SECTION 6. WHAT ARE

THE SPECIFIC PROCEDURES FOR APPLICATIONS FOR RECOGNITION OF EXEMPT STATUS UNDER § 501 OR § 521?

In general .01 This section sets forth procedures for applying for and issuing determination letters in response to applications for recognition of exempt status under § 501 or § 521 other than those subject to Rev. Proc. 2018–4, this Bulletin (relating to pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans).

Terrorist organizations not eligible to apply for recognition of exemption

.02 An organization that is identified or designated as a terrorist organization within the meaning of § 501(p)(2) is not eligible to apply for recognition of exemption.

Format of application .03 An organization seeking recognition of exempt status under § 501 or § 521 is required to submit the appropriate completed application form or the appropriate completed letter request. In the case of a numbered application form, the current version of the form must be submitted.

Form 8718 .04 An organization applying for recognition of exempt status must attach a completed Form 8718, User Fee for Exempt Organization Determination Letter Request, to its application, unless the organization is submitting Form 1023 or Form 1023-EZ. Form 8718 is an attachment related to user fees that is not, itself, a determination letter application.

Form 1023-EZ applications .05 (1) Eligibility for Form 1023-EZ application. An organization 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 6.05(2) 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:

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

(b) 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

(c) 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.

(2) Ineligibility for Form 1023-EZ application. The following organizations are not eligible to submit Form 1023-EZ and must use Form 1023 to apply for recognition of exemption under § 501(c)(3):

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

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

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

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

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

(f) 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 under § 6033(j));

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

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

(i) 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));

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

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

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

(m) 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;

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

(o) 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;

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

(q) Health Maintenance Organizations (HMOs);

(r) 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);

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Form 1023 and Form 1023-EZ applications for reinstatement after automatic revocation

What are the requirements for a completed application?

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

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

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

(u) Private operating foundations;

(v) 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 (see section 6.05(3) of this revenue procedure for additional information);

(w) Organizations applying for retroactive reinstatement under section 4 of Rev. Proc. 2014– 11, 2014–3 I.R.B. 411, after being automatically revoked that are seeking a foundation classification that is different from the classification they had at the time of revocation.

(x) Agricultural research organizations described in § 170(b)(1)(A)(ix); and

(y) Organizations that are currently or were previously exempt under another subsection of § 501(c).

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

(3) Form 1023 and Form 1023-EZ applications for reinstatement after automatic revo- cation. 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 6.05(1)–(2) of this revenue procedure, 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 (other than an organization also seeking a foundation status change as explained in section 6.05(2)(w)). 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.

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(1) A completed application (other than a Form 1023-EZ), including a letter application, is one that:

(a) is signed by an authorized individual under penalties of perjury (see sections 4.04 and 4.06 of this revenue procedure);

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Requirements for a completed Form 1023-EZ application

(b) includes the organization’s correct EIN;

(c) (i) 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;

(ii) for organizations described in § 501(c)(3), see Form 1023 and Notice 1382, Changes for Form 1023 ;

(d) 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;

(e) includes a copy of the organizing or enabling document that is signed by a principal officer or two members in the case of an unincorporated association, 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;

(f) 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;

(g) if the organization has adopted bylaws or similar governing rules, includes a current copy; the bylaws need not be signed if submitted as an attachment to the application for recognition of exemption; otherwise, the bylaws must be verified as current by an authorized individual (see section 4.04 of this revenue procedure);

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

(2) A Form 1023-EZ submitted online at www.pay.gov by an eligible organization is complete if it:

(a) 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 Instructions for Form 1023-EZ and understands the requirements to be exempt under § 501(c)(3) as expressed therein;

(b) includes the organization’s correct EIN;

(c) is electronically signed, under penalties of perjury, by an individual authorized to sign for the organization (as specified in sections 4.04 and 4.06 of this revenue procedure and the Instructions for Form 1023-EZ); and

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What are the standards for issuing a determination letter on exempt status?

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

Exempt status may be recognized in advance of actual operations

Even if application is complete, additional information may be required

(d) is accompanied by the correct user fee.

A Form 1023-EZ will not be considered complete 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 within the meaning of section 6.05 of this revenue procedure will not be considered complete.

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(1) A favorable determination letter will be issued to an organization if its completed application, including attestations and supporting documents, along with any additional information requested by the Service and provided by the organization, establishes that it meets the particular requirements of the section under which exemption from Federal income tax is claimed.

(2) (a) 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.

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

(ii) 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.

(iii) 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 section 9 of this revenue procedure.

(b) 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).

(3) Even though an application is complete, the Service may request additional information before issuing a determination letter. The failure to respond to a request for additional information may result in the closure of the application without a determination letter being issued and without a refund of the user fee. If the failure to respond to a request for additional information results in the Service issuing a proposed adverse determination letter to the organization, the proposed adverse determination letter will inform the organization of its opportunity to protest/appeal the decision and request a conference. See section 9 for the applicable appeal/protest procedures.

(a) 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).

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(b) The Service will select a statistically valid random sample of Form 1023-EZ applications for pre-determination reviews, which will result in requests for additional information.

Effective date of exemption .08

(1) In general. A determination letter recognizing exemption of an organization described in § 501(c), other than § 501(c)(29), is effective as of the date of formation of an organization if: (1) its purposes and activities prior to the date of the determination letter have been consistent with the requirements for exemption; and (2) it has filed an application for recognition of exemption within 27 months from the end of the month in which it was organized.

(2) Special cases. 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) and 301.9100–3. In addition, special rules apply with respect to organizations described in § 501(c)(29). See Rev. Proc. 2012–11, 2012–7 I.R.B. 368.

(3) When the Service requires the organization to make amendments.

(a) 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 the determination letter.

(b) If the Service requires the organization to make a nonsubstantive amendment, exemption will ordinarily be recognized as of the date of formation if it meets the requirements in section 6.08(1) of this revenue procedure. 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 are consistent with the requirements for exemption.

(4) When an application is not submitted within 27 months of formation. An organization that otherwise meets the requirements for tax-exempt status and the issuance of a determination letter that does not meet the requirements for recognition from date of formation will be recognized from the postmark date of its application or the submission date of its 1023-EZ, as applicable.