SECTION 6. WHAT

ARE THE SPECIFIC PROCEDURES FOR APPLICATIONS FOR RECOGNITION OF EXEMPTION UNDER §§ 501 OR 521?

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In general .01 This section sets forth procedures for applying for and issuing determination letters in response to applications for recognition of exemption under §§ 501 or 521, other than those subject to Rev. Proc. 2023-4 (relating to pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans).

Terrorist organizations not eligible to apply for recognition of exemption

Format of application

.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.

.03 An organization seeking recognition of exemption 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. The current version of the form can be found on www.irs.gov (“Forms & Instructions”).

User fees .04 An organization applying for recognition of exemption must pay the user fee with its Form 1023, Form 1023-EZ, Form 1024, or Form 1024-A through www.pay.gov when submitting its form. For other applications for recognition of exemption, an organization must attach a completed Form 8718, User Fee for Exempt Organization Determination Letter Request, to its 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) of this revenue procedure as an organization that is ineligible to submit Form 1023-EZ. An organization is an eligible organization if the organization satisfies 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 two years;

(b) The organization had annual gross receipts of $50,000 or less in each of the past three 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);

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

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(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 whose tax-exempt status were previously revoked or that are successors to an organization whose tax-exempt status was previous revoked (other than an organization the taxexempt 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 IRB 652);

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

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

(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 tax-exempt status under sections 5 or 6 of Rev. Proc. 2014-11, 2014-3 IRB 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 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 revocation. Organizations that claim tax-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 their tax-exempt status. If an organization fails to file required Form 990 series returns or notices for three consecutive years, its tax-exempt status will be automatically revoked by operation of § 6033(j). Such an organization may apply for reinstatement of its tax-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) of Rev. Proc. 2014-11). 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.

What are the requirements .06 for a completed application?

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

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

(a) is signed or, in the case of a Form 1023, Form 1024, or Form 1024-A, is electronically signed by an authorized individual under penalties of perjury (see sections 4.04 and 4.06 of this revenue procedure);

(b) includes the organization’s correct EIN;

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Requirements for a completed Form 1023-EZ application

(c) (i) for organizations other than those described in § 501(c)(3) or (4), 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) or (4), see Form 1023 and Instructions for Form 1023 or Form 1024-A and Instructions for Form 1024-A, respectively;

(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 satisfies the requirements of a “conformed copy,” as outlined in Rev. Proc. 68-14, 1968-1 CB 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); and

(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 tax-exempt status 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

(d) is accompanied by the correct user fee.

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

Tax-exempt status must be established in application, including attestation and supporting documents

Tax-exempt status may be recognized in advance of actual operations

Even if application is complete, additional information may be required

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 satisfies 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, tax-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 tax-exempt status pursuant to the section of the Code under which tax-exempt status 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 tax-exempt status pursuant to the section of the Code under which tax-exempt status 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, tax-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 satisfies the requirements for tax-exempt status 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 of this revenue procedure for the applicable appeal/protest procedures.

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Effective date of tax-exempt status

(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).

(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.

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(1) In general . A determination letter recognizing tax-exempt status 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 tax-exempt status; 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) 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 but 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 Form 1023, Form 1023-EZ, Form 1024, or Form 1024-A, as applicable.

(3) Application of Treas. Reg. § 301.9100-3: Organizations required to apply for tax-exempt status under §§ 505, 508, and 501(c)(29) and the regulations thereunder. Unlike other taxexempt organizations, an organization described in § 501(c)(3), (9), or (17) generally is required to apply for recognition of exemption within 27 months from the end of the month in which it was organized in order to be recognized and treated as tax-exempt effective as of the date of formation. See §§ 505 and 508, Treas. Reg. §§ 1.505(c)-1T, 1.508-1(a), and 301.9100-2(a)(2)(iii) and (iv). A similar rule applies to organizations described in § 501(c)(29). See § 501(c)(29), Treas. Reg. § 1.501(c)(29)-1, and Rev. Proc. 2015-17, 2015-7 IRB 599. In its application for recognition of exemption under § 501(c)(3), (9), (17), or (29), an organization that has not filed its application within the required time period may request relief under Treas. Reg. § 301.9100-3 in order to be recognized and treated as tax-exempt effective as of a date earlier than the date of application, and EO Determinations may grant such relief if the requirements for relief are met. An organization applying for recognition of exemption under § 501(c)(3) after 27 months from formation may not use Form 1023-EZ if it requests an effective date earlier than the submission date, but instead must file a Form 1023. An organization will not be granted relief under Treas. Reg. § 301.9100-3 if either (1) granting the request for relief would result in the organization’s tax-exempt status being automatically revoked under § 6033(j)(1) effective before the application date (without regard to the provisions of § 6033(j)(3) and guidance issued thereunder), or (2) the period of limitations on assessment under § 6501(a) for any taxable year for which the organization claims tax-exempt status has expired prior to the date of application.

(4) Application of Treas. Reg. § 301.9100-3: Organizations not required to apply for tax- exempt status under §§ 505, 508, or 501(c)(29) and the regulations thereunder . Treas. Reg. § 301.9100-3 does not apply to an organization that is not required to apply for recognition of exemption in order to be tax-exempt, and the Service will not consider a request for relief under Treas. Reg. § 301.9100-3 from such an organization.

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

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