Revocations

When you’re determining that a subordinate organization should no longer be tax-exempt, you are effectively proposing to remove the organization from the group ruling. This terminates their exempt status, and constitutes an adverse action that triggers the subordinate's rights to appeal. When writing the report of examination, minimize the use of terms like "revoke" and "revocation" . Instead, use the phrase "removal from the group exemption" or some variation.

Removal of any subordinates that are under an IRC 501(c) group ruling triggers the administrative record requirement if unagreed. See IRM 4.70.14.2.4.1, EP & EO - Declaratory Judgment Cases and the Administrative Record for unagreed cases.

Revocation of the central organization's exempt status results in the termination of the group ruling as a whole. The subordinate organizations may seek their own individual recognition, join another group ruling, or if a statutorily exempt organization continue as exempt without recognition. The central organization is subject to declaratory judgment procedures under IRC 7428 and Mandatory Review (or Appeals) issues a 90-day final adverse determination letter (FADL). Contact Mandatory Review for a custom agreed revocation letter. See also IRM 4.70.14.6.9, EO - Revocations, any other loss of tax exemption, and foundation reclassifications.

For all revocations of central or subordinate organizations under examination, prepare Form 2363-A, Request for IDRS Input for BMF/EO Entity Change, to update the Exempt Organizations Business Master File (EO BMF) status to 22. Leave the Form 2363-A in the case file (and/or upload the Form 2363-A to RCCMS). See IRM 4.70.14.2.1.3.3, EO – Conversion of Returns, for securing converted returns or enforcing income tax on revoked organizations.

If Mandatory Review concurs with (or Appeals sustains) the revocation, they send Form 2363-A to the FAST unit to update the EO BMF status to 22. If a central organization is revoked, the GEN file updates all the subordinates to status 28.