SECTION 7. WHAT ARE — Internal Revenue Bulletin 2018-1

THE SPECIFIC PROCEDURES FOR DETERMINATION LETTER REQUESTS ON FORM 8940?

In general .01 This section explains the specific procedures for requesting a determination letter by submitting Form 8940, including requests for a determination letter on foundation status.

Requests made on Form .02 A request described in section 4.02(5) must be submitted on Form 8940 (except where 8940 otherwise permitted, including when such request is made as part of an application for recognition of exempt status), along with all information, documentation, and other materials required by Form 8940 and the instructions thereto, as well as the appropriate user fee provided in Appendix A. For complete information about filing requirements and the submission process, refer to Form 8940 and the Instructions for Form 8940.

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Initial classification of private foundation status

Under what circumstances must an organization request a determination of foundation status, and when is such a request optional?

Not applicable to private foundation terminations under § 507 or changes of status pursuant to examination

.03 All § 501(c)(3) organizations are classified as private foundations under § 509(a) unless they qualify as a public charity under § 509(a)(1) (which cross-references § 170(b)(1)(A)(i)-(vi)), (2), (3), or (4). See Treas. Reg. §§ 1.170A–9, 1.509(a)–1 through 1.509(a)-7. The Service determines an organization’s private foundation or public charity status when the organization files its Form 1023, or when eligible, Form 1023-EZ. This status will be included in the organization’s determination letter on exempt status.

.04 (1) Requests to change from one public charity classification to another public charity classification. On its Form 990, Return of Organization Exempt From Income Tax Under section 501(c), 527, or 4947(a)(1) of the Internal Revenue Code (except private foundations), a public charity indicates the paragraph of § 509(a), and subparagraph of § 170(b)(1)(A), if applicable, under which it qualifies as a public charity. Because of changes in its activities or operations, this may differ from the public charity status listed in its original determination letter. Although an organization is not required to obtain a determination letter to qualify for the new public charity status, in order for Service records to recognize any change in public charity status, an organization must obtain a new determination of foundation status by filing Form 8940 pursuant to this revenue procedure.

(2) Requests from public charities for private foundation status. If a public charity no longer qualifies as a public charity under § 509(a)(1)-(4), then it becomes a private foundation, and as such, it must file Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation . The organization is not required to, but may, obtain a determination letter on its new private foundation status. The organization indicates this change in foundation status by filing its Form 990-PF return and following any procedures specified in the form, instructions, or other published guidance. Thereafter, the organization may terminate its private foundation status, such as by giving notice and qualifying as a public charity again under § 509(a)(1)-(3) during a 60-month termination period in accordance with the procedures under § 507(b)(1)(B) and Treas. Reg. § 1.507–2(b).

(3) Requests from private foundations for public charity status. An organization that erroneously determined that it was a private foundation (for example, by erroneously classifying an item or items in its calculation of public support) and wishes to correct the error can request a determination letter classifying it as a public charity by showing that it continuously met the public support tests during the relevant periods.

(4) Requests for private operating foundation status. A private foundation may qualify as an operating foundation under § 4942(j)(3) without a determination letter from the Service, but the Service will not recognize such status in its records without a determination letter from the Service. An organization claiming to be an exempt operating foundation under § 4940(d)(2) must obtain a determination letter from the Service recognizing such status to be exempt from the § 4940 tax on net investment income.

.05

(1) The procedures in this revenue procedure do not apply to the notice an organization must submit in seeking to terminate its private foundation status under § 507.

(2) The procedures in this revenue procedure also do not apply to the examination of an organization which results in changes to its foundation status.

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SECTION 8. WITHDRAWAL OF A REQUEST FOR DETERMINATION LETTER

Request may be withdrawn prior to issuance of a determination letter

§ 7428 implications of withdrawal of application under § 501(c) or (d)

SECTION 9. PROCEDURES FOR ADVERSE DETERMINATION LETTERS

.01 A taxpayer may withdraw a request for a determination letter at any time before the determination letter is issued by the Service. An authorized individual must make such a request in writing in accordance with the instructions to the form on which the request for a determination letter was submitted, if applicable. For purposes of this section, the issuance of a determination letter includes a proposed adverse determination letter.

(1) When a request for determination letter is withdrawn, the Service will retain the application, Form 8940, or letter request and all supporting documents.

(2) The Service may consider the information submitted in connection with the withdrawn request in a subsequent examination of the organization, or in connection with a subsequent application submitted by the organization.

(3) Generally, the user fee will not be refunded if a request is withdrawn. See section 14 of this revenue procedure.

.02 The withdrawal of an application under § 501(c) or (d) is not a failure to make a determination within the meaning of § 7428(a)(2) or an exhaustion of administrative remedies within the meaning of § 7428(b)(2).

In general .01 This section explains the procedures for issuing adverse determination letters. Different procedures apply to adverse determination letters relating to issues that may receive Appeals consideration and to all other types of adverse determination letters.

Types of requests that may receive Appeals Office consideration

.02 The following types of determination letter requests will provide an organization with an opportunity to protest/appeal a proposed adverse determination:

(a) the initial qualification of the organization as exempt from tax under § 501(a) or § 521, or as an organization described in § 170(c)(2);

(b) the classification or reclassification of the organization’s foundation status under § 509(a); and

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Contents of proposed adverse determination letter for requests with appeals rights

Protest/appeal of a proposed adverse determination letter on certain issues

Final adverse determination letter where no protest/appeal is submitted

Review of protest by EO Determinations

Consideration by the Appeals Office

Effect of new information raised in protest/appeal

.03 If EO Determinations reaches the conclusion that the organization does not meet the requirements for a favorable determination letter and the letter is a type for which an opportunity for protest/appeal is available under section 9.02, the Service will issue a proposed adverse determination letter, which will:

(a) include a detailed discussion of the basis for the Service’s conclusion; and

(b) inform the organization of its opportunity to protest/appeal the decision and request a conference.

The non-acceptance under section 4.10 of a request for a determination letter is not a proposed adverse determination.

.04 To protest/appeal a proposed adverse determination letter described in section 9.02, 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 is requesting an Appeals Office conference.

.05 If an organization does not submit a timely protest/appeal of a proposed adverse determination letter on an issue described in section 9.02, a final adverse determination letter will be issued to the organization. The final adverse letter will provide information about the disclosure of the proposed and final adverse letters. See section 13.04 of this revenue procedure.

The non-acceptance under section 4.10 of a request for a determination letter is not a final adverse determination.

.06 If an organization submits a protest/appeal of a proposed adverse determination letter described in section 9.02, EO Determinations will review the protest, and, if it determines that the organization meets the requirements for approval of its request, issue a favorable determination letter. If EO Determinations maintains its adverse position after reviewing the protest, it will forward the case file to Appeals. If new information is raised in the protest, EO Determinations will follow the procedures described in section 9.08, which may require the issuance of a new proposed denial, prior to sending the case to Appeals.

.07 The Appeals Office will consider the organization’s protest/appeal submitted in response to a proposed adverse determination letter described in section 9.02. 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 generally 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 non-uniformity, the Appeals Office must request technical advice from the Office of Associate Chief Counsel (Tax Exempt and Government Entities). See Rev. Proc. 2018–2, this Bulletin.

.08 If the organization submits new information as part of a protest, or during Appeals consideration, the matter may be returned to EO Determinations for further consideration. As a result of its review of the new information, EO Determinations may issue a favorable determination letter, rebuttal letter, or new proposed adverse determination letter. If a rebuttal letter is

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An appeal or protest may be withdrawn

Appeal and conference rights not applicable in certain situations

Adverse determination letter on an issue that will not receive Appeals Office consideration

SECTION 10. DECLARATORY JUDGMENT PROVISIONS OF § 7428

Actual controversy involving certain issues

issued, EO Determinations will forward the case to the Appeals Office. If a new proposed adverse determination letter is issued, the organization must submit a protest/appeal of the new proposed adverse determination letter in order to have Appeals Office consideration of the issue.

.09 An organization may withdraw its protest/appeal 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. An organization that withdraws a protest/appeal will not be considered to have exhausted its administrative remedies within the meaning of § 7428(b)(2).

.10 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).

.11 If EO Determinations reaches the conclusion that the organization does not meet the requirements for a favorable determination on an issue that is not described in section 9.02 (e.g., advance approval that a potential grant or contribution constitutes an “unusual grant”; exemption from Form 990 filing requirements), the Service generally will advise the organization of its adverse position and give the organization a chance to submit additional information or withdraw the request before issuing an adverse determination letter, which will include a detailed discussion of the basis for the Service’s conclusion. The organization will not have the opportunity to protest/appeal the adverse determination letter.

.01 Generally, a declaratory judgment proceeding under § 7428 can be filed in the United States Tax Court, the United States Court of Federal Claims, or the District Court of the United States for the District of Columbia with respect to an actual controversy involving a determination by the Service or a failure of the Service to make a determination with respect to:

(1) the initial qualification or continuing qualification of an organization as an organization described in § 501(c)(3) which is exempt from tax under § 501(a) or as an organization described in § 170(c)(2);

(2) the initial classification or continuing classification of an organization as a private foundation (as defined in § 509(a));

(3) the initial classification or continuing classification of an organization as a private operating foundation (as defined in § 4942(j)(3));

(4) the initial classification or continuing classification of a cooperative as an organization described in § 521(b) which is exempt from tax under § 521(a); or

(5) the initial qualification or continuing qualification of an organization as an organization described in § 501(c) (other than paragraph (3)) or § 501(d) and exempt from tax under § 501(a).

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Final determination to which § 7428 applies

Failure to make a determination to which § 7428 applies

§ 7428 does not apply to the non-acceptance or withdrawal of a request

Exhaustion of administrative remedies

.02 A final determination to which § 7428 applies is a determination letter, sent by certified or registered mail, which holds that the organization is:

(1) not described in § 501(c), § 501(d), or § 170(c)(2);

(2) a public charity described in a part of § 509 or § 170(b)(1)(A) other than the part under which the organization requested classification;

(3) not a private operating foundation as defined in § 4942(j)(3); or

(4) a private foundation and not a public charity described in a part of § 509 or § 170(b)(1)(A).

.03 If the Service declines to issue a determination letter under section 3.02 of this revenue procedure to an organization seeking a determination described in section 10.01 of this revenue procedure, the organization may be able to pursue a declaratory judgment under § 7428, provided that it has exhausted its administrative remedies.

.04 (1) The non-acceptance for processing of a request under section 4.10 of this revenue procedure is not a final determination, or a failure to make a determination, to which § 7428 applies.

(2) The withdrawal of an application pursuant to section 8 is not a failure to make a determination within the meaning of § 7428(b)(2).

.05 Before filing a declaratory judgment action, an organization must exhaust its administrative remedies by taking, in a timely manner, all reasonable steps to secure a determination from the Service. These include:

(1) (a) For an organization seeking to be described in § 501(c)(3), the filing of a completed application Form 1023 (within the meaning of section 6.06(1) of this revenue procedure) or a completed Form 1023-EZ (within the meaning of section 6.06(2) of this revenue procedure);

(b) For an organization seeking private foundation classification, a completed Form 8940; or

(c) For an organization seeking to be described in § 501(c) (other than paragraph (3)) or in § 501(d), a completed appropriate Form or letter request (within the meaning of section 6.06(1)).

(2) In appropriate cases, requesting relief pursuant to Treas. Reg. § 301.9100–1 of the Procedure and Administration Regulations regarding the extension of time for making an election or application for relief from tax;

(3) When applicable, the timely submission of all additional information requested by the Service to perfect a determination letter request;

(4) In appropriate cases, requesting relief under § 7805(b) in the manner provided in section 12.04 of this revenue procedure; and

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Not earlier than 270 days after seeking determination

Service must have reasonable time to act on an appeal or protest

SECTION 11. FAVORABLE DETERMINATION LETTERS

Reliance on determination letter

(5) Exhaustion of all administrative appeals available within the Service pursuant to section 9 of this revenue procedure.

An organization will not have exhausted its administrative remedies by completing the steps in this section if the organization submitted Form 1023-EZ but was not eligible to submit Form 1023-EZ, as described in section 6.05(1)–(2) of this revenue procedure.

.06 An organization will in no event be deemed to have exhausted its administrative remedies prior to the earlier of:

(1) the completion of all reasonable steps to secure a determination from the Service, including the applicable steps in section 10.05, and the issuance by the Service by certified or registered mail of a final determination letter; or

(2) the expiration of the 270-day period described in § 7428(b)(2) in a case where the Service has not issued a final determination letter, and the organization has taken, in a timely manner, all reasonable steps to secure a determination letter as provided in section 10.05. The 270-day period referred to in § 7428(b)(2) will not be considered to have started prior to the date a completed application is submitted to the Service. If the Service requests additional information from an organization, 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).

.07 The steps described in section 10.05 will not be considered completed until the Service has had a reasonable time to act upon a protest/appeal.

.01 A taxpayer ordinarily may rely on a favorable determination letter received from the Service, regardless of the format of request submitted, subject to the conditions and limitations described in this section.

Limitations on reliance .02

(1) Will not apply to another taxpayer. A taxpayer may not rely on, use, or cite as precedent a determination letter issued to another taxpayer. See § 6110(k)(3).

(2) Material change in facts. A determination letter may not be relied upon by the organization submitting the request if there is a material change in facts. For a determination letter on exempt status, a material change, inconsistent with exemption, includes a change in the character, the purpose, or the method of operation of the organization. See section 12.01 of this revenue procedure.

(3) Inaccurate information on request. A determination letter issued to an organization that submitted a request in accordance with this revenue procedure may not be relied upon by the organization submitting the request if it was based on any omission or inaccurate material information submitted by the organization. Inaccurate material information includes

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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. See section 12.01 of this revenue procedure.

(4) Change in law. A change in law may affect reliance. See section 12.01 of this revenue procedure.

Post-determination review .03

(1) Determination letters may be post-reviewed. Determination letters may be reviewed by EO Determinations Quality Assurance to assure uniform application of the statutes, tax treaties, regulations, court opinions, or guidance published in the Internal Revenue Bulletin.

(2) Procedures for addressing determination letters reviewed and found to have been issued in error. If upon post-determination review EO Determinations Quality Assurance concludes, based on the information contained in the existing application file, that a determination letter issued by EO Determinations was issued in error, the matter will be referred to EO Examinations for consideration.

SECTION 12. REVOCATION OR MODIFICATION OF A DETERMINATION LETTER

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

Revocation or modification of a determination letter may be retroactive

.01 In general. A determination letter 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 for a determination letter recognizing exemption, pursuant to § 6033(j), for failure to file a required annual return or notice for three consecutive years.

Note : If an organization no longer qualifies under the Code section for which it originally applied for recognition of tax-exempt status, then the determination letter will be revoked, rather than modified.

.02 In the case of a revocation or modification of a determination letter described in section 9.02, the procedures to protest/appeal the revocation or modification are generally the same as set out in section 9 of this revenue procedure. However, organizations revoked under § 6033(j) will not have an opportunity for Appeals consideration.

.03 The revocation or modification of a determination letter may be retroactive if:

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Organization may request that retroactivity be limited under § 7805(b)

(1) there has been a change in the applicable law;

(2) the organization omitted or misstated material information. 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;

(3) the organization operated in a manner materially different from that originally represented in an application for recognition of exemption; or

(4) in the case of an organization to which § 503 applies, the organization 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.

If a determination letter is revoked or modified by a letter with retroactive effect, the letter will, except in fraud cases, state the grounds on which the determination letter is being revoked or modified and explain the reasons why it is being revoked or modified retroactively.

.04 An organization may seek relief from retroactive revocation or modification of a determination letter under § 7805(b). A request for relief under § 7805(b) must be in writing and must be submitted to the agent or specialist assigned to the case. The request for relief under § 7805(b) must be submitted before issuance of the final adverse determination letter.

(1) Form of request for relief. An organization’s request to limit the retroactive effect of the revocation or modification of the determination letter must—

(a) state that it is being made under § 7805(b);

(b) state the relief sought;

(d) include any documents bearing on the request.

(2) Notice of denial of request for relief. If the request for relief under § 7805(b) is denied, the organization will be notified in writing of the denial.

(3) Organization must exhaust its administrative remedies. If an organization seeks declaratory judgment under § 7428 in response to a retroactive revocation or modification, to preserve judicial review of a claim for relief under § 7805(b), the organization must follow the steps in this revenue procedure in order to have exhausted its administrative remedies with respect to its request under § 7805(b). If the organization does not complete the applicable steps, the organization will not have exhausted its administrative remedies as required by § 7428(b)(2) with respect to its request for § 7805(b) relief, and will thus be precluded from obtaining § 7805(b) relief in any declaratory judgment it seeks under § 7428.

If the organization has requested § 7805(b) relief, the organization’s administrative remedies

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Effective date of revocation or modification of a determination letter on exempt status

SECTION 13. DISCLOSURE OF APPLICATIONS AND DETERMINATION LETTERS INCLUDING THAT OF FOUNDATION STATUS

Determination letter will be disclosed under § 6104 or § 6110 depending on the type of request and the type of determination letter issued

Disclosure of applications, supporting documents, and favorable determination letters under § 6104

with respect to its § 7805(b) request will not be considered exhausted until the Service has had a reasonable amount of time to act upon the request.

.05 Effective date of revocation or modification.

(1) Where the organization omitted or misstated material information in a request, revocation or modification will be effective as of the effective date of the determination letter issued in response to the request.

(2) Where there is a material change in facts, inconsistent with the conclusion of a determination letter, revocation or modification will ordinarily take effect as of the date of such material change.

(3) If a determination letter was issued in error or is no longer in accord with the Service’s position, and § 7805(b) relief is granted (see section 12.04 of this revenue procedure), ordinarily, the revocation or modification will be effective not earlier than the date on which the Service modifies or revokes the original determination letter.

.01 Sections 6104 and 6110 provide rules for the disclosure of requests, including forms, supporting documents, and determination letters issued in response to requests.

(1) A favorable determination letter issued in response to an application for recognition of exemption from Federal income tax under §§ 501 or 521, as well as certain determination letters regarding foundation status are disclosed under § 6104. Determination letters that an applicant organization is exempt from Federal income tax and letters or documents issued by the Service that an organization is or is not a private foundation, or described in §§ 509(a), 4940(d)(2), 4942(j)(3), or 4940(f) are disclosed under § 6104.

(2) Other determination letters are disclosed under § 6110. Any determination letter that is not disclosed under § 6104 is disclosed under § 6110. This includes proposed and final denial of exemption when such denial becomes final, advance approval of grant making procedures described in § 4545(g), advance approval of certain set-asides described in § 4942(g)(2), advance approval of voter registration activities described in § 4945(f), and advance approval of an unusual grant per Rev. Proc. 81–7, 1981–1 C.B. 621.

(3) Whether other determination letters are disclosed under § 6104 or § 6110 will vary based on the type of determination.

.02 If a favorable determination letter is issued in response to an application for recognition of exemption from Federal income tax under § 501 or § 521, the application form, any supporting documents, and any determination letter issued in response to the application (including a proposed adverse determination letter), are available for public inspection upon request under § 6104(a)(1). In addition, letters or documents issued by the Service that an organization is or is

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Disclosure of determination letters under § 6110

Taxpayer may protest disclosure under § 6110 of certain information in a determination letter

Taxpayer may request delay of public inspection under § 6110

not a private foundation, or described in §§ 509(a), 4940(d)(2), 4942(j)(3), or 4940(f) are disclosed under § 6104. However, there are certain limited disclosure exceptions for a trade secret, patent, process, style of work, or apparatus, if the Service determines that the disclosure of the information would adversely affect the organization.

(1) The public can request information available for public inspection under § 6104(a)(1) by submitting Form 4506–A, Request for Public Inspection or Copy of Exempt or Political Organization IRS Form. Organizations should ensure that applications and supporting documents do not include unnecessary personal identifying information (such as bank account numbers or social security numbers) that could result in identity theft or other adverse consequences if publicly disclosed.

(2) The exempt organization is required to make its exemption application form, supporting documents, and any determination letter issued in response to the application (including a proposed adverse determination letter) available for public inspection without charge. For more information about the exempt organization’s disclosure obligations, see Publication 557, Tax- Exempt Status for Your Organization.

.03 The Service is required to make any determination letter that is not disclosed under § 6104, including adverse determinations of exempt status, available for public inspection under § 6110. Upon issuance of the final adverse determination letter to an organization, both the proposed adverse determination letter and the final adverse determination letter will be released pursuant to § 6110. In addition, determinations of advance approval of grant making procedures described in § 4945(g), advance approval of certain set-asides described in § 4942(g)(2), advance approval of voter registration activities described in § 4945(f), and advance approval of an unusual grant per Rev. Proc. 81–7, 1981–1 C.B. 621, will be released pursuant to § 6110.

The written determination and background file documents are made available to the public after the deletion of names, addresses, and any other information that might identify the taxpayer. See § 6110(c) for other specific disclosure exemptions.

.04 If the determination letter is being disclosed under § 6110, the determination letter will enclose Notice 437, Notice of Intention to Disclose, and redacted copies of the final and proposed adverse determination letters. Notice 437 provides procedures to follow and instructions if the organization disagrees with the deletions proposed by the Service.

Within 20 calendar days after the Service receives the response to the Notice 437, the Service will mail to the taxpayer its final administrative conclusion regarding the deletions to be made. The taxpayer does not have the right to a conference to resolve any disagreements concerning material to be deleted from the text of the determination letter. However, these matters may be taken up at an Appeals conference that is otherwise scheduled regarding the request, if available under section 9 of this revenue procedure.

.05 After receiving the Notice 437, but within 60 calendar days after the date of notice, the taxpayer may send a request for delay of public inspection under either § 6110(g)(3) or (4). The request for delay must be sent to the Service office indicated on the Notice 437. The request for delay under § 6110(g)(4) must contain a statement from which the Commissioner of Internal Revenue may determine that there are good reasons for the delay.

Note : Section 6110(l)(1) states that § 6110 disclosure provisions do not apply to any matter to which § 6104 applies. Therefore, disclosure of determination letters and related background file documents dealing with an approved application for exemption under § 501(a) as an organization

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Disclosure to State officials when the Service refuses to recognize exemption under § 501(c)(3)

Disclosure to State officials of information about § 501(c)(3) applicants