Key point 6-03.05. The Church Audit Procedures Act provides churches with a number of important protections in the event of an IRS inquiry or examination. However, there are some exceptions.
Section 7602 of the tax code gives the IRS broad authority to examine or subpoena the books and records of any person or organization for the purposes of (1) ascertaining the correctness of any federal tax return, (2) making a return where none has been filed, (3) determining the liability of any person or organization for any federal tax, or (4) collecting any federal tax. This authority has been held to apply to churches. See, e.g., United States v. Coates, 692 F.2d 629 (9th Cir. 1982); United States v. Dykema, 666 F.2d 1096 (7th Cir. 1981); United States v. Freedom Church, 613 F.2d 316 (1st Cir. 1979).
In 1984 Congress enacted the Church Audit Procedures Act to provide churches with important protections ...
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