Internal Revenue Bulletin: 2018-23

June 4, 2018


Highlights of This Issue

 

These synopses are intended only as aids to the reader in identifying the subject matter covered. They may not be relied upon as authoritative interpretations.

EXEMPT ORGANIZATIONS

Rev. Proc. 2018–32 Rev. Proc. 2018–32

This revenue procedure modifies and combines Rev. Proc. 81–6, 1981–1 C.B. 620; Rev. Proc. 81–7, 1981–1 C.B. 621; Rev. Proc. 89–23, 1989–1 C.B. 844; and Rev. Proc. 2011–33, 2011–25 I.R.B. 887, into one revenue procedure to provide accessible guidance for grantors and contributors of tax-exempt organizations on deductibility and reliance issues.

Rev. Rul. 2018–14 Rev. Rul. 2018–14

This revenue ruling obsoletes Rev. Rul. 68–59, 1968–1 C.B. 273, which held that an exempt organization in computing its net operating loss under § 172 of the Internal Revenue Code (Code) must exclude the specific deduction of $1,000 provided in § 512(b)(12) of the Code. Section 512(b)(12) was subsequently amended to codify this ruling.

Rev. Rul. 2018–15 Rev. Rul. 2018–15

This revenue ruling obsoletes certain revenue rulings which provided guidance on the advance ruling process under former §§ 1.170A–9(e)(5) and 1.509(a)–3(d) of the Income Tax Regulations for determining whether a newly created section 501(c)(3) organization is not a private foundation. Final regulations promulgated by T.D. 9549, 2011–46 I.R.B. 718, 76 FR 55746–01, eliminated the advance ruling process.

Income Tax

Rev. Proc. 2018–34 Rev. Proc. 2018–34

This revenue procedure provides indexing adjustments for certain provisions under section 36B of the Internal Revenue Code. In particular, it updates the Applicable Percentage Table in § 36B(b)(3)(A)(i) to provide the Applicable Percentage Table for 2019. This table is used to calculate an individual’s premium tax credit. This revenue procedure also updates the required contribution percentage in § 36B(c)(2)(C)(i)(II) for plan years beginning after calendar year 2018. The percentage is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage under § 36B.

Rev. Rul. 2018–16 Rev. Rul. 2018–16

Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 1274, 1288, and other sections of the Code, tables set forth the rates for June 2018.

Preface

The IRS Mission

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code. This part includes rulings and decisions based on provisions of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation. This part is divided into two subparts as follows: Subpart A, Tax Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous. To the extent practicable, pertinent cross references to these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest. This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for the matters published during the preceding months. These monthly indexes are cumulated on a semiannual basis, and are published in the last Bulletin of each semiannual period.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Rev. Rul. 2018–14

The Internal Revenue Service (IRS) is continuing its program of reviewing revenue rulings published in the Internal Revenue Bulletin to identify and publish lists of those rulings that are obsolete and therefore are no longer considered determinative because: (1) the applicable statutory provisions or regulations have been changed or repealed; (2) the ruling position is specifically covered by a statute, regulation, or subsequent published position; or (3) the facts set forth no longer exist or are not sufficiently described to permit clear application of the current statute and regulations.

This revenue ruling obsoletes Rev. Rul. 68–59, 1968–1 C.B. 273, which held that an exempt organization in computing its net operating loss under § 172 of the Internal Revenue Code (Code) must exclude the specific deduction of $1,000 provided in § 512(b)(12) of the Code. Section 512(b)(12) was amended to disallow the $1,000 specific deduction for the purpose of computing the net operating loss under § 172. Tax Reform Act of 1969, Pub. L. No. 91–172, § 121(b)(2)(B), 83 Stat 487, 539 (1969).

Rev. Rul. 68–59 has been identified under the IRS’s review program as no longer being determinative because the ruling position is now specifically covered by a statute and is hereby declared obsolete.

DRAFTING INFORMATION

The principal author of this revenue ruling is Gregory Schantz of the Office of Associate Chief Counsel (Tax Exempt and Government Entities Associate Chief Counsel). For further information regarding this revenue ruling, contact Gregory Schantz at (202) 317-4086 (not a toll-free number).

Rev. Rul. 2018–15

The Internal Revenue Service (IRS) is continuing its program of reviewing revenue rulings published in the Internal Revenue Bulletin to identify and publish lists of those rulings that are obsolete and therefore are no longer considered determinative because: (1) the applicable statutory provisions or regulations have been changed or repealed; (2) the ruling position is specifically covered by a statute, regulation, or subsequent published position; or (3) the facts set forth no longer exist or are not sufficiently described to permit clear application of the current statute and regulations.

This revenue ruling publishes a list of rulings which provided guidance on the advance ruling process under former §§ 1.170A–9(e)(5) and 1.509(a)–3(d) of the Income Tax Regulations for a newly created organization described in § 501(c)(3) of the Internal Revenue Code (section 501(c)(3) organization). Final regulations promulgated by T.D. 9549, 2011–46 I.R.B. 718, 76 FR 55746–01, eliminated the advance ruling process for determining whether a newly created section 501(c)(3) organization is not a private foundation. See §§ 1.170A–9(f)(5) and 1.509(a)–3(e). Under the new regulations, the IRS will classify a newly created section 501(c)(3) organization as a publicly supported organization in its first five years of existence if it can show in its application for exemption that it can reasonably be expected to receive the requisite public support during such period. See §§ 1.170A–9(f)(4) and 1.509(a)–3(d). The listed revenue rulings have been identified under the IRS’s review program as no longer being determinative because the applicable regulations have been changed.

Accordingly, the revenue rulings listed below are hereby declared obsolete.

Rev. Rul. No. C.B. Citation
1. Rev. Rul. 74–487, 1974–2 C.B. 82;
2. Rev. Rul. 75–211, 1975–1 C.B. 86;
3. Rev. Rul. 77–115, 1977–1 C.B. 154;
4. Rev. Rul. 77–407, 1977–2 C.B. 77;
5. Rev. Rul. 80–113, 1980–1 C.B. 58.

The IRS will continue to review other revenue rulings relating to the advance ruling process in former §§ 1.170A–9(e)(5) and 1.509(a)–3(d) to identify those that, for the reasons stated above, are inapplicable to future transactions. Therefore, failure to include any particular revenue ruling in the above list should not be construed as an indication that the revenue ruling necessarily is determinative with respect to future transactions.

DRAFTING INFORMATION

The principal author of this revenue ruling is Gregory Schantz of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this revenue ruling, contact Gregory Schantz at (202) 317-4086 (not a toll-free number).

Rev. Rul. 2018–16

This revenue ruling provides various prescribed rates for federal income tax purposes for June 2018 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

REV. RUL. 2018–16 TABLE 1
Applicable Federal Rates (AFR) for June 2018
Period for Compounding
  Annual Semiannual Quarterly Monthly
Short-term
AFR 2.34% 2.33% 2.32% 2.32%
110% AFR 2.58% 2.56% 2.55% 2.55%
120% AFR 2.82% 2.80% 2.79% 2.78%
130% AFR 3.05% 3.03% 3.02% 3.01%
Mid-term
AFR 2.86% 2.84% 2.83% 2.82%
110% AFR 3.14% 3.12% 3.11% 3.10%
120% AFR 3.44% 3.41% 3.40% 3.39%
130% AFR 3.72% 3.69% 3.67% 3.66%
150% AFR 4.31% 4.26% 4.24% 4.22%
175% AFR 5.03% 4.97% 4.94% 4.92%
Long-term
AFR 3.05% 3.03% 3.02% 3.01%
110% AFR 3.36% 3.33% 3.32% 3.31%
120% AFR 3.67% 3.64% 3.62% 3.61%
130% AFR 3.98% 3.94% 3.92% 3.91%
REV. RUL. 2018–16 TABLE 2
Adjusted AFR for June 2018
Period for Compounding
  Annual Semiannual Quarterly Monthly
Short-term adjusted AFR 1.78% 1.77% 1.77% 1.76%
Mid-term adjusted AFR 2.17% 2.16% 2.15% 2.15%
Long-term adjusted AFR 2.31% 2.30% 2.29% 2.29%
REV. RUL. 2018–16 TABLE 3
Rates Under Section 382 for June 2018
Adjusted federal long-term rate for the current month 2.31%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 2.31%
REV. RUL. 2018–16 TABLE 4  
Appropriate Percentages Under Section 42(b)(1) for June 2018  
Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%.  
Appropriate percentage for the 70% present value low-income housing credit 7.68%
Appropriate percentage for the 30% present value low-income housing credit 3.29%
REV. RUL. 2018–16 TABLE 5  
Rate Under Section 7520 for June 2018  
Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest 3.4%

Part III. Administrative, Procedural, and Miscellaneous

Rev. Proc. 2018–32

 

TABLE OF CONTENTS  
SECTION 1. PURPOSE 739
SECTION 2. BACKGROUND 740
.01 Charitable Contributions Eligible for Deductions 740
.02 Organizations That Cease to Qualify as Organizations Described in § 170(c) 740
.03 Regulatory Provisions for Reliance 740
.04 Provision of § 501(p) - Suspension of Tax-exempt Status of Organizations Designated as Terrorist Organizations 740
.05 Prior Reliance Revenue Procedures 740
.06 Reliance Revenue Procedure Combined with Safe Harbor Revenue Procedures into One Revenue Procedure 741
SECTION 3. IRS LISTS AND DATABASES 741
.01 IRS Searchable Databases 741
.02 Tax Exempt Organization Search (Pub. 78 Data) - In General 742
.03 Tax Exempt Organization Search (Pub. 78 Data) - Deductibility Codes 742
.04 EO BMF Extract 742
.05 Downloading and Viewing the EO BMF Extract 742
.06 Auto-Revocation List 742
.07 Affirmation Letter 742
SECTION 4. RELIANCE ON TAX EXEMPT ORGANIZATION SEARCH (PUB. 78 DATA) AND THE EO BMF EXTRACT FOR TAX-EXEMPT STATUS 743
.01 General Reliance Rule 743
.02 General Reliance Rule for Automatic Revocation 743
.03 Extended Reliance Under Certain Circumstances 743
.04 Exception to the General Reliance Rule 743
.05 Reliance Rule for Subsequent Listing After Prior Revocation 743
.06 Reliance Rule for Subsequent Listing After Prior Automatic Revocation 743
SECTION 5. RELIANCE ON TAX EXEMPT ORGANIZATION SEARCH (PUB. 78 DATA) AND THE EO BMF EXTRACT FOR PUBLIC CHARITY STATUS 743
.01 General Reliance Rule 743
.02 Exception to General Reliance Rule 744
SECTION 6. CERTAIN LIMITATIONS ON TAX-EXEMPT AND PUBLIC CHARITY STATUS RELIANCE 744
.01 Reliance Provisions Apply Only to Certain Names of Organization 744
.02 Reliance Provisions Do Not Apply to Organizations Until They Are Listed in or Covered by Tax Exempt Organization Search (Pub. 78 Data) or the EO BMF Extract 744
.03 Reliance Provisions Do Not Apply to Subordinate Organizations 744
SECTION 7. SAFE HARBORS FOR GRANTORS AND CONTRIBUTORS WHEN AN ORGANIZATION LOSES ITS PUBLIC CHARITY STATUS 744
.01 Aggregate Support Safe Harbor 744
.02 Additional Safe Harbor for Private Foundation Grantors and Contributors 746
.03 Safe Harbor for “Unusual Grants” 746
SECTION 8. RELIANCE ON EO BMF EXTRACT INFORMATION FROM OTHER SOURCES 747
.01 Requirements for Reliance on Information from Third Parties 747
SECTION 9. RELATIONSHIP WITH § 7428 747
.01 Application of § 7428 747
.02 Certain Contributions Are Valid During § 7428 Proceedings 748
SECTION 10. ERRORS OR OMISSIONS 748
SECTION 11. EFFECT ON OTHER DOCUMENTS 748
SECTION 12. EFFECTIVE DATE 748
SECTION 13. DRAFTING INFORMATION 748

 

SECTION 1. PURPOSE

This revenue procedure modifies and supersedes Rev. Proc. 81–6, 1981–1 C.B. 620; Rev. Proc. 81–7, 1981–1 C.B. 621; Rev. Proc. 89–23, 1989–1 C.B. 844; and Rev. Proc. 2011–33, 2011–25 I.R.B. 887, and combines them into one revenue procedure to provide more easily accessible guidance to grantors and contributors to tax-exempt organizations on deductibility and reliance issues.

This revenue procedure sets forth the extent to which grantors and contributors may rely on the listing of an organization in Internal Revenue Service (IRS) databases of organizations eligible to receive tax-deductible contributions under § 170, for purposes of determining whether the grants or contributions to such organizations may be deductible under § 170, and for certain other purposes. This revenue procedure also provides safe harbors for determining that a grantor’s or contributor’s grant or contribution will not cause the grantor or contributor to be considered to be responsible for, or aware of, an act that results in an organization’s loss of public charity classification and for determining that a grant or contribution is considered an unusual grant.

Finally, this revenue procedure incorporates the modifications made in the transition from the use of Publication 78 to the use of IRS’s database, Tax Exempt Organization Search (Pub. 78 data), reflects the changes to regulations eliminating the advance ruling process and changing the computation period for determining public support for organizations classified under §§ 170(b)(1)(A)(vi) and 509(a)(1) or under § 509(a)(2), and provides non-substantive modifications and changes throughout for clarity and readability purposes.

SECTION 2. BACKGROUND

.01 Charitable Contributions Eligible for Deductions.

Contributions to or for the use of an organization described as eligible for charitable contributions in § 170(c), may be deductible, with certain limitations, by contributors for federal income tax purposes. It is the responsibility of an organization receiving contributions to ensure that its character, purposes, activities, and method of operation satisfy the qualification requirements of § 170(c) at the time of the contribution in order for grantors and contributors to have the assurance that their contributions will be deductible when made.

.02 Organizations That Cease to Qualify as Organizations Described in § 170(c).

A determination letter or ruling on tax-exempt status is based solely on the facts, attestations, and representations contained in the administrative record, including the application for exemption (Form 1023 or Form 1023EZ), and any information submitted in support of the application. If there is a material change, inconsistent with exemption, in the character, purposes, or method of operation from those on which the determination letter or ruling was based, or if there was any omission or misstatement of material information, which includes incorrect representations or attestations as to the organization’s organizational documents, the organization’s exempt purpose, the organization’s conduct of prohibited and restricted activities, or the organization’s eligibility to file Form 1023–EZ, and the change, omission, or misstatement is such that the organization ceases, as a matter of law, to qualify as an organization described in § 170(c), the determination letter or ruling ceases to be applicable. In such circumstances, except as otherwise provided by the validation provision of § 7428(c) (see section 9 of this revenue procedure), it is only by the exercise of the authority under § 7805(b)(8) that grantors or contributors to the organization may be allowed a deduction for grants or contributions made after the organization ceases to qualify under § 170(c).

.03 Regulatory Provisions for Reliance.

Under § 1.170A–9(f)(5)(ii) of the regulations, a grantor or contributor may rely on the continued validity of a determination letter or ruling concluding that an entity is described in § 170(b)(1)(A)(vi) until the IRS makes a public announcement of the entity’s change in status. However, the grantor or contributor may not rely on a determination letter or ruling if the grantor or contributor was responsible for, or aware of, the act or failure to act that resulted in the loss of classification or knew that the loss was imminent.

Similarly, under § 1.509(a)–7, once an organization has received a determination letter or ruling classifying it as an organization described in § 509(a)(1), (2), or (3), the treatment of contributions and grants, and the status of grantors and contributors to such organization, will not be affected by a subsequent revocation by the IRS of the organization’s classification as a public charity until the date on which the IRS publicly announces the change of status, unless the grantor or contributor had prior knowledge of the revocation of the determination letter or ruling or was in part responsible for, or was aware of, the act or failure to act which gave rise to the revocation of the determination letter or ruling classifying the organization as a public charity.

.04 Provision of § 501(p) - Suspension of Tax-exempt Status of Organizations Designated as Terrorist Organizations.

Section 501(p) provides for the suspension of tax-exempt status under § 501(a) of organizations designated as terrorist organizations under federal law (as described in § 501(p)(2)) and for the denial of charitable contribution deductions for contributions made to such organizations during the period of suspension. Suspension of tax-exempt status and non-deductibility of contributions begin on the date of the first publication of a designation or identification described in § 501(p)(2) (ordinarily published by the Office of Foreign Assets Control or OFAC). Under § 501(p)(7), the IRS provides public notice of the suspension and non-deductibility of contributions. However, pursuant to § 501(p)(4) and (7), grantors and contributors may not rely on the IRS listing of organizations with regard to tax-exempt status and eligibility for deductible contributions with respect to an organization from the date of the first publication of a terrorist designation of the organization by OFAC or otherwise as provided under § 501(p)(2). Thus, the rules set forth in this revenue procedure regarding grantor and contributor reliance on IRS lists and databases of exempt organizations do not apply in the case of suspensions under § 501(p) from the time that a terrorist designation is made under § 501(p)(2). Also, a designated organization may not challenge the suspension of tax-exempt status or the denial of deductions in an administrative or judicial proceeding (including but not limited to proceedings under § 7428) relating to the federal tax liability of such organization or other person.

.05 Prior Reliance Revenue Procedures.

The IRS has issued several revenue procedures to further describe the extent to which grantors and contributors may rely on the IRS’s identification of an organization’s tax-exempt and foundation status and to provide safe harbors with regard to the effect of grants and contributions on an organization’s foundation status.

(1) Rev. Proc. 81–6.

Rev. Proc. 81–6 provides a safe harbor to all grantors and contributors to determine if they were entitled to rely on the classification of an organization as a public charity, and would be deemed not to have knowledge of, be responsible for, or be aware of a substantial and material change in an organization’s source of support that gave rise to the revocation of a determination letter or ruling classifying the organization as a public charity.

(2) Rev. Proc. 81–7.

Rev. Proc. 81–7 provides a safe harbor to grantors and contributors as to the grants and contributions that will be considered unusual grants. Under §§ 1.170A–9(f)(6)(ii) and 1.509(a)–3(c)(3), the receipt of an “unusual grant” will not result in a grantee organization losing its classification as a public charity and becoming a private foundation because an unusual grant is excluded from both the numerator and the denominator of the applicable support fraction for purposes of determining whether the organization is publicly supported under § 170(b)(1)(A)(vi) and § 509(a)(1) or under § 509(a)(2). Thus, a grantor or contributor who makes a grant or contribution that is an “unusual grant” to a publicly supported organization will not be responsible for an act that results in the organization’s loss of classification as a publicly supported organization and is entitled to rely on the organization’s classification as a publicly supported organization.

(3) Rev. Proc. 89–23.

Rev. Proc. 89–23 provides an additional safe harbor to private foundation grantors and contributors for determining if they were entitled to rely on the classification of an organization, and would be deemed not to have knowledge of, or be responsible for, or aware of, a substantial and material change in an organization’s source of support that gave rise to the revocation of a determination letter or ruling classifying the organization as a public charity. This additional safe harbor was provided to private foundations because in general their reliance on the classification of an organization relates to their liability for excise taxes under §§ 4942 and 4945 if they make grants or contributions to other private foundations, rather than to the deductibility of contributions. More specifically, a private foundation may not be able to count a grant as a qualifying distribution under § 4942(g) if the grant causes the recipient organization to lose its classification as a public charity and become a private foundation. A private foundation may also be subject to an excise tax under § 4945(a) on taxable expenditures if it has not followed the expenditure responsibility requirements of § 4945(d)(4)(B) in regard to a grant that causes the recipient organization to lose its classification as a public charity and become a private foundation.

(4) Rev. Proc. 2011–33.

As an update to earlier revenue procedures, Rev. Proc. 2011–33 sets forth the extent to which grantors and contributors may rely on the listing of an organization in Publication 78, Cumulative List of Organizations Described in § 170(c), for purposes of deducting contributions under § 170 and making grants under §§ 4942, 4945, and 4966.

.06 Reliance Revenue Procedure Combined with Safe Harbor Revenue Procedures into One Revenue Procedure.

In order to simplify compliance for grantors and contributors, this revenue procedure combines the safe harbors of Rev. Procs. 81–6, 81–7, and 89–23 and the reliance revenue procedure of Rev. Proc. 2011–33, and replaces them with one revenue procedure on deductibility and reliance issues for grantors and contributors.

SECTION 3. IRS LISTS AND DATABASES

To assist the general public, the IRS maintains and updates two different publicly available compilations of information on organizations eligible to receive tax-deductible contributions under § 170. The first compilation lists organizations that are eligible to receive tax-deductible charitable contributions (eligible organization list) and the second compilation is an extract of certain information concerning tax-exempt organizations from the IRS electronic Business Master File (BMF) (the EO BMF Extract).

.01 IRS Searchable Databases.

Historically, the eligible organization list was maintained in IRS Publication 78. In Rev. Proc. 2011–33, the IRS announced that it had discontinued publishing the paper version of Publication 78 and would maintain the eligible organization list solely on an electronic database. The electronic database was then maintained on the IRS website (www.irs.gov) as part of Exempt Organizations Select Check (“Select Check”). Select Check consisted of three searchable databases located on the IRS website that containedError! Hyperlink reference not valid. information about tax-exempt organizations. The first database contains the eligible organization list. This searchable database is the successor to Publication 78, and is described on the website (as of the date of publication of this revenue procedure) as listing organizations that “are eligible to receive tax-deductible charitable contributions (Pub. 78 data).” (The remainder of this revenue procedure refers to this eligible organization list as “Tax Exempt Organization Search (Pub. 78 data).”) The second database (Automatic Revocation of Exemption List or Auto-Revocation List) contains a list of organizations that have had their tax-exempt status revoked under § 6033(j) for failure to file a required annual return or notice for three consecutive years. The third database contains the information reported in notices (Forms 990–N, commonly referred to as e-Postcards) filed under § 6033(i) by organizations that are not required to file a Form 990 or Form 990–EZ return under § 6033 due to their size. In May 2018, the IRS changed the name of Select Check to Tax Exempt Organization Search and expanded its capabilities. As part of the change to Tax Exempt Organization Search, the IRS retained the three existing databases and added two additional searchable databases to the search tool. The first new database includes images of Form 990 series annual returns filed by tax-exempt organizations on or after January 1, 2018, to the extent that these annual returns are available to the public pursuant to § 6104. The second new database includes images of favorable determination letters issued by the IRS to organizations to recognize the organization’s tax-exempt status. The searchable determination letters include those favorable determination letters issued on or after January 1, 2014. Finally, Tax Exempt Organization Search now allows customers to search interactively across all five databases.

.02 Tax Exempt Organization Search (Pub. 78 Data) - In General.

Generally, Tax Exempt Organization Search (Pub. 78 data) includes organizations that have received a determination letter or ruling stating that contributions to the listed organization (or in the case of a group exemption, to the listed central organization and those subordinate organizations covered by the group exemption letter) may be deductible as provided in § 170. (Note that Tax Exempt Organization Search (Pub. 78 data) does not include separate listings for subordinate organizations covered by a group exemption letter.) The information contained in Tax Exempt Organization Search (Pub. 78 data) is taken from the BMF, and is generally updated monthly. Each version of Tax Exempt Organization Search (Pub. 78 data) contains a posting date.

.03 Tax Exempt Organization Search (Pub. 78 Data) - Deductibility Codes.

Through the use of a “deductibility code”, Tax Exempt Organization Search (Pub. 78 data) indicates the foundation classification under § 509(a) of the listed organization. This classification assists grantors and contributors in determining the appropriate percentage limitations on deductibility of charitable contributions to the organization and also assists private foundations and sponsoring organizations of donor-advised funds making grants to it in determining whether they would be required to exercise expenditure responsibility. Tax Exempt Organization Search (Pub. 78 data) does not indicate specifically whether an organization is described in § 509(a)(1) or (2) or a particular subparagraph of § 170(b)(1)(A). However, Tax Exempt Organization Search (Pub. 78 data) was modified from the format used in Publication 78 in order to indicate whether an organization is a supporting organization described in § 509(a)(3) and whether the organization is a Type III non-functionally integrated supporting organization.

.04 EO BMF Extract.

The EO BMF Extract is available to the public through the Tax Statistics section of the IRS website. The EO BMF Extract contains more information, in a slightly different format, than Tax Exempt Organization Search (Pub. 78 data) and includes information on most tax-exempt organizations, rather than just the tax-exempt organizations eligible to receive tax-deductible contributions under § 170 that are included in Tax Exempt Organization Search (Pub. 78 data). Among the data fields provided for organizations in the EO BMF Extract are an organization’s name and Employer Identification Number (EIN), address, subsection code (the paragraph under § 501(c) under which the organization is recognized as exempt), ruling date, affiliation code (status as an independent, central, or subordinate organization), deductibility code, and foundation code (indicating whether an organization is a private foundation, private operating foundation, or public charity and, if applicable, the appropriate subparagraph of § 170(b)(1)(A)). For determination letters or rulings issued in 2011 and after, the foundation code generally includes an indication whether a § 509(a)(3) supporting organization is a Type I, Type II, or Type III functionally or non-functionally integrated supporting organization. Each version of the EO BMF Extract contains a posting date.

.05 Downloading and Viewing the EO BMF Extract.

The EO BMF Extract and its corresponding instructions are available for download directly from the IRS website (www.irs.gov). Instructions for downloading the EO BMF Extract are also located on the IRS website. Generally, the EO BMF Extract information is extracted and updated on a monthly basis.

.06 Auto-Revocation List.

When an organization’s tax-exempt status has been automatically revoked pursuant to § 6033(j) (providing for the automatic revocation of the tax-exempt status of organizations that are required to file annual returns or notices pursuant to § 6033(a)(1) or (i) but fail to do so for 3 consecutive years), the name of such organization is removed from Tax Exempt Organization Search (Pub. 78 data) and added to the Auto-Revocation List in the next revision cycle. The Auto-Revocation List contains the organization’s name, EIN, city, state, zip code, country, exemption type, effective date of revocation, and the date the organization’s name was posted on the Auto-Revocation List. The Auto-Revocation List is generally updated monthly. An organization whose tax-exempt status has been automatically revoked under § 6033(j) that subsequently applies for reinstatement of tax-exempt status in accordance with Rev. Proc. 2014–11, 2014–3 I.R.B. 41, (or any successor revenue procedure) and that is recognized by the IRS as tax-exempt will appear on Tax Exempt Organization Search (Pub. 78 data). However, its name will remain on the Auto-Revocation List because the IRS is statutorily required to maintain and publish a list of organizations whose tax-exempt status has been automatically revoked. An organization whose name appears on the Auto-Revocation List in error, however, will be removed from the list. The Auto-Revocation List also provides a column that lists the reinstatement date for organizations that applied for and received reinstatement of their tax-exempt status after it was automatically revoked pursuant to § 6033(j).

.07 Affirmation Letter.

For the convenience of organizations, grantors, and contributors, the IRS will issue an affirmation letter confirming that an organization is currently recognized as tax-exempt, and, if a § 501(c)(3) organization, its foundation status. See § 6104(a)(1)(A). The IRS will also issue to a tax-exempt organization an affirmation letter to reflect a name or address change of the tax-exempt organization. See section 3.01(2) of Rev. Proc. 2018–5, 2018–1 I.R.B. 235, or the corresponding provision of any successor revenue procedure.

SECTION 4. RELIANCE ON TAX EXEMPT ORGANIZATION SEARCH (PUB. 78 DATA) AND THE EO BMF EXTRACT FOR TAX-EXEMPT STATUS

.01 General Reliance Rule.

If an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract ceases to qualify as an organization to which contributions are deductible under § 170 and the IRS revokes a determination letter or ruling concluding that the organization is one to which contributions are deductible under § 170, grantors and contributors to that organization may generally rely on the determination letter or ruling information provided in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract that contributions to the organization are deductible under § 170 until the date of a public announcement stating that the organization ceases to qualify as an organization contributions to which are deductible under § 170. The public announcement may be made via the Internal Revenue Bulletin, on the portion of the IRS website (at www.irs.gov) that relates to exempt organizations, or by such other means designated to put the public on notice of the change in the organization’s status.

.02 General Reliance Rule for Automatic Revocation.

If an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract ceases to qualify as an organization to which contributions are deductible under § 170 as a result of loss of tax-exempt status pursuant to § 6033(j), grants and contributions made to the organization by persons unaware of the change in the status of the organization generally will be considered deductible in accordance with the rules of § 170 if made on or before the date its name is posted on the Auto-Revocation List.

.03 Extended Reliance Under Certain Circumstances.

Under certain circumstances, such as if a legally enforceable obligation under local law has been made to the organization prior to the date of the public announcement or posting, and the satisfaction of such obligation occurs on or after the date, the period for which a grant or contribution is deductible may be extended upon specific exercise of authority under § 7805(b)(8). See, e.g., Rev. Rul. 78–129, 1978–1 C.B. 67.

.04 Exception to the General Reliance Rule.

The IRS is not precluded from disallowing a deduction for any contribution made after an organization ceases to qualify under § 170(c) and prior to the public announcement or posting of the revocation if the grantor or contributor:

(1) Had knowledge of the revocation of the determination letter or ruling prior to the public announcement or posting;

(2) Was aware that such revocation was imminent; or

(3) Was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification.

.05 Reliance Rule for Subsequent Listing After Prior Revocation.

Grantors and contributors may rely on the organization’s subsequent listing in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract for contributions or grants made after the date of the subsequent listing even if the organization’s tax-exempt status was previously revoked if the date the organization is posted in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract is after the date of the public announcement of the revocation of the organization’s tax-exempt status.

.06 Reliance Rule for Subsequent Listing After Prior Automatic Revocation.

Similarly, grantors and contributors may rely on the organization’s subsequent listing in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract for grants or contributions made after the date of the subsequent listing even if the organization’s tax-exempt status was previously automatically revoked pursuant to § 6033(j) and the organization’s name appears on the Auto-revocation List, if the date the organization is posted in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract is after the date of the posting of the organization on the Auto-Revocation List. Grantors and contributors may also rely on a determination letter, ruling, or an affirmation letter for an organization if the effective date of the letter is on or after the date of revocation for the organization listed on the Auto-Revocation List.

SECTION 5. RELIANCE ON TAX EXEMPT ORGANIZATION SEARCH (PUB. 78 DATA) AND THE EO BMF EXTRACT FOR PUBLIC CHARITY STATUS

.01 General Reliance Rule.

If an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF as a public charity ceases to qualify as a public charity and the IRS revokes a determination letter or ruling classifying the organization as a public charity, grantors and contributors to that organization may generally rely on the classification information provided in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract for contribution and grant purposes until the date of a public announcement stating that the organization ceases to qualify as a public charity. Grantors and contributors may also rely on any classification of an organization as a Type I, Type II, or Type III functionally or non-functionally integrated supporting organization in Tax Exempt Organization Search (Pub. 78 data) and the EO BMF Extract. Private foundations and sponsoring organizations of donor-advised funds may rely on an organization’s public charity status (or supporting organization type), to the extent set forth in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract, for grant making purposes under §§ 4942, 4945, and 4966, until the date of a public announcement stating that the organization ceases to qualify as a public charity.

.02 Exception to General Reliance Rule.

The grantor or contributor is not entitled to rely on the listed public charity classification of an organization in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract or the listed classification of an organization in its determination letter or ruling if the grantor or contributor:

(1) Had knowledge of the revocation of the determination letter or ruling classifying the organization as a public charity prior to the announcement or posting, or

(2) Was in part responsible for, or was aware of, the act or failure to act that gave rise to the revocation of the determination letter or ruling classifying it as a public charity.

SECTION 6. CERTAIN LIMITATIONS ON TAX-EXEMPT AND PUBLIC CHARITY STATUS RELIANCE

.01 Reliance Provisions Apply Only to Certain Names of Organization.

The reliance on tax-exempt and public charity status provided by sections 4 and 5 of this revenue procedure applies only to grants or contributions made to an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract in the organization’s official name, its recognized popular name, or a contraction of either of these names that is reasonably identifiable or widely known. The reliance on tax-exempt and public charity status provided by sections 4 and 5 of this revenue procedure does not apply to contributions or grants made nominally to an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract but with the understanding or on a condition that they be made available to or for the use of an organization not listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract.

.02 Reliance Provisions Do Not Apply to Organizations Until They Are Listed in or Covered by Tax Exempt Organization Search (Pub. 78 Data) or the EO BMF Extract.

The provisions of sections 4 and 5 of this revenue procedure do not apply to an organization until it is listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract.

.03 Reliance Provisions Do Not Apply to Subordinate Organizations.

The reliance on tax-exempt and public charity status provided by sections 4 and 5 of this revenue procedure does not apply to a subordinate organization covered by a group exemption letter regardless of whether the subordinate organization appears in the EO BMF Extract. For further information concerning reliance on group exemptions, consult the official subordinate listing approved by the listed central organization or contact the central organization directly. See Publication 4573, Group Exemptions.

SECTION 7. SAFE HARBORS FOR GRANTORS AND CONTRIBUTORS WHEN AN ORGANIZATION LOSES ITS PUBLIC CHARITY STATUS

 

.01 Aggregate Support Safe Harbor.

(1) For purposes of section 5.02 of this revenue procedure, grantors and contributors will not be considered responsible for, or aware of, an act that results in the loss of classification due to a change in financial support if the aggregate of grants or contributions received from such grantor or contributor for the taxable year of the recipient organization in which the grant or contribution is received is 25 percent or less of the aggregate support, as defined in section 7.01(2) or section 7.01(3) of this revenue procedure, received by the recipient organization for the four taxable years immediately preceding such taxable year. If a grant or contribution is made during the first four and one-half months of the recipient organization’s taxable year, the computation period may consist of the four taxable years immediately preceding such taxable year or the four taxable years immediately preceding the prior taxable year.

(2) For purposes of section 7.01(1) of this revenue procedure, in computing aggregate support for publicly supported organizations described in § 170(b)(1)(A)(vi), the term “support” has the same meaning as for purposes of § 1.170A–9(f)(7), except that it does not include any support provided by the grantor or contributor (or disqualified persons with respect to the grantor or contributor).

(3) For purposes of section 7.01(1) of this revenue procedure, in computing aggregate support for publicly supported organizations described in § 509(a)(2), the term “support” has the same meaning as in § 509(d), except that it does not include any support provided by the grantor or contributor (or disqualified persons with respect to the grantor or contributor).

(4) The safe harbor provided in section 7.01 of this revenue procedure is not available to a grantor or contributor who is in a position of authority (such as a foundation manager within the meaning of § 4946(b)) with respect to the recipient organization (or who otherwise has the ability to exercise control over the recipient organization), or to a person who is standing in a relationship described in § 4946(a)(1)(C)–(G) with respect to such person who is in a position of authority or control. Similarly, the exclusion is not available to a person who obtains a position of authority with respect to the recipient organization (or who otherwise gains the ability to exercise control over the recipient organization), as a consequence of the grant or contribution, or to a person who will be standing in a relationship described in § 4946(a)(1)(C)–(G) with respect to such person who is in a position of authority or control.

(5) The safe harbor provision in section 7.01 of this revenue procedure is not applicable if the grantor or contributor has actual knowledge of the loss of classification of public charity status or after the date of a public announcement that the organization ceases to qualify as a public charity.

(6) The following examples illustrate the application of section 7.01 of this revenue procedure:

(a) Example 1: B was determined by the IRS in 2002 to be a § 509(a)(2) public charity and received total support of $340,000 in 2014 through 2017. B is a calendar year taxpayer. X, an individual, is considering making a grant of $30,000 to the organization in June 2018. X contributed $40,000 of the $340,000 of total support B received during the four-year period 2014–2017. Accordingly, B’s aggregate support (as defined in section 7.01(3) of this revenue procedure) is $300,000. Because X’s grant of $30,000 in 2018 is only 10 percent of B’s aggregate support during the four years immediately preceding 2018, X’s grant will not cause X to be considered to be responsible for an act that results in B’s loss of public charity status, even if B is later determined to be a private foundation for its 2018 taxable year.

The computations are as follows:

Support received by B during the four-year computation period (2014–2017) $340,000
Less: Support provided by X during the four-year computation period (2014–2017) ($40,000)
Aggregate support (as defined in section 7.01(3) of this revenue procedure) received by B during the four-year computation period $300,000
Support provided by X during the 2018 tax year, divided by aggregate support (as defined in section 7.01(3) of this revenue procedure) received by B during the four-year computation period $30,000 $300,000 = 10%

(b) Example 2: C was determined by the IRS in 2000 to be a § 509(a)(2) public charity. C is a calendar year taxpayer. Y, an individual, plans to make a $75,000 grant to C in early January 2018. C received total aggregate support in the amount of $320,000 during the four-year period 2013–2016. Y contributed $20,000 of the $320,000 of total support received by C during the four-year period 2013–2016. As of December 31, 2017, C estimated its total support for 2014–2017 to be $340,000. However, because C has not closed its books for 2017, C has not yet finally determined its total support for 2014–2017. Y contributed $60,000 to C during the four-year period 2014–2017.

Because Y’s grant will be made in the first four and one-half months of C’s taxable year, Y may use either the four-year computation period 2014–2017 or the four taxable years preceding the taxable year prior to the year of the grant (2013–2016). If Y elects the four-year computation period 2014–2017 and makes a grant in January 2018, Y would not know the amount of aggregate support (as defined in section 7.01(3) of this revenue procedure) that C received during the four-year period 2014–2017. If C’s total support for 2014–2017 did not equal or exceed $360,000, Y’s contribution of $75,000 would exceed 25 percent of C’s aggregate support during the four-year computation period 2014–2017.

If, however, Y elects to use the four-year period consisting of 2013–2016, because Y’s grant of $75,000 in 2018 is 25 percent of C’s aggregate support (as defined in section 7.01(3) of this revenue procedure) during the four-year computation period 2013–2016, Y will be deemed not to be responsible for an act that results in C’s loss of public charity status, even if C is later determined to be a private foundation for its 2018 taxable year.

If Y uses the 2014–2017 four-year computation period, the computations are as follows (assuming the estimates are the actual support):

Support received as of December 31, 2017, by C during the four-year computation period (2014–2017) $340,000
Less: Support provided by Y during the four-year computation period (2014–2017) ($60,000)
Aggregate support (as defined in section 7.01(3) of this revenue procedure) received as of December 31, 2017, by C during the four-year computation period $280,000
Support provided by Y during the 2018 tax year, divided by aggregate support (as defined in section 7.01(3) of this revenue procedure) received as of December 31, 2017, by C during the four-year computation period. This amount exceeds the safe harbor maximum of 25 percent in section 7.01(1). $75,000 $280,000 = 26.8 %

If Y uses the 2013–2016 four-year computation period, the computations are as follows:

Support received by C during the four-year computation period (2013–2016) $320,000
Less: Support provided by Y during the four-year computation period (2013–2016) ($20,000)
Aggregate support (as defined in section 7.01(3) of this revenue procedure) received by C during the four-year computation period $300,000
Support provided by Y during the 2018 tax year, divided by aggregate support (as defined in section 7.01(3) of this revenue procedure) received by C during the four-year computation period $75,000 $300,000 = 25%

.02 Additional Safe Harbor for Private Foundation Grantors and Contributors.

(1) For purposes of section 5.02 of this revenue procedure, private foundation grantors or contributors will not be considered responsible for, or aware of, an act that results in a recipient organization’s loss of classification as a public charity due to a change in financial support if the recipient organization has received a determination letter or ruling that it is described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) and the recipient organization is not controlled directly or indirectly by the private foundation.

(2) For purposes of section 7.02(1) of this revenue procedure, a recipient organization is controlled, directly or indirectly, by a private foundation if the private foundation and disqualified persons with respect to the private foundation, by aggregating their votes or positions of authority, may require the recipient organization to perform any act that significantly affects its operations or may prevent the recipient organization from performing such an act.

(3) The safe harbor in section 7.02 of this revenue procedure is not applicable if the private foundation grantor or contributor has actual knowledge of the loss of classification of public charity status or after the date of a public announcement that the organization ceases to qualify as a public charity.

.03 Safe Harbor for “Unusual Grants.”

(1) For purposes of §§ 1.170A–9(f)(6)(ii) and 1.509(a)–3(c)(3), a grant or contribution with all of the characteristics described in this section 7.03(1) (see § 1.509(a)–3(c)(4)) will be considered an unusual grant.

(a) By reason of its size, the grant or contribution would adversely affect the status of a recipient organization under §§ 170(b)(1)(A)(vi) and 509(a)(1) or under § 509(a)(2), absent its treatment as an “unusual grant” under §§ 1.170A–9(f)(6)(ii) and 1.509(a)–3(c)(3).

(b) The grant or contribution is not made by a person who created the organization or by a person who was a substantial contributor (within the meaning of § 507(d)(2)) to the organization prior to the grant or contribution (or by a person standing in a relationship described in § 4946(a)(1)(C) through (G) to either person).

(c) The grant or contribution is not made by a person who is in a position of authority with respect to the organization (such as a foundation manager within the meaning of § 4946(b)), by a person who otherwise has the ability to exercise control over the recipient organization, or by a person standing in a relationship described in § 4946(a)(1)(C) through (G) to any person who is in a position of authority or control. Similarly, the grant or contribution is not made by a person who, as a consequence of the grant or contribution, becomes a person of authority with respect to the organization, a person who otherwise gains the ability to exercise control over the organization, or a person who will be standing in a relationship described in § 4946(a)(1)(C) through (G) to any person who is in a position of authority or control.

(d) The grant or contribution is in the form of cash, readily marketable securities, or assets that directly further the exempt purpose of the organization, such as a contribution of a painting to a museum.

(e) The recipient organization has received a final determination letter or ruling classifying it as an organization described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) and the organization is actively engaged in a program of activities in furtherance of its exempt purpose.

(f) The grantor or contributor has not imposed material restrictions or conditions (within the meaning of § 1.507–2(a)(7)) upon the organization in connection with the grant or contribution.

(g) The terms and amount of the grant or contribution are expressly limited to underwriting no more than one year’s operating expenses, if the grant or contribution is intended to underwrite operating expenses, and the grant or contribution is not used to finance capital items.

(2) A grant or contribution would adversely affect the status of an organization under §§ 170(b)(1)(A)(vi) and 509(a)(1) or under § 509(a)(2) for purposes of section 7.03(1) of this revenue procedure only if the organization otherwise meets the support test described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) in the year being tested without taking into account the grant or contribution. The year being tested is the year for which satisfaction of one of the public support tests is being determined, and for this purpose, that year’s public support is calculated based upon the aggregate public support received during the four prior taxable years and the current (or tested) taxable year. A grant or contribution does not satisfy the requirements of the safe harbor in section 7.03(1) of this revenue procedure if it is made to an organization that would fail to satisfy the public support test regardless of whether the grant or contribution at issue were made.

(3) A potential recipient organization may request a determination letter under Rev. Proc. 2018–5, and any successor revenue procedure, concerning whether a proposed grant or contribution that does or does not satisfy the requirements of the safe harbor in section 7.03(1) of this revenue procedure will constitute an unusual grant, as provided for in §§ 1.509(a)–3(c)(5) and 1.170A–9(f)(6)(iv).

(4) The following examples illustrate the application of section 7.03 of this revenue procedure.

(a) Example 1: During the years 2013–2017, D, an organization described in § 509(a)(2), received aggregate support of $350,000. Of this amount, $105,000 was received from grants, contributions and receipts from admissions that are described in § 509(a)(2)(A)(i) and (ii). An additional $150,000 was received from grants and contributions from substantial contributors within the meaning of § 507(d)(2) (who are disqualified persons with respect to the recipient organization). The remaining $95,000 was gross investment income as defined in § 509(e).

Included in the contributions from substantial contributors and disqualified persons was a contribution of $50,000 from Z. Z was not the creator of or a substantial contributor to the organization prior to the making of this contribution (or a person standing in a relationship described in § 4946(a)(1)(C) through (G) to any such person.) Z is also not in a position of authority with respect to the organization (or a person standing in a relationship described in § 4946(a)(1)(C) through (G)). In addition, all of the other requirements of section 7.03(1) of this revenue procedure were met with respect to Z’s contribution. If Z’s contribution is excluded from D’s support by reason of the fact that it is an unusual grant, D will have received, for the years 2013–2017, $105,000 from sources described in § 509(a)(2)(A)(i) and (ii), $100,000 in grants and contributions from disqualified persons, and $95,000 in gross investment income. Therefore, if Z’s contribution is excluded from D’s support, D meets the requirements of the § 509(a)(2) support test for the year 2017 because more than one-third of its support is from sources described in § 509(a)(2)(A)(i) and (ii) and no more than one-third of its support is gross investment income. Z’s contribution would adversely affect the status of D under section 7.03(2) of this revenue procedure absent its treatment as an “unusual grant” because the organization otherwise meets the support test described in § 509(a)(2) in the year being tested without the benefit of the grant or contribution. The grant or contribution from Z would cause the organization to fail to satisfy the support test described in § 509(a)(2) if it was not treated as an unusual grant.

Because the requirements of section 7.03(1) of this revenue procedure are satisfied, the contribution is excludable as an unusual grant for purposes of §§ 1.170A–9(f)(6)(ii) and 1.509(a)–3(c)(3). Thus, Z’s contribution of $50,000 will not be considered an act for which Z is responsible that results in A’s loss of classification under § 509(a)(2).

The computations showing the effect of excluding Z’s contribution from D’s support are as follows:

Aggregate support received by D during the tax years from 2013 through 2017 $350,000
Less: contribution from Z ($50,000)
Aggregate support of D less contribution from Z $300,000
Gross investment income received by D as a percentage of aggregate support of D less contribution from Z $95,000/ $300,000 = 31.67%
Grants, contributions, and receipts from admissions described in § 509(a)(2)(i) and (ii) received by D as a percentage of aggregate support of D less contribution from Z $105,000/ $300,000 = 35%

(b) Example 2: Assume the same facts as in Example 1, except that for the years 2013–2017, D received $100,000 (instead of $150,000) from grants or contributions from substantial contributors and disqualified persons. In this case, if Z’s contribution is excluded as an unusual grant, D will have received $105,000 from sources that are described in § 509(a)(2)(A)(i) and (ii), $50,000 in grants and contributions from disqualified persons, and $95,000 in gross investment income. If Z’s contribution is excluded from D’s support, D will have received more than one-third of its support from gross investment income and D would not meet the requirements of the § 509(a)(2) support test for the year 2017. Thus, even though all of the requirements of section 7.03(1) of this revenue procedure would otherwise be satisfied with respect to Z’s contribution, under section 7.03(2) of this revenue procedure, the contribution does not satisfy the requirements of the safe harbor in section 7.03(1) of this revenue procedure and it is not excludable as an unusual grant because D would still not meet the support tests described in §§ 170(b)(1)(A)(vi) and 509(a)(1) or in § 509(a)(2) even if Z’s contribution was excluded.

The computations showing the effect of excluding Z’s contribution from D’s support are as follows:

Aggregate support received by D during the tax years 2013 through 2017 $300,000
Less: contribution from Z ($50,000)
Aggregate support of D less contribution from Z $250,000
Gross investment income received by D as a percentage of aggregate support of less contribution from Z $95,000/ $250,000 = 38%

SECTION 8. RELIANCE ON EO BMF EXTRACT INFORMATION FROM OTHER SOURCES

 

.01 Requirements for Reliance on Information from Third Parties.

A grantor or contributor may rely on information about an organization from the EO BMF Extract that is obtained from a third party, so long as the requirements of this section 8.01 are met:

(1) The third party provides a report to the grantor or contributor that includes:

(a) The organization’s name, EIN, foundation status under § 509(a)(1), (2), or (3) (including supporting organization type, if applicable), and whether contributions to the organization are deductible;

(b) A statement that the information is from the most current update of the EO BMF Extract and the revision date of the EO BMF Extract containing the information; and

(c) The date and time the information was provided to the grantor or contributor; and

(2) The grantor or contributor retains a paper or electronic copy of the report.

SECTION 9. RELATIONSHIP WITH § 7428

 

.01 Application of § 7428.

Section 7428 creates a remedy in the form of access to declaratory judgment procedures, in part, for cases involving a determination by the IRS with respect to the continuing qualification of an organization as one described in § 170(c)(2) or § 501(c)(3), or to the continuing classification of an organization under § 509(a). The remedy is available in these cases if the IRS determines that revocation of tax-exempt status under § 501(c)(3), status under § 170(c)(2), or foundation status under § 509(a) is appropriate, the organization has exhausted its administrative remedies, and the IRS has issued a final adverse determination letter to the organization. Under § 7428(b)(4), no action may be brought under § 7428 with respect to any automatic revocation of status described in § 6033(j)(1).

.02 Certain Contributions Are Valid During § 7428 Proceedings.

Certain contributions are deemed valid under § 7428(c) during proceedings for declaratory judgment involving the revocation of a determination that the organization is described in § 170(c)(2). Under this provision, the organization continues to be treated as an organization described in § 170(c)(2) with respect to contributions from individuals (up to a maximum of $1,000 in the aggregate during the period during which statutory protection applies, as described in this section 9.02) and from other charitable organizations described in § 170(c)(2) that are exempt from tax under § 501(a) (other than organizations with respect to which there is pending a proceeding to revoke the determination under § 170(c)(2)) (without limit). Statutory protection for such contributions, if declaratory judgment is sought on the revocation, would begin on the date of the public announcement of the revocation or removal of the organization’s name from Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract, whichever is earlier, and end on the date on which a decision in the Tax Court becomes final or a judgment of the District Court of the United States for the District of Columbia or the U.S. Court of Federal Claims is entered that the organization is not described in § 170(c)(2). This reliance, however, is not extended to any individual who was responsible, in whole or in part, for the activities (or failures to act) on the part of the organization that were the basis for the revocation.

SECTION 10. ERRORS OR OMISSIONS

Any errors or omissions with respect to a tax-exempt organization in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract should be reported by the tax-exempt organization to the toll-free IRS customer service line at 1-877-829-5500.

SECTION 11. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 81–6, Rev. Proc. 81–7, Rev. Proc. 89–23, and Rev. Proc. 2011–33 are modified and superseded.

SECTION 12. EFFECTIVE DATE

This revenue procedure is effective May 16, 2018.

SECTION 13. DRAFTING INFORMATION

The principal author of this revenue procedure is Melinda Williams of the Office of Associate Chief Counsel (Tax Exempt and Government Entities). For further information regarding this revenue procedure, contact Ms. Williams at 202-317-4086 (not toll-free number).

Revenue Procedure 2018–34

SECTION 1. PURPOSE

This revenue procedure provides indexing adjustments for certain provisions under section 36B of the Internal Revenue Code. In particular, it updates the Applicable Percentage Table in § 36B(b)(3)(A)(i) to provide the Applicable Percentage Table for 2019. This table is used to calculate an individual’s premium tax credit. This revenue procedure also updates the required contribution percentage in § 36B(c)(2)(C)(i)(II) for plan years beginning after calendar year 2018. The percentage is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage under § 36B. This revenue procedure uses the methodology described in Section 4 of Rev. Proc. 2014–37, 2014–2 C.B. 363, to index the Applicable Percentage Table and the § 36B required contribution percentage.

In addition to the adjustments described in Rev. Proc. 2014–37, § 36B(b)(3)(A)(ii)(II) provides that, except as provided in § 36B(b)(3)(A)(ii)(III), an additional adjustment must be made for years after 2018 to reflect the rates of premium growth relative to the growth in the consumer price index. The IRS and the Treasury Department have determined that the failsafe exception described in § 36B(b)(3)(A)(ii)(III) applies for 2019 and no additional adjustment under § 36B(b)(3)(A)(ii)(II) is required for 2019.

SECTION 2. ADJUSTED ITEMS

.01 Applicable Percentage Table for 2019. For taxable years beginning in 2019, the Applicable Percentage Table for purposes of § 36B(b)(3)(A)(i) and § 1.36B–3(g) is:

Household income percentage of Federal poverty line: Initial percentage Final percentage
Less than 133% 2.08% 2.08%
At least 133% but less than 150% 3.11% 4.15%
At least 150% but less than 200% 4.15% 6.54%
At least 200% but less than 250% 6.54% 8.36%
At least 250% but less than 300% 8.36% 9.86%
At least 300% but not more than 400% 9.86% 9.86%

.02 Section 36B Required Contribution Percentage for 2019. For plan years beginning in 2019, the required contribution percentage for purposes of § 36B(c)(2)(C)(i)(II) and § 1.36B–2(c)(3)(v)(C) is 9.86%.

SECTION 3. EFFECTIVE DATE

This revenue procedure is effective for taxable years and plan years beginning after December 31, 2018.

SECTION 4. DRAFTING INFORMATION

The principal author of this revenue procedure is Bill Ruane of the Office of Associate Chief Counsel (Income Tax and Accounting). For further information regarding this revenue procedure, contact Mr. Bill Ruane at (202) 317-4718 (not a toll-free number).

Definition of Terms and Abbreviations

Definition of Terms

Revenue rulings and revenue procedures (hereinafter referred to as “rulings”) that have an effect on previous rulings use the following defined terms to describe the effect:

Amplified describes a situation where no change is being made in a prior published position, but the prior position is being extended to apply to a variation of the fact situation set forth therein. Thus, if an earlier ruling held that a principle applied to A, and the new ruling holds that the same principle also applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances where the language in a prior ruling is being made clear because the language has caused, or may cause, some confusion. It is not used where a position in a prior ruling is being changed.

Distinguished describes a situation where a ruling mentions a previously published ruling and points out an essential difference between them.

Modified is used where the substance of a previously published position is being changed. Thus, if a prior ruling held that a principle applied to A but not to B, and the new ruling holds that it applies to both A and B, the prior ruling is modified because it corrects a published position. (Compare with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used in a ruling that lists previously published rulings that are obsoleted because of changes in laws or regulations. A ruling may also be obsoleted because the substance has been included in regulations subsequently adopted.

Revoked describes situations where the position in the previously published ruling is not correct and the correct position is being stated in a new ruling.

Superseded describes a situation where the new ruling does nothing more than restate the substance and situation of a previously published ruling (or rulings). Thus, the term is used to republish under the 1986 Code and regulations the same position published under the 1939 Code and regulations. The term is also used when it is desired to republish in a single ruling a series of situations, names, etc., that were previously published over a period of time in separate rulings. If the new ruling does more than restate the substance of a prior ruling, a combination of terms is used. For example, modified and superseded describes a situation where the substance of a previously published ruling is being changed in part and is continued without change in part and it is desired to restate the valid portion of the previously published ruling in a new ruling that is self contained. In this case, the previously published ruling is first modified and then, as modified, is superseded.

Supplemented is used in situations in which a list, such as a list of the names of countries, is published in a ruling and that list is expanded by adding further names in subsequent rulings. After the original ruling has been supplemented several times, a new ruling may be published that includes the list in the original ruling and the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study.

Abbreviations

The following abbreviations in current use and formerly used will appear in material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

Numerical Finding List

Numerical Finding List

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin 2017–52, dated December 27, 2017.

Bulletin 2018–1 through 2018–23

Announcements:

Article Issue Link Page
2018-01 2018-09 I.R.B. 2018-09 387
2018-02 2018-09 I.R.B. 2018-09 387
2018-03 2018-09 I.R.B. 2018-09 387
2018-04 2018-10 I.R.B. 2018-10 401
2018-05 2018-13 I.R.B. 2018-13 461
2018-07 2018-16 I.R.B. 2018-16 503
2018-08 2018-19 I.R.B. 2018-19 552

 

Notices:

Article Issue Link Page
2018-01 2018-03 I.R.B. 2018-03 285
2018-02 2018-02 I.R.B. 2018-02 281
2018-03 2018-02 I.R.B. 2018-02 285
2018-05 2018-06 I.R.B. 2018-06 341
2018-06 2018-03 I.R.B. 2018-03 300
2018-07 2018-04 I.R.B. 2018-04 317
2018-08 2018-07 I.R.B. 2018-07 352
2018-10 2018-08 I.R.B. 2018-08 359
2018-11 2018-11 I.R.B. 2018-11 425
2018-12 2018-12 I.R.B. 2018-12 441
2018-13 2018-06 I.R.B. 2018-06 341
2018-14 2018-07 I.R.B. 2018-07 353
2018-15 2018-09 I.R.B. 2018-09 376
2018-16 2018-10 I.R.B. 2018-10 390
2018-17 2018-09 I.R.B. 2018-09 376
2018-18 2018-12 I.R.B. 2018-12 443
2018-19 2018-12 I.R.B. 2018-12 443
2018-20 2018-12 I.R.B. 2018-12 444
2018-21 2018-15 I.R.B. 2018-15 472
2018-22 2018-14 I.R.B. 2018-14 464
2018-23 2018-15 I.R.B. 2018-15 474
2018-24 2018-17 I.R.B. 2018-17 507
2018-25 2018-15 I.R.B. 2018-15 476
2018-26 2018-16 I.R.B. 2018-16 480
2018-27 2018-20 I.R.B. 2018-20 580
2018-28 2018-16 I.R.B. 2018-16 492
2018-29 2018-16 I.R.B. 2018-16 495
2018-30 2018-21 I.R.B. 2018-21 610
2018-31 2018-16 I.R.B. 2018-16 501
2018-32 2018-17 I.R.B. 2018-17 507
2018-33 2018-17 I.R.B. 2018-17 508
2018-34 2018-19 I.R.B. 2018-19 549
2018-35 2018-18 I.R.B. 2018-18 520
2018-36 2018-20 I.R.B. 2018-20 582
2018-37 2018-18 I.R.B. 2018-18 521
2018-38 2018-18 I.R.B. 2018-18 522
2018-39 2018-20 I.R.B. 2018-20 582
2018-40 2018-20 I.R.B. 2018-20 583
2018-41 2018-20 I.R.B. 2018-20 584
2018-43 2018-20 I.R.B. 2018-20 590
2018-44 2018-21 I.R.B. 2018-21 611
2018-45 2018-21 I.R.B. 2018-21 620
2018-46 2018-21 I.R.B. 2018-21 621
2018-47 2018-21 I.R.B. 2018-21 621
2018-49 2018-22 I.R.B. 2018-22 624
2018-50 2018-22 I.R.B. 2018-22 626
2018-51 2018-22 I.R.B. 2018-22 628
2018-52 2018-22 I.R.B. 2018-22 629
2018-53 2018-22 I.R.B. 2018-22 631

 

Proposed Regulations:

Article Issue Link Page
REG-119514-15 2018-04 I.R.B. 2018-04 325
REG-129260-16 2018-14 I.R.B. 2018-14 470
REG-118067-17 2018-08 I.R.B. 2018-08 360
REG-132197-17 2018-10 I.R.B. 2018-10 404
REG-132197-17 2018-10 I.R.B. 2018-10 404
REG-132434-17 2018-16 I.R.B. 2018-16 503

 

Revenue Procedures:

Article Issue Link Page
2018-1 2018-01 I.R.B. 2018-01 1
2018-2 2018-01 I.R.B. 2018-01 106
2018-3 2018-01 I.R.B. 2018-01 130
2018-4 2018-01 I.R.B. 2018-01 146
2018-5 2018-01 I.R.B. 2018-01 244
2018-7 2018-01 I.R.B. 2018-01 282
2018-8 2018-02 I.R.B. 2018-02 286
2018-9 2018-02 I.R.B. 2018-02 290
2018-10 2018-07 I.R.B. 2018-07 355
2018-11 2018-05 I.R.B. 2018-05 334
2018-12 2018-06 I.R.B. 2018-06 349
2018-13 2018-07 I.R.B. 2018-07 356
2018-14 2018-09 I.R.B. 2018-09 378
2018-15 2018-09 I.R.B. 2018-09 379
2018-16 2018-09 I.R.B. 2018-09 383
2018-17 2018-09 I.R.B. 2018-09 384
2018-18 2018-10 I.R.B. 2018-10 392
2018-19 2018-14 I.R.B. 2018-14 466
2018-20 2018-11 I.R.B. 2018-11 427
2018-21 2018-14 I.R.B. 2018-14 467
2018-22 2018-18 I.R.B. 2018-18 524
2018-23 2018-17 I.R.B. 2018-17 516
2018-24 2018-18 I.R.B. 2018-18 525
2018-25 2018-18 I.R.B. 2018-18 543
2018-26 2018-18 I.R.B. 2018-18 546
2018-27 2018-20 I.R.B. 2018-20 591
2018-28 2018-20 I.R.B. 2018-20 592
2018-29 2018-22 I.R.B. 2018-22 634
2018-30 2018-21 I.R.B. 2018-21 622
2018-31 2018-22 I.R.B. 2018-22 637
2018-32 2018-23 I.R.B. 2018-23 739
2018-33 2018-22 I.R.B. 2018-22 734
2018-34 2018-23 I.R.B. 2018-23 748

 

 

Revenue Rulings:

Article Issue Link Page
2018-01 2018-02 I.R.B. 2018-02 275
2018-02 2018-02 I.R.B. 2018-02 277
2018-03 2018-02 I.R.B. 2018-02 278
2018-04 2018-04 I.R.B. 2018-04 304
2018-05 2018-06 I.R.B. 2018-06 339
2018-06 2018-10 I.R.B. 2018-10 388
2018-07 2018-13 I.R.B. 2018-13 445
2018-09 2018-14 I.R.B. 2018-14 462
2018-10 2018-16 I.R.B. 2018-16 477
2018-11 2018-18 I.R.B. 2018-18 518
2018-12 2018-20 I.R.B. 2018-20 575
2018-13 2018-20 I.R.B. 2018-20 576
2018-14 2018-23 I.R.B. 2018-23 736
2018-15 2018-23 I.R.B. 2018-23 736
2018-16 2018-23 I.R.B. 2018-23 737

 

Treasury Decisions:

Article Issue Link Page
9829 2018-04 I.R.B. 2018-04 308
9830 2018-11 I.R.B. 2018-11 423
9831 2018-13 I.R.B. 2018-13 459
9832 2018-16 I.R.B. 2018-16 477

 

Effect of Current Actions on Previously Published Items

Finding List of Current Actions on Previously Published Items

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2017–27 through 2017–52 is in Internal Revenue Bulletin 2017–52, dated December 27, 2017.

Bulletin 2018–1 through 2018–23

 

Notices:

Old Article Action New Article Issue Link Page
2003-65 Modified by Notice 2018-30 2018-21 I.R.B. 2018-21 610

 

INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue Bulletins are available at www.irs.gov/irb/.

We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page (www.irs.gov) or write to the

Internal Revenue Service, Publishing Division, IRB Publishing Program Desk, 1111 Constitution Ave. NW, IR-6230 Washington, DC 20224.