Jack:

    We routinely work with applications that have been "sent to the national
office."  If an application is "sent to the national office," it means that
an issue or issues have been identified in the application by the original
reviewing agent that give the agent pause, and which the agent feels a more
technical review by a more skilled agent is required.  It always means that
there is some problem with the application that could result in denial of the
application.

    I suspect that what the IRS would really like your client to do is
establish objective standards in your organization's fundamental documents
for determining who is to receive the assistance of the charity.   Such
standards would give the IRS assurance that only poor people would receive
the benefits, and make it easier to determine if the mission was being
adhered to in an audit of activities.  Addressing this concern could be as
simple as enacting a Bylaw amendment or more likely an amendment to the
Articles of Incorporation.

    Last year, our office was brought in at the "national office" stage, well
after the Form 1024 was filed, to help a group of ranchers and cattlemen in
Wyoming/Montana opposed to illegal imports of below cost beef, to obtain
trade association status, (501(c)(6)), that the national office kept trying
to deny by saying they were an agriculture organization (which meant
potentially less availability of tax deductible contributions under o162).
What we did in that case was setup a conference call with the client's
lawyers and the IRS national office team assigned to the file.  We talked
through the application, identified each and every problem the IRS had
identified, and then our firm prepared, in essence, a supplemental brief
addressing each issue.  In the process, we learned that a few minor changes
to the Articles of Incorporation and Bylaws, plus the supplemental
application information, were enough to address the IRS's agents concerns,
and they issued the tax determination letter.

    Thus, I would suggest that you request a conference call with the
national office agent or "team" reviewing the application, and get them to
identify each and every concern with the application.   Then, ask them for a
period of time to respond.  Ask them if changes in the fundamental corporate
documents would help address their concerns.  And of course, be mindful that
if you have had ongoing activities, you will want to be sure that anything
you do will result in retroactive deductibility for what contributions you
have already received.

    During late 1999, the IRS was accused of responding to political pressure
in triggering audits of exempt organizations by the Landmark Legal
Foundation, a conservative, Washington, D.C. legal foundation.  Landmark did
a Freedom of Information Act request and released documents which tended to
indicate that the IRS was auditing groups in response to complaints from
Congressmen.  The IRS denied that political influence plays a role in its
decisions, and, since then, the IRS exempt organizations unit has been very
careful about not creating an impression that they respond to political
pressure.

    If your client would like our firm to help as a consultant to work with
the national office, we'd be pleased to be of assistance.  We would need to
review the file and have your client execute a Form 2848 Power of Attorney
for us to join the team.

    Hope this is helpful.

Best regards,

Jim Lacy
Wewer & Lacy, LLP

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