SECTION 3. WHAT ARE THE

PROCEDURES FOR REQUESTING RECOGNITION OF EXEMPT STATUS?

In general

.01 An organization seeking recognition of exempt status under § 501 or § 521 is required to submit the appropriate application. In the case of a numbered application form, the current version of the form must be submitted. A central organization that has previously received recognition of its own exemption can request a group exemption letter by submitting a letter application along with Form 8718, User Fee for Exempt Organization Deter- mination Letter Request. See Rev. Proc. 80–27. Form 8718 is not a determination letter application. Attach Form 8718 to the determination letter application.

User fee

.02 An application must be submitted with the correct user fee, as set forth in Rev. Proc. 2016–8, this Bulletin.

Form 1023 application

.03 An organization seeking recognition of exemption under § 501(c)(3) and § 501(e), (f), (k), (n), (q), or (r) must submit a completed Form 1023, Applica- tion for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code . In the case of an organization that provides credit counseling services, see § 501(q). In the case of an organization that is a hospital and is seeking exemption

Sec. 3.03 January 4, 2016 190 Bulletin No. 2016–1

under § 501(c)(3), see § 501(r). Notwithstanding the foregoing, eligible organizations may seek recognition of exemption under § 501(c)(3) by submitting a completed Form 1023–EZ, Streamlined Appli- cation for Recognition of Exemption un- der Section 501(c)(3) of the Internal Revenue Code, as described below.

Form 1023–EZ application

.04 An eligible organization, as described in section 3.05, may, but is not required to, seek recognition of taxexempt status under § 501(c)(3) by submitting a completed Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. The Form 1023–EZ and user fee must be submitted online at www.pay.gov . Paper submissions will not be accepted and will be treated as an incomplete form 1023–EZ as described in section 4.06. An incomplete Form 1023–EZ will not be accepted for processing by the Service even if it has been successfully submitted through www.pay.gov . Alternatively, an eligible organization may seek exemption under § 501(c)(3) by submitting a complete Form 1023.

Eligibility for Form 1023–EZ application

.05 An organizations that is an eligible organization may use Form 1023–EZ to apply for recognition of exemption under § 501(c)(3), unless the organization is designated in section 3.06 as an organization that is ineligible to submit Form 1023–EZ. An organization is an eligible organization if the organization meets all of the following criteria:

(1) The organization has projected annual gross receipts of $50,000 or less in the current taxable year and the next 2 years;

(2) The organization had annual gross receipts of $50,000 or less in each of the past 3 years for which the organization was in existence; and

(3) The organization has total assets the fair market value of which does not exceed $250,000. For purposes of this eligibility requirement, a good faith estimate of the fair market value of the organization’s assets is sufficient.

Ineligibility for Form 1023–EZ application

.06 The following organizations are not eligible organizations and must use Form 1023 to apply for recognition of exemption under § 501(c)(3):

(1) Organizations formed under the laws of a foreign country (United States territories and possessions are not considered foreign countries);

(2) Organizations that do not have a mailing address in the United States (territories and possessions are considered the United States for this purpose);

(3) Organizations that are successors to, or controlled by, an entity suspended under § 501(p) (suspension of tax-exempt status of terrorist organizations);

(4) Organizations that are not corporations, unincorporated associations, or trusts, such as a limited liability corporation (LLC);

(5) Organizations that are formed as for-profit entities or are successors to forprofit entities;

(6) Organizations that were previously revoked or that are successors to a previously revoked organization (other than an organization the tax-exempt status of which was automatically revoked for failure to file a Form 990 series return or notice for three consecutive years);

(7) Churches or conventions or associations of churches described in § 170(b)(1)(A)(i);

(8) Schools, colleges, or universities described in § 170(b)(1)(A)(ii);

(9) Hospitals or medical research organizations described in § 170(b)(1)(A)(iii) or § 501(r)(2)(A)(i) (cooperative hospital service organizations described in § 501(e));

(10) Cooperative service organizations of operating educational organizations described in § 501(f);

(11) Qualified charitable risk pools described in § 501(n);

(12) Supporting organizations described in § 509(a)(3);

(13) Organizations that have as a substantial purpose providing assistance to individuals through credit counseling activities such as budgeting, personal finance, financial literacy, mortgage foreclosure assistance, or other consumer credit areas;

(14) Organizations that invest, or intend to invest, 5 percent or more of their total assets in securities or funds that are not publicly traded;

(15) Organizations that participate, or intend to participate, in partnerships (including entities or arrangements treated as partnerships for Federal tax purposes) in which they share profits and losses with partners other than § 501(c)(3) organizations;

(16) Organizations that sell, or intend to sell, carbon credits or carbon offsets;

(17) Health Maintenance Organizations (HMOs);

(18) Accountable Care Organizations (ACOs), or organizations that engage in, or intend to engage in, ACO activities (such as participation in the Medicare Shared Savings Program (MSSP) or in activities unrelated to the MSSP described in Notice 2011–20, 2011–16 I.R.B. 652);

(19) Organizations that maintain, or intend to maintain, one or more donor advised funds;

(20) Organizations that are organized and operated exclusively for testing for public safety and that are requesting a foundation classification under § 509(a)(4);

(21) Private operating foundations; and (22) Organizations that are applying for retroactive reinstatement of exemption under sections 5 or 6 of Rev. Proc. 2014– 11, 2014–3 I.R.B. 411, after being automatically revoked (s ee section 3.11 for additional information).

Further information regarding these eligibility requirements may be provided in the Instructions for Form 1023–EZ .

Form 1024 application

.07 An organization seeking recognition of exemption under § 501(c)(9) or § 501(c)(17), must submit a completed Form 1024, Application for Recognition of Exemption Under Section 501(a), along with Form 8718, User Fee for Exempt Organization Determination Letter Re- quest . An organization seeking a determination letter from the Service recognizing exemption under § 501(c)(2), (4), (5), (6), (7), (8), (10), (12), (13), (15), (19), or (25) must submit a completed Form 1024, along with Form 8718. In the case of an organization that provides credit counseling services and seeks recognition of exemption under § 501(c)(4), see § 501(q).

Sec. 3.07 Bulletin No. 2016–1 191 January 4, 2016

Letter application

.08 An organization seeking recognition of exemption under § 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), or (29), or under § 501(d), must submit a letter application along with Form 8718.

Form 1028 application

.09 An organization seeking recognition of exemption under § 521 must submit a completed Form 1028, Application for Recognition of Exemption Under Sec- tion 521 of the Internal Revenue Code, along with Form 8718.

Form 8871 notice for political organizations

.10 A political party, a campaign committee for a candidate for federal, state or local office, and a political action committee are all political organizations subject to tax under § 527. To be tax-exempt, a political organization may be required to notify the Service that it is to be treated as a § 527 organization by electronically filing Form 8871, Political Organization Notice of Section 527 Status . For details, go to the IRS website at www.irs.gov/ polorgs .

Applications for reinstatement after automatic revocation

.11 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 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, as provided in Rev. Proc. 2014–11. Consistent with the eligibility requirements for using Form 1023–EZ that are set forth in section 3.05, only an organization requesting reinstatement of § 501(c)(3) status under section 4 (streamlined retroactive reinstatement of tax-exempt status for small organizations within 15 months of revocation) or section 7 (reinstatement of tax-exempt status from

postmark date) of Rev. Proc. 2014–11 may apply using Form 1023–EZ. An organization requesting reinstatement of § 501(c)(3) status under section 5 (retroactive reinstatement of tax-exempt status within 15 months of revocation) or section 6 (retroactive reinstatement more than 15 months after revocation) of Rev. Proc. 2014–11 must apply using Form 1023.

Requirements for a completed application other than a Form 1023– EZ application

.12 A completed application (other than a Form 1023–EZ), including a letter application, is one that:

(1) is signed by an authorized individual;

(2) includes an Employer Identification Number (EIN);

(3) for organizations other than those described in § 501(c)(3), includes a statement of receipts and expenditures and a balance sheet for the current year and the three preceding years (or the years the organization was in existence, if less than four years), and if the organization has not yet commenced operations or has not completed one accounting period, a proposed budget for two full accounting periods and a current statement of assets and liabilities; for organizations described in § 501(c)(3), see Form 1023 and Notice 1382; (4) includes a detailed narrative statement of proposed activities, including each of the fundraising activities of a § 501(c)(3) organization, and a narrative description of anticipated receipts and contemplated expenditures;

(5) includes a copy of the organizing or enabling document that is signed by a principal officer or is accompanied by a written declaration signed by an authorized individual certifying that the document is a complete and accurate copy of the original or otherwise meets the requirements of a “conformed copy” as outlined in Rev. Proc. 68–14, 1968–1 C.B. 768; (6) if the organizing or enabling document is in the form of articles of incorporation, includes evidence that it was filed with and approved by an appropriate state official ( e.g., stamped “Filed” and dated by the Secretary of State); alternatively, a copy of the articles of incorporation may

be submitted if accompanied by a written declaration signed by an authorized individual that the copy is a complete and accurate copy of the original copy that was filed with and approved by the state; if a copy is submitted, the written declaration must include the date the articles were filed with the state;

(7) if the organization has adopted bylaws or similar governing rules, includes a current copy; the by-laws need not be signed if submitted as an attachment to the application for recognition of exemption; otherwise, the by-laws must be verified as current by an authorized individual; and

(8) is accompanied by the correct user fee and Form 8718, when applicable.

Requirements for a completed Form 1023–EZ application

.13 A Form 1023–EZ submitted online at www.pay.gov by an eligible organization is complete if it:

(1) includes responses for each required line item of the form, including an accurate date of organization and an attestation that the organization has completed the Form 1023–EZ eligibility worksheet, as in effect on the date of submission, is eligible to apply for exemption using Form 1023–EZ, and has read the Instruc- tions for Form 1023–EZ and understands the requirements to be exempt under § 501(c)(3) as expressed therein;

(2) includes the organization’s correct Employer Identification Number (EIN);

(3) is electronically signed, under penalties of perjury, by an individual authorized to sign for the organization (as specified in the Instructions for Form 1023– EZ) ; and

(4) is accompanied by the correct user fee.

A Form 1023–EZ will not be considered completed if the organization’s name and EIN do not match the records in the Service’s Business Master File. Furthermore, a Form 1023–EZ submitted by an organization that is not an eligible organization will not be considered completed.

Terrorist organizations not eligible to apply for recognition of exemption

.14 An organization that is identified or designated as a terrorist organization within

Sec. 3.14 January 4, 2016 192 Bulletin No. 2016–1

the meaning of § 501(p)(2) is not eligible to apply for recognition of exemption.