SECTION 12. REVOCATION OR

MODIFICATION OF DETERMINATION LETTER RECOGNIZING EXEMPTION

A determination letter recognizing exemption may be revoked or modified: (1) by a notice to the taxpayer to whom the determination letter 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.

Revocation or modification of a determination letter may be retroactive

.01 The revocation or modification of a determination letter recognizing exemption may be retroactive if there has been a change in the applicable law, or if 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 certain cases an organization may seek relief from retroactive revocation or modification of a determination letter under § 7805(b). Requests for § 7805(b) relief are subject to the procedures set forth in Rev. Proc. 2016–1, this Bulletin.

(1) Where there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of an organization, revocation or modification will ordinarily take effect as of the date of such material change.

(2) In the case where a determination letter is issued in error or is no longer in accord with the Service’s position and § 7805(b) relief is granted ( see sections 13 and 14 of Rev. Proc. 2016–4, this Bulletin), ordinarily, the revocation or modification will be effective not earlier than the

date when the Service modifies or revokes the original determination letter.

(3) A misstatement of material information includes an incorrect representation or attestation as to the organization’s organizational documents, the organization’s exempt purpose, the organization’s conduct of prohibited and restricted activities, or the organization’s eligibility to file Form 1023–EZ.

(4) Information provided on an application for recognition of exemption (e.g. Form 1023–EZ, Form 1023, or Form 1024) that has been withdrawn will not be considered for purposes of limiting the retroactive effect of a revocation or modification of a determination letter.

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

.02 In the case of a revocation or modification of a determination letter, the appeal and conference procedures are generally the same as set out in section 7 of this revenue procedure. However, appeal and conference rights are not applicable to matters where delay would be prejudicial to the interests of the Service (such as in cases involving fraud, jeopardy, the imminence of the expiration of the statute of limitations, or where immediate action is necessary to protect the interests of the Government). Organizations revoked under § 6033(j) will not have an opportunity for Appeal consideration.