4.75.24 Organizations Covered by a Group Ruling

Manual Transmittal

July 03, 2017

Purpose

(1) This transmits revised IRM 4.75.24, Exempt Organizations Examination Procedures, Organizations Covered by a Group Ruling.

Background

IRM 4.75.24 contains guidance for examining central, intermediate, and subordinate organizations covered under a group return.

Material Changes

(1) Revised 4.75.24.1 to incorporate service-wide memorandum, Heightened Awareness, Sensitivity and Understanding of Internal Controls September 14, 2016.

(2) IRM 4.75.24.3(2) & (3): Added the PATH Act laws to update considerations in a group ruling audit.

(3) IRM 4.75.24.3.3: Substituted references to Group Ruling Letters with published letter citations.

(4) Changed the Exempt Organizations structure in accordance with the reorganization. (ie; EPR =FSL/ET)

(5) Terms such as examiner, examination, and examine were changed to agent, audit, and audit, in connection with the Plain Writing Act.

Effect on Other Documents

This revision supersedes IRM 4.75.24, Organizations Covered by a Group Ruling, dated February 5, 2015.
This revision incorporates Interim Guidance Memorandum TEGE-04-0216-0003, PATH ACT Impact on Revocations and Modifications of Exempt Status, effective February 22, 2016.
This revision incorporates Interim Guidance Memorandum TEGE-04-0814-0025, New Timeframes for Cases Subject to Appeals, effective August 6, 2014.

Audience

Tax Exempt and Government Entities
Exempt Organizations
Examinations

Effective Date

(07-03-2017)

Margaret Von Lienen
Director, Exempt Organizations
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: This manual focuses on an agent’s responsibilities for audits of organizations under a group ruling. Topics addressed include:

    1. The various structures of group rulings

    2. Filing requirements of group rulings

    3. Special procedures for specific issues

    4. Statute requirements

    5. Appeals consideration

    6. Revocations of group rulings

    7. Terminations of group rulings

  2. The procedures in this manual apply to Exempt Organization Examination agents and reviewers in the following series:

    • GS-512

    • GS-526

    • GS-987

  3. Policy Owner: Director, Exempt Organizations

  4. Program Owner: Exempt Organizations

Background

  1. This IRM contains specific guidance for EO field agents. This IRM supplements other IRMs to address the unique problems and procedures in organizations that are under group rulings.

Authority

  1. The primary objective of the EO audit program is regulatory with emphasis on continued qualification of exempt organizations. See Policy Statement 4-119 and IRM 1.2.13.1.36 .

  2. IRC 7602 gives agents the authority to:

    1. Examine any books, papers, records or any data necessary to complete an audit.

    2. Issue a summons for information necessary to complete an audit.

    3. Take testimony under oath to secure additional information needed.

    4. Ask about any offense connected with administering or enforcing the Internal Revenue laws.

Responsibilities

  1. During an audit, agents are responsible for determining if the organization:

    1. Meets the requirements for exemption under a group ruling.

    2. Meets the requirements as a central or parent organization.

    3. Filed all required tax and information returns.

    4. Reported information and tax liabilities correctly.

  2. The IRS adopted the Taxpayer Bill of Rights in June, 2014. Agents are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3) and IRM 1.2.10.37.

Program Controls

  1. Consult the Knowledge Management Network (K-Net) to ensure you’ve properly developed issues and consistently applied the law.

Acronyms

  1. The table lists commonly used acronyms and their definitions.

    Acronym Definition
    EO Exempt Organizations
    FSL/ET Federal State Local/Employment Tax
    AIMS Audit Information Management System
    K-NET Knowledge Management Network
    RAR Revenue Agent Report
    TAM Technical Advice Memorandum
    TE/GE Tax Exempt/Government Entities
    STAT NOTICE STATUTORY NOTICE OF DEFICIENCY
    PF Private Foundation
    NOL Net Operating Loss

Organizational Structures

  1. A "central" or "parent" organization exempt under IRC 501(c) may obtain exemption recognition, on a group basis, for subordinate organizations under its general supervision or control. The central organization (not the IRS) determines which organizations are included as subordinates under its group exemption ruling.

  2. An "intermediate" organization is a central organization of a group exemption that is also a subordinate of another central organization.

    Example:

    A state or regional organization that is a central organization with subordinate units under its group exemption, and is itself, a subordinate of a national organization under that organization’s group exemption (Rev. Proc. 80-27, section 3.03).

  3. A "subordinate" may consist of a:

    • Chapter

    • Local post

    • Unit of the central organization

  4. A subordinate may or may not be incorporated, but it must have an organizing document.

  5. Central organizations must establish that each of the subordinates included in the group exemption letter meet all these criteria:

    1. Affiliated with the parent at the close of its annual accounting period.

    2. Subjected to the parent's general supervision or control.

    3. Exempted under the same paragraph of IRC 501(c) as the other subordinates.

    4. Not organized or operated as a private foundation.

    5. Not organized and operated in a foreign country.

    Note:

    The central organization doesn’t have to be exempt under the same paragraph of IRC 501(c) as its subordinates. The subordinates must be exempt under the same paragraph of IRC 501(c).

  6. See IRM 25.7.3.1.1, Group Exemption Requirements, for a discussion of other requirements for exemption of the subordinates.

Audit Considerations

  1. Group rulings present unique situations:

    1. Central organizations have the power to grant and take away exemption for their subordinates, simply by updating their annual list of subordinates.

    2. The IRS can also take away the exemption for any specific subordinate, intermediate organization, central organization, or entire group entity.

  2. If a subordinate fails to qualify for tax-exempt status under the same paragraph of IRC 501(c) as the other subordinates in the group, you must remove it from the group ruling, even if it qualifies for another paragraph in IRC 501(c).

    Example:

    ABC, a veterans organization, is a subordinate organization covered by a group exemption ruling held by its parent organization. All subordinates in the group are exempt under IRC 501(c)(19). ABC's Form 990 for 201512 is under audit.. The agent determines that ABC doesn’t meet the requirements of IRC 501(c)(19) because it fails to meet the membership tests. ABC does, however qualify for tax-exemption under IRC 501(c)(4). Due to the PATH Act, you must propose revocation under IRC 501(c)(19) and removal from the group ruling. Encourage the organization to apply for its own independent tax-exempt status.

  3. An organization recognized as exempt by the IRS under IRC 501(c) or (d) can't be modified to another code section. If the organization doesn’t meet the requirements of IRC 501(c) or (d), its exempt status must be revoked.

  4. Subordinates who obtain a separate determination of tax-exemption letter no longer need to be included under the group ruling, and will lose their individual exemption determination if they go back to join a group ruling.

  5. Administratively, group rulings result in fewer applications for exemption. Subordinates of a group ruling can also opt to reduce the number of information returns by filing a group return. See IRM 4.75.24.3.1.

  6. Group rulings also complicate the issue of the statute of limitations. See IRM 4.75.24.3.2:

    1. Which return(s) start the running of the statute of limitations?

    2. Who is authorized to sign an extension?

    3. Who signs when the organization under audit filed via a group return?

  7. Group rulings also modify the notification procedures. IRS must, in certain situations, contact the parent entity. Sometimes, it’s okay to contact the parent entity for help in an audit. See IRM 4.75.24.3.3.

Group Returns

  1. A central organization may file, under 26 CFR 1.6033-2(d), in addition to its own annual information return, a group return on behalf of two or more of its subordinate organizations covered by a group exemption letter:

    1. Affiliated with the central organization at the close of its annual accounting period.

    2. Subjected to the general supervision or control of the central organization.

    3. Exempted under the same paragraph of IRC 501(c) as the other subordinate(s).

    4. Filed based on the established annual accounting period of the central organization.

  2. The group return may include only those exempt subordinates that have authorized the central organization in writing to include them in the return. The subordinates have to submit to the central organization statements specifying their gross income, receipts and disbursements, as well as such related information as is required to be stated in the group return.

  3. A central organization that files a group return must attach to the return, a list of the subordinates’:

    • names

    • addresses

    • employer identification numbers

  4. Any subordinates not included in a group return generally are subject to the standard filing requirements.

  5. The central organization may not include itself on the group return. The central organization must file its own separate return. See 26 CFR 1-6033-2(d).

  6. If the central, intermediate, and/or subordinate organizations are subject to unrelated business income tax or other taxes, they must file their own Forms 990-T or other tax returns. The group return may reflect a consolidated amount of unrelated business income in the Form 990 Part VIII, Statement of Revenue.

Statute of Limitations

  1. The general rules for the statute of limitations are:

    IRC 7502. Timely Mailing Treated as Timely Filing and Paying
    If the return is postmarked: And the return is received: The statute date is based on:
    On or before the normal due date Before, on or after the normal due date Normal due date
    After the normal due date
    (No extension)
    After the normal due date Service Center received date
    On or before the extension date
    (After the normal statute date)
    On or before the extension due date Service Center received date
    On or before the extension date
    (After the normal statute date)
    After the extension due date Postmark date
    After the extension date After the extension due date Service Center received date
  2. The central organization is subject to the standard filing requirements:

    2010 Tax Year and later
    (Filed in 2011 and later)
    Form to file
    Gross receipts normally ≤ $50,000 990-N
    Gross receipts > $200,000, and
    Total assets > $500,000
    990-EZ or
    990
    Gross receipts ≥ $200,000, or
    Total assets ≥ $500,000
    990

    Note:

    Organizations eligible to submit the e-Postcard or file Form 990-EZ may choose to file a full return.

  3. A group return is always filed on a Form 990.

  4. A central organization filing a group return on behalf of two or more affiliates uses a special Employer Identification Number (EIN) to file the group return. This EIN is provided with the group ruling letter. To research the EIN, use command code EOGENS (Exempt Organization Group Exemption Number) using the group exemption number (GEN) to find the EIN of the group return. Consult the Field Agent Support Team (FAST) if unable to find the EIN through regular IDRS research.

  5. A subordinate organization may or may not be included on a group return. Review BMFOLT (Business Master File Online Transcript) on IDRS for the subordinate's EIN for the year in question. If a subordinate has been included on the group return, BMFOLT reflects a transaction code (TC) 590 and closing code (CC) 14. The transaction will also reflect a "PAR EIN XX-XXXXXXX" .

  6. If a subordinate claims to have been included on a group return, but IDRS doesn’t show a TC 590 CC 14, secure a copy of the group return via Online SEIN. Review the return to see whether the subordinate is listed as included on the group return. Contact the FAST unit to request the input of the TC 590 CC 14.

    Note:

    If a parent organization doesn’t include the subordinate on the list of subordinates provided to the IRS annually, the subordinate isn’t recognized as part of the group exemption. In this situation, the subordinate's status on BMFOLO (Business Master File Online Organization)/INOLES (Online Entity) is 28, and is subject to a Form 1120 filing requirement.

  7. If a subordinate organization is included on a group return, the subordinate's statute of limitations for income tax is based on the filing of the group return. See the table in IRM 4.75.24.3.2(1) to determine the statute of limitations.

  8. If a subordinate organization is not included on a group return, the subordinate is subject to its own Form 990 filing requirements. See the table in IRM 4.75.24.3.2(2) for the filing requirements.

    1. If a subordinate does not file a required Form 990 return, follow delinquent return procedures in IRM 4.75.22, EO Delinquent, Amended, and Substitute for Return Procedures.

    2. If a subordinate does not file required Form 990 returns (or Form 990-N) for three consecutive years, the subordinate is subject to auto revocation. Refer to the survey procedures for auto-revoked organizations in IRM 4.75.16.5.2. You aren’t required to secure the delinquent Forms 990 that gave rise to the automatic revocation.

    3. If a parent organization fails to file its own return for three consecutive years, the parent organization will be automatically revoked and the entire group ruling is terminated.

Extending the Statute of Limitations
  1. Request a statute extension if the case is subject to Mandatory Review and there are less than 455 days remaining on the current statute of limitations. If not subject to Mandatory Review, ensure that you close the case to the EO Closing Unit with 180 days remaining on the statute.

  2. See below for officers authorized to sign a consent:

    If examining a Authorized to sign consent
    Subordinate organization's Form 990 series return Officers of the subordinate. If authorized, officers of the central (or intermediate) organization may sign on behalf of the subordinate.
    Central organization Only officers of the central organization.
    Group return Officers of the central organization. Use the special EIN of the group return

    Note:

    In some circumstances, contact Area Counsel when the subordinates are separate legal entities, such as corporations, trusts, or other entities.

  3. In all situations, if there is a duly authorized valid Power of Attorney, the POA may sign the consent on behalf of the organization. Attach a copy of the signed Power of Attorney to the signed consent form.

Unagreed Cases Protested to Appeals
  1. Remember these timeframes for an unagreed case with a formal protest to Appeals:

    • Review functions won’t accept protested cases subject to Appeals if there are less than 455 days (15 months) remaining on the statute of limitations for assessment.

    • Appeals won’t accept protested cases if less than 365 days remain until the expiration of the statute of limitations for assessment.

  2. For cases being returned to Appeals after consideration of a new issue or new information:

    • Review won’t accept a protested case if there are less than 270 days (9 months) remaining on the statute of limitations for assessment.

    • Appeals won’t accept cases if less than 180 days remain until the expiration of the statute of limitations for assessment.

  3. If Appeals returns a case to EO Examinations, there must be at least 210 days remaining on the statute of limitations when review receives it.

  4. For an unagreed case without protests, the case must have at least 270 days remaining on the statute of limitations when review receives it.

Notification Requirements

  1. You don’t have to notify a central organization of your audit of an intermediate or subordinate organization.

    Exception:

    terminations and revocations

  2. If unable to contact the subordinate organization, contact the central (or intermediate) organization for help contacting the officers of the subordinate. The central organization is responsible for ensuring that the subordinate organization continues to meet the requirements for exemption under the group ruling.

  3. See the following chart for the appropriate letter to issue and the group that issues the letter:

    Audit Issue Letter to issue Group responsible for issuance
    Revocation of subordinate organization ("removal from group exemption coverage" ) Letter 3618, 30-Day letter Audit group
    Letter to issue in response to 30-Day letter
    If valid protest received -
    Issue Letter 5326, if applicable
    Audit group
    If invalid protest or no reply -
    Final Adverse Determination Letter (FADL)
    Mandatory Review
    If agreement is secured -
    Final Adverse Determination Letter
    Mandatory Review
    Notification letter to Central Organization if revocation becomes final
    (Exhibit 4.75.24-1)
    Mandatory Review
    Revocation of Central Organization Letter 3618, 30-Day letter Audit group
    Letter to issue in response to 30-Day letter If valid protest received -
    Issue Rebuttal Letter 5326
    Audit group
    If invalid protest or no reply -
    Final Adverse Determination Letter(FADL)
    Mandatory Review
    If agreement is secured Final Adverse Determination Letter (FADL) Mandatory Review
    Termination of Subordinate/intermediate organization Termination Letter 5426 Mandatory Review
    Notification letter to Central Organization
    (Exhibit 4.75.24-3)
    Mandatory Review
    Termination of Central Organization Termination Letter 5426 Mandatory Review
  4. Prepare all letters issued to the taxpayer by the audit group. Note on the Form 3198-A, TE/GE Special Handling Notice, the file name for the letter and its folder location on RCCMS. Mandatory Review letters will be prepared and issued by Mandatory Review.

Revocations

  1. When determining that a subordinate or intermediate organization should no longer be tax-exempt, you are effectively proposing to remove the organization from the group ruling. This terminates their exempt status, and constitutes an adverse action that triggers the subordinate's rights to appeal. When writing the audit report, minimize the use of terms like "revoke" and "revocation" . Instead, use the phrase "removal from the group exemption" or some variation.

  2. Removal of any subordinates that are under an IRC 501 (c) or (d) group ruling triggers the administrative record requirement. See IRM 4.75.32, Declaratory Judgment Cases And The Administrative Record.

  3. A revocation of a central organization's exemption automatically results in the revocation of all subordinates in the group ruling.

  4. For all revocations of central or subordinate organizations under audit, prepare Form 2363-A, Request for IDRS Input for BMF/EO Entity Change, to update the Exempt Organizations Business Master File (EO BMF) status to 22. Leave the Form 2363-A in the case file (and/or upload the Form 2363-A to RCCMS). See IRM 4.75.31, for securing converted returns or enforcing income tax on revoked organizations.

  5. If Mandatory Review concurs with (or Appeals sustains) the revocation, Mandatory Review sends Form 2363-A to the FAST unit to update the EO BMF status to 22. If a central organization is revoked, the GEN file updates all the subordinates to status 28.

Terminations

  1. Organizations that have their own exemption letter are corporations, trusts, or associations. Organizations included under a group ruling may receive charters from the central organization. This is common with many fraternal and veterans organizations.

  2. For termination procedures, see IRM 4.75.16, Case Closing Procedures. When auditing a subordinate that has a charter from the parent, in lieu of or in addition to a certificate of incorporation, determine whether the charter has been rescinded/revoked by the central organization. Obtain a copy of the letter rescinding/revoking the charter of the subordinate entity.

  3. When a central organization dissolves/terminates, the group ruling's exemption is also terminated. The central organization notifies the subordinates of the termination of their exemption under the group ruling. A subordinate may then file for a separate exemption letter through the regular Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code/Form 1024, Application for Recognition of Exemption Under Section 501(a) or for Determination Under Section 120, procedures.

  4. For all subordinate/intermediate termination cases, prepare Form 2363-A to update the status to 20. Leave the Form 2363-A in the case file (and/or upload the Form 2363-A to RCCMS). Mandatory Review sends the Form 2363-A to the FAST unit when they finish reviewing the case.

  5. When a central organization terminates, prepare Form 2363-A to update the special EIN's status to 29. Leave the Form 2363-A in the case file (and/or upload the Form 2363-A to RCCMS). Mandatory Review sends the Form 2363-A to the FAST unit upon completion of the case review. When processed, the subordinates are updated to EO BMF status 28.

Concurrent Examinations

  1. A central organization’s group ruling dissolves when:

    1. A central organization is terminated.

    2. Its exemption is revoked (automatically or manually).

    3. It files a final return.

  2. The action impacts any current audit of an intermediate or subordinate organization. All members of the group ruling are updated to EO BMF status 28. Any former subordinate organizations who later file a Form 990 series return are updated to status 40 or 36, depending on the code section claimed on the return. Subordinate organizations are also placed in status 40 or 36 upon notification by a central organization that it is dissolving its group ruling (but not terminating).

  3. When possible, attempt to coordinate audits of parent and subordinate organizations. For those auditing subordinate organizations, check AIMS to see if the parent and/or the group return is under audit. Contact the audit group to discuss the audit issues and coordinate actions.

  4. Mandatory Review follows these actions when these events occur:

    For all central organization terminations and revocations:
    1. Mandatory Review or Appeals issues the final letter (termination or FADL to the central organization.)
    2. The reviewer, or Appeals, notifies the Manager, Mandatory Review, of the issuance of the letter to the central organization.
    3. The Manager, Mandatory Review, in turn notifies the Manager, FSL/ET, of the termination or revocation of the central organization.
    4. The Manager, FSL/ET, sends a secure e-mail to the Area Managers providing directions on any subordinates/intermediates in their inventories. See Exhibit 4.75.24-5 for terminations. See Exhibit 4.75.24-6 for revocations.
    5. When the waiting period per IRC 7428 ends, either the Statute Coordinator, Mandatory Review, or Appeals, depending on the location of the file, notifies the Manager, Mandatory Review of whether a petition was filed with the court.
    6. The Manager, Mandatory Review, informs the Manager, FSL/ET.
    7. If no petition was filed, the Manager, FSL/ET, sends a secure e-mail to the Area Managers instructing them to proceed with final actions. See Exhibit 4.75.24-7.

    Note:

    Cases where a petition was filed remain in suspense.

    8. Upon notification by Appeals or Counsel of the conclusion of the court case(s), the Manager, FSL/ET, sends a secure e-mail to the Area Managers with instructions for removing cases from suspense and concluding the audits. See Exhibit 4.75.24-8 and Exhibit 4.75.24-9.
  5. Follow these actions for the parent and subordinate organizations:

    If the parent's revocation/termination... Then for the subordinate...
    Occurs before the subordinate’s Close the examination of the Form 990.
    Pursue other taxes (excise/employment).
    Occurs after the subordinate’s Follow normal procedures.

Notification Letter to Central Organization - Revocation of Subordinate

Internal Revenue Service Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street M/C 4920 DAL
Dallas, TX 75242
Date: Taxpayer Identification Number:
[Insert TIN]
Person to Contact/ID Number:
[Insert name, ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
Contact Numbers:
Phone: [Insert phone number]
Fax: [Insert fax number]
Dear Sir or Madam:
RE: [Subordinate organization’s name]
EIN: [Subordinate organization’s EIN]
Effective [insert date], we removed [insert subordinate organization name] from coverage under your group exemption. Your subordinate is no longer exempt under Section 501(c)( _) of the Internal Revenue Code.
If you have any questions, please contact the person listed above.
Sincerely,
[Insert name]
Director, EO Examinations

90-Day Final Adverse Determination Letter - Revocation of 501(c) Subordinate

Internal Revenue Service Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street M/C 4920 DAL
Dallas, TX 75242
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Person to Contact:
[Insert name]
Employee Identification Number:
[Insert ID Number]
[Insert name of entity]
[Insert attention line]
[Insert street address]
[Insert city, state, and zip code]
Employee Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
CERTIFIED MAIL
Dear [Sir or Madam],
This is a final adverse determination regarding your exempt status under section 501(c)( ) of the Internal Revenue Code (the Code). Our favorable determination letter to you dated [date] is hereby revoked and you are no longer exempt under section 501(a) of the Code effective [date].
The revocation of your exempt status was made for the following reason[s]:
[Insert applicable and appropriate summary of the reasons for the revocation.]
Contributions to your organization are no longer deductible.
{Note: If, the organization has deductibility code “2”, this paragraph is not applicable}
You are required to file income tax returns on Form [1120 or 1041]. If you have not already filed these returns and the agent has not provided you instructions for converting your previously filed Form(s) 990 [or 990-EZ or 990-BL or 990-PF] to Form(s) 1120 [or Form(s) 1041], you should file these income tax returns with the appropriate Service Center for the tax year[s] ending [date], and for all tax years thereafter in accordance with the instructions of the return.
[As you were a private foundation as of the effective date of revocation, you are considered to be taxable private foundation until you terminate your private foundation status under section 507 of the Code. In addition to your income tax return, you must also continue to file Form 990-PF by the 15th Day of the fifth month after the end of your annual accounting period.]
Processing of income tax returns and assessments of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Internal Revenue Code.
If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: United States Tax Court, the United States Court of Federal Claims, or the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed before the 91st day after the date this determination was mailed to you if you wish to seek review of our determination. Please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory judgment by referring to the enclosed Publication 892. Please note that the United States Tax Court is the only one of these courts where a declaratory judgment action can be pursued without the services of a lawyer. You may write to the courts at the following addresses:
United States Tax Court
400 Second Street, NW
Washington, DC 20217
US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005
U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001
You also have the right to contact the Office of the Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute for established IRS procedures, such as the formal Appeals process. The Taxpayer Advocate cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You may call toll-free, 1-877-777-4778, and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your local Taxpayer Advocate at:
Taxpayer Advocate Service
[1st Line Address]
[2nd Line Address]
[City, State Zip]
[Phone Number]
If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.
Sincerely,
[Name of Designated Official]
Designated Official
Enclosure:
Publication 892

Notification Letter to Central Organization - Termination of Subordinate

Internal Revenue Service Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street M/C 4920 DAL
Dallas, TX 75242
Date: Taxpayer Identification Number:
[Insert TIN]
Person to Contact/ID Number:
[Insert name, ID number]
[Insert name of entity]
[Insert street address]
[Insert city, state, and zip code]
Contact Numbers:
Phone: [Insert phone number]
Fax: [Insert fax number]
Dear Sir or Madam:
RE: [Subordinate organization’s name]
EIN: [Subordinate organization’s EIN]
Effective [insert date], [insert subordinate organization’s name]’s exemption under Section 501(c)( _) of the Internal Revenue Code is terminated because [insert subordinate’s name] dissolved.
As a result, your group ruling letter no longer covers [insert subordinate organization’s name].
If you have any questions, please contact the person listed above.
Sincerely,
[Insert name]
Director, EO Examinations

Central Organization 90-Day Final Adverse Determination Letter (501(c)(3))

Internal Revenue Service Department of the Treasury
TE/GE Exempt Organizations Examinations
1100 Commerce Street M/C 4920 DAL
Dallas, TX 75242
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Person to Contact:
[Insert name of reviewer]
Employee Identification Number:
[Insert ID Number]
[Insert name of entity]
[Insert attention line]
[Insert street address]
[Insert city, state, and zip code]
Employee Telephone Number:
[Insert phone number] (Phone)
[Insert fax number] (Fax)
CERTIFIED MAIL
Dear [Sir or Madam]:
This is a final adverse determination regarding your exempt status under section 501(c)(3) of the Internal Revenue Code (the Code). Our favorable determination letter to you dated [date] is hereby revoked and you are no longer exempt under section 501(a) of the Code effective [date].
The revocation of your exempt status was made for the following reason[s]:
[Insert applicable and appropriate summary of the reasons for the revocation.]
Contributions to your organization are no longer deductible.
{Note: If, the organization has deductibility code "2" , this paragraph is not applicable}
Revenue Procedure 80-27 provides guidance on group exemptions. According to this revenue procedure, when we revoke your tax exemption, we also revoke your group exemption. Effective [date], your Group Exemption Number [insert GEN] is no longer valid. Please tell your subordinates of this action. Each subordinate that wants tax exemption should file an individual application. Otherwise, each subordinate should file a federal tax return.
You are required to file federal tax returns for the tax period(s) shown above. Unless an extension of time is granted or the returns are already filed, send them to Ogden Service Center within 60 days from the date on this letter. Returns for later years are filed with the appropriate service center indicated in the return instructions.
If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following venues:


the United States Tax Court
the United States Court of Federal Claims
the United States District Court for the District of Columbia
A petition or complaint in one of these three courts must be filed before the 91st day after the date this determination was mailed to you if you wish to seek review of our determination. Please contact the clerk of the respective court for rules and the appropriate forms regarding filing petitions for declaratory judgment by referring to the enclosed Publication 892. Please note that the United States Tax Court is the only one of these courts where a declaratory judgment action can be pursued without the services of a lawyer. You may write to the courts at the following addresses:
United States Tax Court
400 Second Street, NW
Washington, DC 20217
U.S. Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005
U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001
Filing a petition for declaratory judgment however, does not delay the processing of income tax returns and assessments of any taxes due.
You have the right to contact the Taxpayer Advocate Service. Their assistance is not a substitute for established IRS procedures, such as the formal appeals process. They cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States court. However, they can see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling. You may call toll-free 1-877-777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact your local Taxpayer Advocate at:
Internal Revenue Service
Taxpayer Advocate Service
[1st Line Address]
[2nd Line Address]
[City, State, Zip]
[Phone Number]
If you have any questions, please contact the person listed above.
Sincerely,
[Insert name]
Director, EO Examinations
Enclosures:
Publication 892
Form 6018, Consent to Proposed Action - Section 7428

Secure E-Mail message from Manager, ET/FSL, to Area Managers Regarding the Termination of a Central Organization

Subject: Central Organization Termination

On [insert date], Mandatory Review issued a termination letter to [insert name of organization]. Under Rev. Proc. 80-27, the group exemption is dissolved. Any organization under GEN [insert GEN] will now be updated to EO BMF status 28 and may be subject to a Form 1120 filing requirement.

Please check your inventory to see if you have any subordinate organizations included in the group ruling of the aforementioned parent under examination. If you have cases in status 10, please survey the case. If you have cases in status 12, continue to pursue any excise and/or employment taxes. For income tax purposes for years prior to [insert effective date of termination], continue to pursue unrelated business income. For years after that date, follow the instructions in IRM 4.75.31 for converted returns.

Secure E-Mail message from Manager, ET/FSL, to Area Managers Regarding the Revocation of a Central Organization (FADL Issued)

Subject: Central Organization Final Adverse Determination Letter Issued

On [insert date], Mandatory Review issued a 90-day final adverse determination letter proposing revocation to [insert name of central organization]. Under Rev. Proc. 80-27, the group exemption will be revoked if the revocation becomes final. Any organization under GEN [insert GEN] would be updated to EO BMF status 28 and may be subject to a Form 1120 filing requirement.

Please check your inventory to see if you have any subordinate organizations included in the group ruling of the aforementioned parent under examination. If you have cases in status 10, please survey the case. If you have cases in status 12, continue to pursue any excise and/or employment taxes. For income tax purposes for years prior to [insert effective date of revocation], continue to pursue unrelated business income. For any cases where you are pursuing revocation or would consider income taxes/converted returns in subsequent years, request a statute extension for at least one year and suspense the case.

Secure E-Mail message from Manager, ET/FSL, to Area Managers Regarding the Revocation of a Central Organization (FADL Not Petitioned)

Subject: Central Organization Revocation Final

On [insert date], Mandatory Review issued a 90-day final adverse determination letter proposing revocation to [insert name of central organization], which did not file a petition with the courts. Under Rev. Proc. 80-27, the group exemption is revoked. Any organization under GEN [insert GEN] is to be updated to EO BMF status 28 and may be subject to a Form 1120 filing requirement.

Please check your inventory to see if you have any subordinate organizations included in the group ruling of the aforementioned parent under examination. If you have cases in status 10, please survey the case. If you have cases in status 12, continue to pursue any excise and/or employment taxes. For income tax purposes for years prior to [insert effective date of revocation], continue to pursue unrelated business income. For subsequent years, see IRM 4.75.31 for converted returns. If pursuing revocation but no taxes, survey the case. The appropriate closing letter is a custom letter.

Secure E-Mail message from Manager, ET/FSL, to Area Managers Regarding the Revocation of a Central Organization (Courts Upheld)

Subject: Central Organization Final Adverse Letter Petitioned

On [insert date], Mandatory Review issued a 90-day final adverse determination letter proposing revocation to [insert name of central organization]. The organization has lost its court case. Under Rev. Proc. 80-27, the group exemption is revoked. Any organization under GEN [insert GEN] is to be updated to EO BMF status 28 and may be subject to a Form 1120 filing requirement.

Please check your inventory to see if you have any subordinate organizations included in the group ruling of the aforementioned parent under examination. If you have cases in status 10, please survey the case. If you have cases in status 12, continue to pursue any excise and/or employment taxes. For income tax purposes for years prior to [insert effective date of revocation], continue to pursue unrelated business income. For subsequent years, see IRM 4.75.31 for converted returns. If pursuing revocation but no taxes, survey the case. The appropriate closing letter is a custom letter.

Secure E-Mail message from Manager, ET/FSL, to Area Managers Regarding the Revocation of a Central Organization (Courts Rejected)

Subject: Central Organization Final Adverse Letter Petitioned

On [insert date], Mandatory Review issued a 90-day final adverse determination letter proposing revocation to [insert name of central organization]. We did not prevail in the court case. Therefore, please check your inventory to see if you have any subordinate cases in suspense. If so, please remove those cases from suspense and continue with the examinations.