SECTION 7. WHAT ARE THE

PROCEDURES WHEN EXEMPT STATUS IS DENIED?

Proposed adverse determination letter

.01 If EO Rulings and Agreements reaches the conclusion that the organization does not satisfy the requirements for exempt status pursuant to the section of the Code under which exemption is claimed, the Service generally will issue a proposed adverse determination letter, which will:

(1) include a detailed discussion of the Service’s rationale for the denial of taxexempt status; and

(2) advise the organization of its opportunity to appeal the decision and request a conference.

The non-acceptance of an application for incompleteness by the Service under sections 4.05 and 4.06 is not a proposed adverse determination.

Appeal of a proposed adverse determination letter issued by EO Rulings and Agreements

.02 A proposed adverse determination letter issued by EO Rulings and Agreements will advise the organization of its

opportunity to appeal the determination by requesting Appeals Office consideration. To do this, the organization must submit a statement of the facts, law and arguments in support of its position within 30 days from the date of the proposed adverse determination letter. The organization must also state whether it wishes an Appeals Office conference.

Final adverse determination letter or ruling where no appeal or protest is submitted

.03 If an organization does not submit a timely appeal of a proposed adverse determination letter issued by EO Rulings and Agreements, a final adverse determination letter will be issued to the organization. The final adverse letter will provide information about the filing of tax returns and the disclosure of the proposed and final adverse letters.

The non-acceptance of an application for incompleteness by the Service under sections 4.05 and 4.06 is not a final adverse determination.

How EO Rulings and Agreements administers an appeal of a proposed adverse determination letter

.04 If an organization submits a protest of the proposed adverse determination letter, EO Rulings and Agreements will first review the protest, and, if it determines that the organization qualifies for taxexempt status, issue a favorable exempt status determination letter. If EO Rulings and Agreements maintains its adverse position after reviewing the protest, it will forward the protest and the exemption application case file to the Appeals Office. As described in Section 5, for protests of proposed adverse determinations on applications transferred to the former EO Technical office, organizations may request a conference with EO Rulings and Agreements in addition to having its protest and exemption application file forwarded to the Appeals Office.

Consideration by the Appeals Office

.05 The Appeals Office will consider the organization’s appeal. If the Appeals Office agrees with the proposed adverse determination, it will either issue a final adverse determination or, if a conference

was requested, contact the organization to schedule a conference. At the end of the conference process, which may involve the submission of additional information, the Appeals Office will either issue a final adverse determination letter or a favorable determination letter. If the Appeals Office believes that an exemption or private foundation status issue is not covered by published precedent or that there is nonuniformity, the Appeals Office must request technical advice from the Office of Associate Chief Counsel (Tax Exempt and Government Entities). See Rev. Proc. 2016–2, this Bulletin.

An appeal or protest may be withdrawn

.06 An organization may withdraw its appeal or protest before the Service issues a final adverse determination letter. Upon receipt of the withdrawal request, the Service will complete the processing of the case in the same manner as if no appeal or protest was received.

Appeal and conference rights not applicable in certain situations

.07 The opportunity to appeal a proposed adverse determination letter and the conference rights described above 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).