Public Disclosure of Material Relating to Tax-Exempt Organizations

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-246250-96]

RIN 1545-AV13

Public Disclosure of Material Relating to Tax-Exempt

Organizations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to the

public disclosure requirements of section 6104(e) of the Internal

Revenue Code. The proposed regulations provide guidance for a tax-

exempt organization required to make its application for tax exemption

and annual information return available for public inspection. The

proposed regulations also provide guidance for a tax-exempt

organization required to comply with requests made in writing or in

person from individuals who seek a copy of those documents. The

proposed regulations describe how a tax-exempt organization can make

those documents widely available and, therefore, not be required to

provide copies in response to individual requests. The proposed

regulations address the standards that apply in determining whether a

tax-exempt organization is the subject of a harassment campaign and

guidance on the applicable procedures to obtain relief. This document

also provides notice of a public hearing.

DATES: Written comments and requests to speak (with outlines of oral

comments) at the public hearing scheduled for February 4, 1998,

beginning at 10 a.m. must be submitted by December 26, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-246250-96), room

5226, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington DC 20044. Submissions may be hand-delivered between the

hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-246250-96), Courier's

Desk, Internal Revenue Service, Constitution Avenue NW., Washington DC.

Alternatively, taxpayers may submit comments electronically via the

Internet by selecting the ``Tax Regs'' option on the IRS Home Page, or

by submitting comments directly to the IRS Internet site at http://

www.irs.ustreas.gov/prod/tax__regs/comments.html. The public hearing

will be held in the IRS Auditorium, Internal Revenue Service Building,

1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Michael B.

Blumenfeld, (202) 622-6070; concerning submissions and the hearing,

Michael Slaughter, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in this notice of proposed

rulemaking have been submitted to the Office of Management and Budget

for review in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)). Comments on the collections of information should be

sent to the Office of Management and Budget, Attn: Desk Officer for the

Department of the Treasury, Office of Information and Regulatory

Affairs, Washington, DC 20503, with copies to the Internal Revenue

Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC

20224. Comments on the collections of information should be received by

November 25, 1997. Comments are specifically requested concerning:

Whether the proposed collections of information are necessary for

the proper performance of the functions of the Internal Revenue

Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed

collections of information;

How the quality, utility, and clarity of the information to be

collected may be enhanced;

How the burden of complying with the proposed collections of

information may be minimized, including through the application of

automated collection techniques or other forms of information

technology; and

Estimates of capital or start-up costs and costs of operation,

maintenance, and purchase of services to provide information.

The collections of information in these proposed regulations are in

Secs. 301.6104(e)-1, 301.6104(e)-2, and 301.6104(e)-3. This information

is required to enable a tax-exempt organization to comply with section

6104(e) of the Internal Revenue Code. Under section 6104(e), a tax-

exempt organization is required to make its application for tax

exemption and its annual information returns available for public

inspection. In addition, a tax-exempt organization is required to

comply with requests made in writing or in person from individuals who

seek a copy of those documents or, in the alternative, to make its

documents widely available. The requirement that a tax-exempt

organization make its application for tax exemption and annual

information returns available for public inspection and comply with

requests made in writing or in person from individuals who seek a copy

of those documents or, in the alternative, make the documents widely

available, will enable the public to obtain information about the tax-

exempt organization. Under section 6104(e), a tax-exempt organization

is permitted to file an application for relief from the requirement to

provide copies if the organization reasonably believes it is the

subject of a harassment campaign. The information a tax-exempt

organization provides when filing an application for a determination

that it is subject to a harassment campaign will be used by the IRS to

make such determination. The collection of information is required to

obtain relief from the requirement to comply with requests for copies

if such requests are part of the harassment campaign. The likely

respondents and/or recordkeepers are tax-exempt organizations. The

burden for recordkeeping and for reporting is reflected below.

Estimated total annual recordkeeping burden: 551,000 hours.

Estimated average annual burden per recordkeeper: 30 minutes.

Estimated number of recordkeepers: 1,100,000.

Estimated total annual reporting burden: 500 hours.

Estimated average annual reporting burden per respondent: 29

minutes.

Estimated number of respondents: 1050.

Estimated annual frequency of responses: on occasion.

An agency may not conduct or sponsor, and a person is not required

to respond to, a collection of information unless it displays a valid

control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be

retained as long as their contents may become material in the

administration

[[Page 50534]]

of any internal revenue law. Generally, tax returns and tax return

information are confidential, as required by 26 U.S.C. 6103.

Background

This document contains proposed amendments to the Income Tax

Regulations (26 CFR part 301) relating to the section 6104(e)

disclosure requirements affecting tax-exempt organizations

(organizations described in sections 501 (c) or (d) and exempt from

taxation under section 501(a)). Section 10702 of the Omnibus Budget

Reconciliation Act of 1987 (OBRA '87) added subsection (e) to section

6104 of the Internal Revenue Code (Code). Section 6104(e) requires each

tax-exempt organization, including one that is a private foundation, to

allow public inspection of the organization's application for

recognition of tax exemption. Section 6104(e) also requires each tax-

exempt organization, other than one that is a private foundation, to

allow public inspection at the organization's principal office (and

certain regional or district offices) of its three most recent annual

information returns. Each return must be made available for a 3-year

period beginning on the date the return is required to be filed or is

actually filed, whichever is later. Notice 88-120 (1988-2 C.B. 454),

provided tax-exempt organizations with guidance for complying with the

section 6104(e) public inspection requirements.

The Taxpayer Bill of Rights 2 (TBOR2), enacted on July 30, 1996,

amended section 6104(e) by adding additional requirements. As amended,

section 6104(e) requires each tax-exempt organization, including one

that is a private foundation, to comply with requests, made either in

writing or in person, for copies of the organization's application for

recognition of tax-exempt status. Section 6104(e) also requires each

tax-exempt organization, other than one that is a private foundation,

to comply with requests, made either in writing or in person, for

copies of the organization's three most recent annual information

returns. The organization must fulfill these requests without charge,

other than a reasonable fee for reproduction and mailing costs. If the

request for copies is made in person, the organization must provide the

requested copies immediately. If the request for copies is made in

writing, the organization must provide the copies within 30 days.

Section 6104(e) also provides that an organization is relieved of its

obligation to provide copies upon request if, in accordance with

regulations to be promulgated by the Secretary of the Treasury, (1) the

organization has made the requested documents widely available or (2)

the Secretary of the Treasury determines, upon application by the

organization, that the organization is subject to a harassment campaign

such that a waiver of the obligation to provide copies would be in the

public interest.

In Notice 96-48 (1996-39 I.R.B. 8), the IRS invited comments on the

changes made by TBOR2. Twenty-two comments were received and considered

in the drafting of this notice of proposed rulemaking. The comments

addressed a range of issues, although they made several suggestions in

common. Several commentators requested that the guidance on the new

disclosure requirements follow the existing guidance on the public

inspection requirements provided in Notice 88-120. Several commentators

also recommended that the fee charged by the IRS for copies of

organization documents be used to establish a reasonable fee for an

organization to charge when fulfilling requests for copies of the

documents. A number of comments were received concerning the Internet.

Most, but not all, of these comments urged that posting an

organization's documents on the Internet be treated as making those

documents widely available. Finally, several commentators asked for

guidance in determining when an organization is subject to a harassment

campaign, how to apply for a harassment determination, what kind of

relief is available while such an application is pending and the effect

of a determination that the organization is the subject of a harassment

campaign.

Explanation of Provisions

Overview

The proposed regulations provide guidance concerning the

application and returns a tax-exempt organization must make available

for public inspection and must supply in response to requests for

copies. The proposed regulations also provide guidance on (1) the place

and time for making these documents available for public inspection,

(2) conditions that may be placed on requests for copies of documents,

and (3) the amount, form and time of payment of any fees that may be

charged. The regulations also prescribe how an organization can make

its application for tax exemption and annual information returns widely

available. Finally, the proposed regulations provide guidance on the

standards that apply in determining whether an organization is the

subject of a harassment campaign and on the applicable procedures for

obtaining relief.

Material Required To Be Made Available for Public Inspection and

Supplied in Response to a Request for Copies

The proposed regulations specify the documents that a tax-exempt

organization must make available for public inspection or supply in

response to a request for copies. A tax-exempt organization, including

one that is a private foundation, must make its application for tax

exemption available. An application for tax exemption includes the

application form (such as Form 1023 or Form 1024) and any supporting

documents filed by the organization in support of its application. It

also includes any letter or document issued by the IRS in connection

with the application. Consistent with the guidance provided in Notice

88-120, if an organization filed its application before July 15, 1987,

the proposed regulations provide that the organization is required to

make available a copy of its application only if it had a copy of the

application on July 15, 1987.

A tax-exempt organization, other than one that is a private

foundation, must make its three most recent annual information returns

available. Generally, an annual information return includes Forms 990,

990-EZ, 990-BL, and Form 1065. It also includes all schedules and

attachments filed with the IRS. An organization is not required,

however, to disclose the parts of the return that identify names and

addresses of contributors to the organization, nor is it required to

disclose Form 990-T. The proposed regulations provide rules concerning

the documents that must be made available by an organization that is

recognized as tax-exempt under a group exemption letter or that files a

group return pursuant to Sec. 1.6033-2(d) and Rev. Proc. 80-27, 1980-1

C.B. 677 (or any successor provision). Finally, the proposed

regulations provide guidance to an individual denied inspection, or a

copy, of an application or a return. In such a case, the individual may

provide the IRS with a statement that describes the reason why the

individual believes the denial was in violation of legal requirements.

Place and Time Documents Must Be Available for Public Inspection

The proposed regulations provide that a tax-exempt organization

must make the specified documents available for public inspection at

its principal, regional and district offices. The specified documents

generally must be

[[Page 50535]]

available for inspection on the day of the request during the office's

normal business hours. Consistent with section 6104(e) and Notice 88-

120, the proposed regulations provide that an office of an organization

will be considered a regional or district office only if it has three

or more paid full-time employees (or paid employees, whether part-time

or full-time, whose aggregate number of paid hours per week is at least

120). The rules exclude certain sites where the organization's

employees perform solely exempt function activities from being treated

as a regional or district office. In addition, the proposed regulations

prescribe how an organization that does not maintain a permanent office

or whose office has very limited hours during certain times of the year

can comply with the public inspection requirements. The proposed

regulations also provide rules concerning the conditions the

organization may impose on public inspections that are consistent with

Notice 88-120.

Requirement To Furnish Copy to a Requester

The proposed regulations require that a tax-exempt organization

accept requests for copies made in person at the same place and time

that the information must be available for public inspection. They also

generally require an organization to provide the copies on the day of

the request. In unusual circumstances, an organization will be

permitted to provide the requested copies on the next business day.

When a request is made in writing, the proposed regulations require

that a tax-exempt organization furnish the copies within 30 days from

the date it receives the request. If an organization, however, requires

advance payment of a reasonable fee for copying and mailing, it may

provide the copies within 30 days from the date it receives payment,

rather than from the date of the initial request.

The proposed regulations provide guidance as to what constitutes a

request, when a request is considered received, and when copies are

considered provided. The proposed regulations provide that, instead of

requesting a copy of an entire application for tax exemption or annual

information return, individuals may request a specific part of either

document. Finally, the proposed regulations permit a principal,

regional, or district office of an organization to use an agent to

process requests for copies.

Reasonable Fee for Providing Copies

The proposed regulations provide that the reasonable fee a tax-

exempt organization is permitted to charge for copies may be no more

than the fees charged by the IRS for copies of tax-exempt organization

tax returns and related documents (currently $1.00 for the first page

and $.15 for each subsequent page), plus actual postage costs. The

proposed regulations permit an organization to collect payment in

advance of providing the requested copies. If an organization receives

a written request for copies with no payment enclosed, and the

organization requires payment in advance, the organization must request

payment within 7 days from the date it receives the request. Payment

will be deemed to occur on the day an organization receives the cash,

check (provided the check subsequently clears) or money order. The

proposed regulations require an organization to accept payment made by

cash or money order, and when the request is made in writing, also

accept payment made by personal check. An organization is permitted,

though not required, to accept other forms of payment. To protect

requesters from unexpected fees where a tax-exempt organization does

not require prepayment and where a requester does not enclose

prepayment with a request, an organization must receive consent from a

requester before providing copies for which the fee charged for copying

and postage is in excess of $20.

Making Applications and Information Returns Widely Available

The proposed regulations provide that a tax-exempt organization is

not required to comply with requests for copies if the organization has

made the requested documents widely available. The proposed regulations

specify that an organization can make its application for tax exemption

and/or an annual information return widely available by posting the

applicable document on the organization's World Wide Web page on the

Internet or by having the applicable document posted on another

organization's page as part of a database of similar materials. In

addition, the proposed regulations provide that the Commissioner may

prescribe, by revenue procedure or other guidance, other methods that

an organization can use to make its application and/or its return

widely available. An organization that makes its application and/or its

return widely available must inform individuals who request copies how

and where to obtain the requested document. The Treasury and the IRS

are interested in comments on additional methods by which applications

and returns could be made widely available, including the use of a

clearinghouse that maintains a large inventory of documents from many

organizations.

Harassment Campaigns

The proposed regulations provide guidance in determining whether a

tax-exempt organization is the subject of a harassment campaign.

Generally, a harassment campaign exists where an organization receives

a group of requests, and the relevant facts and circumstances show that

the purpose of the group of requests was to disrupt the operations of

the tax-exempt organization rather than to obtain information. The

proposed regulations also contain examples that evaluate whether

particular situations constitute a harassment campaign and whether an

organization has a reasonable basis for believing that a request is

part of the harassment campaign. For example, the IRS will not allow

organizations to suspend compliance with a request for copies from a

representative of the news media even though the organization believes

that request is part of a harassment campaign. The proposed regulations

also permit an organization to disregard requests in excess of two per

month or four per year made by a single individual or sent from a

single address. Finally, the proposed regulations provide procedures

for requesting a determination that an organization is subject to a

harassment campaign, the treatment of requests for copies while a

request for a determination is pending, and the effect of such a

determination.

Proposed Effective Date

These regulations are proposed to be effective beginning 60 days

after publication of these regulations as final regulations.

Special Analyses

Pursuant to sections 603(a) and 605(b) of the Regulatory

Flexibility Act, it is certified that the collection of information

referenced in this notice of proposed rulemaking will not have a

significant economic impact on a substantial number of small entities.

Although a substantial number of small entities will be subject to the

collection of information requirements in these regulations, the

requirements will not have a significant economic impact on these

entities. The average time required to maintain and disclose the

information required under these regulations is estimated to be 30

minutes for each tax-exempt

[[Page 50536]]

organization. This estimate is based on the assumption that, on

average, a tax-exempt organization will receive one request per year to

inspect or provide copies of its application for tax exemption and its

annual information returns. Less than 0.001 percent of the tax-exempt

organizations affected by these regulations will be subject to the

reporting requirements contained in the regulations. It is estimated

that annually, approximately 1,000 tax-exempt organizations will make

its documents widely available by posting them on the Internet. In

addition, it is estimated that annually, approximately 50 tax-exempt

organizations will file an application for a determination that they

are the subject of a harassment campaign such that a waiver of the

obligation to provide copies of their applications for tax exemption

and their annual information returns is in the public interest. The

average time required to complete, assemble and file an application

describing a harassment campaign is expected to be 5 hours. Because

applications for a harassment campaign determination will be filed so

infrequently, they will have no effect on the average time needed to

comply with the requirements in these regulations. In addition, a tax-

exempt organization is allowed in these regulations to charge a

reasonable fee for providing copies to requesters. Therefore, it is

estimated that on average it will cost tax-exempt organizations less

than $10 per year to comply with these regulations, which is not a

significant economic impact.

Pursuant to section 7805(f) of the Internal Revenue Code, this

notice of proposed rulemaking will be submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its

impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments (a signed original

and eight (8) copies) that are submitted timely to the IRS. All

comments will be available for public inspection and copying.

A public hearing has been scheduled for February 4, 1998, beginning

at 10 a.m. in the IRS Auditorium, Internal Revenue Building, 1111

Constitution Avenue, NW., Washington, DC. Because of access

restrictions, visitors will not be admitted beyond the Internal Revenue

Service Building lobby more than 15 minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing.

Persons that wish to present oral comments at the hearing must

submit written comments and an outline of the topics to be discussed

and the time devoted to each topic (signed original and eight (8)

copies) by December 26, 1997.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the schedule of speakers will be prepared after

the deadline for receiving outlines has passed. Copies of the agenda

will be available free of charge at the hearing.

Drafting Information

The principal author of these regulations is Michael B. Blumenfeld,

Office of Associate Chief Counsel (Employee Benefits and Exempt

Organizations), IRS. Other personnel from the IRS and Treasury

Department also participated in their development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR Part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for 26 CFR part 301 is amended

by adding entries in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 301.6104(e)-2 also issued under 26 U.S.C. 6104(e)(3);

Section 301.6104(e)-3 also issued under 26 U.S.C. 6104(e)(3); * * *

Par. 2. Sections 301.6104(e)-0, 301.6104(e)-1, 301.6104(e)-2, and

301.6104(e)-3 are added to read as follows:

Sec. 301.6104(e)-0 Table of contents.

This section lists captions contained in Secs. 301.6104(e)-1,

301.6104(e)-2, and 301.6104(e)-3.

Sec. 301.6104(e)-1 Public inspection and distribution of annual

information returns of tax-exempt organizations (other than private

foundations) and applications for tax exemption.

(a) In general.

(b) Definitions.

(1) Tax-exempt organization.

(2) Private foundation.

(3) Application for tax exemption.

(i) In general.

(ii) No prescribed application form.

(iii) Exceptions.

(4) Annual information return.

(i) In general.

(ii) Returns more than 3 years old.

(5) Regional or district offices.

(i) In general.

(ii) Site not considered a regional or district office.

(c) Special rules relating to public inspection.

(1) Permissible conditions on public inspection.

(2) Organizations that do not maintain permanent offices.

(d) Special rules relating to copies.

(1) Time and place for providing copies in response to requests

made in person.

(i) In general.

(ii) Unusual circumstances.

(iii) Agents for providing copies.

(2) Request for copies in writing.

(i) In general.

(ii) Time and manner of fulfilling written requests.

(A) In general.

(B) Agents for providing copies.

(3) Request for a copy of parts of document.

(4) Fees for copies.

(i) In general.

(ii) Form of payment.

(A) Request made in person.

(B) Request made in writing.

(iii) Avoidance of unexpected fees.

(iv) Responding to inquiries of fees charged.

(e) Rules relating to documents to be provided by regional and

district offices, and local and subordinate organizations.

(1) Documents to be provided by regional and district offices.

(2) Documents to be provided by local and subordinate

organizations.

(f) Failure to comply with public inspection or copying

requirements.

(g) Effective date.

Sec. 301.6104(e)-2 Making applications and returns widely

available.

(a) In general.

(b) Widely available.

(1) In general.

(2) Internet posting.

(3) Notice requirement.

(c) Effective date.

Sec. 301.6104(e)-3 Tax-exempt organization subject to harassment

campaign.

(a) In general.

(b) Harassment.

(c) Special rule for multiple requests from a single individual

or address.

(d) Harassment determination procedure.

(e) Effect of a harassment determination.

(f) Examples.

(g) Effective date.

Sec. 301.6104(e)-1 Public inspection and distribution of annual

information returns of tax-exempt organizations (other than private

foundations) and applications for tax exemption.

(a) In general. Except as otherwise provided in this section, a

tax-exempt organization, including one that is a private foundation,

shall make its application for tax exemption (as defined in paragraph

(b)(3) of this section) available for public inspection

[[Page 50537]]

without charge at its principal, regional and district offices during

regular business hours. A tax-exempt organization, other than a private

foundation, shall make its annual information returns (as defined in

paragraph (b)(4) of this section) available for public inspection

without charge in the same offices during regular business hours. Each

annual information return shall be made available for a period of three

years beginning on the date the return is required to be filed

(determined with regard to any extension of time for filing) or is

actually filed, whichever is later. In addition, except as provided in

Sec. 301.6104(e)-2 and Sec. 301.6104(e)-3, an organization shall

provide a copy without charge, other than a reasonable fee for

reproduction and actual postage costs, of all or any part of any

application or return required to be made available for public

inspection under this paragraph to any individual who makes a request

for such copy in person or in writing. See paragraph (d)(4) of this

section for rules relating to fees for copies.

(b) Definitions. For purposes of section 6104(e) and the

regulations thereunder, the following definitions apply:

(1) Tax-exempt organization. The term tax-exempt organization means

any organization that is described in section 501(c) or section 501(d)

and is exempt from taxation under section 501(a).

(2) Private foundation. The term private foundation means a private

foundation as defined in section 509(a).

(3) Application for tax exemption--(i) In general. The term

application for tax exemption includes any prescribed application form

(such as Form 1023 or Form 1024), all documents and statements the

Internal Revenue Service requires an applicant to file with the form,

any statement or other supporting document submitted by an organization

in support of its application, and any letter or other document issued

by the Internal Revenue Service concerning the application (such as a

favorable determination letter or a list of questions from the Internal

Revenue Service about the application). For example, a legal brief

supporting an application, or a response to questions from the Internal

Revenue Service during the application process, is a supporting

document.

(ii) No prescribed application form. If no form is prescribed for

an organization's application for tax exemption, the application for

tax exemption includes--

(A) The application letter and copy of the articles of

incorporation, declaration of trust, or other similar instrument that

sets forth the permitted powers or activities of the organization;

(B) The organization's bylaws or other code of regulations;

(C) The organization's latest financial statements, as of the date

the application is submitted, showing assets, liabilities, receipts and

disbursements;

(D) Statements describing the character of the organization, the

purpose for which it was organized, and its actual activities;

(E) Statements showing the sources of the organization's income and

receipts and their disposition; and

(F) Any other statements or documents the Internal Revenue Service

required the organization to file with, or that the organization

submitted in support of, the application letter.

(iii) Exceptions. The term application for tax exemption does not

include--

(A) Any application for tax exemption filed by an organization that

has not yet been recognized, on the basis of the application, by the

Internal Revenue Service as exempt from taxation for any taxable year;

(B) Any application for tax exemption filed before July 15, 1987

unless the organization filing the application had a copy of the

application on July 15, 1987; or

(C) Any material, including the material listed in

Sec. 301.6104(a)-1(i) and information that the Secretary would be

required to withhold from public inspection, that is not available for

public inspection under section 6104.

(4) Annual information return--(i) In general. The term annual

information return includes an exact copy of any return filed by a tax-

exempt organization pursuant to section 6033. It also includes any

amended return filed with the Internal Revenue Service after the date

the original return is filed. The copy must include all information

furnished to the Internal Revenue Service on Form 990, Return of

Organization Exempt From Income Tax, or any version of Form 990 (such

as Forms 990-EZ or 990-BL except Form 990-T) and Form 1065, as well as

all schedules, attachments and supporting documents, except for the

name or address of any contributor to the organization. For example,

the annual information return includes Schedule A of Form 990

containing supplementary information on section 501(c)(3)

organizations, and those parts of the return that show compensation

paid to specific persons (Part VI of Form 990 and Parts I and II of

Schedule A of Form 990). The term annual information return does not

include Schedule A of Form 990-BL, Form 990-T, Exempt Organization

Business Income Tax Return or Form 1120-POL, U.S. Income Tax Return For

Certain Political Organizations. For purposes of this section and the

regulations thereunder, an annual information return does not include

the return of a private foundation. See Sec. 301.6104(d)-1 for

requirements relating to public disclosure of private foundation annual

returns.

(ii) Returns more than 3 years old. The term annual information

return does not include any return after the expiration of 3 years from

the date the return is required to be filed (including any extension of

time that has been granted for filing such return) or is actually

filed, whichever is later. If an organization has filed an amended

return, however, the amended return must be made available for a period

of 3 years beginning on the date it is filed with the Internal Revenue

Service.

(5) Regional or district offices--(i) In general. A regional or

district office is any office of a tax-exempt organization, other than

its principal office, that has--

(A) 3 or more paid full-time employees; or

(B) Paid employees, whether part-time or full-time, whose aggregate

number of paid hours a week are normally at least 120.

(ii) Site not considered a regional or district office. A site is

not considered a regional or district office, however, if--

(A) The only services provided at the site further exempt purposes

(such as day care, health care or scientific or medical research); and

(B) The site does not serve as an office for management staff,

other than managers involved solely in managing the exempt function

activities at the site.

(c) Special rules relating to public inspection--(1) Permissible

conditions on public inspection. A tax-exempt organization may have an

employee present in the room during an inspection. The organization,

however, must allow the individual conducting the inspection to take

notes freely during the inspection, and to photocopy the document at no

charge, if the individual provides the photocopying equipment at the

place of inspection.

(2) Organizations that do not maintain permanent offices. If a tax-

exempt organization does not maintain a permanent office, the

organization shall comply with the public inspection requirements of

paragraph (a) of this section by making its application for tax

[[Page 50538]]

exemption and its annual information returns, as applicable, available

for inspection at a reasonable location of its choice. Such an

organization shall permit public inspection within a reasonable amount

of time after receiving a request for inspection (normally not more

than 2 weeks) and at a reasonable time of day. At the organization's

option, it may mail, within 2 weeks of receiving the request, a copy of

its application for tax exemption and annual information returns to the

requester in lieu of allowing an inspection. The organization may

charge the requester for copying and actual postage costs only if the

requester consents to the charge. An organization that has a permanent

office, but has no office hours or has very limited hours during

certain times of the year, shall make its documents available during

those periods when office hours are limited or not available as though

it were an organization without a permanent office.

(d) Special rules relating to copies--(1) Time and place for

providing copies in response to requests made in-person--(i) In

general. A tax-exempt organization shall provide copies of the

documents it is required to provide under section 6104(e) in response

to a request made in person at the time and place that it makes its

documents available for inspection under paragraph (a) of this section.

Except as provided in paragraph (d)(1)(ii) of this section, an

organization shall provide such copies to a requester on the day the

request is made.

(ii) Unusual circumstances. Where unusual circumstances exist such

that fulfilling a request on the same business day places an

unreasonable burden on the tax-exempt organization, the organization

may provide the copies in response to a request made in person on the

next business day following the day of the request. Unusual

circumstances may include, but are not limited to, receipt of a volume

of requests that exceeds the organization's daily capacity to make

copies; requests received shortly before the end of regular business

hours that require an extensive amount of copying; or requests received

on a day when the organization's managerial staff is conducting special

duties, such as student registration, rather than its regular

administrative duties.

(iii) Agents for providing copies. A principal, regional or

district office of a tax-exempt organization subject to the

requirements of this section may retain a local agent, within

reasonable proximity of the applicable office, to process in person

requests for copies of its documents. An agent that receives a request

for copies must provide the copies within the time and under the

conditions that apply to the organization itself. For example, an agent

must provide a copy to a requester on the day the agent receives the

request. However, an office using such an agent that receives an in-

person request for a copy must immediately provide the name, address

and telephone number of the local agent to the requester. An

organization that notifies an in-person requester of such an agent is

not required to respond further to the requester. However, the penalty

provisions of sections 6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue

to apply to the tax-exempt organization if the organization's agent

fails to provide the documents as required under section 6104(e).

(2) Request for copies in writing--(i) In general. A tax-exempt

organization must honor a written request for a copy of documents that

the organization is required to provide under section 6104(e) if the

request--

(A) Is addressed to, and delivered by mail, electronic mail,

facsimile, a private delivery service as defined in section 7502(f), or

in person, to the principal, regional or district office of the

organization; and

(B) Sets forth the address to which the copy of the documents

should be sent.

(ii) Time and manner of fulfilling written requests--(A) In

general. A tax-exempt organization receiving a written request for a

copy shall mail the copy of the requested documents (or the requested

parts of documents) within 30 days from the date it receives the

request. If a tax-exempt organization requires payment in advance, it

shall provide the copies within 30 days from the date it receives

payment. If an organization requiring payment in advance receives a

written request without payment or an insufficient payment, the

organization must, within 7 days from the date it receives the request,

notify the requester of its prepayment policy and the amount due. A

request or payment that is mailed shall be deemed (in the absence of

evidence to the contrary) to be received by an organization 7 days

after the date of the postmark. Requests transmitted to the

organization by electronic mail or facsimile shall be deemed received

the day the request is transmitted successfully. Copies are deemed

provided on the date of the postmark or private delivery mark (or if

sent by certified or registered mail, the date of registration or the

date of the postmark on the sender's receipt). If an individual making

a request consents, a tax-exempt organization may provide a copy of the

requested document exclusively by electronic mail. In such case, the

material is provided on the date the organization successfully

transmits the electronic mail.

(B) Agents for providing copies. A tax-exempt organization subject

to the requirements of this section may retain an agent to process

written requests for copies of its documents. The agent shall provide

the copies within the time and under the conditions that apply to the

organization itself. For example, if the organization received the

request first (e.g. before the agent), the deadline for providing a

copy in response to a request shall be determined in reference to when

the organization received the request, not when the agent received the

request. An organization that transfers a request for a copy to such an

agent is not required to respond further to the request. However, if

the organization's agent fails to provide the documents as required

under section 6104(e), the penalty provisions of sections

6652(c)(1)(C), 6652(c)(1)(D), and 6685 continue to apply to the tax-

exempt organization.

(3) Request for a copy of parts of document. A tax-exempt

organization must fulfill a request for a copy of the organization's

entire application for tax exemption or annual information return or

any identifiable part, attachment or supporting paper of its

application or return. A request for a copy of less than its entire

application or less than its entire return must describe the

information desired in sufficient detail to enable the organization to

identify the desired part of the applicable document without placing an

unreasonable burden upon the organization. For example, a request may

be limited to those parts of an organization's annual information

return that relates to the compensation of the organization's officers

and managers.

(4) Fees for copies--(i) In general. A tax-exempt organization

charges a reasonable fee for providing copies only if it charges no

more than the per-page copying charge stated in

Sec. 601.702(f)(5)(iv)(B) of this chapter (fee charged by the Internal

Revenue Service for providing copies to a requester), plus no more than

the actual postage costs incurred by the organization to provide the

copies. An organization may require that an individual requesting

copies of documents pay the fee before the documents are provided. If

the organization has provided an individual making a request with

notice of the fee, and the individual has not paid the fee within 30

days, or if the individual pays

[[Page 50539]]

the fee by check and the check does not clear when deposited, the

organization may disregard the request.

(ii) Form of payment--(A) Request made in person. If a tax-exempt

organization charges a fee for copying as permitted under paragraph

(d)(4)(i) of this section, it shall accept payment by cash and money

order for requests made in person. The organization may accept other

forms of payment, such as personal checks or credit cards.

(B) Request made in writing. If a tax-exempt organization charges a

fee for copying and postage as permitted under paragraph (d)(4)(i) of

this section, it shall accept payment by certified check, personal

check and money order for requests made in writing. The organization

may accept other forms of payment, such as credit cards.

(iii) Avoidance of unexpected fees. Where a tax-exempt organization

does not require prepayment and a requester does not enclose prepayment

with a request, an organization must receive consent from a requester

before providing copies for which the fee charged for copying and

postage under paragraph (d)(4)(i) of this section is in excess of $20.

(iv) Responding to inquiries of fees charged. In order to

facilitate a requester's ability to receive copies promptly, a tax-

exempt organization shall respond to any questions from potential

requesters concerning its fees for copying and postage. For example,

the organization shall inform the requester of its charge for copying

and mailing its application for exemption and each annual information

return, with and without attachments, so that a requester may include

payment with the request for copies.

(e) Rules relating to documents to be provided by regional and

district offices, and local and subordinate organizations--(1)

Documents to be provided by regional and district offices. A regional

or district office of a tax-exempt organization must satisfy the same

rules as the principal office with respect to public inspection and

providing copies of its application for tax exemption and annual

information returns. However, a regional or district office is not

required to make its annual information return available for inspection

or for providing copies until 30 days after the date the return is

required to be filed (including any extension of time that is granted

for filing such return) or is actually filed, whichever is later.

(2) Documents to be provided by local and subordinate

organizations. A local organization that does not file its own annual

information return (because it is affiliated with a central

organization that files a group return pursuant to Sec. 1.6033-2(d))

must make available the applicable annual information returns filed by

the central organization. However, a local organization is not required

to make its annual information return available for inspection or for

providing copies until 30 days after the date the return is required to

be filed (including any extension of time that is granted for filing

such return) or is actually filed by the central organization,

whichever is later. If a subordinate organization is covered by a group

exemption letter, the application for tax exemption the subordinate

organization must make available for public inspection and furnish in

response to requests for copies is the application submitted to the

Internal Revenue Service by its parent or supervisory organization to

obtain the group exemption letter, as well as any additional documents

submitted in order to cover the subordinate organization under the

group exemption letter.

(f) Failure to comply with public inspection or copying

requirements. If a tax-exempt organization denies an individual's

request for inspection or a copy of an application for tax exemption or

an annual information return as required under section 6104(e) and this

section, and the individual wants to alert the Internal Revenue Service

to the possible need for enforcement action, the individual may provide

a statement to the Director, Exempt Organizations Division, CP:E:EO,

Internal Revenue Service, 1111 Constitution Avenue, NW., Washington,

D.C. 20224 that describes the reason why the individual believes the

denial was in violation of the requirements of section 6104(e).

(g) Effective date. This section is effective beginning 60 days

after its publication as a final regulation in the Federal Register.

Sec. 301.6104(e)-2 Making applications and returns widely available.

(a) In general. A tax-exempt organization is not required to comply

with a request for a copy of its application for tax exemption or an

annual information return pursuant to Sec. 301.6104(e)-1(a) if the

organization has made the requested application or return widely

available in accordance with paragraph (b) of this section. An

organization that makes its application or return widely available must

nevertheless make the application or return available for public

inspection as required under Sec. 301.6104(d)-1 or Sec. 301.6104(e)-1,

as applicable.

(b) Widely available--(1) In general. A tax-exempt organization

makes its application for tax exemption and/or an annual information

return widely available if the organization uses a method specified in

paragraph (b)(2) of this section or in a revenue procedure or other

form of guidance issued by the Commissioner, and if the organization

satisfies the requirements of paragraph (b)(3) of this section.

(2) Internet posting. A tax-exempt organization can make its

application for tax exemption and/or an annual information return

widely available by posting the application or return on a World Wide

Web page that the tax-exempt organization establishes and maintains or

by having the application or return posted, as part of a database of

similar documents of other tax-exempt organizations, on a World Wide

Web page established and maintained by another entity. In order for the

application or return to be widely available through an Internet

posting, the entity maintaining the World Wide Web page must have

procedures for ensuring the reliability and accuracy of the application

or return that it posts on the page and must take reasonable

precautions to prevent alteration, destruction or accidental loss of

the application or return posted on its page. Furthermore, the

application or return will be considered widely available only if--

(i) It is posted in the same format used by the Internal Revenue

Service to post forms and publications on the Internal Revenue Service

World Wide Web page;

(ii) The World Wide Web page through which it is available clearly

informs readers that the document is available and provides

instructions for downloading it;

(iii) When downloaded and printed in hard copy, the application or

return is in substantially the same form as the original application or

return, and contains the same information provided in the original

application or return filed with the Internal Revenue Service (except

information withheld pursuant to Sec. 301.6104(e)-1(b)(4)(i) (the names

and addresses of contributors listed on the annual information),

Schedule A of Form 990-BL and information on the application for tax

exemption required to be withheld under section 6104(a)(1)(D) and

Sec. 301.6104(e)-1(b)(3) (trade secrets and similar information)); and

(iv) A person can access and download the application or return

without payment of a fee to the organization maintaining the World Wide

Web page.

[[Page 50540]]

(3) Notice requirement. If a tax-exempt organization has made its

application for tax exemption and/or an annual information return

otherwise widely available it must tell any individual requesting a

copy where the documents are available (including the address on the

World Wide Web, if applicable). If the request is made in person, the

organization shall provide such notice to the individual immediately.

If the request is made in writing, the notice shall be provided within

7 days of receiving the request.

(c) Effective date. This section is effective beginning 60 days

after its publication as a final regulation in the Federal Register.

Sec. 301.6104(e)-3 Tax-exempt organization subject to harassment

campaign.

(a) In general. If the key district director for the district where

the organization's principal office is located determines that the

organization is the subject of a harassment campaign and compliance

with the requests that are part of the harassment campaign would not be

in the public interest, a tax-exempt organization is not required to

fulfill a request (as otherwise required by Sec. 301.6104(e)-1(a)) for

a copy that it reasonably believes is part of the campaign.

(b) Harassment. A group of requests for an organization's

application for tax exemption or annual information returns is

indicative of a harassment campaign if the requests are part of a

single coordinated effort to disrupt the operations of a tax-exempt

organization rather than to collect information about the organization.

Whether a group of requests constitutes a harassment campaign depends

on the relevant facts and circumstances. Facts and circumstances that

indicate the organization is the subject of a harassment campaign

include: a sudden increase in the number of requests; an extraordinary

number of requests made through form letters or similarly worded

correspondence; evidence of a purpose to deter significantly the

organization's employees or volunteers from pursuing the organization's

exempt purpose; requests that contain language hostile to the

organization; direct evidence of bad faith by organizers of the

purported harassment campaign; evidence that the organization has

already provided the requested documents to a member of the purported

harassing group; and a demonstration by the tax-exempt organization

that it routinely provides copies of its documents upon request.

(c) Special rule for multiple requests from a single individual or

address. A tax-exempt organization may disregard any request for copies

of all or part of any document beyond the first two received within any

30-day-period or the first four received within any one-year-period

from the same individual or the same address, regardless of whether the

key district director has determined that the organization is subject

to a harassment campaign.

(d) Harassment determination procedure. A tax-exempt organization

may apply for a determination that it is the subject of a harassment

campaign by submitting a signed application to the key district

director for the key district where the organization's principal office

is located. The application shall consist of a written statement giving

the organization's name, address, employer identification number, and

the name, address and telephone number of the person to contact

regarding the application, and describing in detail the facts and

circumstances that the organization believes support a determination

that the organization is subject to a harassment campaign. The

organization may suspend compliance with respect to any request for a

copy of its documents based on its reasonable belief that such request

is part of a harassment campaign, provided that the organization files

an application for a determination within 5 days from the day the

organization first suspends compliance with respect to a request that

is part of the alleged campaign. In addition, the organization may

suspend compliance with any request it reasonably believes to be part

of a harassment campaign until it receives a response to its

application for a harassment campaign determination.

(e) Effect of a harassment determination. If the appropriate key

district director determines that a tax-exempt organization is the

subject of a harassment campaign, such organization is not required to

comply with any request for copies that it reasonably believes is part

of the campaign. This determination may be subject to other terms and

conditions set forth by the key district director. A person (as defined

in section 6652(c)(4)(C)) shall not be liable for any penalty under

sections 6652(c)(1)(C), (D) or 6685 for failing to timely provide a

copy of documents in response to a request covered in a request for a

harassment determination if the organization fulfills the request

within 30 days of receiving a determination from the key district

director that the organization is not subject to a harassment campaign.

Notwithstanding the preceding sentence, if the key district director

further determines that the organization did not have a reasonable

basis for requesting a determination that it was subject to a

harassment campaign or reasonable belief that a request was part of the

campaign, the person (as defined in section 6652(c)(4)(C)) remains

liable for any penalties that result from not providing the copies in a

timely fashion.

(f) Examples. The provisions of this section may be further

illustrated by the following examples.

Example 1. V, a tax-exempt organization, receives an average of

25 requests per month for copies of its three most recent

information returns. In the last week of May, V is mentioned in a

national news magazine story that discusses information contained in

V's 1996 information return. From June 1 through June 30, 1997 V

receives 200 requests for a copy of its documents. Other than the

sudden increase in the number of requests for copies, there is no

other evidence to suggest that the requests are part of an organized

campaign to disrupt V's operations. Although fulfilling the requests

will place a burden on V, the facts and circumstances do not show

that V is subject to a harassment campaign. Therefore, V must

respond timely to each of the 200 requests it receives in June.

Example 2. Y is a tax-exempt organization that receives an

average of 10 requests a month for copies of its annual information

returns. From March 1, 1997 to March 31, 1997, Y receives 25

requests for copies of its documents. Fifteen of the requests come

from individuals Y knows to be active members of the board of

organization X. In the past X has opposed most of the positions and

policies that Y advocates. None of the requesters have asked for

copies of documents from Y during the past year. Y has no other

information about the requesters. Although the facts and

circumstances show that some of the individuals making requests are

hostile to Y, they do not show that the individuals have organized a

campaign that will place enough of a burden on Y to disrupt its

activities. Therefore, Y must respond to each of the 25 requests it

receives in March.

Example 3. The facts are the same as in Example 2, except that

during March 1997, Y receives 100 requests. In addition to the

fifteen requests from members of organization X's board, 75 of the

requests are similarly worded form letters. Y discovers that several

individuals associated with X have urged the X's members and

supporters, via the Internet, to submit as many requests for a copy

of Y's annual information returns as they can. The message

circulated on the Internet provides a form letter that can be used

to make the request. Both the appeal via the Internet and the

requests for copies received by Y contain hostile language. During

the same year but before the 100 requests were received, Y provided

copies of its annual information returns to the headquarters of X.

The facts and circumstances show that the 75 form letter requests

are coordinated for the purpose of disrupting Y's operations, and

not to collect information that has already been provided to an

association representing the requesters' interests. Thus, the fact

and circumstances show that Y is the subject of an organized

[[Page 50541]]

harassment campaign. To confirm that it may disregard the 90

requests that constitute the harassment campaign, Y must apply to

the district director for a determination. Y may disregard the 90

requests while the application is pending and after the

determination is received. However, it must respond within the

applicable time limits to the 10 requests it received in March that

were not part of the harassment campaign.

Example 4. The facts are the same as in Example 3, except that Y

receives 5 additional requests from representatives of the news

media. In the past, some of these representatives have published

articles criticizing Y. Some of these articles were hostile to Y.

Normally, the Internal Revenue Service will not consider a tax-

exempt organization to be reasonable under paragraph (d) of this

section if it disregards requests from members of the news media.

There are no additional facts that demonstrate that Y could

reasonably believe the requests from the news media to be part of

X's harassment campaign. Thus, although Y is the subject of a

harassment campaign, it must respond within the applicable time

limits to the 5 requests that it received from representatives of

the news media.

(g) Effective date. This section is effective beginning 60 days

after its publication as a final regulation in the Federal Register.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

[FR Doc. 97-25492 Filed 9-25-97; 8:45 am]

BILLING CODE 4830-01-U