PROOF Act
- Sponsor
- Rep. Doggett, Lloyd [D-TX-37]
- Committees
- Ways and Means Committee (primary)
- Last action
- Sep 3, 2026
Bottom line
The PROOF Act enhances procedural safeguards and transparency for tax-exempt organizations facing IRS examinations and potential termination of their tax-exempt status.
What it actually does
This bill amends the Internal Revenue Code of 1986 to establish new due process requirements for the Internal Revenue Service (IRS) when examining and making adverse determinations regarding the tax-exempt status of organizations. It mandates detailed notice requirements for examinations, specific record-keeping and disclosure obligations for the IRS, and provides organizations with enhanced rights to conferences and appeals before their tax-exempt status can be terminated or modified. The bill also coordinates these new protections with existing rules for church tax examinations and formalizes the appeals process with the IRS Independent Office of Appeals.
Proponents argue
Proponents argue that the bill is essential for ensuring fairness and transparency in IRS interactions with tax-exempt organizations. They contend that it protects organizations from arbitrary or opaque actions by mandating clear communication, detailed record-keeping, and robust opportunities for organizations to understand and respond to IRS concerns, thereby upholding fundamental due process rights.
Opponents contend
Opponents might argue that while due process is important, these new requirements could significantly increase the administrative burden on the IRS, potentially slowing down investigations and making it more difficult and time-consuming to address instances of non-compliance or abuse among tax-exempt entities. They might contend that existing protections are sufficient or that the bill introduces unnecessary procedural hurdles.
The bill is relatively short and clearly structured, making it accessible for an informed reader to understand its provisions within a reasonable timeframe.
Section 2(a), inserting new section 7611A(a) and (b)
Enhanced Notice Requirements for Tax-Exempt Examinations
This provision establishes that the IRS can only begin a tax-exempt examination (for non-church organizations) if it provides written notice detailing the examination's subject matter, issue areas, relevant tax periods, and contact information for the assigned agent. If the scope of the examination expands, the IRS must issue a subsequent notice with the new details. This ensures organizations are fully informed about the nature and scope of an audit from the outset.
Supporters argue
Supporters argue that clear and detailed notice prevents 'fishing expeditions' by the IRS and ensures organizations can adequately prepare and respond to an examination, promoting fairness and efficiency in the process.
Critics contend
Critics might contend that these detailed notice requirements could make IRS examinations more cumbersome and time-consuming, potentially delaying the identification and resolution of non-compliance issues.
Tradeoffs
This provision balances an organization's right to be fully informed about an IRS examination with the IRS's need for flexibility and efficiency in conducting investigations.
Section 2(a), inserting new section 7611A(c)(1)-(5)
Mandated Due Process for Adverse Determinations
This section outlines comprehensive due process requirements for the IRS before it can make an adverse determination regarding an organization's tax-exempt status. It mandates the creation and disclosure of a detailed examination record, requires information requests to be specific and relevant, and guarantees organizations the right to supervisory conferences during an examination and a closing conference before a proposed adverse determination letter is issued. These steps aim to ensure a fair and transparent process leading up to any decision.
Section 2(a), inserting new section 7611A(c)(6)
Requirement for Proposed Adverse Determination Letter
This provision mandates that the IRS must issue a 'proposed adverse determination letter' at least 30 days before issuing a final adverse determination regarding an organization's tax-exempt status. This letter must prominently state the proposed action, summarize findings, detail the legal and factual basis, specify the effective date, and thoroughly explain the organization's protest and appeal rights, including administrative appeal and judicial review, along with applicable deadlines.
Section 2(b) and 2(c)
Coordination with Church Examinations and Enhanced Appeals Process
The bill amends existing Section 7611, which governs church tax examinations, to include new rights for churches, such as the right to a supervisory conference and expanded notice details. Additionally, it adds a new paragraph to Section 7803(e) to explicitly make the resolution process of the IRS Independent Office of Appeals available for proposed adverse determinations regarding any tax-exempt organization's status, setting specific deadlines (10 business days for acknowledgment, 90 days for a conference) for the Appeals Office to respond to requests.
While the IRS is generally required to disclose the full examination record to an organization, this clause provides an exception for privileged communications. However, it mandates that if any required content is solely within a privileged communication, a summary of that content must still be disclosed to the organization.
Section 7611A(c)(2)(B)(ii)
Why it matters:The protection of privileged communications is standard legal practice, but the specific requirement for a summary ensures that the spirit of transparency is maintained even when full disclosure is legally restricted. It's a nuanced point that balances competing legal principles.
Case for: Protects sensitive legal advice and internal deliberations within the IRS, which is crucial for effective government function, while still ensuring the organization receives sufficient information to understand the basis of the IRS's findings.
Case against: Could be viewed as a potential avenue for the IRS to withhold critical details under the guise of privilege, even with the summary requirement, if the definition or application of 'privileged' is interpreted broadly.
Estimated impact: This provision has a minor impact on overall transparency but can be significant in specific cases where the IRS's rationale might be embedded in legally privileged discussions.