rp-14-40.pdf

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Revenue Procedure 2014-40

TABLE OF CONTENTS

SECTION 1. PURPOSE .............................................................................
3
.01 Description of terms used in this revenue procedure ..............................3

SECTION 2. ELIGIBILITY...............................................................................
4
.01 Organizations not eligible to submit Form 1023-EZ.................................. 4
.02 Terrorist organizations..................................................................... 5

SECTION 3. RELATED REVENUE PROCEDURES AND EFFECT ON OTHER
REVENUE PROCEDURES..........................................................................

5
.01 Revenue Procedure 2014-9 .............................................................. 5
.02 Revenue Procedure 2014-10 ............................................................ 6
.03 Revenue Procedure 2014-8 .............................................................. 6
.04 Revenue Procedure 2014-4 .............................................................. 6
.05 Revenue Procedure 2014-5 .............................................................. 6
.06 Revenue Procedure 2014-11 ............................................................ 6
.07 References inclusive of annual successor revenue procedures ..................6

SECTION 4. PROCEDURES FOR REQUESTING RECOGNITION OF EXEMPT
STATUS UNDER § 501(c)(3) .........................................................................

6
.01 In general ..................................................................................... 6
.02 Application ....................................................................................7
.03 User fee ....................................................................................... 7
.04 Method of submission ..................................................................... 7
.05 Requirements for a completed Form 1023-EZ....................................... 7
.06 Form 1023-EZ from an organization with a pending Form 1023 ................8
.07 No expedited handling......................................................................8

SECTION 5. STANDARDS FOR ISSUING A DETERMINATION LETTER ON
EXEMPT STATUS UNDER § 501(c)(3)......................................................................

8
.01 In general ..................................................................................... 8
.02 Non-acceptance of Forms 1023-EZ ....................................................8
.03 Additional information may be required ................................................9
.04 Issuance of determination letter ......................................................... 9
.05 Proposed adverse determination letters and appeal procedure ................ 9
.06 Requests for technical advice ............................................................10

.07 Withdrawal of a Form 1023-EZ .......................................................... 10

SECTION 6. DECLARATORY JUDGMENT PROVISIONS OF § 7428 ................
10
.01 General description ......................................................................... 10
.02 Exhaustion of administrative remedies ................................................ 11
.03 Service must have reasonable time to act on an appeal ..........................11
.04 Exhaustion of administrative remedies no earlier than 270 days after
seeking determination and taking all reasonable steps to secure a
determination letter ..........................................................................

11
.05 Final determination to which § 7428 applies ......................................... 11
.06 Treatment of withdrawals and non-accepted applications ........................ 12

SECTION 7. DISCLOSURE OF APPLICATIONS AND DETERMINATION
LETTERS ................................................................................................................

12
.01 Disclosure of favorable determinations ................................................ 12
.02 Disclosure of adverse determinations ................................................. 13
.03 Disclosure to state officials ................................................................13

SECTION 8. EFFECT OF DETERMINATION LETTER RECOGNIZING
EXEMPTION ............................................................................................

13
.01 Effective date of exemption .............................................................. 13
.02 Reliance on determination letter ........................................................ 14
.03
.04
Automatic revocation ......................................................................
Filing requirement .........................................................................
14
15

SECTION 9. REVOCATION OR MODIFICATION OF DETERMINATION LETTER
RECOGNIZING EXEMPTION .......................................................................

15
.01 In general ..................................................................................... 15
.02 Retroactive revocation or modification ................................................. 15
.03 Appeal and conference procedures .....................................................16

SECTION 10. EFFECTIVE DATE ................................................................
16

SECTION 11. DRAFTING INFORMATION .....................................................
16

SECTION 12. PAPERWORK REDUCTION ACT..............................................
16

SECTION 13. REQUEST FOR COMMENTS ..................................................
17

SECTION 1. PURPOSE

This revenue procedure sets forth procedures for applying for and for issuing
determination letters on the exempt status under § 501(c)(3) of the Internal Revenue
Code (Code) using Form 1023-EZ, Streamlined Application for Recognition of
Exemption under Section 501(c)(3) of the Internal Revenue Code. This revenue
procedure is generally available for certain U.S. organizations with assets of $250,000
or less and annual gross receipts of $50,000 or less.

.01 For purposes of this revenue procedure –

(1) The “Service” means the Internal Revenue Service.
(2) An “eligible organization” is an organization that is eligible to submit Form 1023-EZ.
U.S. organizations with both assets valued at $250,000 or less and annual gross
receipts of $50,000 or less may submit Form 1023-EZ unless the organization is
designated in section 2 as an organization that is not eligible to submit Form
1023-EZ.
(3) “EO Determinations” means the office of the Service that is primarily responsible for
processing applications for tax-exempt status. It includes the main EO
Determinations office located in Cincinnati, Ohio, and other field offices that are
under the direction and control of the Director, EO Rulings and Agreements.
Applications are generally processed in the centralized EO Determinations office in
Cincinnati, Ohio. However, some applications may be processed in other EO
Determinations offices.
(4) “Appeals Office” means any office under the direction and control of the Chief,
Appeals. The purpose of the Appeals Office is to resolve tax controversies, without
litigation, on a fair and impartial basis. The Appeals office is independent of EO
Determinations.
(5) A “determination letter” means a written statement issued by EO Determinations or
an Appeals Office in response to an application for recognition of exemption from
Federal income tax under § 501. This includes a written statement issued by EO
Determinations or an Appeals Office on the basis of technical advice pursuant to the
procedures prescribed in Rev. Proc. 2014-5, 2014-1 I.R.B. 169.
(6) “Form 1023-EZ” means the Form 1023-EZ, Streamlined Application for Recognition
of Exemption Under Section 501(c)(3) of the Internal Revenue Code, which is the
application used by eligible organizations to apply for recognition of exemption under
§ 501(c)(3) pursuant to this revenue procedure.

(7) “Form 1023” means the Form 1023, Application for Recognition of Exemption Under
Section 501(c)(3) of the Internal Revenue Code, which is the application used to
apply for recognition of exemption under § 501(c)(3) pursuant to Rev. Proc. 2014-9,
2014-2 I.R.B. 281.

SECTION 2. ELIGIBILITY

.01 The following organizations are not eligible organizations and must use Form
1023 to apply for recognition of exemption under § 501(c)(3):

(1) Organizations with projected annual gross receipts of more than $50,000 in either
the current taxable year or the next 2 years.
(2) Organizations with annual gross receipts that have exceeded $50,000 in any of the
past 3 years.
(3) Organizations with total assets the fair market value of which is in excess of
$250,000. For purposes of this eligibility requirement, a good faith estimate of the
fair market value of the organization’s assets is sufficient.
(4) Organizations formed under the laws of a foreign country (United States territories
and possessions are not considered foreign countries).
(5) Organizations that do not have a mailing address in the United States (territories
and possessions are considered the United States for this purpose).
(6) Organizations that are successors to, or controlled by, an entity suspended under §
501(p) (suspension of tax-exempt status of terrorist organizations).
(7) Organizations that are not corporations, unincorporated associations, or trusts.
(8) Organizations that are successors to a for-profit entity.
(9) 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).
(10) Churches or conventions or associations of churches described in § 170(b)(1)(A)(i).
(11) Schools, colleges, or universities described in § 170(b)(1)(A)(ii).
(12) 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).
(13) Cooperative service organizations of operating educational organizations described
in § 501(f).
(14) Qualified charitable risk pools described in § 501(n).
(15) Supporting organizations described in § 509(a)(3).
(16) 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.

(17) Organizations that invest, or intend to invest, 5 percent or more of their total assets
in securities or funds that are not publicly traded.
(18) 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.
(19) Organizations that sell, or intend to sell, carbon credits or carbon offsets.
(20) Health Maintenance Organizations (HMOs).
(21) 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).
(22) Organizations that maintain, or intend to maintain, one or more donor advised
funds.
(23) Organizations that are organized and operated exclusively for testing for public
safety and that are requesting a foundation classification under § 509(a)(4).
(24) Private operating foundations.
(25) 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.

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

.02 Terrorist organizations.
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.

SECTION 3. RELATED REVENUE PROCEDURES AND EFFECT ON OTHER
REVENUE PROCEDURES

.01 Rev. Proc. 2014-9, 2014-2 I.R.B. 281, sets forth procedures for issuing
determination letters and rulings on the exempt status of organizations under §§ 501
and 521. Those procedures do not apply to determination letters issued under this
revenue procedure except to the extent specifically noted herein. This revenue
procedure amplifies Rev. Proc. 2014-9 by providing alternative application and
processing procedures for Form 1023-EZ, which may be used by eligible organizations
seeking recognition of exemption under § 501(c)(3).

.02 Rev. Proc. 2014-10, 2014-2 I.R.B. 293, sets forth procedures for issuing rulings
and determination letters on private foundation status under § 509(a). This revenue

procedure amplifies Rev. Proc. 2014-10 by providing that the private foundation status
of an organization may be determined when an eligible organization submits a Form
1023-EZ.

.03 Rev. Proc. 2014-8, 2014-1 I.R.B. 242, sets forth user fees for requests for a
determination letter. This revenue procedure supplements Rev. Proc. 2014-8 by
establishing the user fee for submitting a Form 1023-EZ pursuant to this revenue
procedure.

.04 Rev. Proc. 2014-4, 2014-1 I.R.B. 125, sets forth procedures regarding the
Service’s provision of guidance to taxpayers on issues under the jurisdiction of the
Commissioner, Tax Exempt and Government Entities Division. This revenue procedure
amplifies Rev. Proc. 2014-4 by providing that EO Determinations may also issue
determination letters on initial qualification for exempt status of organizations described
in § 501(c)(3) that applied using Form 1023-EZ, in accordance with this revenue
procedure.

.05 Rev. Proc. 2014-5, 2014-1 I.R.B. 169, sets forth procedures regarding the
issuance of technical advice in exempt organizations matters. This revenue procedure
amplifies Rev. Proc. 2014-5 by providing that technical advice may also be sought and
issued in the circumstances described in this revenue procedure.

.06 Rev. Proc. 2014-11, 2014-3 I.R.B. 411, sets forth procedures for reinstating the
tax-exempt status of organizations that have had their tax-exempt status automatically
revoked under § 6033(j)(1). This revenue procedure amplifies Rev. Proc. 2014-11 by
providing that eligible organizations may apply for reinstatement under Rev. Proc. 2014-
11 by submitting a Form 1023-EZ instead of a Form 1023. Form 1023-EZ is considered
to be an “Application” within the meaning of section 2.01(1) of Rev. Proc. 2014-11.

.07 Any reference herein to an annual revenue procedure listed in sections 3.01
through 3.05 also refers to any successor to that revenue procedure.

SECTION 4. PROCEDURES FOR REQUESTING RECOGNITION OF EXEMPT
STATUS UNDER § 501(c)(3)

.01 In general.
Unless subject to a specific exception, all organizations seeking tax-
exempt status under § 501(c)(3) must, as a condition of exemption, apply for recognition
of exempt status with the Service. An eligible organization may, but is not required to,
seek recognition of tax-exempt status under § 501(c)(3) by submitting a Form 1023-EZ
in accordance with this revenue procedure. Alternatively, an eligible organization may

follow the procedures in Rev. Proc. 2014-9, to seek recognition of exemption under
§ 501(c)(3) by submitting a Form 1023.

.02 Application. An eligible organization seeking recognition of exempt status under
§ 501(c)(3) using this revenue procedure must submit a completed Form 1023-EZ. See
section 4.05 for a definition of completed Form 1023-EZ. An incomplete Form 1023-EZ
will not be accepted for processing by the Service even if it has been successfully
submitted through www.pay.gov. See section 5.02(1).

.03 User fee. An application submitted under this revenue procedure must include
the correct user fee, which is $400. In future years, the user fee shall be set forth in a
successor revenue procedure to Rev. Proc. 2014-8.

.04 Method of submission. An eligible organization seeking recognition of tax
exempt status under § 501(c)(3) using this revenue procedure must submit the Form
1023-EZ and user fee online at www.pay.gov
. Paper submissions will not be accepted
and will be treated as incomplete Forms 1023-EZ as described in section 5.02(1).

.05 Requirements for a completed Form 1023-EZ.
For purposes of this revenue
procedure, a Form 1023-EZ submitted by an eligible organization is completed if it:

(1) 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;
(2) includes the organization’s correct Employer Identification Number (EIN);
(3) is electronically signed, under penalties of perjury, by an individual authorized to sign
for the organization (as specified in the Instructions for Form 1023-EZ); and
(4) is accompanied by the correct user fee specified in Section 4.03.

A Form 1023-EZ will not be considered completed 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 will not be
considered completed.

.06 Form 1023-EZ from an organization with a pending Form 1023.

(1) The Service will accept for processing a completed Form 1023-EZ from an eligible
organization that has a Form 1023 pending with the Service, provided that the Form
1023 has not yet been assigned for review. The Form 1023-EZ will be treated as a
written request for withdrawal of the pending Form 1023, and the Form 1023 will be
treated as withdrawn as described in section 6 of Rev. Proc. 2014-9. The user fee
paid for the Form 1023 will generally not be refunded. See section 6 of Rev. Proc.
2014-9. In addition, the filing date of the Form 1023-EZ (not the withdrawn Form
1023) will be treated as the date that the organization provided the notice required
under § 508 to the Service. If the filing date of the Form 1023-EZ is within 27
months from the end of the month in which it was organized, the organization may
be recognized as exempt from the date it was organized. If it is not, then the
organization’s exemption, if granted, will generally be effective from the date the
Form 1023-EZ was filed. See section 8 below.
(2) The Service will not accept for processing a completed Form 1023-EZ from an
eligible organization that has a Form 1023 pending with the Service if the Form 1023
has already been assigned for review. If this section 4.06(2) applies, an
organization will be notified of the non-acceptance of the Form 1023-EZ and any
user fee that was paid with the Form 1023-EZ will be refunded, as described in
section 5.02(3).

.07 No expedited handling.
An organization may not request expedited handling of a
Form 1023-EZ submitted under this revenue procedure.

SECTION 5. STANDARDS FOR ISSUING A DETERMINATION LETTER ON EXEMPT
STATUS UNDER § 501(c)(3)

.01 In general.
This section sets forth procedures that the Service will use to process
a Form 1023-EZ.

.02 Non-acceptance for processing of Forms 1023-EZ.

(1) A submitted Form 1023-EZ that is not completed within the meaning of section 4.05
will not be accepted for processing by the Service. The Service may, but is not
required to, request additional information under section 5.03 to verify that a Form
1023-EZ is completed. If an organization’s Form 1023-EZ is not accepted for
processing, it will be notified of the non-acceptance of its application and any user
fee that was paid will be refunded.
An eligible organization may then submit a
properly completed Form 1023-EZ with a new user fee online at www.pay.gov
.
Alternatively, an eligible organization may apply on a Form 1023 under the
procedures described in Rev. Proc. 2014-9.

(2) The Service will not accept for processing a Form 1023-EZ from an organization if
the organization has an application for recognition of tax-exempt status other than a
Form 1023 (e.g., Form 1024, Application for Recognition of Exemption under
Section 501(a)) pending with the Service. An organization will be notified of the non-
acceptance of the Form 1023-EZ, and any user fee that was paid with the Form
1023-EZ will be refunded.
(3) The Service will not accept for processing a Form 1023-EZ from an eligible
organization if the organization has a Form 1023 pending with the Service that has
been assigned for review. See section 4.06. An organization will be notified of the
non-acceptance of the Form 1023-EZ, and any user fee that was paid with the Form
1023-EZ will be refunded.

.03 Additional information may be required. The Service may request additional
information from any organization before accepting a Form 1023-EZ for processing or
making a determination of exempt status. Additionally, the Service will select a
statistically valid random sample of Forms 1023-EZ for pre-determination reviews,
which may also result in requests for additional information. If the Service requests
information prior to accepting a Form 1023-EZ for processing and the organization fails
to respond to a request for additional information, the application will not be accepted
for processing. In the case of a Form 1023-EZ that has been accepted for processing
by the Service, a failure to respond to a request for additional information will result in
the closure of the application without a determination letter being issued and without a
refund of the user fee.

.04 Issuance of determination letter.
A favorable determination letter will be issued
to an organization only if the attestations contained in the organization’s completed and
accepted Form 1023-EZ (along with any additional information requested by the Service
and provided by the organization) are consistent with requirements for exemption under
section 501(c)(3). Exempt status may be recognized in advance of the organization’s
operations. The determination letter will also classify the organization as either a “public
charity” or a “private foundation,” consistent with the attestations made and any
additional information provided by the organization upon request by the Service.

.05 Adverse determination letters and appeal procedure.
If the Service concludes,
including based on additional information provided under section 5.03, that the
organization does not satisfy the requirements for exemption under § 501(c)(3), the
Service generally will issue a proposed adverse determination letter, which will:

(1) include the Service’s rationale for the proposed denial of tax-exempt status; and

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

An organization receiving a proposed adverse determination letter will be subject to the
procedures described in section 7 of Rev. Proc. 2014-9. Upon issuance of a final
adverse determination letter, an organization’s proposed adverse and final adverse
determination letters are subject to disclosure to the public and state officials as
described below in sections 7.02 and 7.03. An adverse determination letter issued
under this section 5.05 is a final determination to which § 7428 applies. See section 6.
Note, however, that the non-acceptance of a Form 1023-EZ under section 5.02 is not a
proposed or final adverse determination.

.06 Requests for technical advice. EO Determinations is responsible for the
issuance of determination letters to eligible organizations seeking recognition of exempt
status under § 501(c)(3) pursuant to this revenue procedure. See Rev. Proc. 2014-4.
However, technical advice on a Form 1023-EZ submitted and accepted for processing
pursuant to this revenue procedure may be requested by EO Determinations or by an
organization pursuant to the procedures described in section 5 of Rev. Proc. 2014-9
and sections 4.04 and 4.05 of Rev. Proc. 2014-5.

.07 Withdrawal of a Form 1023-EZ.
A Form 1023-EZ may only be withdrawn upon
the written request of an authorized individual prior to the issuance of a determination
letter (including a proposed adverse determination letter).

(1) When a Form 1023-EZ is withdrawn, the Service will retain the application. The
Service may consider the information submitted in connection with the withdrawn
request in a subsequent examination of the organization.
(2) Generally, the user fee will not be refunded if an application is withdrawn. See Rev.
Proc. 2014-8, section 10.

SECTION 6. DECLARATORY JUDGMENT PROVISIONS OF § 7428

.01 General description.
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 the initial or continuing qualification or
classification of an organization under § 501(c)(3) (charitable, educational, etc.);
§ 170(c)(2) (deductibility of contributions); § 509(a) (private foundation status);
§ 4942(j)(3) (operating foundation status); or § 521 (farmers’ cooperative).

.02 Exhaustion of administrative remedies. 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. For purposes
of this revenue procedure, these reasonable steps include:

(1) the filing by an organization of a completed Form 1023-EZ (within the meaning of
section 4.05);
(2) in appropriate cases (i.e., where the organization did not submit Form 1023-EZ
within 27 months after the end of the month in which it was organized and seeks an
effective date earlier than its submission date), 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) the timely submission of all additional information requested by the Service in
accordance with section 5.03; and
(4) the exhaustion of all administrative appeals available within the Service pursuant to
section 7 of Rev. Proc. 2014-9.

.03 Service must have reasonable time to act on an appeal.
The steps described in
section 6.02 will not be considered completed until the Service has had a reasonable
time to act upon an appeal.

.04 Exhaustion of administrative remedies no earlier than 270 days after seeking
determination and taking all reasonable steps to secure a determination letter. An
eligible organization that has submitted Form 1023-EZ will in no event be deemed to
have exhausted its administrative remedies prior to the earlier of:

(1) the completion of the steps in section 6.02 and the sending 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 in which the
Service has not issued a final determination letter, and the eligible organization has
taken, in a timely manner, all reasonable steps to secure a determination letter.

.05 Final determination to which § 7428 applies. Section 7428 only applies to final
determinations. The final determinations to which § 7428 applies are described in
section 10.05 of Rev. Proc. 2014-9. The non-acceptance of a Form 1023-EZ under
section 5.02 is not a final determination to which § 7428 applies. In addition, an
organization will not be considered to have exhausted its administrative remedies by
completing the steps in section 6.02 if the organization was not eligible to submit Form
1023-EZ, as described in section 2.01.

.06 Treatment of withdrawals and non-accepted applications. The Service does not
consider the withdrawal of an application pursuant to section 5.07 or the non-
acceptance of an application pursuant to section 5.02 as 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). The 270-day period referred to in
§ 7428(b)(2) will not be considered to have started prior to the date a completed Form
1023-EZ is submitted to the Service. If the Service requests additional information from
an organization pursuant to section 5.03, 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).

SECTION 7. DISCLOSURE OF APPLICATIONS AND DETERMINATION LETTERS

Sections 6104 and 6110 provide rules for the disclosure of applications, including any
additional information received by the Service from the organization pursuant to section
5.03, and determination letters.

.01 Disclosure of favorable determinations.
The favorable determination letters
issued by the Service and the associated Forms 1023-EZ (including any additional
information received by the Service from the organization) are available for public
inspection under § 6104(a)(1). 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 Service is required to make favorable determination letters and the associated
applications available upon request. The public can request this information by
submitting Form 4506-A, Request for Public Inspection or Copy of Exempt or
Political Organization IRS Form. Organizations applying for exemption should
ensure that their applications 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 and
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.

.02 Disclosure of adverse determinations. The Service is required to make adverse
determination letters available for public inspection under § 6110 after the deletion of
names, addresses, and other identifying information. Upon issuance of a final adverse
determination letter to an eligible organization pursuant to section 5.05, both the
proposed adverse determination letter and the final adverse determination letter will be
available for public inspection in accordance with section 8.02 of Rev. Proc. 2014-9.

.03 Disclosure to state officials.

(1) The Service may disclose to State officials the name, address, and EIN of any
organization that has applied for recognition of exemption under § 501(c)(3),
including an organization that applies using Form 1023-EZ under this revenue
procedure.
(2) The Service may notify the appropriate State officials of a refusal to recognize an
organization as tax-exempt under § 501(c)(3). See § 6104(c). The Service does not
consider the non-acceptance of an application under section 5.02 to be a refusal.
See section 8.03 of Rev. Proc. 2014-9, for more information about disclosure in
cases where the Service refuses to recognize an organization as exempt under
§ 501(c)(3).

SECTION 8. EFFECT OF DETERMINATION LETTER RECOGNIZING EXEMPTION

.01 Effective date of exemption
. A determination letter recognizing exemption of an
organization described in § 501(c)(3) is usually 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; (2) it has not failed to
file required Form 990 series returns or notices for three consecutive years; and (3) it
has submitted an application for recognition of exemption within 27 months from the end
of the month in which it was organized. Special rules may apply to certain organizations
applying for exemption under § 501(c)(3). See § 508, and Treas. Reg. §§ 1.508-1(a)(2),
1.508-1(b)(7), and 301.9100-2(a)(2)(iv).

(1) 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.

(2) If an eligible organization has submitted a Form 1023-EZ within 27 months from the
end of the month in which it was organized and the Service requires the organization
to make a nonsubstantive amendment, exemption will ordinarily be recognized as of
the date of formation. 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.
(3) An eligible organization applying under this revenue procedure that does not submit
Form 1023-EZ within 27 months from the end of the month in which it was organized
will generally be recognized as exempt from the submission date of its Form
1023-EZ. For this purpose, the submission date of Form 1023-EZ is determined
without regard to the submission date of any previously submitted application for
recognition of tax-exemption (including a Form 1023-EZ, Form 1023, or Form 1024)
that has been withdrawn by the organization or not accepted for processing by the
Service. Thus, if an eligible organization that has a Form 1023 pending with the
Service files a Form 1023-EZ in accordance with section 4.06 outside the 27-month
window, it will generally be recognized as exempt from the submission date of its
Form 1023-EZ, not from the date it submitted its Form 1023. An organization that
believes it qualifies for an earlier effective date may request the earlier date by
sending correspondence to the address listed in the Instructions for Form 1023-EZ.
The correspondence should include the organization’s name, EIN, the effective date
the organization is requesting, an explanation of why the earlier date is warranted,
and any supporting documents. This correspondence should be sent after the
organization receives its determination letter. Alternatively, the organization may
complete Form 1023 instead of completing Form 1023-EZ.

.02 Reliance on determination letter.
A determination letter recognizing exemption
may not be relied upon if there is a material change, inconsistent with exemption, in the
character, the purpose, or the method of operation of the organization, or a change in
the applicable law. Also, a determination letter issued to an organization that submitted
a Form 1023-EZ in accordance with this revenue procedure may not be relied upon if it
was based on any inaccurate material information submitted by the organization.
Inaccurate material information includes an incorrect attestation as to the organization’s
organizational documents, the organization’s exempt purposes, the organization’s
conduct of prohibited and restricted activities, or the organization’s eligibility to file Form
1023-EZ. See also section 9.

.03 Automatic revocation.
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 2.01, 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. 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 under Rev. Proc. 2014-9.

.04 Filing requirement. Generally, an organization that qualifies for exemption under
§ 501(c)(3) is required to file an annual return in accordance with § 6033(a). However,
an eligible organization, other than a private foundation, that normally has gross
receipts of $50,000 or less is not required to file an annual return, but must furnish
notice on Form 990-N providing the information required by § 6033(i). See Rev. Proc.
2011-15, 2011-3 I.R.B. 322. An eligible organization (other than a private foundation)
that applies for recognition of exempt status under this revenue procedure is not
required to separately notify the Service that it is excepted from the annual filing
requirement under § 6033(a) if it is claiming a filing exemption solely on the basis that
its gross receipts are normally $50,000 or less. However, if such an organization claims
an exception from filing an annual return under § 6033(a) on a basis other than it being
an organization (other than a private foundation) that normally has gross receipts of
$50,000 or less, it must file a Form 8940, Request for Miscellaneous Determination, with
the Service and provide a statement of all of the facts on which its claim is based. A
separate user fee will be required when filing the Form 8940.

SECTION 9. REVOCATION OR MODIFICATION OF DETERMINATION LETTER
RECOGNIZING EXEMPTION

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

.02 Retroactive revocation or modification. The revocation or modification of a
determination letter recognizing the exemption of an organization that submitted a Form
1023-EZ in accordance with this revenue procedure may be retroactive if there has
been a change in the applicable law, if the organization operated in a manner materially
different from that represented on its completed Form 1023-EZ (including any additional
information provided), or if the organization misstated or omitted any material
information on its completed Form 1023-EZ (including any additional information
provided). A misstatement of material information includes an incorrect attestation as to
the organization’s organizational documents, the organization’s exempt purposes, the
organization’s conduct of prohibited and restricted activities, or the organization’s
eligibility to file Form 1023-EZ. Information provided on an application for recognition of
exemption (e.g., Form 1023-EZ, Form 1023, or Form 1024) that has been withdrawn will
not be considered for purposes of limiting the retroactive effect of a revocation or
modification of a determination letter. In certain cases an organization may seek relief
from retroactive revocation or modification of a determination letter under § 7805(b).
Requests for § 7805(b) relief may be made as described in section 12 of Rev. Proc.
2014-9 and Rev. Proc. 2014-4.

.03 Appeal and conference procedures.
In the case of a revocation or modification
of a determination letter, the appeal and conference procedures are the same as those
set out in section 12 of Rev. Proc. 2014-9.

SECTION 10. EFFECTIVE DATE

This revenue procedure is effective July 1, 2014.

SECTION 11. DRAFTING INFORMATION

The principal authors of this Revenue Procedure are Timothy Berger and Melinda
Williams of the Exempt Organizations, Tax Exempt and Government Entities Division,
and James Martin of the Office of Associate Chief Counsel (Tax Exempt and
Government Entities). For additional information, please contact Mr. Berger at 202-317-
8533, Ms. Williams at 202-317-8532, or Mr. Martin at 202-317-5800 (these are not
toll-free numbers).

SECTION 12. PAPERWORK REDUCTION ACT

Any collection of information under this revenue procedure will be reported and
approved through Form 1023-EZ (OMB approval number 1545-0056).

17
An agency may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a valid control number assigned by the Office
of Management and Budget.

SECTION 13. REQUEST FOR COMMENTS

The Service and the Treasury Department request comments on this revenue
procedure, which will be considered in making any future update to these procedures.

Comments should refer to Rev. Proc. 2014-40, and should be submitted to:

Internal Revenue Service
Attn: CC:PA:LPD:PR
(Rev. Proc. 2014-40) Room 5203
P. O. Box 7604
Ben Franklin Station
Washington, DC 20044

Submissions also may be hand delivered Monday through Friday between the hours of
8 am and 4 pm to CC:PA:LPD:PR (Rev. Proc. 2014-40) Courier’s Desk, Internal
Revenue Service, 1111 Constitution Avenue, N.W. Washington, D.C. Alternatively,
comments may be submitted electronically via the following e-mail address:
Notice.Comments@irscounsel.treas.gov
. Please include “Rev. Proc. 2014-40” in the
subject line of any electronic communication. All comments will be available for public
inspection and copying.

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