7.20.5  Review Procedures for EO Determinations

Manual Transmittal

October 01, 2015


(1) This transmits revised IRM 7.20.5, Exempt Organizations Determination Letter Program, Review Procedures for EO Determinations.

Material Changes

(1) Updates and reorganizes content to reflect current EO Determinations Quality Assurance practices.

(2) Removes references to the Tax Exempt Quality Measurement Systems (TEQMS) and post review by EO Technical.

(3) Removes several mandatory review categories (including voluntary requests for private foundation status, conservation easements, cases identified as potentially abusive, technical advice requests, and partnership cases) and adds new categories (including various health care categories, pooled trusts or special needs pooled trusts, and charitable risk pools).

(4) Incorporates Interim Guidance Memorandum TEGE-07-0615-0013, Exempt Organizations Determinations Quality Measurement Process.

(5) Replaces letter exhibits with electronic links to copies of the letters.

(6) Removes review bulletin exhibits.

(7) Makes editorial changes throughout.

Effect on Other Documents

This supersedes IRM 7.20.5 dated July 7, 2009, and incorporates Interim Guidance Memorandum TEGE-07-0115-0002, IRM Sections Impacted by the Realignment of Work between TE/GE and the Office of Associate Chief Counsel (TEGE). This incorporates and obsoletes Interim Guidance Memorandum TEGE-07-0615-0013, Exempt Organizations Determinations Quality Measurement Process.


Tax Exempt and Government Entities
Exempt Organizations

Effective Date


Tamera L. Ripperda
Director, Exempt Organizations
Tax Exempt and Government Entities  (10-01-2015)

  1. This IRM describes the responsibilities and procedures for Exempt Organizations (EO) Determinations Quality Assurance (EODQA) for employees reviewing Exempt Organizations Determinations (EOD) cases.

  2. EODQA advises EOD senior management of areas that need attention and recommendation and/or implements programs to improve technical and procedural processing of determination cases. EODQA reviews determination cases to ensure:

    1. Technical accuracy

    2. Adherence to written procedures

    3. Uniform and impartial treatment of exempt organizations' interests while protecting the government's interest

    4. Identification of unfavorable case patterns, trends affecting processing quality, problem areas, unique issues, and new or novel techniques that EOD specialists develop

  3. EODQA provides analytic support to EOD senior management to measure, report, and recommend improvements in EOD program quality, primarily through sample case review (see IRM, Processing Sample Review Cases).

  4. EODQA reviews and processes determination cases designated for mandatory review and:

    1. Returns cases requiring additional consideration to specialists and tax examiners with a Reviewer’s Memorandum.

    2. Mails favorable or adverse letters on reviewed and approved cases.

    3. Forwards cases requiring Appeals’ consideration to the Office of Appeals.

  5. EODQA:

    • Helps EOD specialists, tax examiners, and managers by providing training on technical and procedural issues and issuing guidance.

    • Provides informal advice regarding procedural and technical issues upon request.

    • Reports significant trends, problem areas, quality measurement findings, and important Appeals decisions to EOD senior management.  (10-01-2015)
Types of EODQA Review

  1. EODQA performs these reviews:

    • Sample

    • Mandatory

    • Manager's discretion

    • Saturation or special

  2. The Quality Measurement Process (QMP) is EODQA’s sample review program to calculate EOD case processing quality scores using attributes measuring the work quality. EODQA reports quality scores for each process and describes any trends or recommends improvements quarterly for:

    • Form 1023-EZ - standard processing

    • Form 1023-EZ - pre-determination processing

    • All other Determination case processing (i.e., all requests other than Form 1023-EZ)


    Results aren’t used to evaluate individual specialists or tax examiners.

  3. Mandatory review is a review of open cases that are complex, sensitive, or impactful. See IRM for a list of mandatory review cases.

  4. An EOD group manager may refer a case for manager’s discretion review to get an independent view or guidance on a particular (open) case.

    • The group manager sends the open case to EODQA, explaining why it should be reviewed.

    • EODQA reviews the case and provides a no error Reviewer’s Memorandum to the group manager.

  5. Saturation or special review may be handled either as open or closed case review.

    • Saturation review identifies cases by category (e.g., applications, amendment cases, reinstatement cases).

    • Special review identifies cases by issue (e.g., applications from scientific research organizations).  (10-01-2015)
Cases Subject to Mandatory Review

  1. Cases subject to mandatory review are cases involving:

    1. Proposed adverse determinations

    2. Cases subject to IRC 6110 disclosure including IRC 4942(g)(2), IRC 4945(f), IRC 4945(g), and unusual grant determinations

    3. An organization that was previously revoked or denied recognition of exemption


      This doesn’t include organizations automatically revoked for failure to file returns.

    4. Issues that shouldn’t be resolved in a routine, standard, or uniform manner (including new, unusual, or sensitive matters, issues elevated to the Emerging Issues Committee or TEGE Division Counsel, etc.)


      See IRM 1.54.1, TE/GE Roles and Responsibilities.

    5. All group ruling requests including:

      • Cases where EOD declines to issue a group ruling

      • Related/concurrent individual application cases

    6. Private and public schools that are any of these:

      • Located in Mississippi and Louisiana (including charter schools and home schools)

      • A successor to a for-profit organization

      • Engaging services from a management services organization

      • Providing management services to one or more charter schools

    7. State credit unions under IRC 501(c)(14)

    8. Small insurance companies or associations under IRC 501(c)(15)

    9. Farmers' cooperatives under IRC 521

    10. Credit or foreclosure counseling organizations subject to IRC 501(q)

    11. Religious and apostolic organizations under IRC 501(d)

    12. Foreign organizations (not including those formed in U.S. possessions)

    13. Limited liability companies

    14. Applications that indicate actual or potential political campaign intervention activities including:

      • Voter registration

      • Inaugural and convention host committees

      • Post-election transition teams (to help an elected official before officially assuming the elected position)

      • Voter guides

      • Voter polling

      • Voter education

      • Other activities that may appear to support or oppose candidates for public office


      Applications for IRC 501(c)(4) with Letter 5228 signed representations are not subject to mandatory review.

    15. Nominating convention or nominating convention host committee requesting IRC 501(c)(3), IRC 501(c)(4), or IRC 501(c)(6) exemption


      For these purposes, a nominating convention is an organization that conducts a convention arranged by a political party at which delegates select candidates for public office.


      A nominating convention host committee is an organization that encourages the selection of a particular location for a nominating convention. It may also be involved in arranging hospitality events for delegates to a nominating convention (e.g., offering a welcoming ceremony and informational services or otherwise supporting a nominating convention).

    16. Small voluntary employees' beneficiary associations (i.e., IRC 501(c)(9) organizations with 20 or fewer members entitled to receive benefits)

    17. Prepaid health care plans (e.g., health maintenance organizations) requesting IRC 501(c)(3) or IRC 501(c)(4) exemption

    18. IRC 501(m) commercial-type insurance activities

    19. Hospitals subject to IRC 501(r) requirements and other health care providers including:

      • Hospitals participating in whole joint ventures described in Rev. Rul. 98-15

      • Faculty group practice organizations (i.e., group medical practices that employ the faculty members of a medical school or its affiliated hospital)

      • Physician-hospital organizations (i.e., organizations controlled jointly by a hospital and physicians to carry out some of their activities)

      • Individual practice associations (i.e., organizations that arrange to provide health care services to enrollees in a prepaid health care organization by contracting with physicians)

      • Corporate practice of medicine (health provider formed under a state’s for-profit professional corporate laws)

      • Accountable care organizations

    20. Cooperative hospital service organizations for activities not specifically listed under IRC 501(e)

    21. Organizations that transmit or exchange health data or pharmaceutical prescriptions electronically or promote or facilitate such activities including regional health information organizations (i.e., organizations that establish and operate a network through which stakeholders may create, access, and transmit patient records through the network

    22. IRC 501(c)(3) or IRC 501(c)(4) pooled trusts or special needs pooled trusts (e.g., trusts that provide benefits to disabled persons on Medicaid or Supplemental Social Security)

    23. IRC 501(n) charitable risk pools

    24. Organizations providing free open source software where the free software is central to the organization’s exempt purpose

    25. Other cases selected for review by the EODQA Manager


    Related cases worked simultaneously (and by the same specialist) with one of these cases are also subject to mandatory review (e.g., if an organization located in Mississippi requests reclassification as a private school and also requests an exception to filing Form 990, submit both cases to EODQA for mandatory review).  (10-01-2015)
EODQA Reviewer’s Duties

  1. EODQA reviewer duties:

    1. Review determination cases identified for mandatory review, saturation review, special review, or manager's discretion review.

    2. Perform QMP sample reviews.

    3. Prepare a Reviewer’s Memorandum after review to bring significant items to the manager’s and specialist/tax examiner’s attention.

    4. Respond to requests to comment on technical and procedural accuracy of new or revised form letters, standardized work papers, and written procedures.

    5. Explain significant developments on technical and procedural matters to EOD specialists.  (10-01-2015)
Processing Sample Review Cases

  1. EODQA identifies all closed cases weekly using the Business Objects system and sorts the cases into three lists:

    • Form 1023-EZ cases not selected for pre-determination review

    • Form 1023-EZ cases selected for pre-determination review

    • All other determination cases (all requests other than Form 1023-EZ)

  2. To identify cases for QMP review, EODQA:

    1. Randomizes the order of cases in each list (using Excel random number generators and sorting functions).

    2. Selects cases from each list using a modified interval sampling based on the projected number of closures for the year.


    If the sampling method determines that every 70th case be reviewed to reach the desired sample size and EOD closes 140 cases during the period, EODQA selects two cases for that period. Because the list of cases is randomized, EODQA reviews the first two listed cases.

  3. EODQA reviews QMP cases after any final letters are mailed to the applicant and the cases are closed off the system (TEDS/EDS).

  4. EODQA periodically assigns closed QMP cases to reviewers. Reviewers generally have until the end of the current QMP quarterly rating period to complete their reviews.

  5. Review the case for technical and procedural accuracy. Determine whether the specialist/tax examiner:

    1. Obtained/developed all pertinent facts on technical issues, both favorable and unfavorable.

    2. Based the determination on laws, regulations, published rulings, and court cases that support the findings.

  6. Ensure the case file contains properly completed:

    1. Determination letters with appropriate addenda and attachments

    2. Forms, checksheets, and guidesheets applicable to the case

    3. Special processing instructions (e.g., Special Handling Notice)

    4. Exempt Organizations Determination System (EDS) or applicable processing system documents (or both)

    5. Form 5666, TE/GE Referral Information Report, if applicable

  7. Rate cases by answering a series of questions in a survey format using the software system CVENT. Survey questions correlate to attributes.

  8. The process assigns each attribute to one of four categories:

    • Customer accuracy

    • Procedural accuracy

    • Regulatory accuracy

    • Timeliness

  9. The system totals each attribute category and averages them to determine the quality score for the process.

    • The process weighs each attribute equally within its category.

    • "N/A" answers aren’t counted in the calculation.

  10. Each quarter, the system calculates a quality score for each process (full application determination cases, standard Form 1023-EZ cases, and pre-determination review 1023-EZ cases). EODQA reports the scores on the function’s Business Performance Review.

  11. Generally, don’t return QMP cases for further development. However, you may return a case to the group (with EODQA Manager agreement) if the:

    • Qualification for exemption or foundation classification isn’t clear.

    • Case has other circumstances indicating that not returning the case would be a serious administrative omission.


      Under the circumstances, the determination would result in serious criticism of the IRS’s administration of the tax laws, establish a precedent that would seriously hamper IRS attempts to take corrective actions, or result in inconsistent treatment of similarly situated organizations.

    • Error would result in serious negative consequences to the organization (e.g., incorrect information provided in a favorable determination letter).

  12. Send cases meeting these criteria to the group manager with a Reviewer’s Memorandum (see IRM  (10-01-2015)
Processing Technical Review Cases

  1. Technical case reviews types:

    • Mandatory

    • Manager’s discretion

    • Saturation

    • Special cases

  2. EODQA maintains open cases in unassigned inventory until assigned in the order received.


    Expedited cases or cases requiring immediate review per the EODQA Manager are assigned to the next available reviewer.

  3. Review the case within five workdays of assignment.

  4. Review the case for technical and procedural accuracy. Determine whether the specialist:

    1. Obtained/developed all pertinent facts on technical issues, both favorable and unfavorable.

    2. Based the determination on laws, regulations, published rulings, and court cases that support the findings.

    3. Explained clearly and concisely the IRS’s position on an adverse determination.

  5. Ensure that the case file contains properly completed:

    1. Determination letters with appropriate addenda and attachments

    2. Special processing instructions (e.g., Special Handling Notice)

    3. Forms, checksheets, and guidesheets applicable to that case

    4. EDS and/or applicable processing system documents

    5. Form 5666, TE/GE Referral Information, if applicable

  6. You may return a case to a specialist using a Reviewer’s Memorandum (see IRM, Reviewer’s Memorandum).

  7. Enter the results of the case review in CVENT.  (10-01-2015)
Reviewer’s Memorandum

  1. Use a Reviewer’s Memorandum to report findings to group managers. Issue:

    • Inquiry memo when you detect a significant error and must return the case to the specialist/tax examiner to correct or reconsider.

    • Advisory memo (with or without a case file) if you find insignificant errors that don’t affect the case outcome.


      Issue an advisory memo to notify a specialist if you made substantive changes to a determination letter before mailing (attach a copy of the revised letter).


      Generally don’t prepare advisory memos on sample cases. You may issue inquiry memos in limited situations (see IRM

    • No error memo (with or without a case file) if the specialist didn’t cause the error or to return a protest or appeals decision.

    • Commendatory memo to congratulate a specialist for doing an excellent job on a particular case (don’t return the case file).

  2. Prepare a Reviewer’s Memorandum, as follows:

    1. Check the box for the type of memo (inquiry, advisory, etc.).

    2. Enter the required information.

    3. Explain the issue or problem, provide recommendations, and, if needed, list citations for supporting precedent or procedures.

  3. Submit the memo and case to the EODQA Manager for review.

  4. EODQA manager: sign the memorandum or return the information to the reviewer for further consideration.

  5. EODQA program assistant: after the EODQA Manager signs the memo, send the original and a copy of the memo to the group manager. EODQA keeps a copy.

  6. Group manager: review the memo.

    1. If you disagree with an inquiry memo, discuss the memo with the EODQA Manager. If he/she doesn’t agree, elevate to the Area Manager.

    2. If you agree with an inquiry memo, forward the case to the specialist/tax examiner to complete recommended actions. Maintain appropriate case controls.

    3. With an advisory, no error, or commendatory memo, consider the information but generally you don’t need to respond to EODQA.

  7. Specialist/tax examiner: make the agreed changes and complete the Response to Reviewer’s Memorandum.

  8. Group manager: approve the specialist/tax examiner’s actions by signing the Response to Reviewer’s Memorandum. Forward the case file and all copies of the Reviewer’s Memorandum and Response to Reviewer’s Memorandum to EODQA.

  9. Reviewer: review the specialist/tax examiner’s actions. If no further action needed:

    1. Sign the Response to Reviewer’s Memorandum.

    2. Complete the CVENT survey on the response.


      Don’t complete CVENT for a QMP case response.

    3. Submit the case to the EODQA manager for approval.

  10. Reviewer: if you recommend further specialist/tax examiner action, discuss with the EODQA Manager to determine whether to discuss with the group manager or return the case.

  11. EODQA program assistant: after all actions are completed and approved, distribute copies of the Reviewer’s Memorandum and Response to Reviewer’s Memorandum to:

    • The administrative file (originals)

    • EOD Area Manager

    • Group Manager file

    • EODQA file  (10-01-2015)
Processing Adverse Rulings

  1. To ensure unagreed cases are resolved at the lowest possible level, confirm that the specialist made a reasonable effort to ensure that the organization understands the reason for the adverse ruling. Considering the following questions may help:

    1. Did the specialist contact the organization by telephone to discuss the basis for the tentative adverse issue, any alternatives such as withdrawing the request, the organization’s appeal rights, and the consequences of the adverse action?

    2. To what extent was the group manager involved in the determination?

  2. Determine if the specialist:

    1. Considered classification under other subsections (if applicable based on the facts of the case).

    2. Gave the organization an opportunity to amend organizational documents, proposed activities, or both, to qualify for exempt status (if appropriate based on the facts).

    3. Addressed foundation status as a secondary issue in an IRC 501(c)(3) proposed adverse determination if the specialist disagrees with the requested status.

    4. Prepared the appropriate determination letter.

    5. Included any required enclosures or other documents with the letter.

    6. Completed the correct system closing actions (e.g., in EDS).

  3. Correct or change the adverse letter if necessary or prepare an inquiry memo to return the case to the specialist following the procedures in IRM


    Prepare an advisory memo to notify the specialist of substantial letter changes if not returning case to the specialist (see IRM

  4. Attach a copy of Pub 892, How to Appeal an IRS Decision on Tax-Exempt Status, to the letter (when appropriate).

  5. Submit the case to the EODQA Manager for approval of denial letter.

  6. EODQA program assistant: after approval by the EODQA Manager:

    1. Mail the letter.


      Generally mail proposed and final adverse letters via certified mail.

    2. Email a copy of the letter to the reviewer noting the mailing date.

    3. Hold a case with a 30-day protest period pending an organization's response.

  7. Reviewer: email a copy of the letter (noting the mailing date) to the specialist and the specialist’s manager.

  8. Reviewer: after the 30-day hold period, contact the specialist to confirm he/she didn’t receive a written protest. If the organization didn’t submit a written protest and the file documents that the organization received the proposed adverse letter (certified delivery confirmation), close the case (see IRM


    For files and letters subject to IRC 6104, prepare the appropriate final letter, if any (e.g., Letter 1079-F), and close the case using the procedures in IRM 7.20.2, Determination Letter Processing of Exempt Organizations.  (10-01-2015)
Response to Adverse Letter

  1. An organization may mail or fax a protest directly to the EODQA reviewer. If a specialist receives a protest to a proposed adverse letter, he/she immediately notifies the reviewer and forwards the protest to EODQA.

  2. Reviewer:

    1. Carefully consider the protest’s effect on the determination.

    2. If the protest raises facts or arguments the specialist hasn’t already considered, prepare a no error memo to send the case to the specialist for further consideration.


      If the protest does not change the specialist’s proposed determination, he/she incorporates the protest and a response to the protest into the proposed adverse letter. The revised letter is sent to the organization with a new 30-day protest period following the procedures in IRM

    3. If the protest doesn’t present new facts or arguments, prepare the case for the appropriate Appeals office. Index, tab, and bind the case (using a two-prong fastener). Prepare a file memo indicating the organization’s foundation status if the denial is overturned (IRC 501(c)(3) only).

    4. Submit the case to the EODQA Manager to review and return to the specialist or to approve for sending to Appeals.

  3. If approved for Appeals:

    1. EODQA program assistant: update the case to Status 54 in EDS and send the case to Appeals using Form 3210, Document Transmittal.

    2. Reviewer: notify the specialist and group manager that the case was transferred to Appeals.  (10-01-2015)
Appealed Adverse Cases

  1. If Appeals upholds the adverse letter, the Appeals Office prepares and issues a final adverse letter. If Appeals doesn’t uphold an adverse ruling, the Appeals Office prepares and issues a closing letter revoking the proposed adverse letter and addressing the effective date of exemption and foundation status (if applicable). Appeals returns the case file to EODQA.

  2. Reviewer:

    1. Review the case summary prepared by Appeals.


      Discuss any novel legal analyses, disagreement with case disposition, or procedures used to settle the case with the EODQA manager who will determine how to share the information.

    2. Confirm that the determination made in the case is clear and consistent with the documents and letters issued by Appeals.

    3. Consider other appropriate follow-up actions before closing the case (e.g., preparing an exam referral).

    4. Issue the appropriate EOD closing letter based on information in the Appeals closing letter if the adverse ruling isn’t upheld.


      EDS Letter 947, 948, etc.

    5. Confirm Master File and/or the applicable processing systems have been updated.

    6. Prepare a no error memo for the originating group manager, attaching a copy of the Appeals statement.

    7. Assemble the case file and submit to EP/EO Determinations Processing Unit.

  3. EODQA Manager: may report significant appealed determination case decisions to EOD senior management.  (10-01-2015)
Processing IRC 6110 Letters

  1. Certain written determination letters are subject to public disclosure under IRC 6110 after certain identifying information is redacted. Proposed and final adverse letters on requests for exemption are disclosable under IRC 6110 (after a final adverse determination is issued). See IRM 7.20.3, Processing Foundation and Miscellaneous Determination Requests, for a chart of other letters subject to IRC 6110.

  2. Review an IRC 6110 letter to ensure technical and procedural accuracy including use of the correct letter.

  3. An IRC 6110 letter must include a:

    • Uniform Issue List (UIL) index on the first page of the letter

    • Legend of identifiers used in the letter as substitutes for information not subject to public disclosure under IRC 6110

  4. Prepare a redacted copy of an IRC 6110 letter:

    1. Replace identifying information in the legend with general terms.

    2. Remove the organization’s name, mailing address, and employer identification number.

    3. Remove information identifying IRS personnel.

    4. Prepare Notice 437, Notice of Intention to Disclose (Rulings).

  5. For IRC 6110 non-adverse cases, prepare:

    1. Copies of the unredacted closing letter and submit to the EODQA Manager for approval.

    2. A redacted copy of the IRC 6110 letter after approval.

  6. For IRC 6110 adverse cases:

    1. Prepare any appropriate final determination letter entering the specialist’s name and ID number on the letter.

    2. Prepare redacted copies of the proposed and final adverse letters.

    3. Notify the specialist and group manager of the final adverse closing via email or a no error memo.

  7. For all IRC 6110 cases:

    1. Prepare a Checklist for IRC 6110 Written Determinations.

    2. Indicate the appropriate closing status and actions and forward the case to the EODQA Manager for approval.

    3. Submit the letters and case file to the EODQA program assistant for letter mailing and case closing.

    4. Advise the Office of Chief Counsel via email that the letter was issued, attaching copies of all redacted and unredacted letters, Notice 437, and the Checklist for IRC 6110 Written Determinations.


      Indicate in the email if a final adverse letter was issued.

    5. After a 15-day hold, if the taxpayer doesn’t respond, assemble the case file and send to EP/EO Determinations Processing Unit.

  8. See IRM 7.28.4, Public Inspection of Written Determinations Under IRC 6110, for more information on IRC 6110 requirements and processing procedures.  (10-01-2015)
User Fee Disputes

  1. The EODQA Manager has the final authority to resolve disputes about refunds or waivers of user fees (see Rev. Proc. 2015-8, updated annually).

  2. Generally, an EOD specialist:

    1. Prepares and submits a user fee dispute to the EODQA Manager on behalf of an organization.

    2. Summarizes the facts and law relative to the user fee dispute on Form 14269, User Fee Waiver Request.

    3. Submits the form to the group manager for review.


      See IRM 7.20.2 for specialist procedures.

  3. The group manager sends the waiver request to EODQA with the case information.

  4. The EODQA Manager (or designated reviewer):

    1. Analyzes the issue.

    2. Sets out his or her position in a response to the specialist’s recommendation.

    3. Signs the response and returns the case to the group manager for further processing.

  5. The specialist tells the organization about the decision, and if adverse, explains the reason (even though an organization can’t appeal a user fee decision).

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