Section 7611 of the Internal Revenue Code is known as the “Church Audit Procedures Act.” It governs the conditions under which the IRS may initiate a church tax inquiry or examination. Naturally, given the heightened protection of churches under the US Constitution, the IRS is limited in when it may investigate a church and it must demonstrate specific criteria before it may even take the first step in launching an investigation.
A church tax inquiry is the IRS’ method of investigating whether a church has violated the IRS Code or regulations. The IRS starts an inquiry by making an initial request for information or materials that a church normally keeps in its records.
Such an inquiry may begin only when an appropriate high-level Treasury official (such as a Regional Commissioner or higher-level official within the Department) holds a reasonable belief, given a set of circumstances or facts made in writing, that:
- The church may in fact not qualify for the tax exemption it claims;
- The church may be engaged in business or trade no related to church activities; or
- The church may be performing activities otherwise subject to taxation.
Section 7611 is a powerful law that protects a church from a haphazard or politically-motivated examination by the IRS into the church.
Provident Law’s church and nonprofit attorneys can help. Should a church find itself subject to a church tax inquiry, we can help the church through the process. We also counsel churches through the process of any transaction. Moreover, we stand ready to counsel and serve charities, foundations, private schools, colleges, universities and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.