aug. 20, 1996, 110 Stat. 1890; Pub. 
L. 105-206, title I, Sec. 1102(e)(3), July 22, 1998, 112 Stat. 705.)


                            Prior Provisions

    A prior section 7611 was renumbered section 7613 of this title.


                               Amendments

    1998--Subsec. (f)(1). Pub. L. 105-206 substituted ``Secretary'' for 
``Assistant Commissioner for Employee Plans and Exempt Organizations of 
the Internal Revenue Service'' in concluding provisions.
    1996--Subsec. (h)(7). Pub. L. 104-188 substituted ``appropriate'' 
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 section 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, Sec. 1899A(62), reenacted 
subpar. (B) without change.
    Subsec. (i). Pub. L. 99-514, Sec. 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''.


                    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 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

    Section 1033(d) of Pub. L. 98-369 provided that: ``The amendments 
made by this section [enacting this section and amending sections 7428 
and 7605 of this title] shall apply with respect to inquiries and 
examinations beginning after December 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 [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 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.

                  Section Referred to in Other Sections

    This section is referred to in section 7605 of this title.
