Publication 3319.pdf

2021 Grant Application Package and Guidelines i LOW INCOME TAXPAYER CLINICS

TABLE OF CONTENTS

MAY 2020

DEAR PROSPECTIVE LOW INCOME TAXPAYER CLINIC GRANT APPLICANT:

I am pleased to announce the opening of the 2021 Low Income Taxpayer Clinic (LITC) grant application period, beginning April 30, 2020 through June 16, 2020.

Under Internal Revenue Code (IRC) § 7526, the IRS provides matching grants up to $100,000 per year to qualifying organizations representing low-income taxpayers in 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. If you would like to know more about the activities and accomplishments of organizations that have been awarded LITC funding in prior years, see Publication 5066, LITC Program Report.

This publication outlines eligibility requirements for an LITC matching grant and provides instructions to apply. Topics include:

n Award 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 Offce responsibilities;

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

This publication, including the appendices, should be retained for future reference by all LITC grant recipients as it includes program and grant administration guidance for the grant year.

The IRS remains committed to achieving maximum access to representation for low-income taxpayers.

Thus, in awarding 2021 LITC grants, we will continue to work toward the following program goals:

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

The IRS may award grants to qualifying organizations for one-year, two-year, or three-year project periods.

To be considered for 2021 LITC Program grant funding, all Full Grant Applications and Non-Competing

Continuation (NCC) Requests must be submitted electronically by 11:59 pm (ET) on June 16, 2020, via www.grants.gov or www.GrantSolutions.gov, respectively. The cost of preparing and submitting applications and NCC Requests is the responsibility of each applicant. In mid-May, the LITC Program Offce is hosting a webinar (or teleconference presentation) for applicants submitting a full application or those interested in learning more about the application process. If interested in participating, visit www.irs.gov/litc for more http://www.grants.gov http://www.GrantSolutions.gov http://www.irs.gov/litc ii LOW INCOME TAXPAYER CLINICS information, including confrmation of the date and a link to register for the session. Clinics submitting an

NCC Request or interested in the “What’s New” portion of the training should check the LITC Toolkit for a date and time.

Qualifed applicants will be notifed in November 2020 of their matching grant award for the 2021 year. 2021 grant award recipients are required to attend the Annual LITC Grantee Conference held in

December 2020 or January 2021. Clinics will be notifed of the conference date and location as soon as it is determined.

If you have questions about the LITC Program or grant application process, please contact the LITC

Program Offce at 202-317-4700 (not a toll-free call) or by email at LITCProgramOffce@irs.gov.

Thank you for your interest in the LITC Program, and I look forward to another successful year in 2021.

Sincerely, Erin Collins

National Taxpayer Advocate mailto:LITCProgramOffice@irs.gov iii LOW INCOME TAXPAYER CLINICS

WHAT IS NEW THIS YEAR

Below is a list of signifcant changes to this year’s Publication 3319:

n IRC § 7526 was amended to allow IRS employees to advise taxpayers about the availability of LITCs, the eligibility requirements for assistance, and information regarding the location of and contact information for clinics funded under this statute. As such, Taxpayer Assistance Center (TAC) sites can now make referrals to specifc LITCs and all sites have copies of IRS Publication 4134, Low

Income Taxpayer Clinic List, available to the public.

n Beginning in December 2020, the Data Universal Numbering System (DUNS) number for all entities will be replaced by a Unique Entity Identifer (UEI), or the Entity ID. The UEI will be requested via, assigned by, and managed through System for Award Management (SAM) at www.SAM.gov. Grants.

gov will begin changing the naming convention to UEI in March 2020, but the number that shows will still be the DUNS number. Organizations should use their current DUNS number until SAM generates the UEI for your organization.

n The conference attendance sections have been revised and clarifed for LITC funds usage for more than two conference attendees and nonattendance of key clinic staff. If special circumstances exist you may request an exception.

n Clinics are now required to use the LITC Program logo in educational and publicity materials.

n Clarifed technical consultations section.

n New section on retaining client records.

n Clarifed the rule surrounding the use of the de minimis indirect cost rate.

n The Civil Rights Protection and Other Federally Mandated Compliance section added a paragraph, “Guidance to Federal Financial Assistance Recipients Regarding Title VI Prohibition Against National

Origin Discrimination Affecting Limited English Profcient (LEP) Persons.”

n Changes made to the Civil Rights Protection section.

n New Standard Form 425 provided in Appendix B.

n As a result of the ongoing Coronavirus Disease (COVID-19) pandemic, the Offce of Management and Budget (OMB) has provided agencies with the authority to grant certain administrative relief to federal grant recipients. As of the time of printing this Publication, LITCs will be afforded relief in the following areas:

n Applicants required to complete and submit a single audit to the Federal Audit Clearinghouse as of March 19, 2020 and have a fscal year-end through June 30, 2020 are allowed to delay the completion and submission of the single audit for six months beyond the normal due date.

n Current registrants in SAM with active registrations expiring before May 16, 2020 will be afforded a one-time automatic extension of 60 days.

n For NCC Requests, an abbreviated process will be used.

n Any additional OMB COVID-19 pandemic guidance impacting the LITC Program will be communicated on the LITC Toolkit. New applicants can contact the LITC Program Offce at http://www.SAM.gov iv LOW INCOME TAXPAYER CLINICS

202-317-4700 (not a toll-free call) or email at LITCProgramOffce@irs.gov if they have questions about whether any additional guidance has been issued.

AVOIDING COMMON ERRORS

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

Standard Form 424 Applicants requesting a multi-year grant utilized the wrong proposed project end date on line 17b.

Form 13424-M Applicants indicate a single audit was “Qualifed” when it was actually “Unqualifed” and the correct selection on the form is “Unmodifed.”

Form 13424-J 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 defning 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).”

There is no break-down of travel and training expenses into categories such as lodging, transportation, and meals and incidentals.

The Project Abstract is incomplete — the four primary numerical goals are not included and/or the civil rights information is not fully addressed.

Employer Identifcation Number and Data Universal Numbering System Number First-time registration for an Employer Identifcation Number (EIN) and Data Universal Numbering

System (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 SAM.

Attachments The Indirect Cost Rate Agreement (ICRA) submitted by applicants is incomplete or expired. To determine whether the ICRA is properly applied, the LITC Program Offce must know what costs were included in the Modifed 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.

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

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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 Defnitions

II. FEDERAL AWARD INFORMATION

A. Awards Are Subject to Congressional Appropriations

B. Award Performance Period

C. Subgrants Are 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 Identifers

i. System for Award Management

ii. Employer Identifcation Number

iii. DUNS Number vi 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 Offce Evaluation of Full Grant Applications and NCC Requests, and Selection . . 30

i. LITC Program Offce Evaluation

ii. Civil Rights Reviews

VI. AWARD ADMINISTRATION

A. Notifcation of Selection

B. Notice of Award

C. Administrative Requirements

i. Standards for Operating an LITC

ii. LITC Program Offce 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 Confdentiality

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

D. National Policy Requirements and Administrative Requirements

i. General Compliance

ii. Managing Grant Funds vii LOW INCOME TAXPAYER CLINICS

iii. Lobbying Restrictions

E. Reporting Responsibilities

i. Events Requiring Notifcation to the LITC Program Offce

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 Offce

VIII. AWARD MODIFICATION, SUSPENSION, TERMINATION, OR WITHDRAWAL

APPENDIX A

APPENDIX B

COMMON IRS AND FEDERAL GRANT ACRONYMS

GLOSSARY

INDEX

Paperwork Reduction Act Notice:

This application package is provided for awards under the Low Income Taxpayer Clinic Grant Program. The information is requested from the applicants in order to determine their eligibility for an LITC grant and evaluate their grant proposals. Applicants are not required to respond to this collection of information unless it displays a currently valid OMB number. The estimated average burden associated with this collection of information is 60 hours per respondent for program sponsors and 2 hours for student and program participants. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the IRS, Tax Forms and Publication Division, 1111 Constitution Ave., NW, Washington, DC 20224. Do not send grant application forms to this address. Grant applications must be submitted through www.grants.gov and continuation requests must be submitted through www.GrantSolutions.gov. Comments about this application package should be sent to: Internal Revenue Service, Taxpayer Advocate Service, LITC Program Offce, TA:LITC, Room 1034, 1111 Constitution Ave., NW, Washington, DC 20224.

Catalog of Federal Domestic Assistance Number: 21.008 OMB Approval No.1545-1648 http://www.grants.gov http://www.grantsolutions.gov viii LOW INCOME TAXPAYER CLINICS

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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 English as a second language (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 Defnitions.

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. The 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 responsibilities. Learning is enhanced by LITCs providing an opportunity for taxpayers to ask questions and interact with clinic staff. Educational activities may be accomplished directly with taxpayers or indirectly through other organizations or groups that assist low-income and ESL taxpayers.

At least 90 percent of the taxpayers the 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 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 Requirement.

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).

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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 2020 grant year, however, there are several geographic areas of the country without an LITC or with very limited coverage. Thus, in awarding 2021 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 clinics 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.

Areas of Special Consideration

ARIZONA (Coconino and Gila counties), CALIFORNIA (Kern County), FLORIDA (Brevard, Citrus, Flagler, Hernando, Lake, Marion, Orange, Osceola, Putnam, Seminole, Sumter, and Volusia counties), HAWAII, MONTANA, NEVADA, NEW YORK (Delaware, Dutchess, Orange, Putnam, Sullivan, and Ulster counties), NORTH DAKOTA, PENNSYLVANIA (Bradford, Carbon, Clinton, Columbia, Lackawanna, Luzerne, Lycoming, Monroe, Montour, Northumberland, Pike, Snyder, Sullivan, Susquehanna, Tioga, Union, Wayne, and Wyoming counties), PUERTO RICO, WEST VIRGINIA, and

WYOMING

Figure 1, 2020 LITC Coverage by County

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LITC PROGRAM DESCRIPTION

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Important Dates for 2021 LITC Grant Program

Application period April 30, 2020 – June 16, 2020

New Applicant Webinar Mid-May 2020

Application review and evaluation June – November 2020

Notification of selection/non-selection November 2020

Grant year January 1, 2021 – December 31, 2021

Interim report due July 30, 2021

Year-End report due March 31, 2022

B. HISTORY OF THE LITC PROGRAM

As part of the IRS Restructuring and Reform Act of 1998,3 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 less than $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 towards 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 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 NTA 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 infation in future years pursuant to the rules prescribed in

IRC § 1(f ).4 The LITC Program is hopeful the recommendation will be sponsored and adopted by Congress for future grant years.

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

4 National Taxpayer Advocate 2020 Purple Book, Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and

Improve Tax Administration103 (Increase the Individual Low Income Taxpayer Clinic Grant Cap and Index It for Infation).

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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 qualifed low-income taxpayer clinics.

(b) Defnitions. For purposes of this section —

(1) Qualifed low-income taxpayer clinic.

(A) In general. The term “qualifed 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 Offce of Management and Budget; and

(ii) the amount in controversy for any taxable year generally does not exceed the amount specifed 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 satisfes the requirements of paragraph (1) through representation of taxpayers or referral of taxpayers to qualifed representatives.

(3) Qualifed representative. The term “qualifed 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 specifc 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.

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

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(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 qualifcations of its administrators and qualifed 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 benefts) 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 qualifed low-income taxpayer clinics. Notwithstanding any other provision of law, offcers 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 specifc qualifed 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 which 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 the NTA who can communicate the issues and proposed solutions to lawmakers and the IRS administration in Annual Reports to Congress. Advocacy may also consist of responding to public requests for comments to IRS regulations or procedures.

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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 which 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 and LITC 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). 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. Educational activities may also include a workshop or free training for other organizations that assist low-income or ESL taxpayers. 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 allows LITCs to

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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 will allow for audience interaction with the presenter.

English as a Second Language (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 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.

Low Income Taxpayer Clinic (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 fat fee; the fee cannot fuctuate 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).

http:Grants.gov

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Outreach is an activity conducted by LITCs 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.iii, 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.

Qualifed 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 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. 3), IRM 1.2.2.14.18 (Aug. 19, 2019).

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.

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I. LITC

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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. 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.

Qualified organizations include, among others, academic institutions and nonprofit organizations throughout the U.S., which must meet the goals of the program to provide representation, education, and advocacy on behalf of low-income and ESL taxpayers.

Congress appropriated $12 million for LITC grant awards for 2020,5 and the IRS awarded over $11.6 million in grants to 131 entities located in 45 states and the District of Columbia. The average award in 2020 was more than $88,000. Figure 2 explains how the LITC Program receives its funding.

Figure 2, How the LITC Program Receives Its Funding

Step Three The President signs the appropriations bill into law, making funds available to executive The appropriations agencies, including the committees submitStep Two IRS.legislative proposals

Congressional which are brought to the appropriations floor for consideration by committees consider the the House of President’s Budget as Representatives and the

Step One

Office of Management and they prepare Senate. Once the House

Budget coordinates with appropriations legislation and the Senate consider federal agencies to for the upcoming fiscal the proposals and formulate the President’s year, which begins on reconcile them, Congress

Budget, which covers all October 1. passes a unified federal agencies, omnibus budget and including the IRS, and sends the legislation to reflects the President’s the President to be priorities and vision for signed into law.

the country. Federal law requires that the President submit a budget proposal to Congress every February, which serves as a starting point for negotiations in Congress.

The major expenditures incurred by LITCs are personnel costs and fringe benefits paid to provide direct representation, education, and advocacy services to low-income and ESL taxpayers. LITCs are prohibited from using matching funds to pay indirect expenses, including general overhead of the clinic.6 This ensures more program funds are spent on taxpayer representation, education, and advocacy rather than administrative costs.

Step Four

5 Pub. L. No. 116-93, 133 Stat. 2317, 2439 (2019).

6 IRC § 7526(c)(5).

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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. First-time applicants will only be awarded a single-year grant. Multi-year grants will only be awarded to applicants that have successfully completed at least one year under the terms and conditions of the LITC grant. Determination of the grant period is at the discretion of the LITC Program Office. Thus, the Program Office may elect to award a single-year grant to applicants that requested a multi-year grant.

Multi-year grant recipients will be reviewed annually for satisfactory performance and progress in meeting goals and objectives as well as 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. SUBGRANTS ARE PROHIBITED

A clinic may not make a subgrant of LITC grant funds to another organization or individual. A subgrant is a payment to another organization or contractor to deliver a key component of the program such as controversy representation or ESL education. This is different from payments made to a vendor or provider for providing goods and services to the clinic, which is permissible. For example, an LITC may not pay another organization to prepare and conduct its ESL educational activities; however, the clinic could pay a firm to translate its educational materials into another language or hire an interpreter to assist with delivery of education.

D. LITC GRANTS ARE NOT COOPERATIVE AGREEMENTS

Funds awarded under IRC § 7526 create grant agreements rather than cooperative agreements between the recipient and the IRS. A cooperative agreement provides for substantial involvement between the federal awarding agency and the grant recipient in carrying out the activity contemplated by the federal award. While the LITC Program Office has numerous responsibilities in administering the grant and providing oversight and assistance to clinics, that involvement does not result in the formation of a cooperative agreement. See the definitions of “cooperative agreement” and “grant agreement” in 2 CFR § 200.24 and 2 CFR § 200.51 respectively for additional details.

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III. AWARD ELIGIBILITY REQUIREMENTS

Applicants that fail to satisfy the eligibility screening criteria described below will be notified and, in some circumstances, may be provided an opportunity to correct the problem. Those provided an opportunity must correct the problem in a timely manner or be eliminated from consideration. Applications that pass the eligibility screening will then undergo a technical evaluation. See Section V, Application Review.

A. ELIGIBLE APPLICANTS

To receive a grant pursuant to IRC § 7526, an applicant must represent low-income taxpayers in controversies with the IRS and operate a program to inform ESL taxpayers about their rights and responsibilities under the IRC. Examples of an eligible applicant include:

n A clinical program at an accredited law, business, or accounting school in which students represent low-income taxpayers in controversies with the IRS; 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 and operate a program to inform ESL taxpayers about their rights and responsibilities under the IRC.

B. REQUIREMENT TO PROVIDE MATCHING FUNDS EQUAL TO AWARD

IRC § 7526(c)(5) requires clinics to provide matching funds on a dollar-for-dollar basis for all federal funds awarded by the IRS. The matching funds requirement ensures that each LITC grant represents a financial partnership between the clinic and the federal government for the benefit of low-income and ESL taxpayers. The commitment of matching funds by the clinic leverages the federal funding investment so that an LITC can assist more taxpayers in need. Many programs provide matching funds in the form of cash or third-party in-kind contributions (e.g., time worked by volunteers) that far exceed the minimum. Only funds that are used in direct support of the LITC Program qualify as matching funds. See Section IV.E.iii, Meeting the Matching Funds Requirement.

C. OTHER ELIGIBILITY REQUIREMENTS

i. Using Grant Funds to Support Other Activities is Prohibited

An organization awarded an LITC grant may provide qualifying LITC services within a broader spectrum of activity. For example, a clinic may provide representation in nontax matters (e.g., landlord/tenant disputes) as well as representation in tax matters, provided LITC grant funds are used only to support the representation of eligible taxpayers in a controversy with the IRS and/or a state or local tax agency concerning the same or related tax matter. LITC grant funds may also be used for properly allocated portions of indirect costs of the organization that support LITC grant activities.

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

An LITC may not charge more than a nominal fee for its services. If a clinic charges a nominal fee, it must charge that same fee to all taxpayers, regardless of the services being sought. The goal of the LITC Program is to enhance access to representation, education, and advocacy services for low-income taxpayers. If a clinic charges an amount that is not nominal and results in fewer taxpayers assisted, the goal of the program is not being achieved. A clinic may not charge a separate or additional fee (even if it is nominal) to prepare a tax return or a claim for refund.

Note: Reimbursement of actual costs incurred (e.g., photocopying, court costs, and expert witness fees) is not considered a fee and is therefore permitted.

iii. Compliance with Federal Tax and Nontax Requirements

Federal Tax Debts The IRS is prohibited from awarding an LITC grant to an applicant that is noncompliant with a federal tax return filing or payment obligation. Consequently, an applicant must be in full compliance with its federal tax responsibilities when applying for an LITC grant and throughout the grant year. Standard Form 424, Application for Federal Assistance, (see Appendix A) requires the applicant to state whether it is delinquent on any federal debt and if so, to provide an explanation. The LITC Program Office conducts reviews to confirm applicants’ compliance with federal tax responsibilities and other terms and conditions of the grant. See Section III.C.i, Using Grant Funds to Support Other Activities is Prohibited, supra.

An outstanding federal tax debt is any unpaid federal tax liability (including penalties and interest) that has been assessed, is not disputed, and for which all judicial and administrative remedies have been exhausted or have lapsed. An applicant or grant recipient will not be treated as noncompliant for purposes of IRC § 7526 (and therefore still eligible for funding) if the applicant or grant recipient is in a dispute with the IRS regarding a federal tax liability or has entered into and remains current with an installment agreement or other payment arrangement with the federal government to satisfy any federal tax liabilities.

IRC § 6103 prohibits the LITC Program Office from disclosing a federal tax compliance issue to anyone who is not authorized to receive the taxpayer’s tax information. Therefore, to facilitate the resolution of any potential federal tax compliance issues, Form 13424, Low Income Taxpayer Clinic Application Information, requires applicants to provide contact information for the Tax Compliance Officer (TCO), who is the individual responsible for handling the organization’s federal tax matters. Some applicants are part of a larger organization (e.g., academic institution which operates a clinic), in which case the LITC Program Office must be able to verify that the sponsoring organization does not have a federal tax compliance issue before awarding grant funds. In this situation, the TCO must be the person who is the individual responsible for handling the sponsoring organization’s federal tax matters. Applicants must also provide documentation (e.g., articles of organization or a Form 2848, Power of Attorney and Declaration of Representative) which shows how the applicant on Form 13424 is properly authorized to receive tax information to prevent the IRS from making an unauthorized disclosure.

Complying with federal tax obligations is a requirement to receive an LITC grant, so it is…