Table of Contents
If your organization is one of the organizations described in this publication and is seeking recognition of tax-exempt status from the IRS, you should follow the procedures described in this chapter and the instructions that accompany the appropriate application forms.
For information on section 501(c)(3) organizations, go to Section 501(c)(3) Organizations chapter 3. If your organization is seeking exemption under one of the other paragraphs of section 501(c), see chapter 4.
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Application procedures that generally apply to all organizations discussed in this publication, including the application forms;
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Rulings and determination letters (approvals/disapprovals);
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Appeal procedures available if an adverse determination letter is proposed; and
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Group exemption letters.
Oral requests for recognition of exemption will not be considered by the IRS. Your application for tax-exempt status must be in writing using the appropriate forms as discussed below.
If your organization is seeking recognition of exemption from federal income tax, it must use a specific application prescribed by the IRS in Rev. Proc. 2011-9, section 3. Rev. Proc. 2011-9, section 3. If your organization is a central organization with exempt status, see Group Exemption Letter, later. All applications must be signed by an authorized individual.
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501(c)(3) Corporations, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports, or prevention of cruelty for children or animals,
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501(e) Cooperative hospital service organization,
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501(f) Cooperative service organization of operating educational organizations,
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501(k) Certain organizations providing child care,
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501(n) Charitable risk pools, and
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501(q) Credit counseling organizations.
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501(c)(2) Title holding corporations,
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501(c)(4) Civic leagues, social welfare organizations,
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501(c)(5) Labor, agricultural, or horticultural organizations,
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501(c)(6) Business leagues, chambers of commerce, etc.,
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501(c)(7) Social clubs,
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501(c)(8) Fraternal beneficiary societies, orders, or associations,
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501(c)(9) Voluntary employees’ beneficiary associations,
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501(c)(10) Domestic fraternal societies, orders, etc.,
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501(c)(12) Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies,
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501(c)(13) Cemetery companies,
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501(c)(15) Mutual insurance companies or associations,
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501(c)(17) Trusts providing for the payment of supplemental unemployment compensation benefits,
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501(c)(19) A post, organization, auxiliary unit, etc. of past or present members of the Armed Forces of the United States, and
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501(c)(25) Title holding corporation or trusts.
Form 8718, User Fee for Exempt Organization Determination Letter Request, must also be sent along with Form 1024.
Some organizations do not have to use specific application forms. The application your organization must use is specified in the chapter in this publication dealing with your kind of organization. It is also shown in the Organization Reference Chart.
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Online—Click on the Employer ID Numbers (EINs) link at www.IRS.gov/businesses/small. The EIN is issued immediately once the application information is validated.
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By telephone at 1-800-829-4933 from 7:00 a.m. to 10:00 p.m. in the organization's local time zone.
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By mailing or faxing Form SS-4, Application for Employer Identification Number.
To help in processing your application, be sure to attach all schedules, statements, and other documents required by the application form. If you do not attach them, you may have to resubmit your application or you may otherwise encounter a delay in processing your application.
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Identify the material to be withheld (the document, page, paragraph, and line) by clearly marking it “Not Subject To Public Inspection.”
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Include the reasons for your organization's position that the information is of the type that can be withheld from public inspection.
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Be filed with the office where your organization files the documents in which the material to be withheld is contained.
Internal Revenue Service
PO Box 12192
Covington, KY 41012-0192
Requests other than applications. Requests other than applications for recognition of exemption or Form 8940 (for example, requests for rulings involving feeder organizations, application of excise taxes to activities of private foundations, taxation of unrelated business income, etc.) should be sent to:
Internal Revenue Service
Attention: EO Technical
P.O. Box 27720
McPherson Station
Washington, DC 20038
These requests, similar to applications for recognition of exemption previously discussed, must be accompanied by the appropriate user fee.
An organization must describe fully the activities in which it expects to engage. This includes standards, procedures, or other means adopted or planned by the organization for carrying out its activities, expected sources of funds, and the nature of its contemplated expenses.
When an organization does not supply the information previously mentioned under Application Procedures , or fails to furnish a sufficiently detailed description of its proposed activities to permit a conclusion that it will clearly be exempt, a proposed adverse determination letter or ruling may be issued.
A ruling or determination letter recognizing exemption is usually effective as of the date of formation of an organization if, during the period before the date of the ruling or determination letter, its purposes and activities were those required by the law. (See Application for Recognition of Exemption in chapter 3 for the special rule for organizations applying for recognition of exemption under section 501(c)(3).) Upon obtaining recognition of exemption, the organization can file a claim for a refund of income taxes paid for the period for which its exempt status is recognized.
If an organization is required to alter its activities or substantially amend its charter to qualify, the ruling or determination letter recognizing exemption will be effective as of the date specified in the letter. If a nonsubstantive amendment is made, such as correction of a clerical error in the enabling instrument or the addition of a dissolution clause, exemption will ordinarily be recognized as of the date of formation if the activities of the organization before the ruling or determination are consistent with the exemption requirements.
A ruling or determination letter recognizing exemption cannot be relied on if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization. Also, a ruling or determination letter cannot be relied on if it is based on any inaccurate material factual representations.
A ruling or determination letter recognizing exemption may be revoked or modified by:
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A notice to the organization to which the ruling or determination letter originally was issued,
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Enactment of legislation or ratification of a tax treaty,
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A decision of the United States Supreme Court,
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Issuance of temporary or final regulations, or
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Issuance of a revenue ruling, a revenue procedure, or other statement published in the Internal Revenue Bulletin or Cumulative Bulletin.
If your organization applies for tax-exempt status and EO Determination decides your organization does not qualify, your organization will be advised of its rights to protest the determination by requesting Appeals Office consideration. This process does not apply to determinations issued by EO Technical. Your organization must submit a statement of its views fully explaining its reasoning. The statement must be submitted within 30 days from the date of the adverse determination letter and must state whether it wishes Appeals Office consideration.
EO Determinations will consider the statement protesting and appealing (hereinafter appealing) the adverse determination and decide if the information affects its determination. If the appeal does not provide a basis to reconsider its adverse determination, it will forward the appeal and case file to the Appeals Office. For more information about the role of the Appeals Office, see Publication 892, Exempt Organization Appeal Procedures for Unagreed Issues. The appeal should include the following information.
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The organization's name, address, daytime telephone number, and employer identification number.
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A statement that the organization wants to protest the determination.
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A copy of the letter showing the determination you disagree with, or the date and symbols on the determination letter.
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A statement of facts supporting the organization's position in any contested factual issue.
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A statement outlining the law or other authority the organization is relying on.
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A statement as to whether a conference at the Appeals Office is desired.
The statement of facts in item 4 must be declared true under penalties of perjury. This may be done by adding to the protest the following signed declaration:
“Under penalties of perjury, I declare that I have examined the statement of facts presented in this protest and in any accompanying schedules and statements and, to the best of my knowledge and belief, it is true, correct, and complete.” | ||
Signature. |
If the organization's representative submits the appeal, a substitute declaration must be included, stating:
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That the representative prepared the appeal and accompanying documents, and
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Whether the representative knows personally that the statements of fact contained in the appeal and accompanying documents are true and correct.
Be sure the appeal contains all of the information requested. Incomplete appeals will be returned for completion.
If a conference is requested, it will be held at the Appeals Office, unless the organization requests that the meeting be held at a field office convenient to both parties.
The Appeals Office, after considering the organization's appeal as well as information presented in any conference held, will notify the organization of its decision and issue an appropriate determination letter. An adverse decision can be appealed to the courts (discussed later).
The Appeals Office must request technical advice from EO Technical on any exempt organization issue concerning qualification for exemption or foundation status for which there is no published precedent or for which there is reason to believe that nonuniformity exists. If an organization believes that its case involves such an issue, it should ask the Appeals Office to request technical advice from EO Technical.
Any determination letter issued on the basis of technical advice from EO Technical cannot be appealed to the Appeals Office for those issues that were the subject of the technical advice from EO Technical.
If an application is referred to EO Technical for issuance of a ruling and an adverse ruling is issued, the organization will be informed of the basis for the conclusion, its right to file a protest within 30 days, and its right to have a conference at Headquarters.
In the case of an application under section 501(c)(3), all of the following actions, called administrative remedies, must be completed by your organization before an unfavorable ruling or determination letter from the IRS can be appealed to the courts.
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The filing of a substantially completed application Form 1023 or group exemption request under section 501(c)(3) (described earlier in this chapter) or the filing of a request for a determination of foundation status (see Private Foundations and Public Charities in chapter 3).
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In the case of a late-filed application, requesting relief under Regulations section 301.9100 regarding applications for extensions of time for making an election or application for relief from tax (see Application for Recognition of Exemption in chapter 3).
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The timely submission of all additional information requested to perfect an exemption application or request for determination of private foundation status.
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Exhaustion of all administrative appeals available within the IRS, including protest of an adverse ruling issued by EO Technical in an exemption application.
The actions just described will not be considered completed until the IRS has had a reasonable time to act upon the appeal or protest, as the case may be.
An organization will not be considered to have exhausted its administrative remedies before the earlier of:
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The completion of the steps just listed and the sending by certified or registered mail of a notice of final determination, or
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The expiration of the 270-day period in which the IRS has not issued a notice of final determination and the organization has taken, in a timely manner, all reasonable steps to secure a ruling or determination.
If the IRS issues an unfavorable determination letter or ruling to your organization and you have exhausted all the administrative remedies just discussed, your organization can seek judicial remedies.
For example, if your organization has paid the tax resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a refund in a U.S. District Court or the U.S. Court of Federal Claims. Or, if your organization elected not to pay the tax deficiency resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a redetermination of the tax deficiencies in the United States Tax Court. For more information on these types of suits, get Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund.
In certain situations, your organization can file suit for a declaratory judgment in the U.S. District Court for the District of Columbia, the U.S. Court of Federal Claims, or the U.S. Tax Court. This remedy is available if your organization received an adverse notice of final determination, or if the IRS failed to make a timely determination on your initial or continuing qualification or classification as an exempt organization. However, your exempt status claim must be as:
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An organization qualifying under section 501(c)(3),
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An organization to which a deduction for a contribution is allowed under section 170(c)(2),
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An organization that is a private foundation under section 509(a),
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A private operating foundation under section 4942(j)(3), or
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A cooperative organization that is exempt from tax under section 521.
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Is not described in section 501(c)(3) or section 170(c)(2),
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Is a private foundation as defined in section 4942(j)(3), or
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Is a public charity described in a part of section 509(a) or section 170(b)(1)(A) other than the part under which your organization requested classification.
A group exemption letter is a ruling or determination letter issued to a central organization recognizing on a group basis the exemption under section 501(c) of subordinate organizations on whose behalf the central organization has applied for recognition of exemption.
A central organization is an organization that has one or more subordinates under its general supervision or control.
A subordinate organization is a chapter, local, post, or unit of a central organization. A central organization may be a subordinate itself, such as a state organization that has subordinate units and is itself affiliated with a national (central) organization.
A subordinate organization may or may not be incorporated, but it must have an organizing document. A subordinate that is organized and operated in a foreign country cannot be included in a group exemption letter. A subordinate described in section 501(c)(3) cannot be included in a group exemption letter if it is a private foundation described in section 509(a).
If your organization is a subordinate one controlled by a central organization (for example, a church, 4-H Clubs, Disabled American Veterans, or a fraternal organization), you should check with the central organization to see if it has been issued a group exemption letter that covers your organization. If it has, you do not have to file a separate application unless your organization no longer wants to be included in the group exemption letter.
If the group exemption letter does not cover your organization, ask your central organization about being included in the next annual group ruling update that it submits to the IRS.
If your organization is a central organization with affiliated subordinates under its control, it can apply for a group exemption letter for its subordinates, provided it has obtained recognition of its own exemption before or concurrently with the group exemption. You should make the application for such subordinates by letter instead of submitting either Form 1023 or 1024. This procedure relieves each of the subordinates covered by a group exemption letter from filing its own application. A central organization obtains its own recognition of exemption by sending its application to the IRS address shown on Form 8718 or Form 1023.
If the central organization has previously obtained recognition of its own exemption, it must indicate its employer identification number and the date of the letter recognizing its exemption. It need not forward documents already submitted. However, if it has not already done so, the central organization must submit a copy of any amendment to its governing instruments or internal regulations as well as any information about changes in its character, purposes, or method of operation.
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Information verifying that the subordinates:
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Are affiliated with the central organization at the close of its annual accounting period;
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Are subject to its general supervision or control;
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Are all eligible to qualify for exemption under the same paragraph of section 501(c), though not necessarily the paragraph under which the central organization is exempt;
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Are not private foundations if the application for a group exemption letter involves section 501(c)(3);
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Are all on the same accounting period as the central organization if they are to be included in group returns; and
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Are organizations that have been formed within the 15-month period preceding the date of submission of the group exemption application if they are claiming section 501(c)(3) status and are subject to the requirements of section 508(a) and wish to be recognized as exempt from their dates of creation (a group exemption letter may be issued covering subordinates, one or more of which have not been organized within the 15-month period preceding the date of submission, if all subordinates are willing to be recognized as exempt only from the date of application).
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A detailed description of the purposes and activities of the subordinates, including the sources of receipts and the nature of expenditures.
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A sample copy of a uniform governing instrument (such as a charter or articles of association) adopted by the subordinates, or, in its absence, copies of representative instruments.
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An affirmation to the effect that, to the best of the officer's knowledge, the purposes and activities of the subordinates are as stated in (2) and (3), above.
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A statement that each subordinate to be included in the group exemption letter has given written authorization to that effect, signed by an authorized officer of the subordinate, to the central organization (see also New 501(c)(3) organizations that want to be included , later in this section).
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A list of subordinates to be included in the group exemption letter to which the IRS has issued an outstanding ruling or determination letter relating to exemption.
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If the application for a group exemption letter involves section 501(c)(3) and is subject to the provisions of the Code requiring that it give timely notice that it is not a private foundation (see Private Foundations in chapter 3), an affirmation to the effect that, to the best of the officer's knowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as defined in section 509(a).
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For each subordinate that is a school claiming exemption under section 501(c)(3), the information required by Revenue Ruling 71-447, 1971-2 C.B. 230 and Revenue Procedure 75-50, 1975-2 C.B. 587 (these requirements are fully described in chapter 3, under Private Schools ; see also Schedule B, Form 1023).
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For any school affiliated with a church, the information to show that the provisions of Revenue Ruling 75-231, 1975-1 C.B. 158, have been met.
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A list of the names, mailing addresses, actual addresses if different, and EINs of subordinates to be included in the group exemption letter. A current directory of subordinates may be furnished instead of the list if it includes the required information and if the subordinates not to be included in the group exemption letter are identified.
Continued effectiveness of a group exemption letter is based on the following conditions.
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The continued existence of the central organization.
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The continued qualification of the central organization for exemption under section 501(c).
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The submission by the central organization of the information required annually (described under Information Required Annually).
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The annual filing of an information return (Form 990, for example) by the central organization if required.
The continued effectiveness of a group exemption letter as to a particular subordinate is based on these four conditions, as well as on the continued conformity by the subordinate to the requirements for inclusion in a group exemption letter, the authorization for inclusion, and the annual filing of any required information return for the subordinate.
To maintain a group exemption letter, the central organization must submit annually, at least 90 days before the close of its annual accounting period, all of the following information.
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Information about all changes in the purposes, character, or method of operation of the subordinates included in the group exemption letter.
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A separate list (that includes the names, mailing addresses, actual addresses if different, and EINs of the affected subordinates) for each of the three following categories.
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Subordinates that have changed their names or addresses during the year.
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Subordinates no longer to be included in the group exemption letter because they no longer exist or have disaffiliated from or withdrawn their authorization to the central organization.
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Subordinates to be added to the group exemption letter because they are newly organized or affiliated or because they have recently authorized the central organization to include them.
An annotated directory of subordinates will not be accepted for this purpose. If there were none of the above changes, the central organization must submit a statement to that effect.
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The information required to be submitted by a central organization on behalf of subordinates to be included in the group exemption letter is required for subordinates to be added to the letter. (This information is listed in items 1 through 9, under Information required for subordinate organizations, earlier. However, if the information upon which the group exemption letter was based applies in all material respects to these subordinates, a statement to this effect may be submitted instead of the information required by items 1 through 4 of that list.)
The organization should send this information to:
Ogden Service Center
Mail Stop 6271
Ogden, UT 84404-4749
Submitting the required information annually does not relieve the central organization or any of its subordinates of the duty to submit any other information that may be required by an EO area manager to determine whether the conditions for continued exemption are being met.
A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when:
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The central organization notifies the IRS that it is going out of existence,
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The central organization notifies the IRS, by its annual submission or otherwise, that any of its subordinates will no longer fulfill the conditions for continued effectiveness, explained earlier, or
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The IRS notifies the central organization or the affected subordinate that the group exemption letter will no longer have effect for some or all of the group because the conditions for continued effectiveness of a group exemption letter have not been fulfilled.
When notice is given under any of these three conditions, the IRS will no longer recognize the exempt status of the affected subordinates until they file separate applications on their own behalf or the central organization files complete supporting information for their reinclusion in the group exemption at the time of its annual submission. However, when the notice is given by the IRS and the withdrawal of recognition is based on the failure of the organization to comply with the requirements for recognition of tax-exempt status under the particular subsection of section 501(c), the revocation will ordinarily take effect as of the date of that failure. The notice, however, will be given only after the appeal procedures described earlier in this chapter are completed.
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