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June 30, 2022

IRS provides updated guidance for TE/GE to follow in examining tax-exempt organizations

The IRS Tax Exempt and Government Entities division (TE/GE) has published updated guidance to its employees on its examination process (TEGE-04-0920–0020). In addition to revising the examination process and instructions on how Issue Code data under the Reporting Compliance Case Management System (RCCMS) is used, the new guidance provides updated Internal Revenue Manual (IRM) sections, pertinent contacts and hyperlinks.

The updated guidance "supersedes and consolidates all existing procedural guidance describing functional examination processes" for TE/GE and became effective on June 21, 2022.

Examination process

The guidance explains the three phases of the TE/GE examination process: (1) planning; (2) execution; and (3) resolution. In the planning phase, where the scope of an exam is determined, examiners should select issues that "have the broadest impact on compliance, regardless of the size and type of entity or organization."

The selected issues are then developed in the execution phase. The Information Document Request (IDR) process is used "to develop the facts" and aid in interactive discussions between the parties. The guidance encourages examiners to "[m]ake every effort to resolve any factual differences." Examiners may also issue Notices of Proposed Adjustment to explain the government's legal position and elicit responses "to gain an understanding of the entity or organization's position and to achieve issue resolution at the earliest appropriate point."

In the resolution phase, an agreement should be reached "if possible, on the tax or compliance treatment of each issue examined." A Revenue Agent Report or closing agreement may also be issued to the taxpayer. The guidance characterizes early and frequent discussions as "crucial for a complete understanding of the respective merits of an issue."

RCCMS Issue Code data grid

RCCMS helps the IRS track the development and progress of TE/GE examinations. The guidance instructs TE/GE personnel to "familiarize yourself with [RCCMS's] capabilities and use it for all examinations" and to capture data from examinations in the "Issue Code data grid." According to the updated guidance, data recorded in the Issue Code data grid will:

  • Help consistently measure the impact that each technical issue has on the overall results of each exam
  • Help better evaluate the productivity of various workload selection methodologies (e.g., Compliance Strategies, compliance query sets, referrals, claims)
  • Improve systemic identification of potential emerging issues
  • Automate the exam plan approval process
  • Provide real-time feedback on issue identification


In publishing this guidance, TE/GE has provided greater visibility into its examination process and highlighted its expectations for TE/GE Examination agents. For instance, the guidance calls for agents to communicate regularly with the taxpayer through "early and frequent discussions" during an examination to understand the taxpayer's position and resolve the issues "at the earliest appropriate point."

Given the increase in public scrutiny of tax-exempt organizations and examination referrals, exempt organizations should carefully monitor their public documents and communications channels (e.g., Form 990, website) to reflect their compliance with applicable tax law. In addition, exempt organizations should continuously monitor changes on the TE/GE Compliance Program and Priorities webpage, as TE/GE continues to update the site with its compliance strategies and information on referrals, claims and other examination information.

Please contact your Ernst & Young LLP professional for further information.


Contact Information
For additional information concerning this Alert, please contact:
Tax-Exempt Organization Services
   • Steve Clarke (
   • Morgan Moran (
   • Tiyesha Johnson (
   • Cal Hoke (