SECTION 4. WHAT ARE THE

STANDARDS FOR ISSUING A DETERMINATION LETTER ON EXEMPT STATUS?

Exempt status must be established in application, including attestation and supporting documents

.01 A favorable determination letter will be issued to an organization if its application, including attestations and supporting documents, establishes that it meets the particular requirements of the section under which exemption from Federal income tax is claimed.

Determination letter based solely on administrative record

.02 A determination letter on exempt status is issued based solely upon the facts, attestations, and representations contained in the administrative record.

(1) The applicant is responsible for the accuracy of any factual representations or attestations contained in the application.

(2) Any oral representation of additional facts or modification of facts as represented or alleged in the application must be reduced to writing over the signature of an officer or director of the taxpayer under a penalties of perjury statement.

(3) The failure to disclose a material fact or misrepresentation of a material fact on the application, which includes an incorrect representation or attestation, may adversely affect the reliance that would otherwise be obtained through issuance by the Service of a favorable determination letter. See section 11.02 for additional information.

Exempt status may be recognized in advance of actual operations

.03 For all applications other than a Form 1023–EZ, exempt status may be recognized in advance of the organization’s operations if the proposed activities are described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements for exemption pursuant to the section of the Code under which exemption is claimed.

(1) A mere restatement of exempt purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement.

(2) The organization must fully describe all of the activities in which it expects to engage, including the standards, criteria, procedures, or other means adopted or planned for carrying out the activities, the anticipated sources of receipts, and the nature of contemplated expenditures.

(3) Where the organization cannot demonstrate to the satisfaction of the Service that it qualifies for exemption pursuant to the section of the Code under which exemption is claimed, the Service will generally issue a proposed adverse determination letter. See also section 7 of this revenue procedure.

(4) For Form 1023–EZ applications, exempt status may be recognized in advance of the organization’s operations if the attestations contained in the organization’s completed Form 1023–EZ (along with any additional information requested by the Service and provided by the organization) establish that it meets the requirements for exemption under § 501(c)(3).

No letter if exempt status issue in litigation or under consideration within the Service

.04 A determination letter on exempt status ordinarily will not be issued if an issue involving the organization’s exempt status under § 501 or § 521 is pending in litigation, is under consideration within the Service, or if issuance of a determination letter is not in the interest of sound tax administration. If the Service declines to issue a determination letter to an organization seeking exempt status under § 501(c)(3), the organization may be able to pursue a declaratory judgment under § 7428, provided that it has exhausted its administrative remedies.

Incomplete application other than Form 1023–EZ application

.05 If an application does not contain all of the items set out in section 3.12 of this revenue procedure, the Service will return it to the applicant for completion.

(1) In the case of an application under § 501(c)(3) that is returned incomplete, the

270-day period referred to in § 7428(b)(2) will not be considered as starting until the date a completed Form 1023 is refiled with or remailed to the Service. If the application is mailed to the Service and a postmark is not evident, the 270-day period will start to run on the date the Service actually receives the completed Form 1023. The same rules apply for purposes of the notice requirement of § 508.

(2) For applications that are returned to the applicant because they are not complete, the user fee will be returned or refunded. See Rev. Proc. 2016–8, section 10, this Bulletin.

Non-acceptance for processing of Form 1023–EZ application

.06 A submitted Form 1023–EZ that is not completed within the meaning of section 3.13 will not be accepted for processing by the Service. The Service may, but is not required to, request additional information under section 4.07 to validate information presented or to clarify an inconsistency in a Form 1023–EZ. An organization whose Form 1023–EZ is not accepted for processing will be notified of the nonacceptance of its application and any user fee that was paid will be returned or refunded. An eligible organization may then submit a properly completed Form 1023–EZ with a new user fee online at www.pay.gov . Alternatively, an eligible organization may apply on a Form 1023.

(1) The Service will not accept for processing a Form 1023–EZ from an organization if the organization has an application for recognition of tax-exempt status other than a Form 1023 (e.g., Form 1024, Application for Recognition of Exemption under Section 501(a) ) pending with the Service. An organization will be notified of the non-acceptance of the Form 1023– EZ, and any user fee that was paid with the Form 1023–EZ will be returned or refunded.

(2) The Service will not accept for processing a Form 1023–EZ from an organization if the organization has a Form 1023 pending with the Service that has been assigned for review. See section 6.02(2). An organization will be notified of the non-acceptance of the Form 1023–EZ, and any user fee that was paid with the Form 1023–EZ will be returned or refunded. For Form 1023–EZ applications

Sec. 4.06 Bulletin No. 2016–1 193 January 4, 2016

that are submitted when the organization has a Form 1023 pending with the Service that has not been assigned for review, see section 6.02(1).

Even if application is complete, additional information may be required

.07 Even though an application is complete, the Service may request additional information before issuing a determination letter. A failure to respond to a request for additional information will result in the closure of the application without a determination letter being issued and without a refund of the user fee.

(1) If the application involves an issue where contrary authorities exist, an applicant’s failure to disclose and distinguish contrary authorities may result in requests for additional information, which could delay final action on the application.

(2) In the case of an application under § 501(c)(3), the period of time beginning on the date the Service requests additional information until the date the information is submitted to the Service will not be counted for purposes of the 270-day period referred to in § 7428(b)(2).

(3) The Service will select a statistically valid random sample of Form 1023–EZ applications for predetermination reviews, which will result in requests for additional information.

Expedited handling

.08 Procedures for requesting expedited handling.

(1) Applications are normally processed in the order of receipt by the Service. However, expedited processing of an application may be approved where a request is made in writing and contains a compelling reason for processing the application ahead of others. Upon approval of a request for expedited processing, an application will be considered out of its normal order. This does not mean the application will be immediately approved or denied. Circumstances generally warranting expedited processing include:

(a) a grant to the applicant is pending and the failure to secure the grant may have an adverse impact on the organization’s ability to continue to operate;

(b) the purpose of the newly created organization is to provide disaster relief to victims of emergencies such as flood and hurricane; and

(c) there have been undue delays in issuing a determination letter caused by a Service error.

(2) An organization may not request expedited handling of a Form 1023–EZ.

May decline to issue group exemption

.09 The Service may decline to issue a group exemption letter when appropriate in the interest of sound tax administration.