Exempt Organizations - Private Letter Rulings and Determination Letters
The IRS will rule on the tax consequence of proposed changes to an organization's purposes or activities. Thus, if you are unsure about whether proposed changes are consistent with your status as an exempt organization or as a public charity (if applicable), you may want to request a private letter ruling or determination letter. You may also obtain a determination letter on whether you are exempt from annual exempt organization returns. Revenue Procedure 2014-4 provides procedures for such requests.
In some areas, the law requires that an organization notify the Internal Revenue Service or receive an advance determination before undertaking a transaction resulting in certain tax consequences. Thus, an exempt organization must request a private letter ruling or determination with respect to the following issues:
- Advance approval of scholarship programs, and certain other grant-making procedures, of private foundations (Internal Revenue Code section 4945(g))
- Voluntary termination of private foundation status, except by transferring assets to, or operating as, a public charity (Code sections 507(b)(1) and (2))
- Certain determinations regarding application of the neighborhood land rule (Code section 514(b)(3))
- Status as an exempt operating foundation (Code section 4940(d))
- Establishment of a set-aside (Code section 4942(g)(2))
- Extension of disposal period for certain excess business holdings (Code section 4943(c)(7))
- Advance approval of private foundation voter registration activities (Code section 4945(f))
- Certain changes in an organization's accounting methods and periods (see Publication 4221-PC, at p. 8, for a general discussion of accounting methods and periods)
- Treatment of a grant as an unusual grant under sections 1.170A-9(e)(6)(ii) and 1.509(a)-3(c)(3) and related provisions of the Income Tax Regulations.