2022 Publication 3319.pdf

2022 Grant Application Package and Guidelines iLOW INCOME TAXPAYER CLINICS

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MAY 2021

DEAR PROSPECTIVE LOW INCOME TAXPAYER CLINIC GRANT

APPLICANT:

I am pleased to announce the opening of the 2022 Low Income Taxpayer Clinic (LITC) grant application period, beginning May 3, 2021 through June 18, 2021. We are excited about increasing the number of LITCs and the scope of LITC coverage this year and appreciate your consideration and interest.

Under Internal Revenue Code § 7526, the IRS provides matching grants up to $100,000 per year to qualifying organizations representing low-income taxpayers in Internal Revenue Service (IRS) disputes and educating individuals who speak English as a second language (ESL) about their rights and responsibilities as U.S. taxpayers. LITC services must be provided for free or for no more than a nominal fee. To know more about the activities and accomplishments of organizations awarded LITC funding in prior years, see IRS Publication 5066, LITC Program Report.

Publication 3319 outlines eligibility requirements for an LITC matching grant and provides application instructions. Topics include:

n Statutory eligibility requirements;

n Other eligibility and compliance requirements;

n Application and selection process;

n Standards for operating an LITC;

n Reporting responsibilities;

n LITC Program Office responsibilities;

n Application forms and instructions; and n Reporting forms and instructions.

This publication, including the appendices, is a good reference for LITC grant recipients and includes program and grant administration guidance for the grant year.

Congress, the IRS, and the Taxpayer Advocate Service remain committed to achieving maximum access to representation for low-income taxpayers. Thus, in awarding 2022 LITC grants, we will continue to work toward the following program goals:

n Expanding coverage in areas identified as underserved; and n Ensuring that grant recipients demonstrate that they are serving geographic areas with sizable populations eligible for and requiring LITC services.

The IRS may award grants to qualifying organizations for up to a three-year period. However, funding is provided for one-year periods (January 1 – December 31), subject to the availability of annually appropriated funds. Generally, first-time applicants will only be awarded a single-year grant unless the Notice of Funding Opportunity indicates otherwise to recruit applicants in areas with limited or no LITC coverage. See IR- 2021-55, March 15, 2021.

https://www.irs.gov/pub/irs-pdf/p5066.pdf https://www.irs.gov/newsroom/low-income-taxpayer-clinic-2021-supplemental-application-period-now-open https://www.irs.gov/newsroom/low-income-taxpayer-clinic-2021-supplemental-application-period-now-open ii LOW INCOME TAXPAYER CLINICS

All Full Grant Applications and Non-Competing Continuation (NCC) Requests must be submitted electronically by 11:59 pm (ET) on June 18, 2021, via www.grants.gov or https://home.grantsolutions.

gov/home/, respectively. The cost of preparing and submitting applications and NCC Requests is the responsibility of each applicant. In mid-May, the LITC Program Office is hosting a webinar for applicants considering submitting a full application or interested in learning more about the application process. For more information, including a link to register for the webinar, visit www.irs.gov/litc. Clinics submitting an NCC Request should check the LITC Toolkit for the date and time of a session on that specific topic.

Qualified applicants will be notified in November 2021 of their selection for an award for the 2022 year.

Award recipients must attend the Annual LITC Grantee Conference held in December 2021 or January 2022.

The Annual Conference provides an opportunity for new award recipients and returning clinics to meet and share best practices and obtain substantive training on tax law topics relevant to low-income and ESL taxpayers. Award recipients will be notified of the conference date and location (or virtual format) as soon as it is determined.

If you have questions about the LITC Program or grant application process, please contact the LITC Program Office at 202-317-4700 or by email at LITCProgramOffice@irs.gov.

We appreciate your interest in the LITC Program, and we look forward to another successful grant year in 2022 assisting Low Income Taxpayer Clinics in their work to ensure the fairness and integrity of the tax system for low-income and ESL taxpayers.

Sincerely, Erin M. Collins National Taxpayer Advocate http://www.grants.gov https://home.grantsolutions.gov/home/ https://home.grantsolutions.gov/home/ http://www.irs.gov/litc https://www.litctoolkit.com/?password-protected=login&redirect_to=https%3A%2F%2Fwww.litctoolkit.com%2F mailto:LITCProgramOffice%40irs.gov?subject= iiiLOW INCOME TAXPAYER CLINICS

WHAT IS NEW THIS YEAR

Below is a list of some of the more significant changes made to this year’s Publication 3319; however, all are encouraged to read the entire publication. By accepting the Notice of Award, all grant recipients are agreeing to follow the guidelines provided in this publication.

n The Office of Management and Budget (OMB) made extensive changes to 2 CFR Part 200 in August 2020. Revisions have been made throughout this publication to reflect those changes.

n Educational activities: While the primary focus for educational activities should be to educate taxpayers directly, educating organizations or groups that assist low-income taxpayers and taxpayers who speak English as a second language (ESL) is another valuable strategy. Although educational activities delivered to organizations are not included in the numerical goals on Form 13424-M, Low Income Taxpayer Clinic (LITC) Application Narrative, these activities are reported on Form 13424- A, Low Income Taxpayer Clinic (LITC) General Information Report, and considered by the Program Office. Clinics may also use virtual platforms (e.g., Facebook Live) to deliver educational programs and may count them as educational activities for the purposes of LITC reporting when there is a way for participants to be counted and for the speaker and participants to interact. Due to COVID-19, the Program Office understands that there may be challenges in delivering educational activities. Clinics are encouraged to report on Form 13424-N, Low Income Taxpayer Clinic (LITC) Program Narrative Report, Item 2,ix, any related hurdles encountered and alternatives pursued that may not clearly fit within these parameters but are still intended to educate taxpayers.

n The grant closeout section was revised to align with changes to 2 CFR § 200.344, including mandatory reporting by the LITC Program Office to the OMB-designated integrity and performance system (currently Federal Awardee Performance and Integrity Information System (FAPIIS)), if the grant recipient does not submit all required reports and forms within one year of the period of performance end date.

n Multiyear grants will only be awarded to applicants that have successfully completed at least one year under the terms and conditions of the LITC grant unless the Notice of Funding Opportunity indicates otherwise.

n Subawards may be considered in circumstances where the award of a subgrant is likely to assist a grant recipient with expanding coverage to an underserved or uncovered area. Use of a subaward must be proposed in the application and approved in writing by the LITC Program Office. If a sponsoring organization is located in a different geographic area from the service area and has capacity to provide some services remotely such as representation and advocacy services, but needs a local presence to facilitate some client contact and to provide in person education and outreach, the subaward of funds to a local organization to deliver some of these services may be appropriate where the proposed area to be covered is either underserved or uncovered.

n Starting in 2021, SAM.gov will begin the process of replacing the Data Universal Numbering System (DUNS) number for all entities with a Unique Entity Identifier (UEI), or the Entity ID. Organizations should use their current DUNS number until SAM generates the UEI for the organization.

n In accordance with 2 CFR § 25.300(a), a grant recipient may not make a subaward unless the subrecipient has obtained and provided a UEI to the grant recipient.

http://SAM.gov iv LOW INCOME TAXPAYER CLINICS n Due to the current status of government operations as a result of COVID-19, there may be some delays in the SAM registration process. If you are notified that your registration may not be processed, please contact the LITC Program Office as soon as possible to determine what steps to take.

n Unless exempted from this requirement under 2 CFR § 25.110, a clinic must maintain current information in SAM. This includes information on the clinic’s immediate and highest level owner and subsidiaries, as well as on all of the clinic’s predecessors that have been awarded a federal contract or federal financial assistance within the last three years, if applicable, until the clinic submits the final financial report required under this federal award or receives the final payment, whichever is later. This requires that the clinic review and update the information at least annually after the initial registration and more frequently if required by changes in the clinic’s information or another federal award term. See Appendix A to 2 CFR Part 25.

n Grant funds and matching funds must be used for expenses in accordance with the cost principles guidance in 2 CFR Parts 200 and 1000. Generally, for an expense to be allowable, the expense must meet numerous criteria. The following criteria has been added to the list:

n The expense must be incurred during the approved budget period. See 2 CFR § 200.403(h).

Note: In general, grant funds cannot be carried forward from one year to the next unless the LITC Program Office approves such carryover. In appropriate circumstances, however, the LITC Program Office may use discretion to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to 2 CFR § 200.308(e)(3).

n Chart of Allowable Expenses:

n Added case management system software. See 2 CFR § 200.453.

n Added malpractice insurance. See 2 CFR § 200.447. Malpractice insurance was previously listed in error as unallowable.

n Indirect Cost Rate Agreements:

n If an applicant has no other sources of federal funding and has questions about obtaining an Indirect Cost Rate Agreement (ICRA), please contact the LITC Program Office to discuss possible options.

n Grant recipients must make negotiated ICRAs available to the public on an OMB-designated federal website, per 2 CFR § 200.414(h); however, this site has not yet been designated. When the website becomes available, the LITC Program Office will provide details on the LITC Toolkit.

n Previously, under 2 CFR § 200.414(f), a de minimis rate of ten percent of Modified Total Direct Costs (MTDC) was only available for organizations that never had a negotiated ICRA. The current revision of 2 CFR § 200.414(f), however, expands the use of the de minimis rate to organizations that never had an ICRA or those that had a negotiated rate that has expired. No documentation is required to justify the ten percent de minimis indirect cost rate.

n Changes were made to the section about obtaining grant payment history for an OMB or single audit.

An updated weblink is provided for those seeking information pertaining to payment or transaction vLOW INCOME TAXPAYER CLINICS history from the Payment Management System (PMS) - https://pms.psc.gov/grant-recipients/audit-confirmation-procedures.html. Grant recipients are encouraged to notify the auditor how to obtain this information to avoid delays in receiving the needed information and the audit process.

n Applications receiving a ranking panel score of 49 or lower will receive a review by the LITC Program Office to ensure that the ranking score is adequately supported. If the score is found to be supported by the content of the application, the application will not move forward in the review process and will not receive an award.

n LITC Program Office Evaluation of Full Application: The Program Office may utilize additional resources to verify information provided in a full application such as an organization’s website and accreditation or professional licensure websites.

n Changes were made to the section about evaluation of Non-Competing Continuation (NCC) Requests to include a description of the risk assessment to be conducted and what the Program Office will consider when reviewing a grant recipient’s performance history.

n Clinics are strongly encouraged to use the LITC logo in all newly printed or published materials and on their websites. On the LITC Toolkit, the LITC Program Office provides clinics with high-quality electronic files of the logo for their use. The logos should not be altered.

n A failure on the part of the taxpayer to fully report his or her income at commencement of representation may be grounds for disqualification from representation or may require inclusion in the count of cases over 250 percent of the Federal Poverty Level, depending upon the underlying circumstances. The LITC should examine the facts and document its decision and the factors leading to their decision how to handle the situation.

n The section, Representing a Taxpayer With More Than $50,000 in Controversy, was clarified. A case only needs to be reported in the year it is opened. If a clinic intends to accept cases where the amount in controversy exceeds $50,000, the clinic must have a documented policy.

n The section about U.S. Tax Court Pre-Trial Settlement Days was supplemented to address TAS employee involvement. TAS employees also participate in Settlement Days to assist taxpayers with tax issues attributable to non-docketed years. Local Taxpayer Advocates and their staff can work with and inform taxpayers about how TAS may be able to assist with other unresolved tax matters or to provide further assistance after the Tax Court matter is concluded. If a taxpayer experiences difficulties concerning a collection matter, TAS can also assist with collection alternatives.

n The Delegation Order which authorizes the LITC Program Office Director to issue Special Appearance Authorizations for Students and Law Graduates has been revised to expand the definition of qualified law graduate so that more individuals can assist low-income taxpayers. The revised Delegation Order will expire in two years unless reissued.

n National Policy Requirements and Administrative Requirements: Items were added.

n Executive Order 13988, Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation, requires agencies to examine their programs and policies to ensure they are consistent with the Administration’s policy to prevent and combat discrimination on the basis of gender identity or sexual orientation.

https://pms.psc.gov/grant-recipients/audit-confirmation-procedures.html https://pms.psc.gov/grant-recipients/audit-confirmation-procedures.html vi LOW INCOME TAXPAYER CLINICS n Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, requires that all federal agencies select programs of the agency for a review to assess whether there are barriers to participation for members of underserved communities in government services and contracts and to take actions to remove identified barriers. The order also rescinded previous Executive Order 13950 of September 22, 2020 (Combating Race and Sex Stereotyping).

n In the Federal Funding Accountability and Transparency Act section, text was added explaining that unless exempted from this requirement under paragraph d of Appendix A to 2 CFR Part 170, any grant recipient with total funding anticipated to equal or exceed $30,000 in federal funding must report to http://www.fsrs.gov the total compensation for each of the grant recipient’s five most highly compensated executives for the preceding completed fiscal year. See Appendix A to 2 CFR Part 170.

n New text was added to clarify how to complete the application amendment package.

n For Standard Form 424, Application for Federal Assistance, a new descriptive title is provided to respond to question 15. See Appendix A.

AVOIDING APPLICATION COMMON ERRORS

To assist with the application process, see the list below of commonly made errors. Please double check your Full Grant Application or NCC Request to avoid these errors and ensure your application is timely processed and reviewed.

Standard Form 424 n Requesting a multiyear grant utilizing the wrong proposed project end date on line 17b.

n Requesting more than $100,000 in grant funds.

n Missing the matching funds to be provided.

n Missing list of counties that will be covered (attachment option only).

n Missing list of congressional districts that will be covered.

n The Employer Identification Number (EIN) provided does not match the EIN in SAM.gov.

n The DUNS number provided does not match the DUNS number in SAM.gov.

Form 13424-M n Applicants indicate a single audit was “Qualified” when it was actually “Unqualified” and the correct selection on the form is “Unmodified.”

n No responses or incomplete responses are provided to the civil rights review; in particular, the response to question D should address both the needs of individuals with limited English proficiency (LEP) and those who may need a reasonable accommodation in order to access services.

Form 13424-J n No full-time equivalent (FTE) is provided for staff on Form 13424-J, Detailed Budget Worksheet and Narrative Explanations, or applicants fail to state how many hours per week is considered full-time.

http://www.fsrs.gov viiLOW INCOME TAXPAYER CLINICS

The Personnel section of the Detailed Budget Narrative Explanations should start with a statement defining how many hours constitute a work week; for example, “ABC clinic computes 1.0 FTE on a 40-hour work week (2,080 hours per year).”

n There is no breakdown of travel and training expenses into categories such as lodging, transportation, and meals and incidentals.

The Project Abstract n The form is missing the four primary numerical goals:

n New representation cases to be opened in the calendar year;

n Consultations with low-income and ESL taxpayers;

n Educational activities to low-income and ESL taxpayers; and n Low-income and ESL taxpayers to be reached in educational activities.

n Program Plan changes are not addressed. If there are no changes, include a statement indicating no changes or not applicable.

n No responses or incomplete responses are provided to the civil rights review; in particular, the response to question D should address both the needs of individuals with LEP and those who may need a reasonable accommodation in order to access services.

Employer Identification Number and Data Universal Numbering System Number n First-time registration for an EIN and DUNS number is a multi-step process that can take more than eight weeks and must be completed before the application submission deadline. Applicants fail to apply early enough to receive the necessary EIN and DUNS for use in SAM.

Attachments n The Indirect Cost Rate Agreement (ICRA) submitted by applicants is incomplete or expired. To determine whether the ICRA is properly applied, the LITC Program Office must know what costs were included in the Modified Direct Costs. If the ICRA is expired, the applicant should provide an explanation including whether an extension was requested and, if so, the date it was requested.

n The nonprofit determination letter is not provided.

n The letter of accreditation, for academic institutions, is not provided.

n An incomplete copy of the single audit is submitted, or the copy is missing (and it is unavailable on the Federal Audit Clearinghouse (FAC) website).

n The Tax Compliance Officer substantiation documentation is not attached or insufficient.

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TABLE OF CONTENTS

I. LITC PROGRAM DESCRIPTION

A. LITC Grant Program Priorities

B. History of the LITC Program

C. Statutory Authority to Fund LITCs

D. Key Terms and Definitions

II. FEDERAL AWARD INFORMATION

A. Awards Are Subject to Congressional Appropriations

B. Award Performance Period

C. Subawards Are Generally Prohibited

D. LITC Grants Are Not Cooperative Agreements

III. AWARD ELIGIBILITY REQUIREMENTS

A. Eligible Applicants

B. Requirement to Provide Matching Funds Equal to Award

C. Other Eligibility Requirements

i. Using Grant Funds to Support Other Activities Is Prohibited

ii. Charging More Than a Nominal Fee for Services Is Prohibited

iii. Compliance With Federal Tax and Nontax Requirements

iv. Debarment and Suspension

IV. APPLICATION AND SUBMISSION PROCESS

A. Accessing the LITC Grant Application Package and Guidelines

B. Required Content For LITC Full Grant Applications and Non-Competing Continuation Requests

i. Determining Type of Application

ii. Submitting a Full Grant Application on Grants.gov

iii. Instructions for Completing Full Grant Application

iv. Submitting an NCC Request on GrantSolutions

v. Instructions for Completing NCC Request Forms

vi. Withdrawing Applications After Submission

C. System For Award Management Registration Requirement and Unique Entity Identifiers . . . 18

i. System for Award Management

ii. Employer Identification Number

iii. DUNS Number x LOW INCOME TAXPAYER CLINICS

D. Submission Due Dates and Times

i. Due Date for LITC Full Grant Applications and NCC Requests

ii. Incomplete or Late LITC Full Grant Applications and NCC Requests

E. Budget Considerations and Funding Restrictions

i. Spending LITC Grant Funds and Matching Funds

ii. Direct vs. Indirect Expenses

iii. Meeting the Matching Funds Requirement

iv. OMB Audit Requirement

V. APPLICATION REVIEW

A. Technical Evaluation of Full Grant Applications and Scoring Criteria

B. LITC Program Office Evaluation and Selection of Full Grant Applications and NCC Requests

i. LITC Program Office Evaluation

ii. Civil Rights Compliance Reviews

VI. AWARD ADMINISTRATION

A. Notification of Selection

B. Notice of Award

C. Administrative Requirements

i. Standards for Operating an LITC

ii. LITC Program Office Webinars

iii. Annual LITC Grantee Conference

iv. Developing a Community Outreach Plan

v. Building Community Partnerships

vi. Networking With Other LITCs

vii. Mentoring

viii. Technical Assistance Consultation

ix. Maintaining Client Confidentiality

x. Recruiting and Supervising Volunteers

xi. Recordkeeping and File Management

xii. Representing Low-Income Taxpayers

xiii. Education

xiv. Advocacy

xv. Preparing Tax Returns and ITIN Applications xiLOW INCOME TAXPAYER CLINICS

D. National Policy Requirements and Administrative Requirements

i. General Compliance

ii. Managing Grant Funds

iii. Lobbying Restrictions

E. Reporting Responsibilities

i. Events Requiring Notification to the LITC Program Office

ii. Submitting the Interim Report

iii. Submitting the Year-End Report

iv. Grant Closeout

VII. LITC PROGRAM OFFICE RESPONSIBILITIES AND CONTACT

A. Structure

B. Administration

C. Assistance

D. Oversight

E. Site Assistance Visits

F. Contacting the LITC Program Office

VIII. AWARD MODIFICATION, SUSPENSION, TERMINATION, OR WITHDRAWAL

APPENDIX A

APPENDIX B

COMMON IRS AND FEDERAL GRANT ACRONYMS

GLOSSARY

INDEX

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I. LITC PROGRAM DESCRIPTION

A. LITC GRANT PROGRAM PRIORITIES

LITCs Provide Representation, Education, and Advocacy LITCs ensure the fairness and integrity of the tax system for taxpayers who are low-income or speak ESL by:

n Providing pro bono representation on their behalf in tax disputes with the IRS;

n Educating them about their rights and responsibilities as taxpayers; and n Identifying and advocating for issues that impact these taxpayers.

LITCs must:

n Incorporate all three mission prongs into their service delivery strategy;

n Provide dollar-for-dollar matching funds; and n Offer LITC services for free or for no more than a nominal fee. See Section I.D, Key Terms and Definitions.

In December 2015, Congress enacted the Taxpayer Bill of Rights (TBOR)1 in Internal Revenue Code (IRC) § 7803(a)(3), which requires the IRS Commissioner to ensure that employees of the IRS are familiar, and act in accordance, with taxpayer rights. TBOR also educates taxpayers that they have rights; that knowledge, in turn, empowers taxpayers to assert those rights during their interactions with the IRS. One of the ten fundamental rights taxpayers have when dealing with the IRS is the right to retain representation,2 meaning taxpayers have the right to retain an authorized representative of their choice to represent them in their interactions with the IRS.

A taxpayer who cannot afford to hire a representative has the right to be informed about the taxpayer’s potential eligibility for assistance from an LITC. The LITC Program protects taxpayers’ rights by providing free or low-cost access to representation for low-income taxpayers, so that achieving a correct outcome in an IRS dispute does not depend on the taxpayer’s ability to pay for representation. Helping a taxpayer avoid a tax controversy through education and outreach is another essential function of LITCs. LITCs are required to educate taxpayers on their rights and responsibilities to help them understand the U.S. tax system, exercise their rights as taxpayers, and comply with their tax-related responsibilities. LITCs enhance learning by providing an opportunity for taxpayers to ask questions and interact with clinic staff. While the primary focus for educational activities should be to educate taxpayers directly, educating organizations or groups that assist low-income and ESL taxpayers is another valuable strategy.

At least 90 percent of the taxpayers an LITC represents must be low-income, meaning the countable income for the taxpayer’s household does not exceed 250 percent of the Federal Poverty Guidelines. In addition, when an LITC represents a taxpayer, the dollar amount in controversy for any tax year generally must not exceed the amount specified in IRC § 7463, which is also the limit on eligibility for special small case procedures in the U.S.

Tax Court (currently $50,000). See Section VI.C.xii, Representing Low Income Taxpayers, Low-Income Taxpayers and the 90/250 Rule.

1 See Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, Division Q, § 401, 129 Stat. 2242, 3117 (Dec. 18, 2015).

2 See IRC § 7803(a)(3)(I).

2 LOW INCOME TAXPAYER CLINICS

LITC Program Coverage The IRS is committed to achieving maximum access to representation for low-income taxpayers under the terms of this grant program. For the 2021 grant year, however, there are several geographic areas of the country without an LITC or with very limited coverage. Thus, in awarding 2022 LITC grants, we will strive to provide services to low-income and ESL taxpayers in every state, the District of Columbia, and Puerto Rico. We will prioritize the funding of qualified applicants to open new clinics or expand existing LITC coverage in geographic areas with no clinic or very limited coverage (see list below) before adding a new clinic in a geographic area that already has a clinic or coverage.

Areas of Special Consideration3

ARIZONA (Gila County), FLORIDA (Brevard, Citrus, Flagler, Hernando, Lake, Orange, Putnam, Seminole, and Sumter counties), IDAHO (Ada, Adams, Bannock, Bear Lake, Bingham, Boise, Bonneville, Butte, Canyon, Caribou, Clark, Clearwater, Custer, Franklin, Freemont, Gem, Idaho, Jefferson, Latah, Lemhi, Lewis, Madison, Nez Perce, Oneida, Owyhee, Payette, Power, Teton, Washington, and Valley counties), MONTANA, NEVADA, NORTH DAKOTA, PENNSYLVANIA (Bradford, Clinton, Lycoming, Monroe, Northumberland, Pike, Snyder, Sullivan, Susquehanna, Tioga, and Wyoming counties), PUERTO RICO, WEST VIRGINIA, and WYOMING.

Figure 1, 2021 LITC Coverage by County

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3 A 2021 supplemental application period was open at the time of this publication’s production, and related funding decisions may impact this list. See IR-2021-55 (March 15, 2021). Also, please note that the state of Montana is listed as needing additional coverage. However, because it has a clinic, it is not shaded on the map.

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Important Dates for 2022 LITC Grant Program

Application Period May 3 – June 18, 2021

New Applicant Webinar Mid-May 2021

Application review and evaluation June – November 2021

Notification of selection/non-selection November 2021

Grant year January 1 – December 31, 2022

Interim report due August 1, 2022

Year-End report due March 31, 2023

B. HISTORY OF THE LITC PROGRAM

As part of the IRS Restructuring and Reform Act of 1998,4 Congress enacted IRC § 7526 to authorize funding for the LITC Program. The IRS created the LITC Program Office in 1999 to award and administer the grants and provide guidance, assistance, and oversight to LITCs and prospective applicants. The LITC Program Office is part of the Office of the Taxpayer Advocate (commonly referred to as the Taxpayer Advocate Service (TAS)), and TAS is led by the National Taxpayer Advocate, who reports to the IRS Commissioner.

In 1999, the IRS awarded grants totaling nearly $1.5 million to 34 entities located in 18 states and the District of Columbia. The LITC Program Office’s history of recruiting efforts coupled with sound judgment in selecting federal grant recipients has fostered the growth of a nationwide network of independent organizations working toward a common purpose in their local communities. The maximum statutory award amount of $100,000 per clinic has remained constant since the creation of the program. Despite the current funding limitation, LITCs have consistently delivered tremendous results, new clinics join each year, and the program continues to expand coverage into underserved areas of the country. The National Taxpayer Advocate included a legislative recommendation in the most recent Annual Report to Congress to amend IRC § 7526(c)(2) to increase the annual clinic funding limitation to $150,000 and index the limitation to rise with inflation in future years pursuant to the rules prescribed in IRC § 1(f ).5 The LITC Program is hopeful the recommendation will be sponsored and adopted by Congress for future grant years.

4 See IRS Restructuring and Reform Act of 1998, Pub. L. No. 105-206, § 3601, 112 Stat. 685, 774 (1998).

5 National Taxpayer Advocate 2021 Purple Book, Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and

Improve Tax Administration 141 (Increase the Individual Low Income Taxpayer Clinic Grant Cap and Index It for Inflation).

4 LOW INCOME TAXPAYER CLINICS

C. STATUTORY AUTHORITY TO FUND LITCS

The authority to create LITCs is derived from IRC § 7526. The text of IRC § 7526 is reprinted in full below:

Section 7526. Low-income taxpayer clinics.

(a) In general. The Secretary may, subject to the availability of appropriated funds, make grants to provide matching funds for the development, expansion, or continuation of qualified low-income taxpayer clinics.

(b) Definitions. For purposes of this section —

(1) Qualified low-income taxpayer clinic.

(A) In general. The term “qualified low-income taxpayer clinic” means a clinic that —

(i) does not charge more than a nominal fee for its services (except for reimbursement of actual costs incurred); and

(ii) (I) represents low-income taxpayers in controversies with the Internal Revenue Service; or

(II) operates programs to inform individuals for whom English is a second language about their rights and responsibilities under this title.

(B) Representation of low-income taxpayers. A clinic meets the requirements of subparagraph (A)(ii)(I) if —

(i) at least 90 percent of the taxpayers represented by the clinic have incomes which do not exceed 250 percent of the poverty level, as determined in accordance with criteria established by the Director of the Office of Management and Budget; and

(ii) the amount in controversy for any taxable year generally does not exceed the amount specified in section 7463.

(2) Clinic. The term “clinic” includes —

(A) a clinical program at an accredited law, business, or accounting school in which students represent low-income taxpayers in controversies arising under this title; and

(B) an organization described in section 501(c) and exempt from tax under section 501(a) which satisfies the requirements of paragraph (1) through representation of taxpayers or referral of taxpayers to qualified representatives.

(3) Qualified representative. The term “qualified representative” means any individual (whether or not an attorney) who is authorized to practice before the Internal Revenue Service or the applicable court.

(c) Special rules and limitations.

(1) Aggregate limitation. Unless otherwise provided by specific appropriation, the Secretary shall not allocate more than $6,000,000 per year (exclusive of costs of administering the program) to grants under this section.

(2) Limitation on annual grants to a clinic. The aggregate amount of grants which may be made under this section to a clinic for a year shall not exceed $100,000.

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(3) Multi-year grants. Upon application of a qualified low-income taxpayer clinic, the Secretary is authorized to award a multi-year grant not to exceed 3 years.

(4) Criteria for awards. In determining whether to make a grant under this section, the Secretary shall consider —

(A) the numbers of taxpayers who will be served by the clinic, including the number of taxpayers in the geographical area for whom English is a second language;

(B) the existence of other low-income taxpayer clinics serving the same population;

(C) the quality of the program offered by the low-income taxpayer clinic, including the qualifications of its administrators and qualified representatives, and its record, if any, in providing service to low-income taxpayers; and

(D) alternative funding sources available to the clinic, including amounts received from other grants and contributions, and the endowment and resources of the institution sponsoring the clinic.

(5) Requirement of matching funds. A low-income taxpayer clinic must provide matching funds on a dollar-for-dollar basis for all grants provided under this section. Matching funds may include —

(A) the salary (including fringe benefits) of individuals performing services for the clinic; and

(B) the cost of equipment used in the clinic.

Indirect expenses, including general overhead of the institution sponsoring the clinic, shall not be counted as matching funds.

(6) Provision of information regarding qualified low-income taxpayer clinics.

Notwithstanding any other provision of law, officers and employees of the Department of the Treasury may —

(A) advise taxpayers of the availability of, and eligibility requirements for receiving, advice and assistance from one or more specific qualified low-income taxpayer clinics receiving funding under this section, and

(B) provide information regarding the location of, and contact information for, such clinics.

D. KEY TERMS AND DEFINITIONS

90/250 requirement was established by IRC § 7526 and provides that at least 90 percent of the taxpayers represented by a clinic have incomes that do not exceed 250 percent of the Federal Poverty Level. See Section VI.C.xii, Representing Low-Income Taxpayers.

Advocacy as it relates to LITCs is zealously protecting the rights of low-income and ESL taxpayers. Advocacy can occur on an individual or systemic basis. A substantial portion of LITC work is spent assisting clients with an IRS controversy. Clinics advocate for the taxpayers they represent by ensuring they are paying the correct amount of taxes, exploring all possible options for relief, and assisting them in making a fully informed decision on how best to proceed given the facts of the case and the taxpayer’s situation. Notwithstanding the unique nature of each taxpayer’s circumstances, similarly situated taxpayers often experience similar problems with tax administration.

Advocacy includes but is not limited to identifying systemic-level issues and sharing them with TAS. TAS investigates the submissions, proposes solutions, and works with the IRS to resolve the issues, or elevates them to

6 LOW INCOME TAXPAYER CLINICS

the National Taxpayer Advocate who can communicate the issues and proposed solutions to lawmakers and the IRS administration in TAS’s Reports to Congress. Advocacy may also consist of responding to public requests for comments to IRS regulations or procedures.

Amount in controversy is the federal tax amount in dispute for each tax year for which the LITC is representing a taxpayer. Often the amount in controversy is the amount owed or the refund requested. In some disputes with the IRS, however, the amount in controversy is the amount associated with an action taken by the IRS. The amount in controversy includes the tax liability in dispute for a tax year, plus any related penalties imposed. Whether interest is included in the amount in controversy will depend on the nature of the controversy.

The amount in controversy is limited to the amount in dispute, which may be less than the amount specified in an IRS statutory notice of deficiency, a notice of determination, or a notice and demand. If the taxpayer is disputing the amount due in more than one tax year or period, the amount in controversy is determined separately for each year. See Section VI.C.xii, Representing Low-Income Taxpayers, Amount in Controversy Limit.

Cases are those matters that LITCs count and report in inventory when a taxpayer or married taxpayers retain the clinic to represent them in a controversy before the IRS or a federal court. To be counted as a case, the clinic must take steps to address the controversy, including developing a plan for advocacy. If the clinic is representing a married couple, it is counted as one case.

Clinic refers to an LITC. See the definition of LITC below. Throughout this publication, the terms clinic, LITC, and grant recipient are used interchangeably.

Consultation encompasses a discussion with or correspondence to a taxpayer designed to address the taxpayer’s unique circumstances and involves an analysis that is tailored to the taxpayer’s factual situation. A consultation does not result in advocating for the taxpayer before the IRS or relevant court in a representative capacity but might include fact gathering and contact with the IRS that does not rise to the level of advocacy.

Controversy with the IRS is a proceeding brought by the taxpayer under the IRC or any dispute between an individual and the IRS concerning the determination, collection, or refund of any tax, penalties, or interest. The definition is very broad and encompasses all types of disputes arising under the IRC, except criminal tax matters.

For example, a controversy includes a dispute related to the tax provisions of the Affordable Care Act, a revocation or denial of a passport under IRC § 7345, and certain civil actions arising under IRC §§ 7431 to 7435. The dispute may be pending in a federal court or in any tax administration function of the IRS (e.g., Examination, Collection, Appeals, Accounts Management). The dispute does not have to arise under the IRC so long as the dispute is with the IRS; for example, a controversy includes civil penalties arising under Title 31 if the IRS is the other party involved in the controversy. While representing a taxpayer in a controversy with the IRS, an LITC may also need to represent the taxpayer in a controversy with a state or local tax agency concerning the same or related tax matter. Though a controversy does not include a federal criminal tax matter, it may include a state criminal tax matter. A controversy may be considered a civil matter in the federal context, but a criminal matter under state or local law. If the LITC is already representing the taxpayer in the federal civil matter, it may be appropriate for the LITC to expand the scope of the representation to include the state or local tax matter as well.

Educational activities (also referred to as a Program to Inform) are designed to inform ESL or low-income individuals about their rights and responsibilities as taxpayers, as well as tax issues of significance to the intended audience. The two education-related numerical goals referenced on Form 13424-M, Application Narrative, VII.

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Program Numerical Goals C and D, reference those delivered directly to taxpayers. Educational activities may also include a workshop or free training for other organizations that assist low-income or ESL taxpayers. While activities delivered to organizations are not included in the numerical goals on Form 13424-M, these activities are reported on Form 13424-A, Low Income Taxpayer Clinic (LITC) General Information Report, and considered by the Program Office. To be considered an educational activity, information about a specific tax topic or topics must be conveyed to the audience. LITCs should address a wide range of substantive tax issues in their educational programs and materials (e.g., filing requirements, tax recordkeeping, family status issues, refundable credits, the Affordable Care Act, worker classification, identity theft, information about the audit and appeals process, and collection alternatives). Selecting education topics relevant to community needs and offering the presentations and/or presentation materials in languages commonly spoken in the community allow LITCs to reach taxpayers who otherwise might experience great difficulty communicating with the IRS. In general, these programs are delivered in-person to a live audience, with participants registering, signing in, or being counted and allow for audience interaction with the presenter. Clinics may also use virtual platforms (e.g., Facebook Live) to deliver these programs and count them as educational activities for the purposes of LITC reporting when there is a way for participants to be counted and for the speaker and participants to interact. Due to COVID-19, the Program Office understands that there may be challenges in delivering educational activities. Clinics are encouraged to report on Form 13424-N, 2. ix, any related hurdles encountered and alternatives pursued that may not clearly fit within these parameters but are still calculated to educate taxpayers.

ESL taxpayers are persons for whom English is not their first language, which also includes those who communicate using sign language. These individuals may have an additional burden understanding taxpayer rights and responsibilities and are a priority for LITC education and outreach efforts.

Grants.gov is the government website where federal agencies post discretionary funding opportunities and applicants find and apply for them.

GrantSolutions is a web-based, comprehensive grant management system. Clinics use GrantSolutions for submitting an NCC Request, accepting a Notice of Award (NOA), submitting reports, and reporting program plan, staffing, or budget changes.

Key personnel are individuals necessary for the successful functioning of the LITC. Key personnel are responsible for ensuring that the LITC’s day-to-day operations run smoothly, the LITC Program is delivered in accordance with the terms and conditions of the grant, finances are properly administered, and legal arguments are sound. Key personnel include the Clinic Director, Qualified Tax Expert (QTE), and Qualified Business Administrator (QBA). See Section VI.C.i, Standards for Operating an LITC.

Low-income taxpayers are individuals whose income does not exceed 250 percent of the Federal Poverty Guidelines. The Federal Poverty Guidelines are updated annually (usually in late January) by the Department of Health and Human Services (HHS). The LITC Income Guidelines current as of publication can be found in Section VI.C.xii, Representing Low-Income Taxpayers. A sole proprietor is considered an individual and may be assisted by an LITC if otherwise eligible. A business or other entity is not a low-income taxpayer eligible for LITC representation. An individual trying to resolve a tax liability arising from personal involvement with a business can be a low-income taxpayer. For example, an individual who is personally liable for taxes owed from a business (e.g., a responsible person within the meaning of IRC § 6672) may be a low-income taxpayer, provided the individual otherwise meets the definition.

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LITC is an organization receiving a grant pursuant to IRC § 7526 that represents low-income taxpayers in controversies with the IRS and that operates a program to inform ESL individuals about their rights and responsibilities under the IRC. LITCs are also referred to as clinics in this publication. Examples of a clinic include:

n A clinical program at an accredited law, business, or accounting school in which students represent low-income taxpayers in controversies arising under the IRC; and n An organization described in IRC § 501(c) and exempt from tax under IRC § 501(a) in which employees and volunteers represent low-income taxpayers in controversies with the IRS.

Nominal fee is a fee that is insignificantly small or minimal. A nominal fee is a trivial payment, bearing no relation to the value of the representation provided, considering all the facts and circumstances. A nominal fee must be a flat fee; the fee cannot fluctuate based on an hourly rate or the type of services the LITC is providing.

A nominal fee does not include reimbursement for actual costs incurred (e.g., photocopies, court costs, and expert witness fees).

Outreach is an activity conducted by an LITC that involves effectively publicizing and promoting the clinic’s services regarding representation, education, and advocacy on behalf of low-income and ESL taxpayers. LITCs are encouraged to identify linguistic populations, geographic service areas, or other segments of the low-income taxpayer community in which to focus outreach efforts. Outreach activities may involve direct communication (in-person contact or in writing) with taxpayers or may be accomplished through contacts with other organizations or groups that assist low-income and ESL taxpayers. Additional guidance on effective outreach can be found in Section VI.C.iv, Developing a Community Outreach Plan. Outreach plans should be developed in advance of the start of the grant period during which representation and other assistance will be offered.

Pro bono panel is a group of qualified representatives (attorneys, certified public accountants, or enrolled agents) who have agreed to accept taxpayer referrals from an LITC and provide representation or consultation services free of charge to low-income or ESL taxpayers. Clinics may also use volunteers to assist with other tasks such as education, outreach, or mentoring students.

Program plan is a description of the clinic’s planned operations, including a description of the services to be offered; how, when, and where the services will be delivered; who will provide the services; the intended recipients of the services; and numerical goals. The terms and conditions of an LITC grant include the applicant’s program plan and any subsequent changes to the plan that are agreed upon between the Program Office and the clinic.

Qualified representative is a person who is:

n An attorney;

n A Certified Public Accountant (CPA);

n An Enrolled Agent (EA) who is authorized to practice before the IRS;

n An individual authorized to appear before the applicable court where the controversy with the IRS will be adjudicated; or n An individual authorized to practice before the IRS pursuant to 31 Code of Federal Regulations (CFR) § 10.7(d) (e.g., a student, law graduate, tribal court advocate, or other individual for whom the IRS

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has issued a special appearance authorization). See Section VI.C.xii, Representing Low-Income Taxpayers, Representation by Students and Law Graduates.

For individuals other than students or law graduates, the IRS Commissioner (or delegate) has the authority to issue Special Appearance Authorizations to allow them to practice before the IRS.

If the Director of the LITC Program Office has authorized a student or law graduate to practice before the IRS, the student or law graduate must be supervised by a qualified representative. See Delegation Order 25-18 (Rev. 4), April 8, 2021.

NOTE: An unenrolled return preparer who can practice before the IRS based upon return preparation is not a qualified representative for purposes of the LITC Program because the authority of the unenrolled return preparer to act as a representative is limited to only certain taxpayers and select functions of the IRS. For details regarding limited practice before the IRS by individuals who are not attorneys, CPAs, or EAs, see Rev. Proc. 2014-42, 2014-29 I.R.B. 192.

Referral means the referral of low-income taxpayers to a pro bono panel for representation or consultation. An applicant cannot receive a grant solely for referring taxpayers to other qualified representatives.

Uniform Guidance refers to 2 CFR Part 200 (and also the Treasury Department’s implementation thereof, found at 2 CFR Part 1000), which contains uniform administrative requirements that relate to the pre-award, post-award, closeout, and audit phases of the federal grant life cycle.