rp-07-52.pdf

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26 CFR 601.201: Rulings and determination letters.

Rev. Proc. 2007-52

TABLE OF CONTENTS

SECTION 1. WHAT IS THE PURPOSE OF THIS REVENUE PROCEDURE?
.01 Description of terms used in this revenue procedure
.02 Updated annually

SECTION 2. NATURE OF CHANGES AND RELATED REVENUE PROCEDURES
.01 Rev. Proc. 90-27 is superseded and the processing of applications is now centralized
.02 Related revenue procedures

SECTION 3. WHAT ARE THE PROCEDURES FOR REQUESTING RECOGNITION OF EXEMPT
STATUS?
.01 In general
.02 User fee
.03 Form 1023 application
.04 Form 1024 application
.05 Letter application
.06 Form 1028 application
.07 Form 8871 notice for political organizations
.08 Requirements for a substantially completed application
.09 Terrorist organizations not eligible to apply for recognition of exemption

SECTION 4. WHAT ARE THE STANDARDS FOR ISSUING A DETERMINATION LETTER OR
RULING ON EXEMPT STATUS?
.01 Exempt status must be established in application and supporting documents
.02 Determination letter or ruling based solely on administrative record
.03 Exempt status may be recognized in advance of actual operations
.04 No letter if exempt status issue in litigation or under consideration within the Service
.05 Incomplete application
.06 Even if application is complete, additional information may be required
.07 Expedited handling

SECTION 5. WHAT OFFICES ISSUE AN EXEMPT STATUS DETERMINATION LETTER OR
RULING?
.01 EO Determinations issues a determination letter in most cases
.02 Certain applications referred to EO Technical
.03 Technical advice may be requested in certain cases
.04 Technical advice must be requested in certain cases

SECTION 6. WITHDRAWAL OF AN APPLICATION
.01 Application may be withdrawn prior to issuance of a determination letter or ruling
.02 § 7428 implications of withdrawal of application under § 501(c)(3)

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SECTION 7. WHAT ARE THE PROCEDURES WHEN EXEMPT STATUS IS DENIED?
.01 Proposed adverse determination letter or ruling
.02 Appeal of a proposed adverse determination letter issued by EO Determinations
.03 Protest of a proposed adverse ruling issued by EO Technical
.04 Final adverse determination letter or ruling where no appeal or protest is submitted
.05 How EO Determinations handles an appeal of a proposed adverse determination letter
.06 Consideration by the Appeals Office
.07 If a protest of a proposed adverse ruling is submitted to EO Technical
.08 An appeal or protest may be withdrawn
.09 Appeal or protest and conference rights not applicable in certain situations

SECTION 8. DISCLOSURE OF APPLICATIONS AND DETERMINATION LETTERS AND
RULINGS
.01 Disclosure of applications, supporting documents, and favorable determination letters and rulings
.02 Disclosure of adverse determination letters or rulings
.03 Disclosure to State officials when the Service refuses to recognize exemption under § 501(c)(3)
.04 Disclosure to State officials of information about § 501(c)(3) applicants

SECTION 9. REVIEW OF DETERMINATION LETTERS BY EO TECHNICAL
.01 Determination letters may be reviewed by EO Technical to assure uniformity
.02 Procedures for cases where EO Technical takes exception to a determination letter

SECTION 10. DECLARATORY JUDGMENT PROVISIONS OF § 7428
.01 Actual controversy involving certain issues
.02 Exhaustion of administrative remedies
.03 Not earlier than 270 days after seeking determination
.04 Service must have reasonable time to act on an appeal or protest
.05 Final determination to which § 7428 applies

SECTION 11. EFFECT OF DETERMINATION LETTER OR RULING RECOGNIZING
EXEMPTION
.01 Effective date of exemption
.02 Reliance on determination letter or ruling

SECTION 12. REVOCATION OR MODIFICATION OF DETERMINATION LETTER OR RULING
RECOGNIZING EXEMPTION
.01 Revocation or modification of a determination letter or ruling may be retroactive
.02 Appeal and conference procedures in the case of revocation or modification of exempt status letter

SECTION 13. EFFECT ON OTHER REVENUE PROCEDURES

SECTION 14. EFFECTIVE DATE

SECTION 15. PAPERWORK REDUCTION ACT

DRAFTING INFORMATION

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SECTION 1. WHAT IS
THE PURPOSE OF
THIS REVENUE
PROCEDURE?

This revenue procedure sets forth procedures for issuing determination
letters and rulings on the exempt status of organizations under §§ 501 and 521 of
the Internal Revenue Code other than those subject to Rev. Proc. 2007-6, 2007-1
I.R.B. 189 (relating to pension, profit-sharing, stock bonus, annuity, and employee
stock ownership plans). Generally, the Service issues these determination letters
and rulings in response to applications for recognition of exemption from Federal
income tax. These procedures also apply to revocation or modification of
determination letters or rulings This revenue procedure also provides guidance on
the exhaustion of administrative remedies for purposes of declaratory judgment
under § 7428 of the Code.

Description of terms
used in this revenue
procedure
.01 For purposes of this revenue procedure –

(1) the term “Service” means the Internal Revenue Service.

(2) the term “application” means the appropriate form or letter that an
organization must file or submit to the Service for recognition of exemption from
Federal income tax under the applicable section of the Internal Revenue Code.
See section 3 for information on specific forms.

(3) the term “EO Determinations” means the office of the Service that is
primarily responsible for processing initial 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 Manager, EO
Determinations.

(4) the term “EO Technical” means the office of the Service that is
primarily responsible for issuing letter rulings to taxpayers on exempt organization
matters, and for providing technical advice or technical assistance to other offices
of the Service on exempt organization matters. The EO Technical office is located
in Washington, DC.

(5) the term “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 and EO Technical.

(6) the term “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 and 521. This includes a
written statement issued by EO Determinations or an Appeals Office on the basis
of advice secured from EO Technical pursuant to the procedures prescribed herein
and in Rev. Proc. 2007-5, 2007-1 I.R.B. 161.

(7) the term “ruling” means a written statement issued by EO Technical in
response to an application for recognition of exemption from Federal income tax
under §§ 501 and 521.

Updated annually
.02 This revenue procedure is updated annually, but may be modified or

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amplified during the year.

SECTION 2. NATURE
OF CHANGES AND
RELATED REVENUE
PROCEDURES

Rev. Proc. 90-27 is
superseded and the
processing of
applications is now
centralized
.01 This revenue procedure updates Rev. Proc. 90-27, 1990-1 C.B. 514,
which is hereby superseded.

(1) The responsibility for processing applications is now centralized in
the EO Determinations office in Cincinnati, Ohio. Key district offices no longer
exist.

(2) Although applications are generally processed in the Cincinnati
office, some applications may be processed in other EO Determinations offices or
referred to EO Technical.

Related revenue
procedures
.02 This revenue procedure supplements Rev. Proc. 76-34, 1976-2 C.B.
656, with respect to the effects of § 7428 of the Code on the classification of
organizations under §§ 509(a) and 4942(j)(3). Rev. Proc. 80-27, 1980-1 C.B. 677,
sets forth procedures under which exemption may be recognized on a group basis
for subordinate organizations affiliated with and under the general supervision and
control of a central organization. Rev. Proc. 72-5, 1972-1 C.B. 709, provides
information for religious and apostolic organizations seeking recognition of
exemption under § 501(d). General procedures for requests for a determination
letter or ruling are provided in Rev. Proc. 2007-4, 2007-1 I.R.B. 118. User fees for
requests for a determination letter or ruling are set forth in Rev. Proc. 2007-8,
2007-1 I.R.B. 230.

SECTION 3. WHAT
ARE THE
PROCEDURES FOR
REQUESTING
RECOGNITION OF
EXEMPT STATUS?

In general
.01 An organization seeking recognition of exempt status under § 501 or
§ 521 is required to submit the appropriate application. In the case of a numbered
application form, the current version of the form must be submitted. A central
organization that has previously received recognition of its own exemption can
request a group exemption letter by submitting a letter application with Form
8718, User Fee for Exempt Organization Determination Letter Request. See Rev.
Proc. 80-27.

User fee
.02 An application must be submitted with the correct user fee, as set
forth in Rev. Proc. 2007-8.

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Form 1023 application

.03 An organization seeking recognition of exemption under § 501(c)(3)
and §§ 501(e), (f), (k), (n) or (q) must submit a completed Form 1023. In the case
of an organization that provides credit counseling services, see section 501(q) of
the Code.

Form 1024 application
.04 An organization seeking recognition of exemption under
§§ 501(c)(2), (4), (5), (6), (7), (8), (9), (10), (12), (13), (15), (17), (19) or (25)
must submit a completed Form 1024 with Form 8718. In the case of an
organization that provides credit counseling services and seeks recognition of
exemption under section 501(c)(4), see section 501(q) of the Code.

Letter application
.05 An organization seeking recognition of exemption under
§§ 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27) or (28) or under § 501(d)
must submit a letter application with Form 8718.

Form 1028 application
.06 An organization seeking recognition of exemption under § 521 must
submit a completed Form 1028 with Form 8718.

Form 8871 notice for
political organizations
.07 A political party, a campaign committee for a candidate for federal,
state or local office, and a political action committee are all political organizations
subject to tax under § 527. To be tax-exempt, a political organization may be
required to notify the Service that it is to be treated as a § 527 organization by
electronically filing Form 8871, Political Organization Notice of Section 527
Status. For details, go to the IRS website at www.irs.gov/polorgs.

Requirements for a
substantially completed
application
.08 A substantially completed application, including a letter application, is
one that:

(1) is signed by an authorized individual.

(2) includes an Employer Identification Number (EIN).

(3) includes a statement of receipts and expenditures and a balance sheet for
the current year and the three preceding years (or the years the organization was in
existence, if less than four years). If the organization has not yet commenced
operations, or has not completed one accounting period, a substantially completed
application generally includes a proposed budget for two full accounting periods and
a current statement of assets and liabilities.

(4) 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.

(5) includes a copy of the organizing or enabling document that is signed by a
principal officer or is accompanied by a written declaration signed by an authorized
individual certifying that the document is a complete and accurate copy of the original
or otherwise meets the requirements of a “conformed copy” as outlined in Rev. Proc.
68-14, 1968-1 C.B. 768.

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(6) 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.

(7) if the organization has adopted by-laws, includes a current copy. The
by-laws need not be signed if submitted as an attachment to the application for
recognition of exemption. Otherwise, the by-laws must be verified as current by an
authorized individual.

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

Terrorist organizations
not eligible to apply for
recognition of
exemption
.09 An organization that is identified or designated as a terrorist organization
within the meaning of section 501(p)(2) of the Code is not eligible to apply for
recognition of exemption.

SECTION 4. WHAT
ARE THE
STANDARDS FOR
ISSUING A
DETERMINATION
LETTER OR RULING
ON EXEMPT
STATUS?

Exempt status must be
established in
application and
supporting documents

.01 A favorable determination letter or ruling will be issued to an
organization only if its application and supporting documents establish that it
meets the particular requirements of the section under which exemption from
Federal income tax is claimed.

Determination letter or
ruling based solely on
administrative record
.02 A determination letter or ruling on exempt status is issued based
solely upon the facts and representations contained in the administrative record.

(1) The applicant is responsible for the accuracy of any factual
representations contained in the application.

(2) Any oral representation of additional facts or modification of facts as
represented or alleged in the application must be reduced to writing over the
signature of an authorized individual.

(3) The failure to disclose a material fact or misrepresentation of a
material fact on the application may adversely affect the reliance that would
otherwise be obtained through issuance by the Service of a favorable

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determination letter or ruling.

Exempt status may be
recognized in advance
of actual operations
.03 Exempt status may be recognized in advance of the organization’s
operations if the proposed activities are described in sufficient detail to permit a
conclusion that the organization will clearly meet the particular requirements for
exemption pursuant to the section of the Internal Revenue Code under which
exemption is claimed.

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

(2) 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.

(3) Where the organization cannot demonstrate to the satisfaction of the
Service that it qualifies for exemption pursuant to the section of the Internal
Revenue Code under which exemption is claimed , the Service will generally issue
a proposed adverse determination letter or ruling. See also section 7.

No letter if exempt
status issue in litigation
or under consideration
within the Service
.04 A determination letter or ruling on exempt status will not ordinarily be
issued if an issue involving the organization's exempt status under § 501 or § 521
is pending in litigation, is under consideration within the Service, or if issuance of
a determination letter or ruling is not in the interest of sound tax administration. If
the Service declines to issue a determination or ruling to an organization seeking
exempt status under § 501(c)(3), the organization may pursue a declaratory
judgment under § 7428 provided that it has exhausted its administrative remedies.

Incomplete application
.05 If an application does not contain all of the items set out in section 3.08,
the Service may return it to the applicant for completion.

(1) In lieu of returning an incomplete application, the Service may retain the
application and request additional information needed for a substantially completed
application.

(2) In the case of an application or a group exemption request under
§ 501(c)(3) that is returned incomplete, the 270-day period referred to in § 7428(b)(2)
will not be considered as starting until the date a substantially completed Form 1023
or group exemption request is refiled with or remailed to the Service. If the
application or group exemption request is mailed to the Service and a postmark is not
evident, the 270-day period will start to run on the date the Service actually receives
the substantially completed Form 1023 or group exemption request. The same rules
apply for purposes of the notice requirement of § 508.

(3) Generally, the user fee will not be refunded if an incomplete application is
filed. See Rev. Proc. 2007-8, section 10.

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Even if application is
complete, additional
information may be
required
.06 Even though an application is substantially complete, the Service may
request additional information before issuing a determination letter or ruling.

(1) If the application involves an issue where contrary authorities exist, an
applicant’s failure to disclose and distinguish contrary authorities may result in
requests for additional information, which could delay final action on the application.

(2) 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).

Expedited handling
.07 Applications are normally processed in the order of receipt by the
Service. However, expedited handling of an application may be approved where a
request is made in writing and contains a compelling reason for processing the
application ahead of others. Upon approval of a request for expedited handling an
application will be considered out of its normal order. This does not mean the
application will be immediately approved or denied. Circumstances generally
warranting expedited processing include:

(1) A grant to the applicant is pending and the failure to secure the grant may
have an adverse impact on the organization’s ability to continue to operate.

(2) The purpose of the newly created organization is to provide disaster relief
to victims of emergencies such as flood and hurricane.

(3) There have been undue delays in issuing a determination letter or ruling
caused by a Service error.

SECTION 5. WHAT
OFFICES ISSUE AN
EXEMPT STATUS
DETERMINATION
LETTER OR RULING?

EO Determinations issues
a determination letter in
most cases
.01 Under the general procedures outlined in Rev. Proc. 2007-4,
EO Determinations is authorized to issue determination letters on applications for
exempt status under §§ 501 and 521.

Certain applications
referred to EO Technical
.02 EO Determinations will refer to EO Technical those applications that
present issues which are not specifically covered by statute or regulations, or by a
ruling, opinion, or court decision published in the Internal Revenue Bulletin. In
addition, EO Determinations will refer those applications that have been specifically
reserved by revenue procedure or by other official Service instructions for handling
by EO Technical for purposes of establishing uniformity or centralized control of
designated categories of cases. EO Technical will notify the applicant organization
upon receipt of a referred application, and will consider each such application and

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issue a ruling directly to the organization.

Technical advice may be
requested in certain cases
.03 If at any time during the course of consideration of an exemption
application by EO Determinations the organization believes that its case involves an
issue on which there is no published precedent, or there has been non-uniformity in
the Service’s handling of similar cases, the organization may request that EO
Determinations either refer the application to EO Technical or seek technical advice
from EO Technical. See Rev. Proc. 2007-5, section 4.04.

Technical advice must be
requested in certain cases
.04 If EO Determinations proposes to recognize the exemption of an
organization to which EO Technical had issued a previous contrary ruling or
technical advice, EO Determinations must seek technical advice from EO Technical
before issuing a determination letter. This does not apply where EO Technical
issued an adverse ruling and the organization subsequently made changes to its
purposes, activities, or operations to remove the basis for which exempt status was
denied.

SECTION 6.
WITHDRAWAL OF AN
APPLICATION

Application may be
withdrawn prior to
issuance of a
determination letter or
ruling
.01 An application may be withdrawn upon the written request of an
authorized individual at any time prior to the issuance of a determination letter or
ruling. Therefore, an application may not be withdrawn after the issuance of a
proposed adverse determination letter or ruling.

(1) When an application is withdrawn, the Service will retain the application
and all supporting documents. 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. 2007-8, section 10.

§ 7428 implications of
withdrawal of application
under § 501(c)(3)
.02 The Service will not consider the withdrawal of an application under
§ 501(c)(3) as either a failure to make a determination within the meaning of
§ 7428(a)(2) or as an exhaustion of administrative remedies within the meaning of
§ 7428(b)(2).

SECTION 7. WHAT
ARE THE
PROCEDURES WHEN
EXEMPT STATUS IS
DENIED?

Proposed adverse
determination letter or
ruling
.01 If EO Determinations or EO Technical reaches the conclusion that the
organization does not satisfy the requirements for exempt status pursuant to the
section of the Internal Revenue Code under which exemption is claimed, the Service

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will generally issue a proposed adverse determination letter or ruling, which will:

(1) Include a detailed discussion of the Service’s rationale for the denial of
tax-exempt status.

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

Appeal of a proposed
adverse determination
letter issued by EO
Determinations
.02 A proposed adverse determination letter issued by EO Determinations
will advise the organization of its opportunity to appeal the determination by
requesting Appeals Office consideration. To do this, 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 adverse determination letter. The organization must also state
whether it wishes an Appeals Office conference. Any determination letter issued on
the basis of technical advice from EO Technical may not be appealed to the Appeals
Office on issues that were the subject of the technical advice.

Protest of a proposed
adverse ruling issued by
EO Technical
.03 A proposed adverse ruling issued by EO Technical will advise the
organization of its opportunity to file a protest statement within 30 days and to
request a conference. If a conference is requested, the conference procedures
outlined in Rev. Proc. 2007-4, section 12, are applicable.

Final adverse
determination letter or
ruling where no appeal or
protest is submitted
.04 If an organization does not submit a timely appeal of a proposed adverse
determination letter issued by EO Determinations, or a timely protest of a proposed
adverse ruling issued by EO Technical, a final adverse determination letter or
ruling will be issued to the organization. The final adverse letter or ruling will
provide information about the filing of tax returns and the disclosure of the
proposed and final adverse letters or rulings.

How EO Determinations
handles an appeal of a
proposed adverse
determination letter
.05 If an organization submits an appeal of the proposed adverse
determination letter, EO Determinations will first review the appeal, and if it
determines that the organization qualifies for tax-exempt status issue a favorable
exempt status determination letter. If EO Determinations maintains its adverse
position after reviewing the appeal, it will forward the appeal and the exemption
application case file to the Appeals Office.

Consideration by the
Appeals Office
.06 The Appeals Office will consider the organization’s appeal. 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 either
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 EO Technical in accordance with Rev. Proc.
2007-5, section 4.04.

If a protest of a proposed
adverse ruling is
.07 If an organization submits a protest of a proposed adverse exempt status
ruling, EO Technical will review the protest statement. If the protest convinces EO

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submitted to EO
Technical
Technical that the organization qualifies for tax-exempt status, a favorable ruling
will be issued. If EO Technical maintains its adverse position after reviewing the
protest, it will either issue a final adverse ruling 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, EO
Technical will either issue a final adverse ruling or a favorable exempt status
ruling.

An appeal or protest may
be withdrawn
.08 An organization may withdraw its appeal or protest before the Service
issues a final adverse determination letter or ruling. 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.

Appeal or protest and
conference rights not
applicable in certain
situations
.09 The opportunity to appeal or protest a proposed adverse determination
letter or ruling 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).

SECTION 8.
DISCLOSURE OF
APPLICATIONS AND
DETERMINATION
LETTERS AND
RULINGS

§§ 6104 and 6110 of the Code provide rules for the disclosure of
applications, including supporting documents, and determination letters and rulings.

Disclosure of
applications, supporting
documents, and favorable
determination letters or
rulings

.01 The applications, any supporting documents, and the favorable
determination letter or ruling issued are available for public inspection under
§ 6104(a)(1) of the Code. 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 the applications, supporting documents,
and favorable determination letters or rulings 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.

(2) The exempt organization is required to make its exemption application,
supporting documents, and determination letter or ruling 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.

Disclosure of adverse
determination letters or
rulings
.02 The Service is required to make adverse determination letters and rulings
available for public inspection under § 6110 of the Code. Upon issuance of the
final adverse determination letter or ruling to an organization, both the proposed

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adverse determination letter or ruling and the final adverse determination letter or
ruling will be released under § 6110.

(1) These 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.

(2) The final adverse determination letter or ruling will enclose Notice 437,
Notice of Intention to Disclose, and redacted copies of the final and proposed
adverse determination letters or rulings. Notice 437 provides instructions if the
organization disagrees with the deletions proposed by the Service.

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

.03 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) of the
Code. The notice to the State officials may include a copy of a proposed or final
adverse determination letter or ruling the Service issued to the organization. In
addition, upon request by the appropriate State official, the Service may make
available for inspection and copying the exemption application and other
information relating to the Service’s determination on exempt status.

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

.04 The Service may disclose to State officials the name, address, and
identification number of any organization that has applied for recognition of
exemption under § 501(c)(3).

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SECTION 9. REVIEW
OF DETERMINATION
LETTERS BY EO
TECHNICAL

Determination letters
may be reviewed by EO
Technical to assure
uniformity
.01 Determination letters issued by EO Determinations may be reviewed by
EO Technical, or the Office of the Associate Chief Counsel (Passthroughs and
Special Industries) (for cases under § 521), to assure uniform application of the
statutes or regulations, or rulings, court opinions, or decisions published in the
Internal Revenue Bulletin.

Procedures for cases
where EO Technical
takes exception to a
determination letter
.02 If EO Technical takes exception to a determination letter issued by
EO Determinations, the manager of EO Determinations will be advised. If
EO Determinations notifies the organization of the exception taken, and the
organization disagrees with the exception, the file will be returned to EO Technical.
The referral to EO Technical will be treated as a request for technical advice and the
procedures in Rev. Proc. 2007-5 will be followed.

SECTION 10.
DECLARATORY
JUDGMENT
PROVISIONS OF § 7428

Actual controversy
involving certain issues
.01 Generally, a declaratory judgment proceeding under § 7428 of the Code
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); or § 4942(j)(3) (operating foundation status).

Exhaustion of
administrative remedies
.02 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) the filing of a substantially completed application Form 1023 or group
exemption request under § 501(c)(3) pursuant to section 3.08 of this Revenue
Procedure or the request for a determination of foundation status pursuant to
Rev. Proc. 76-34;

(2) in appropriate cases, requesting relief pursuant to § 301.9100-1 of the
Procedure and Administration Regulations regarding the extension of time for
making an election or application for relief from tax (see Rev. Proc. 92-85, 1992-2
C.B. 490);

(3) the timely submission of all additional information requested by the

14
Service to perfect an exemption application or request for determination of private
foundation status; and

(4) exhaustion of all administrative appeals available within the Service
pursuant to section 7.

Not earlier than 270 days
after seeking
determination
.03 An organization 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 10.02, and the sending by the
Service by certified or registered mail of a final determination letter or ruling; 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 or ruling and the
organization has taken, in a timely manner, all reasonable steps to secure a
determination letter or ruling.

Service must have
reasonable time to act on
an appeal or protest
.04 The steps described in section 10.02 will not be considered completed
until the Service has had a reasonable time to act upon an appeal or protest as the
case may be.

Final determination to
which § 7428 applies
.05 A final determination to which § 7428 of the Code applies is a
determination letter or ruling, sent by certified or registered mail, which holds that
the organization is not described in § 501(c)(3) or § 170(c)(2), is a public charity
described in a part of § 509 or § 170(b)(1)(A) other than the part under which the
organization requested classification, is not a private foundation as defined in
§ 4942(j)(3), or is a private foundation and not a public charity described in a part o
f
§ 509 or § 170(b)(1)(A).

SECTION 11. EFFECT
OF DETERMINATION
LETTER OR RULING
RECOGNIZING
EXEMPTION

Effective date of
exemption
.01 A determination letter or ruling recognizing exemption is usually
effective as of the date of formation of an organization if its purposes and activities
prior to the date of the determination letter or ruling were consistent with the
requirements for exemption. However, special rules under § 508(a) of the Code may
apply to an organization applying for exemption under § 501(c)(3), and special rules
under § 505(c) may apply to an organization applying for exemption under
§§ 501(c)(9), (17), or (20).

(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 a determination letter or ruling.

(2) If the Service requires the organization to make a nonsubstantive

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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 or ruling are consistent with the
requirements for exemption.

Reliance on
determination letter or
ruling
.02 A determination letter or ruling 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. Also, a determination letter
or ruling may not be relied upon if it was based on any inaccurate material factual
representations. See section 12.01.

SECTION 12.
REVOCATION OR
MODIFICATION OF
DETERMINATION
LETTER OR RULING
RECOGNIZING
EXEMPTION

A determination letter or ruling recognizing exemption may be revoked or
modified by (1) a notice to the taxpayer to whom the determination letter or ruling
was issued, (2) enactment of legislation or ratification of a tax treaty, (3) a decision
of the United States Supreme Court, (4) the issuance of temporary or final
regulations, or (5) the issuance of a revenue ruling, revenue procedure, or other
statement published in the Internal Revenue Bulletin.
Revocation or
modification of a
determination letter or
ruling may be retroactive
.01 The revocation or modification of a determination letter or ruling
recognizing exemption may be retroactive if the organization omitted or misstated a
material fact, operated in a manner materially different from that originally
represented, or, in the case of organizations to which § 503 of the Code applies,
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. In certain cases an
organization may seek relief from retroactive revocation or modification of a
determination letter or ruling under § 7805(b). Requests for § 7805(b) relief are
subject to the procedures set forth in Rev. Proc. 2007-5.

(1) Where there is a material change, inconsistent with exemption, in the
character, the purpose, or the method of operation of an organization, revocation or
modification will ordinarily take effect as of the date of such material change.

(2) In the case where a determination letter or ruling is issued in error or is
no longer in accord with the Service’s position and § 7805(b) relief is granted (see
sections 13 and 14 of Rev. Proc. 2007-4), ordinarily, the revocation or modification
will be effective not earlier than the date when the Service modifies or revokes the
original determination letter or ruling.

Appeal and conference
procedures in the case of
revocation or
modification of exempt
status letter
.02 In the case of a revocation or modification of a determination letter or
ruling, the appeal and conference procedures are generally the same as set out in
section 7 of these procedures, including the right of the organization to request that
EO Determinations or the Appeals Office seek technical advice from EO Technical.
However, appeal and conference rights 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

16
immediate action is necessary to protect the interests of the Government).

(1) If the case involves an exempt status issue on which EO Technical had
issued a previous contrary ruling or technical advice, EO Determinations generally
must seek technical advice from EO Technical.

(2) EO Determinations does not have to seek technical advice if the prior
ruling or technical advice has been revoked by subsequent contrary published
precedent or if the proposed revocation involves a subordinate unit of an
organization that holds a group exemption letter issued by EO Technical, the EO
Technical ruling or technical advice was issued under the Internal Revenue Code of
1939 or prior revenue acts, or if the ruling was issued in response to Form 4653,
Notification Concerning Foundation Status.

SECTION 13. EFFECT
ON OTHER REVENUE
PROCEDURES

Rev. Proc. 90-27 is superseded.

SECTION 14.
EFECTIVE DATE

This revenue procedure is effective July 23, 2007.

SECTION 15.
PAPERWORK
REDUCTION ACT

The collection of information for a letter application under section 3.05 of
this revenue procedure has been reviewed and approved by the Office of
Management and Budget (OMB) in accordance with the Paperwork Reduction Act
(44 U.S.C. § 3507) under control number 1545-2080. All other collections of
information under this revenue procedure have been approved under separate OMB
control numbers.

An agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection of information displays
a valid OMB control number.

The collection of this information is required if an organization wants to be
recognized as tax-exempt by the Service. We need the information to determine
whether the organization meets the legal requirements for tax-exempt status. In
addition, this information will be used to help the Service delete certain information
from the text of an adverse determination letter or ruling before it is made available
for public inspection, as required by § 6110.

The time needed to complete and file a letter application will vary depending
on individual circumstances. The estimated average time is 10 hours.

Books and records relating to the collection of information must be retained
as long as their contents may become material in the administration of any internal
revenue law. The rules governing the confidentiality of letter applications are
covered in § 6104.

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DRAFTING
INFORMATION

The principal author of this revenue procedure is Wayne Hardesty of the
Exempt Organizations, Tax Exempt and Government Entities Division. For further
information regarding this revenue procedure, please contact the TE/GE Customer
Service office at (877) 829-5500 (a toll-free call).