SECTION 11. EFFECT OF

DETERMINATION LETTER OR RULING RECOGNIZING EXEMPTION

Effective date of exemption .01 A determination letter or ruling recognizing exemption of an organization described in § 501(c), other than § 501(c)(29), is usually effective as of the date of formation of an organization if: (1) its purposes and activities prior to the date of the determination letter or ruling have been consistent with the requirements for exemption; (2) it has not failed to file required Form 990 series returns or notices for three consecutive years; and (3) it has filed an application for recognition of exemption within 27 months from the end of the month in which it was organized. Special rules may apply to an organization applying for exemption under § 501(c)(3), (9) or (17). See §§ 505 and 508, and Treas. Reg. §§ 1.508–1(a)(2), 1.508–1(b)(7) and 301.9100– 2(a)(2)(iii) and (iv). In addition, special rules apply with respect to organizations described in § 501(c)(29). See Rev. Proc. 2012–11, 2012–7 IRB 368.

(1) If the Service requires the organization to alter its activities or make substantive amendments to its enabling instrument, the exemption will be effective as of the date specified in a determination letter or ruling.

(2) If the Service requires the organization to make a nonsubstantive amendment, exemption will ordinarily be recognized as of the date of formation. Examples of nonsubstantive amendments include correction of a clerical error in the enabling instrument or the addition of a dissolution clause where the activities of the organization prior to the determination letter or ruling are consistent with the requirements for exemption.

(3) An organization that otherwise meets the requirements for tax-exempt status and the issuance of a determination letter or ruling that does not meet the requirements for recognition from date of formation will generally be recognized from the postmark date of its application.

(4) Organizations that claim exempt status under § 501(c) generally must file annual Form,990 series returns or notices, even if they have not yet received their determination letter or ruling recognizing exemption. If an organization fails to file required Form 990 series returns or notices for three consecutive years, its exemption will be automatically revoked by operation of § 6033(j). Such an organization may apply for reinstatement of its exempt status, and such recognition may be granted retroactively, only in accordance with the procedure described in Notice 2011–44, 2011–25 IRB 883.

Reliance on determination letter or ruling

SECTION 12. REVOCATION OR MODIFICATION OF DETERMINATION LETTER OR RULING RECOGNIZING EXEMPTION

Revocation or modification of a determination letter or ruling may be retroactive

.02 A determination letter or ruling recognizing exemption may not be relied upon if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization, or a change in the applicable law. Also, a determination letter or ruling may not be relied upon if it was based on any inaccurate material factual representations. See section 12.01.

A determination letter or ruling recognizing exemption may be revoked or modified: (1) by a notice to the taxpayer to whom the determination letter or ruling was issued; (2) by enactment of legislation or ratification of a tax treaty; (3) by a decision of the Supreme Court of the United States; (4) by the issuance of temporary or final regulations; (5) by the issuance of a revenue ruling, revenue procedure, or other statement published in the Internal Revenue Bulletin; or (6) automatically, pursuant to § 6033(j), for failure to file a required annual return or notice for three consecutive years.

.01 The revocation or modification of a determination letter or ruling recognizing exemption may be retroactive if there has been a change in the applicable law, the organization omitted or misstated a material fact, operated in a manner materially different from that originally represented, or, in the case of organizations to which § 503 applies, engaged in a prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purpose and such transaction involved a substantial part of the corpus or income of such organization. In

Bulletin No. 2014–2 291 January 6, 2014

Appeal and conference procedures in the case of revocation or modification of exempt status letter