2023 Publication 3319.pdf

2023 Grant Application Package and Guidelines iLOW INCOME TAXPAYER CLINICS

TABLE OF CONTENTS

MAY 2022

DEAR PROSPECTIVE LOW INCOME TAXPAYER CLINIC GRANT APPLICANT:

I am pleased to announce the opening of the 2023 Low Income Taxpayer Clinic (LITC) grant application period.

It will begin on May 2, 2022, and close on June 16, 2022. We are excited about the prospect of increasing the coverage and number of LITCs for the new grant year and appreciate your consideration and interest.

Over the past two years, the LITC community has provided much needed relief during difficult times.

Clinics confronted significant obstacles trying to move taxpayer cases toward resolution as the Internal Revenue Service (IRS) was adapting to a remote work environment and was often unable to timely process tax returns and correspondence. Yet, clinics often found ways to work around those obstacles and continued to provide services to taxpayers in need. COVID-19 did not stop the LITCs! I welcome adding new clinics and look forward to expanding our footprint for taxpayers.

Under Internal Revenue Code § 7526, the IRS provides matching grants up to $100,000 per year to qualifying organizations that represent low-income taxpayers in IRS disputes and educate individuals who speak English as a second language (ESL) about their rights and responsibilities as U.S. taxpayers. For every dollar of funds awarded by the IRS, the LITC must have a matching dollar from other sources (cash or third-party in-kind contributions). LITC services must be provided for free or for no more than a nominal fee.

LITCs provide a safety net for low-income and ESL taxpayers who require assistance to ensure their rights under the Taxpayer Bill of Rights1 are protected and preserved. I greatly value the work of LITCs and am excited to share that in my most recent Annual Report to Congress, I included a legislative recommendation asking Congress to amend three subsections of IRC § 7526.2 The recommendation calls for:

n Eliminating the $100,000 per-clinic funding cap imposed under current law;

n Changing the requirement that LITCs provide 100 percent “matching funds” to a general rule and providing the Secretary with discretion to set a lesser matching rate (but not below 50 percent) where doing so would expand coverage to additional taxpayers; and n Raising the overall authorized LITC program funding limitation from $6 million to $25 million and providing that the amount be increased annually by the percentage increase during the preceding calendar year in the Chained Consumer Price Index for All Urban Consumers.

These recommendations would strengthen the LITC Program and expand the protection of taxpayer rights.

In the event legislation amending IRC § 7526 is enacted after this publication goes to press, details will be included on www.irs.gov and provided to the clinics.

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;

1 See IRC § 7803(a)(3).

2 National Taxpayer Advocate 2022 Purple Book, Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and

Improve Tax Administration 136-137 (Expand the Protection of Taxpayer Rights by Strengthening the Low Income Taxpayer Clinic Program).

http://www.irs.gov ii LOW INCOME TAXPAYER CLINICS n Application and selection process;

n Standards for operating an LITC;

n Reporting responsibilities, forms, and instructions;

n LITC Program Office responsibilities; and n Application 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, education for ESL taxpayers, and advocacy for issues that impact these taxpayers. Thus, in awarding 2023 LITC grants, we will continue to work toward the following:

n Expanding coverage in areas identified as underserved; and n Ensuring that grant recipients demonstrate 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.

All Full Grant Applications and Non-Competing Continuation (NCC) Requests must be submitted electronically by 11:59 p.m. Eastern Time (ET) on June 16, 2022, 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. On May 5, 2022 from 1:00 p.m. to 3:00 p.m. ET, the LITC Program Office is hosting a webinar for organizations interested in submitting a full application or learning about the application process. For more information, visit www.taxpayeradvocate.irs.gov/about-us/litc-grants/. Clinics submitting an NCC Request should check the LITC Toolkit for the date and time of a session on that topic.

Qualified applicants will be notified in November 2022 of their selection for the 2023 grant year. Award recipients must attend the Annual LITC Grantee Conference held in December 2022 or January 2023. 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.

Sincerely, Erin M. Collins National Taxpayer Advocate http://www.grants.gov https://home.grantsolutions.gov/home https://home.grantsolutions.gov/home http://www.taxpayeradvocate.irs.gov/about-us/litc-grants/ mailto:LITCProgramOffice@irs.gov iiiLOW INCOME TAXPAYER CLINICS

WHAT’S 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 For the word advocacy, the following statement was added (see bold text): Advocacy may also include responding to public requests for comments to IRS regulations or procedures and filing amicus briefs in cases addressing issues that directly impact low-income and English as a second language (ESL) taxpayers. (Page 6) n In the Key Terms and Definitions section, the definition of the word cases was clarified with the following statement: If a taxpayer stops communicating with the clinic after a plan for representation has been developed, the clinic may still count that matter as a case. (Page 6) n In the Compliance with Federal Tax and Nontax Requirements Federal Tax Debts section, the following statement was added: If you are working with someone at the IRS to resolve an outstanding federal tax issue, please provide their name, office in which they work, and phone number when you complete Standard Form 424, question #20. (Page 13) n New guidance has been issued to assist with completing Form 13424-M, LITC Application Narrative, and can be found online at www.taxpayeradvocate.irs.gov/about-us/litc-grants/. (Page 17) n Organizations must provide a Unique Entity Identifier (UEI) with the LITC grant application. As of April 4, 2022, the UEI replaced the Data Universal Numbering System (DUNS) number, a nine-digit unique entity identifier that was provided by Dun & Bradstreet, Inc. The UEI is assigned and managed through the System for Award Management (SAM) at www.SAM.gov. Applicants will no longer have to go to a third-party website to obtain an identifier. For more information about the transition from DUNS to UEI, visit the U.S. General Services Administration (GSA) webpage at www.gsa.gov/about-us/organization/federal-acquisition-service/office-of-systems-management/integrated-award-environment-iae/iae-systems-information-kit/unique-entity-identifier-update. (Page 20) n Refreshments for employees are unallowable with no exception due to workload. See 2 CFR § 200.445. (Page 23) n In the Special Rule for Valuing Volunteer Services of a Qualified Representative section, for the 2022 calendar year the maximum rate is $220 per hour, as prescribed in Revenue Procedure 2021-45, 2021-48 Internal Revenue Bulletin (IRB) 764, unless the representative can establish that a special factor, as described in IRC § 7430(c)(1)(B)(iii), applies. (Page 30) n In accordance with Tax Court Rule 201(a), Tax Court Administrative Order No. 2020-03 and American Bar Association (ABA) Model Rule 1.2(c), an individual admitted to practice and in good standing with the U.S. Tax Court may file a limited appearance for a date or dates during a scheduled Trial Session.

(Page 58) n The Delegation Order, which authorizes the Director of the LITC Program to issue Special Appearance Authorizations for Students and Law Graduates, expands the definition of qualified law graduate so more individuals can assist low-income taxpayers. (Page 59) n LITCs may apply for a special appearance authorization using Form 13424-P, Application for Special Appearance Authorization, and Form 13424-Q, LITC or STCP Student and Law Graduate Information.

https://www.taxpayeradvocate.irs.gov/about-us/litc-grants/ http://www.SAM.gov http://www.gsa.gov/about-us/organization/federal-acquisition-service/office-of-systems-management/integrated-award-environment-iae/iae-systems-information-kit/unique-entity-identifier-update http://www.gsa.gov/about-us/organization/federal-acquisition-service/office-of-systems-management/integrated-award-environment-iae/iae-systems-information-kit/unique-entity-identifier-update http://www.gsa.gov/about-us/organization/federal-acquisition-service/office-of-systems-management/integrated-award-environment-iae/iae-systems-information-kit/unique-entity-identifier-update iv LOW INCOME TAXPAYER CLINICS

These forms were new in 2021. For detailed instructions and copies of these forms, please refer to the LITC Toolkit website. (Page 59) n Starting in the fall of 2022, LITC goals will be reported to USASpending.gov, a website that allows the public to review federal expenditures and increases transparency. (Page 65) n The list of acronyms has been shortened to include only those related to Publication 3319 and federal grants management. (Page 182)

Avoiding Common Errors and Missteps When Applying To assist with the application process, see the list below of common errors and missteps. 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 Legal name does not match the legal name in SAM (Item 8a).

n The Employer Identification Number (EIN) provided does not match the EIN in SAM (Item 8b).

n Missing attachment listing counties covered (Item 14).

n Missing attachment listing congressional districts covered (Item 16b).

n Requesting a multiyear grant utilizing the wrong proposed project end date (Item 17b).

n Requesting more than $100,000 in grant funds (Item 18a).

n Missing the amount(s) of matching funds to be provided (Items 18b-f).

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

n No responses or incomplete responses are provided in the Civil Rights Review section; 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 to access services. “Not Applicable” is not an appropriate response because the questions apply to all organizations.

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.

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.

https://www.usaspending.gov/ vLOW INCOME TAXPAYER CLINICS

WHAT’S NEW THIS YEAR

The Project Abstract (for NCC Requests only) 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. “Not Applicable” is not an acceptable response.

n No responses or incomplete responses are provided in the Civil Rights Review section; in particular, the response to question D should address both the needs of individuals with LEP and those who may need a reasonable accommodation to access services. “Not Applicable” is not an appropriate response because the questions apply to all organizations.

Employer Identification Number and System for Award Management Registration Applicants fail to apply early enough to the IRS to receive an EIN, which is needed to complete the SAM registration process. SAM registration is a multi-step process that can take four to six weeks to complete.

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 so this part of the agreement should be supplied. 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 tax-exempt determination letter (if applicable) 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 is 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 a Non-Competing Continuation Request

v. Instructions for Completing a Non-Competing Continuation Request

vi. Withdrawing Applications After Submission

C. System for Award Management Registration Requirement and Unique Entity Identifiers . . . 19

i. System for Award Management

ii. Employer Identification Number

iii. Unique Entity Identifier

iv. Organization Name Change Requests viii LOW INCOME TAXPAYER CLINICS

D. Submission Due Dates and Times

i. Due Date for LITC Full Grant Applications and Non-Competing Continuation Requests

ii. Incomplete or Late LITC Full Grant Applications and Non-Competing Continuation 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. Office of Management and Budget 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 Non-Competing Continuation 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 a Low Income Taxpayer Clinic

ii. Low Income Taxpayer Clinic Program Office Webinars

iii. Annual Low Income Taxpayer Clinic Grantee Conference

iv. Developing a Community Outreach Plan

v. Building Community Partnerships

vi. Networking With Other Low Income Taxpayer Clinics

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 ixLOW INCOME TAXPAYER CLINICS

xv. Preparing Tax Returns and Individual Taxpayer Identification Number Applications

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

iii. 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

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)3 in Internal Revenue Code (IRC) § 7803(a)(3). TBOR lists rights that already existed in the IRC, putting them in simple language and grouping them into ten fundamental rights. Employees of the IRS are responsible for being familiar with, and acting in accordance with, taxpayer rights. TBOR educates taxpayers about their rights and empowers them to assert those rights during their interactions with the IRS. One of the ten fundamental rights taxpayers have is the right to retain representation,4 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 a 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 must educate taxpayers about their rights and responsibilities to help them understand the U.S. tax system, exercise their rights, 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 ($50,000). See Section VI.C.xii, Representing Low-Income Taxpayers, Low-Income Taxpayers and the 90/250 Requirement.

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

4 See IRC § 7803(a)(3)(I).

2 LOW INCOME TAXPAYER CLINICS

LITC Program Coverage The IRS is committed to achieving maximum access to clinic services for low-income taxpayers under this grant program. For the 2022 grant year, however, there are several geographic areas of the country without an LITC or with very limited coverage. Thus, in awarding 2023 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 Consideration5

ARIZONA (Apache, Coconino, Gila, and Navajo counties), FLORIDA (Baker, Bradford, Brevard, Citrus, Clay, Columbia, Dixie, Duval, Flagler, Hamilton, Hernando, Lafayette, Lake, Madison, Nassau, Orange, Osceola, Seminole, St. John’s, Sumter, Suwanee, Taylor, and Volusia counties), IDAHO (Ada, Adams, Bannock, Bear, Lake, Bingham, Boise, Bonneville, Butte, Canyon, Caribou, Clark, Clearwater, Custer, Franklin, Freemont, Gem, Idaho, Jefferson, Latah, Lemhi, Lewis, Lincoln, Madison, Nez Perce, Oneida, Owyhee, Payette, Power, Teton, Valley, and Washington counties), NORTH CAROLINA (Alamance, Anson, Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Caswell, Chatham, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Durham, Edgecombe, Forsyth, Franklin, Gates, Granville, Greene, Guilford, Halifax, Harnett, Hertford, Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Martin, Montgomery, Moore, Nash, New Hanover, Northampton, Onslow, Orange, Pamlico, Pasquotank, Pender, Perquimans, Person, Pitt, Randolph, Richmond, Robeson, Rockingham, Sampson, Scotland, Stokes, Tyrrell, Vance, Wake, Warren, Washington, Wayne, and Wilson counties) MONTANA, NEVADA, NORTH DAKOTA, PENNSYLVANIA (Bradford, Clinton, Monroe, Northumberland, Pike, Snyder, Sullivan, Susquehanna, Tioga, Union, and Wyoming counties), and PUERTO RICO.

Figure 1, 2022 LITC Coverage by County

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5 See IRS Restructuring and Reform Act of 1998, Pub. L. No. 105-206, § 3601, 112 Stat. 685, 774 (July 22, 1998).

3LOW INCOME TAXPAYER CLINICS

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Important Dates for 2023 LITC Grant Program

Application Period May 2-June 16, 2022

New Applicant Webinar May 5, 2022

Returning Applicant/ NCC Request Webinar May 19, 2022

Application Q&A Webinar June 1, 2022

Application Review and Evaluation June-November 2022

Notification of Selection/Non-Selection November 2022

Grant Year January 1-December 31, 2023

Interim Report Due July 31, 2023

Year-End Report Due April 1, 2024

B. HISTORY OF THE LITC PROGRAM

As part of the IRS Restructuring and Reform Act of 1998, 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 (NTA), who reports to the IRS Commissioner.

In 1999, the IRS awarded grants totaling nearly $1.5 million to 34 entities in 18 states and the District of Columbia. Since inception, the LITC Program has expanded its coverage and in 2022 there are 133 clinics funded with almost $13 million. The LITC Program Office’s history of recruiting 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 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.

4 LOW INCOME TAXPAYER CLINICS

C. STATUTORY AUTHORITY TO FUND LITCs The authority to fund the development, expansion, or continuation of 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) Multiyear grants. Upon application of a qualified low-income taxpayer clinic, the Secretary is authorized to award a multiyear 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. The LITC Program uses the poverty guidelines published annually by the Department of Health and Human Services. 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 involves 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

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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 the NTA who can communicate the issues and proposed solutions to lawmakers and the IRS administration in her reports to Congress. Advocacy may also include responding to public requests for comments on IRS regulations or procedures and filing amicus briefs in cases addressing issues that directly impact low-income and ESL taxpayers.

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 try to address the controversy, including developing a plan for representation. If the clinic is representing a married couple, it is counted as one case. If a taxpayer stops communicating with the clinic after a plan for representation has been developed, the clinic may still count that matter as a 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 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 eligibility and receipt of the Economic Impact Payment, 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 if 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

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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.

Educational activities (also referred to as programs to inform) inform ESL or low-income individuals about their rights and responsibilities as taxpayers, and tax issues of significance to the intended audience. The two education-related numerical goals referenced on Form 13424-M, Application Narrative, VII. Program Numerical Goals C and D, reference those activities delivered directly to taxpayers. Educational activities may also include a workshop or free training for 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. 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 to deliver these programs and count them as educational activities for LITC reporting when there is a way for participants to be counted and for the presenter and participants to interact. Due to the COVID-19 pandemic and its ongoing impact, 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 intended 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. This differs from the term Limited English Proficiency (LEP), which relates to an individual’s relative ability to communicate and receive information in English. LEP taxpayers are a subset of ESL taxpayers but not all ESL taxpayers are LEP.

Grants.gov is the government website used by federal agencies to post discretionary funding opportunities.

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, legal arguments are sound, and educational materials are accurate. Key personnel include the Clinic Director, Qualified Tax Expert (QTE), and Qualified Business Administrator (QBA). See Section VI.C.i, Standards for Operating a Low Income Taxpayer Clinic.

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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.

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 before the start of the grant year during which representation and other assistance will be offered.

Pro bono panel is a group of qualified representatives (attorneys, certified public accountants (CPAs), or enrolled agents (EAs)) 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 agreed upon between the Program Office and the clinic.

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Qualified representative is:

n An attorney;

n A CPA;

n An EA authorized to practice before the IRS;

n An individual authorized to appear before the 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 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. For students and law graduates, the Director of the LITC Program Office has the authority to issue special appearance authorizations; note, however, that the student or law graduate must be supervised by a qualified representative. See Delegation Order 25-18 (Rev. 4), Internal Revenue Manual (IRM) 1.2.2.14.18 (April 8, 2021).

NOTE: An unenrolled return preparer who can practice before the IRS based upon return preparation is not a qualified representative for 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 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. See Section VI.D, National Policy Requirements and Administrative Requirements, for a more detailed discussion.

Additional terms and definitions are available in the Glossary.

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II. FEDERAL AWARD INFORMATION

A. AWARDS ARE SUBJECT TO CONGRESSIONAL APPROPRIATIONS

All awards are subject to the availability of appropriated funds. The IRS may award LITC grants of up to $100,000 per year to qualifying organizations for the development, expansion, or continuation of an LITC.

Congress appropriated “not less than $13 million” for LITC grant awards for fiscal year 2022,6 and the IRS awarded over $12 million7 in grants to 131 entities in 47 states and the District of Columbia. The average award in 2022 was $92,617. Figure 2 explains how the LITC Program receives its funding.

Figure 2, How the LITC Program Receives Its Funding How the LITC Program Receives Its Funding

Step One

Step Two

Step Three

Step Four

Office of Management and Budget coordinates with federal agencies to formulate the President’s Budget, which covers all federal agencies, including the IRS, and reflects the President’s priorities and vision for the country.

Federal law requires that the President submit a budget proposal to Congress between the first Monday in January and the first Monday in February, which serves as a starting point for negotiations in Congress.

Congressional appropriations committees consider the President’s Budget as they prepare appropriations legislation for the upcoming fiscal year, which begins on October 1.

The appropriations committees submit legislative proposals which are brought to the floor for consideration by the House of Representatives and the Senate. Once the House and the Senate consider the proposals and reconcile them, Congress passes a unified omnibus budget and sends the legislation to the President to be signed into law.

The President signs the appropriations bill into law, making funds available to executive agencies, including the IRS.

B. AWARD PERFORMANCE PERIOD

The LITC Program may award grants 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. 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. Determination of the grant period is at the discretion of the LITC

6 Consolidated Appropriations Act, 2022, Pub. L. No. 117-103 (March 15, 2022). Although funds are appropriated for a fiscal year, the Program Office awards grants on an annual basis.

7 The IRS often holds some of the annually appropriated funds in reserve so that well-performing clinics that were not initially awarded the maximum $100,000 award can come back mid-year and request additional funds.

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Program Office. Thus, the Program Office may elect to award a single-year grant to applicants that requested a multiyear grant.

Multiyear grant recipients will be reviewed annually for satisfactory performance and progress in meeting goals and objectives and compliance with grant terms and conditions. The funding level for subsequent years will be reviewed annually and may be increased or decreased at the discretion of the LITC Program Office, based on performance, compliance with grant terms and conditions, and the availability of annually appropriated funds.

Funds awarded must be used for the program specifically authorized in the NOA.

C. SUBAWARDS ARE GENERALLY PROHIBITED

Generally, a clinic may not make a subaward of LITC grant funds to another organization or individual. A subaward is a payment to another organization or contractor to deliver a key component of the program such as controversy representation or ESL education.