IRS cannot waive matching funds for Puerto Rico and Virgin Islands tax clinics

Plain-English summary

Chief Counsel considered whether the Low-Income Taxpayer Clinic Program Office could waive matching-fund requirements for grant recipients in Puerto Rico or the U.S. Virgin Islands. Section 7526(c)(5) requires every clinic grant recipient to match the federal award dollar for dollar. After reviewing territorial statutes and other sources, counsel found no authority allowing a waiver. Counsel distinguished another federal grant program whose agency may waive a regulatory matching requirement, because the clinic requirement is statutory and cannot be waived without statutory authorization.

Ruling snapshot

• Question: May the IRS waive the statutory matching-fund requirement for low-income taxpayer clinics in Puerto Rico or the U.S. Virgin Islands?
• Outcome: Advice given, no waiver authority exists
• Key authorities: IRC § 7526(c)(5); 48 U.S.C. § 1469a; 42 U.S.C. § 10603; 42 C.F.R. § 94.118

Full text (IRS public release)

ID:       CCA_2021072213362340
UILC:     7526.00-00

Number: 202139007
Release Date: 10/1/2021
From: ---------------------
Sent: Thursday, July 22, 2021 1:36:23 PM
To: -------------------------------------------
Cc: -------------------------------------------
Bcc:
Subject: waiver of matching funds requirement for LITCs in Puerto Rico & USVI


Thanks for your patience while I coordinated with General Legal Services (GLS). Unfortunately,
there is no ability for the LITC Program Office to waive the matching funds required by section
7526 for organizations in Puerto Rico or the USVI. Here is the advice from GLS:

         This email responds to your question regarding whether there is any authority
         that would give the LITC Program Office discretion to waive the matching fund
         requirement for grantee organizations in Puerto Rico or the US Virgin
         Islands. As you know, IRC § 7526(c)(5) requires that each LITC grant recipient
         matches, dollar for dollar, all funds awarded under an LITC grant. After looking
         at 48 U.S.C. §1469a; Title 48, Chapters 4 (Puerto Rico), 7 (Virgin Islands), 12
         (Virgin Islands 1954), and 20 (Puerto Rico Oversight, Management, and
         Economic Stability); and a variety of other sources, we have been unable to
         identify any authority that would permit the LITC Program Office the
         aforementioned discretion.

         We did identify one federal grant program, administered by the Justice
         Department’s Office for Victims of Crimes (OVC), that has the regulatory
         authority, per 42 C.F.R. § 94.118(b)(2), to waive the grant matching requirement
         for projects operating in territories or possessions of the United States (excluding
         Puerto Rico). However, it’s important to note that OVC’s matching requirement is,
         itself, a regulatory rather than a statutory requirement. See 42 U.S.C. § 10603
         (providing statutory authority for grant programs under the Crime Victims Fund);
         42 C.F.R. § 94.118(a) (establishing matching fund requirements for grant
         programs authorized by 42 U.S.C. § 10603). In contrast, because the LITC
         matching requirement (IRC § 7526(c)(5)) is statutory, the agency may not waive
         the matching requirement without statutory authority and we have been unable to
         find any statute granting the agency such discretion.

Please let me know if you have any further questions.

------- – please post in LITC – Matching Funds in Puerto Rico, USVI, PRENO-110342-21, and close
7/22. Also, post it on our LITC sharepoint site under Matching Funds. Thanks.