The American Legion recently reported that the Internal Revenue Service was fining Legion posts – up to $1,000 per day – for not keeping records of veterans’ DD-214s, the separation document given by the military to prove honorable service, or other valid documentation. The Legion felt it was being wrongly targeted, resulting in the passing of three resolutions during the organization’s national convention in Houston that called upon Congress to look into the IRS’ field investigations into Legion posts, while lawmakers wrote letters to the IRS asking why inspectors were asking posts to provide discharge papers or service records during reviews of their tax-exempt statuses.

The IRS has now revised its position on the DD-214 requirement in section 501(c)19 of the Internal Revenue Code.

Effective immediately, DD-214s are only required if an agent “possesses information that contradicts documentary information provided (by the veterans service organization) or if the organization fails to satisfy a reasonable request…”

If an agent requires proof of membership eligibility, he or she will first request four sets of documents before requesting DD-214s or other discharge documents.

 

Included with this is the Memorandum sent to all EO Examinations Managers

November 26, 2013

Control No: TEGE-04-1113-21

Affected IRM: IRM 4.76.26

Expiration Date: Nov 26, 2014

MEMORANDUM FOR ALL EO EXAMINATIONS MANAGERS,

ALL EO EXAMINATIONS REVENUE AGENTS

FROM: Nanette M. Downing /s/ Nanette M. Downing

Director, EO Examinations

SUBJECT: Verification of Statutory Membership Requirements of

Veterans’ Organizations

This memorandum revises examination guidelines for tax-exempt veterans’ organizations described in section 501(c)(19) of the Internal Revenue Code (IRC) by eliminating an agent’s discretion to request DD Forms 214 at the outset of examinations for the purpose of determining whether the organization meets statutory membership requirements.

IRC sections 501(c)(19) and 170(c)(3) provide statutory membership requirements for certain tax-exempt veterans’ organizations. Compliance with these requirements has a direct effect on the qualification for tax-exempt status and the deductibility of contributions.

In order to confirm whether a veterans’ organization meets statutory membership requirements, IRM 4.76.26.12(1) provides that examining agents may request, among other documents, DD Forms 214, Certificate of Release or Discharge from Active Duty, of veterans’ organizations. DD Form 214 is a military service discharge certificate issued to veterans, providing proof of military service. However, DD Form 214 also contains private information, such as medical information.

Effective immediately, if an agent needs to determine the composition of membership of a veterans’ organization, the agent shall initially request and collect from the organization four sets of documents, as follows:

1. Membership list(s) that contain the names of the members, the military service dates, and the status of each individual member. This status information is to indicate whether the member is active duty, veteran, cadet, or spouse. The organization may provide list(s) from its affiliated parent organization.

2. A document that shows the dues structure and classes of memberships.

3. The documentary information used by the organization to create the membership list(s) noted above. Organizations should be informed that to satisfy this request they may provide membership applications, membership cards, or other similar documents, other than DD Form 214.

4. Documents showing the organization’s policies and procedures on how it decides an individual is eligible for membership, including documents which show the means by which it enforces its membership requirements.

If an agent possesses information that contradicts documentary information provided or if the organization fails to satisfy a reasonable request, agents may then request DD Forms 214 or other discharge documents from the organization in order to ascertain compliance with the federal tax laws cited herein. DD Forms 214 must include the name, department, component and branch of service, and record of service dates. All other personal information may be redacted.

The contents of this memorandum will be incorporated in IRM 4.76.26.

Please submit your questions to Mandatory Review via *TEGE EO Review Staff.

cc: IRS.gov