7.20.3  Processing Foundation Classification and Miscellaneous Requests

Manual Transmittal

October 02, 2015

Purpose

(1) This transmits revised IRM 7.20.3, Exempt Organizations Determination Letter Program, Processing Foundation Classification and Miscellaneous Requests.

Material Changes

(1) Substantially revised this IRM to reflect current processing procedures.

(2) Reorganized subsections for clarity.

(3) Removed technical information, providing references to the information available in other IRMs, the IRC, or other citable sources.

(4) Incorporated Interim Guidance Memoranda TEGE-07-1014-0027, Interim Guidance for Determination Letter Request Case Designation and Processing, TEGE-07-0315-0006, Streamlined Processing Guidelines for All Cases, and TEGE-07-0915-0022, Updated Procedures for Requesting Additional Information.

(5) Made editorial changes throughout the IRM.

(6) Removed prior IRM 7.20.3.4 (and related subsections) because these types of requests are no longer processed as F cases.

(7) Revised prior IRM 7.20.3.7 (and related exhibits) to remove procedures related to specific programs.

(8) Revised prior IRM 7.20.3.8 to reflect current procedures and that cases are established as A cases.

Effect on Other Documents

This supersedes IRM 7.20.3 dated February 7, 2014.
This incorporates Interim Guidance Memorandum TEGE-07-1014-0027, Interim Guidance for Determination Letter Request Case Designation and Processing, TEGE-07-0315-0006, Streamlined Processing Guidelines for All Cases, and TEGE-07-0915-0022, Updated Procedures for Requesting Additional Information.

Audience

Tax Exempt and Government Entities
Exempt Organizations

Effective Date

(10-02-2015)

Tamera L. Ripperda
Director, Exempt Organizations
Tax Exempt and Government Entities

7.20.3.1  (10-02-2015)
Overview

  1. This IRM provides procedural guidance to process:

    1. Foundation classification requests submitted as part of Form 1023, Application for Recognition of Exemption Under IRC 501(c)(3) of the Internal Revenue Code

    2. Group ruling requests

    3. Requests from government entities requesting voluntary termination of recognition under IRC 501(c)(3)

    4. Requests submitted on Form 8940, Request for Miscellaneous Determination Under Section 507, 509(a), 4940, 4942, 4945, and 6033 of the Internal Revenue Code, including:

    • Foundation reclassifications including termination of private foundation classification

    • Exceptions from Form 990-series filing requirements

    • Foundation classification of non-exempt charitable trusts

    • Advance approvals of grant making procedures, set-asides, unusual grants, and voter registration activities

    Note:

    See IRM 7.20.9, Processing Form 1023-EZ, for foundation classification requests submitted as part of Form 1023-EZ, Streamlined Application for Recognition of Exemption Under IRC 501(c)(3) of the Internal Revenue Code.

  2. Most determination letter requests are subject to a user fee (see Rev. Proc. 2015-8, updated annually). Requests submitted as part of an initial application (e.g., foundation classification, Form 990 filing exception, etc.) are considered part of the initial application and aren’t subject to an additional user fee.

  3. A separate Form 8940 and user fee are generally required for each type of request listed on Form 8940.

    Exception:

    A request for reclassification as a public charity under IRC 509(a)(3) that checks boxes f and g of Form 8940 or a request for advance approval of grant making procedures for a program described in both 4945(g)(1) and 4945(g)(3) is considered a single request.

  4. Exempt Organizations (EO) Determinations makes determinations on these issues (see Rev. Proc. 2015-4, updated annually). EO Determinations specialists perform all actions in this manual unless noted.

  5. These IRM procedures supplement (rather than replace) case processing procedures in IRM 7.20.2, Determination Letter Processing of Exempt Organizations, except as noted throughout the IRM.

    Reminder:

    IRM 7.20.2 lists procedures for contacting an organization or developing cases by preparing Letter 1312, Request for Additional Information, using appropriate approved streamline, pre-written, and/or individually composed questions or approving cases that meet the requirements for the requested determination.

  6. This IRM doesn’t provide detailed technical guidance for making determinations on the different types of cases. We’ve referred to applicable technical guidance cites throughout.

    Note:

    The Instructions for Form 8940 describe suggested documentation that an organization should provide for each type of request listed on the form.

7.20.3.1.1  (10-02-2015)
References

  1. Determination letter requests discussed in this IRM vary in how certain rules apply to the requests:

    1. IRC 7428 declaratory judgment provisions

    2. IRC 6104 or IRC 6110 disclosability

    3. Protest/appeal rights on adverse determinations

  2. The following table identifies the different types requests discussed in this IRM and how these rules apply to the type of request:

    Type of Determination Request IRC 7428 Disclosability of Approval Determination Disclosability of Adverse Determination Appeal rights of Adverse Determination
    I Case
    Approving exemption with adverse foundation classification
    Yes 6104 6104 Yes
    A Case
    Foundation classification (other than exempt operating foundation (EOF))
    Yes 6104 6104 Yes
    A Case
    Foundation classification EOF
    No 6104 6104 No
    P Case
    Termination of private foundation classification
    Yes 6104 6104 Yes
    A Case
    NECT 509(a)(3) qualification
    Yes 6104 6104 No
    A Case
    Other miscellaneous requests and advance approval of unusual grants
    No 6110 6110 No
    A Case
    990 filing exemption
    No 6104 6104 No
    A Case
    Voluntary termination of 501(c)(3) status by a government entity
    No 6104 6110 No
    A Case
    Group exemption under 501(c)(3)
    Yes 6104 6110 Yes
    A Case
    Group exemption under non-501(c)(3)
    No 6104 6110 Yes
    A Case
    Group exemption declination
    No N/A (not a determination) N/A (not a determination) No

7.20.3.2  (10-02-2015)
Processing Initial and Reinstatement Foundation Classification Requests

  1. An organization requests and receives a foundation classification as part of its initial or reinstatement request for exemption (e.g., Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code).

  2. An organization exempt under IRC 501(c)(3) is classified as private foundation unless it meets an exclusion as a public charity described in IRC 509(a)(1) through IRC 509(a)(4). See IRC 509(a), IRC 508(b), and 26 CFR 1.508-1(b).

7.20.3.2.1  (10-02-2015)
Processing Initial and Reinstatement Public Charity Requests

  1. When processing an application for initial or reinstatement of exemption under IRC 501(c)(3), grant an organization the best classification for which it qualifies considering all facts and circumstances including its:

    • Primary purpose

    • Sources of support

    • Requested classification/preference

    Note:

    See IRM 7.20.9, Processing Form 1023-EZ, for information on foundation classification consideration on Form 1023-EZ.

  2. If an organization requests a public charity classification for which it doesn’t meet the requirements:

    1. Consider other public charity classifications.

    2. Discuss with the organization, as appropriate.

  3. If the organization doesn’t agree to change its requested classification (or qualify under any public charity classification), process the request as an adverse foundation classification. See IRM 7.20.3.2.1.2, Requested Public Charity Classification Requirements Not Met, and IRM 7.20.3.2.3, Processing Initial and Reinstatement Adverse Determinations on Foundation Classification.

7.20.3.2.1.1  (10-02-2015)
Public Support Test Considerations

  1. When processing an initial or reinstatement application from an organization requesting public charity classification under IRC 170(b)(1)(A)(vi) or IRC 509(a)(2) and the organization existed for five or more years:

    1. If the foundation classification requires development, request a statement affirming the organization has continuously met the public support test from inception and any financial data needed to calculate public support for the most recent five years.

    2. If you suspect that the organization would fail the public support test based on earlier years, request additional information or make a determination based on the available information (without requesting information regarding earlier years).

    3. If necessary to determine qualification for a public charity classification, complete either:

      • Form 14321, Public Support Test Computation Guidesheet - 170(b)(1)(A)(vi)

      • Form 14396, Public Support Test Computation Guidesheet - 509(a)(2)

  2. If an organization can’t meet a public support test because of one or more unusually large contributions, consider whether it may be entitled to exclude the contributions as unusual grants when computing its public support. See IRM 7.26.3.4.6, Exclusion of Unusual Grants, for unusual grant considerations.

    Note:

    If the contributions don’t constitute unusual grants, see IRM 7.20.3.2.1.2, otherwise, document the unusual grant in the case file.

7.20.3.2.1.2  (10-02-2015)
Requested Public Charity Classification Requirements Not Met

  1. If an organization doesn’t meet the requirements for its requested public charity classification or appears better qualified under a different classification, consider the following:

    If the organization Then
    Hasn’t requested its best foundation classification (e.g., has requested classification as IRC 509(a)(2) appearing to meet the requirements for classification under IRC 170(b)(1)(A)(vi)) and you don’t need any other information Grant the more favorable public charity classification without contacting the organization and document the reason for changing the foundation classification.
    Doesn’t qualify for its requested public charity classification under IRC 509(a) but appears to qualify for a different foundation classification under IRC 509(a) based on information in the case file Contact the organization to explain why it doesn’t qualify for its requested classification, the classification it does appear to qualify under, and any impact of the proposed change. Follow the other guidelines in this chart based on the organization’s response.
    Agrees to a less favorable public charity classification when contacted (including switching from church, school, or hospital classification) Obtain a revised Form 1023 page 10 or 11 (initialed and dated by an authorized person) or a signed statement agreeing to the change in foundation classification.
    Disagrees with the proposed change in public charity classification and wants to submit additional information to support its position Request the necessary additional information. See IRM 7.20.2, Determination Letter Processing for Exempt Organizations, for procedures on requesting additional information.
    Submits additional information which supports its requested public charity classification Close the case with a the requested public charity classification.
    Disagrees with proposed change in classification or submits additional information which doesn’t support a favorable determination on the public charity classification requested Close the case with an adverse foundation classification determination. See IRM 7.20.3.2.3, Processing Initial and Reinstatement Adverse Determinations on Foundation Classification.

    Reminder:

    Secure a written agreement for a change from church, school, or hospital classification to any other public charity classification because the change may affect the organization’s operations and filing requirements. A change from church classification also results in the loss of protection under IRC 7611.

7.20.3.2.1.3  (10-02-2015)
Public Charity Case Closing Assistance

  1. When you approve a case for an organization classified as a public charity, prepare Letter 947, 501(c)(3) Exemption with Definitive Ruling of Public Charity Status, for most cases.

  2. When you approve a case for an organization operating a school but which isn’t required to file Form 990 or Form 990-EZ, include the Letter 947 selective paragraph which states that the organization is responsible for filing Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax.

  3. When you close a case for a charter school under IRC 170(b)(1)(A)(ii), include the Letter 947 selective paragraph about compliance with Rev. Proc. 75-50 if the school doesn’t operate as a charter school in the future.

  4. When you approve a case for an organization classified under IRC 509(a)(3), include the Letter 947 selective paragraph specifying whether it is a Type I, II, III (functionally integrated), or III (non-functionally integrated) supporting organization.

  5. When you approve a case for an organization classified under IRC 509(a)(4), compose a letter similar to Letter 947, but stating contributions aren’t deductible.

    Example:

    "We’re pleased to tell you we determined you’re exempt from federal income tax under Internal Revenue Code (IRC) Section 501(c)(3). Organizations exempt under IRC Section 501(c)(3) are further classified as either public charities or private foundations. We determined you’re a public charity under 509(a)(4). Because you’re classified under Section 509(a)(4), donors can’t deduct contributions they make to you under Section 170. Also, you aren’t qualified to receive tax deductible bequests, devises, transfers, or gifts under Section 2055, 2106, or 2522. This letter could help resolve questions regarding your exempt status. Please keep it for your records."

7.20.3.2.1.4  (10-02-2015)
Public Charity Technical Guidance

  1. See IRM 7.26, Private Foundations Manual, for technical guidance for all foundation classifications under IRC 501(c)(3). The table below provides additional resources for each public charity classification to help you make a determination on foundation classification.

    Note:

    You aren’t required to complete a guidesheet when processing a case; however, if you do, consider including it in the case file at closing.

    Private Foundation Exclusions
    Entity Type IRC Section(s) Technical Guidance Available Guidesheets
    Church or convention or association of churches IRC 509(a)(1) and IRC 170(b)(1)(A)(i)
    • American Guidance Foundation v. U.S., 490 F. Supp. 304, (D.D.C. 1980)

    • IRC 7701(n)

    • Rev. Rul. 74-224

    • IRM 7.25.3.6, Religion or Advancement of Religion

    • IRM 7.26.2.2, IRC 170(b)(1)(A)(i) Exclusion - Church or Convention or Association of Churches

    • Form 14312, Church Guidesheet

    School IRC 509(a)(1) and IRC 170(b)(1)(A)(ii)
    • 26 CFR 1.170A-9(c)(1)

    • Rev. Proc. 75-50

    • IRM 4.76.8, Private and Charter Schools

    • IRM 7.25.3.7, Educational Purposes

    • IRM 7.26.2.3, IRC 170(b)(1)(A)(ii) Exclusion – Educational Organizations

    • Form 14314, Revenue Procedure. 75-50 Guidesheet

    • Form 14323, Charter School Guidesheet

    Hospital/medical research IRC 509(a)(1) and IRC 170(b)(1)(A)(iii)
    • IRC 501(r)

    • 26 CFR 1.501(r)-1 to 7

    • Rev. Proc. 2015-21

    • Notice 2015-46

    • Notice 2012-4

    • IRM 7.25.3.11, Health

    • IRC 7.26.2.4, IRC 170(b)(1)(A)(iii) Exclusion—Hospitals and Medical Research Organizations

     
    Organizations for the benefit of certain state and municipal colleges and universities IRC 509(a)(1) and IRC 170(b)(1)(A)(iv)
    • IRM 7.26.2.5, IRC 170(b)(1)(A)(iv) Exclusion - Organizations for the Benefit of Certain State and Municipal Colleges and Universities

     
    Governmental entity IRC 509(a)(1) and IRC 170(b)(1)(A)(v)
    • IRM 7.26.2.6, IRC 170(b)(1)(A)(v) Exclusion - Governmental Units

    • Form 14324, Organizations Closely Affiliated with State or Indian Tribal Governments Guidesheet

    Publicly supported IRC 509(a)(1) and IRC 170(b)(1)(A)(vi)
    • 26 CFR 1.170A-9(f)(1)

    • IRM 7.26.3, Private Foundations Defined - IRC 509(a)(1) and 170(b)(1)(A)(vi) Exclusion

    • Rev. Rul. 82-132

    • Form 14321, Public Support Test Computation Guidesheet -170(b)(1)(A)(vi)

    Publicly supported IRC 509(a)(2)
    • IRM 7.26.4, Private Foundations Defined - IRC 509(a)(2) Exclusion

    • Form 14396, Public Support Test Computation Guidesheet - 509(a)(2)

    Supporting organizations IRC 509(a)(3)
    • 26 CFR 1.509(a)-4

    • IRM 7.26.5, Private Foundations Defined - IRC 509(a)(3) Exclusion

    • Form 14316, Section 509(a)(3) Supporting Organizations Guidesheet (Type I)

    • Form 14316A, Section 509(a)(3) Supporting Organizations Guidesheet (Type II)

    • Form 14317, Section 509(a)(3) Supporting Organizations Guidesheet (Type III)

    Testing for public safety IRC 509(a)(4)
    • IRM 7.26.2.7, IRC 509(a)(4) Exclusion -Testing for Public Safety

     

7.20.3.2.2  (10-02-2015)
Processing Initial and Reinstatement Private Foundation Classification Requests and Case Closing

  1. An organization can request private foundation classification when it applies for exemption under IRC 501(c)(3). A private foundation can request further classification as a private operating foundation defined in IRC 4942(j)(3) (see IRM 7.20.3.2.2.1).

  2. A private foundation must include certain provisions in its organizing document requiring it to act or refrain from acting so that it won’t be liable for taxes imposed by IRC 4941, IRC 4942, IRC 4943, IRC 4944, and IRC 4945 (see IRC 508(e)). Private foundations, except those organized in New Mexico, meet this requirement through state-enacted statutory provisions (unless language in the organizing document specifically contradicts the state’s provisions) (see Rev. Rul. 75-38).

    Note:

    Rev. Rul. 75-38 hasn’t been updated to reflect that Arizona non-profit law now contains IRC 508(e) provisions.

  3. If a private foundation formed in New Mexico doesn’t include the following provisions in its organizing document, secure an amendment to the document:

    1. [This organization] must comply with the income distributing requirements of IRC 4942.

    2. [This organization] is prohibited from action in violation of IRC 4941, 4943, 4944, and 4945.

  4. Private foundations (including private operating foundations) must request advance approval of grant making procedures under IRC 4945(g) to avoid excise taxes on the grants.

  5. A foundation can request advance approval on its Form 1023 application by completing Schedule H and providing a complete description of its scholarship/grant program (see IRM 7.20.3.3.6 for more information on IRC 4945(g)).

    Note:

    If a private foundation submits information on a scholarship or grant program but doesn’t complete Schedule H or request advance approval under IRC 4945(g), process as a request under IRC 4945(g) (see Rev. Rul. 86-77).

    Note:

    Information on advance approvals under IRC 4945(g) submitted as part of a Form 1023 application are subject to public disclosure under IRC 6104.

  6. For additional technical guidance on private foundation classification, see IRM 7.26.1, Introduction to Private Foundations and Special Rules Under IRC 508.

  7. When you approve a case for an organization classified as a private foundation, prepare Letter 1076, Determination of Exemption Under Section 501(c)(3) as a Private Foundation or Private Operating Foundation, for most cases.

    • If the organization is further classified as a private operating foundation, include the appropriate selective paragraph in the letter.

    • If the organization fully and completely discloses its grant making procedures that meet the requirements of 26 CFR 53.4945-4(c)(1), include the appropriate selective approval paragraphs in the determination letter (see the EDS Closing Worksheet for paragraph numbers and text).

7.20.3.2.2.1  (10-02-2015)
Private Operating Foundation Considerations

  1. A private operating foundation actively conducts its own programs and activities. Contrast this to a private non-operating foundation, which passively distributes funds to accomplish its exempt purpose (e.g., providing grants to other entities or to individuals).

  2. To qualify as a private operating foundation, an organization must demonstrate how it meets both the:

    1. Income test

    2. Either: assets, endowment, or support test

  3. An organization in existence for less than one year may submit an affidavit (or the organization counsel’s opinion) stating in good faith how the assets test and one of the other tests are likely to be met (i.e., a good faith determination).

  4. If an organization requests but doesn’t meet the requirements for classification as a private operating foundation and doesn’t agree to classification as a private non-operating foundation, process the case as an adverse determination on foundation classification (see IRM 7.20.3.2.4, Processing Initial and Reinstatement Adverse Determinations on Foundation Classification).

  5. See 26 CFR 53.4942(b)-1 and IRM 7.26.6, Private Operating Foundations - IRC 4942(j)(3), for technical guidance on private operating foundations.

7.20.3.2.3  (10-02-2015)
Processing Initial and Reinstatement Adverse Determinations on Foundation Classification

  1. If an organization meets the requirements for exemption under IRC 501(c)(3) but doesn’t meet the requirements for its requested classification:

    1. Secure your group manager’s agreement on the adverse position.

    2. Advise the organization of the reason(s) why it doesn’t qualify for the requested foundation classification and explain the classification you are giving it (e.g., the impact of being classified as a private foundation).

    3. Prepare Letter 1079, Exemption Determination with Adverse Issue, detailing the reasons for the proposed adverse issue in Enclosure I of the letter following the format listed for proposed adverse determination letters in IRM 7.20.2.

      Note:

      Don’t prepare a legend for the letter.

    4. Follow the procedures for adverse determinations in IRM 7.20.2.

      Exception:

      Complete closing information as an approval (closing code and determination code 01, etc.).

      Reminder:

      Prepare the case for mandatory review because adverse determinations (including favorable determinations with adverse issues) are subject to mandatory review.

7.20.3.2.4  (10-02-2015)
Processing Initial Determination Requests (Form 1023) From Non-exempt Charitable Trusts

  1. A non-exempt charitable trust (NECT) can request recognition under IRC 501(c)(3) by submitting Form 1023. An NECT is identified in IDRS by a Subsection Code of 90, 91, or 92 and Type of Organization 6.

    Reminder:

    An NECT can request classification as a supporting organization described in IRC 509(a)(3) without requesting recognition of exemption under IRC 501(c)(3) by submitting Form 8940 (see IRM 7.20.3.3.4).

  2. Follow the application processing procedures in IRM 7.20.2, Determination Letter Processing of Exempt Organizations to process a Form 1023 application from an NECT.

  3. If the NECT:

    1. Meets the organizational and operational tests and all other IRC 501(c)(3) requirements, grant a favorable determination using the appropriate determination letter (Letter 947 or Letter 1076). The trust is no longer an NECT.

    2. Doesn’t meet the IRC 501(c)(3) requirements for exemption, discuss the option of withdrawing the request for exemption with the organization. Process as a proposed adverse determination if the organization doesn’t withdraw its request (see IRM 7.20.2).

  4. If you close Form 1023 from an NECT as a:

    1. Withdrawal or as a failure to establish (FTE) (if organization doesn’t respond to an additional information request), see IRM 7.20.3.2.4.1, Non-exempt Charitable Trust Form 1023 Withdrawal or FTE.

    2. Proposed adverse determination, follow the adverse determination procedures in IRM 7.20.2, using a proposed closing code of Status 12 (Other Closing) to retain the NECT’s current status information on Master File.

  5. See IRM 7.26.15, IRC 4947 Trusts, and IRM 4.76.5, Charitable Trusts (IRC 4947(a)(1) and 4947(a)(2)), for technical guidance on NECTs.

7.20.3.2.4.1  (10-02-2015)
Non-exempt Charitable Trust Form 1023 Withdrawal or FTE

  1. Because an NECT’s unsuccessful application for exemption under IRC 501(c)(3) doesn’t change its status as a charitable trust under IRC 4947(a)(1), close the case per IRM 7.20.2 closing procedures except as noted in this section.

  2. If you close the case as a:

    1. Withdrawal: create a withdrawal letter similar to Letter 4785, AFP Case Withdrawal, and Letter 2244, Withdrawal of Exemption Determination Request, and close case Status 04 (Withdrawn by T/P).

    2. FTE: create a letter similar to Letter 1314, EO Determination Request Closed - Failure to Establish, and close case Status 12 (Other) to retain NECT status information on Master File.

  3. Include the following language in the case closing letter if the NECT is currently treated as a private foundation: "Our records indicate you are considered a charitable trust under IRC Section 4947(a)(1) that is treated as a private foundation and are required to file:"

    • "Form 990-PF"

    • "Form 1041 (if you have zero taxable income under Subtitle A of the Code, you may use Form 990-PF to satisfy the requirements of filing Form 1041)"

    • "Form 4720 (if you have a liability for Chapter 42 excise tax (excluding IRC 4940))"

  4. Include the following language in the case closing letter if the NECT is currently treated as supporting organization under IRC 509(a)(3): "Our records indicate you are considered a charitable trust under IRC Section 4947(a)(1) and are subject to the following filing requirements:"

    • "Form 990 or Form 990-PF, depending on your foundation classification"

    • "Form 1041 (if you have zero taxable income under Subtitle A of the Code, you may use Form 990 or Form 990-PF to satisfy the requirements of filing Form 1041)"

    • "Form 4720 (if you have a liability for Chapter 42 excise tax (excluding Section 4940))"

7.20.3.3  (10-02-2015)
Processing Other Miscellaneous Determination Letter Requests

  1. An organization can request a miscellaneous determination letter by submitting a letter request (e.g., group ruling request) or Form 8940, Request for Miscellaneous Determination Under IRC 507, IRC 509(a), IRC 4940, IRC 4942, IRC 4945, and IRC 6033 (as applicable), along with the appropriate user fee. We establish a miscellaneous determination letter request as an amendment (A) case or a termination of private foundation classification (P) case, based on the requested determination. Miscellaneous determination letter requests include:

    1. Reclassification of foundation classification (including a voluntary request for private foundation classification, correction of erroneous classification as a private foundation, and classification as an exempt operating foundation under IRC 4940(d)(2))

    2. Termination of private foundation classification under IRC 507(b)(1)(B) (beginning and ending of termination)

    3. Determination of or change in Type (of supporting organization)

    4. Foundation classification of an NECT

    5. Advance approval of:

      • A potential grant or contribution as an unusual grant

      • Grant making procedures described under IRC 4945(g)

      • Certain set-asides described under IRC 4942(g)(2)

      • Voter registration activities described under IRC 4945(f)

    6. Exception from IRC 6033 filing requirements

    7. Voluntary termination of IRC 501(c)(3) status by a government entity

    8. A group exemption ruling

  2. Secure IDRS research for the case. Research prior determination cases as necessary.

  3. Process the case per the procedures in IRM 7.20.2 (including requesting additional information or closing a case as FTE) unless noted otherwise throughout this IRM. Other processing exceptions to IRM 7.20.2 include:

    • Enter closing information using current Master File information unless specified in this IRM.

    • Prepare Letter 4785, AFP Withdrawal, when closing an A or P case as a withdrawal. Close the case Status 12 (Other).

    • For closing adverse determinations, prepare Letter 4786, Amendment Requests, Adverse Letter. Close the case Status 12 (Other). Prepare Form 2363-A, Request for IDRS Input for BMF-EO Entity Change, to update Master File, if necessary.

    • See IRM 7.20.3.1.1, References, to determine the appropriate appeal rights, IRC 7428 declaratory judgment provisions, and IRC 6104 or IRC 6110 disclosure provisions for the specific type of request.

  4. Don’t import the closing letter into TEDS.

7.20.3.3.1  (10-02-2015)
Request for Reclassification of Foundation Classification

  1. An organization exempt under IRC 501(c)(3):

    1. Receives a foundation classification as part of its initial or reinstatement of exempt status determination.

    2. May request a change to its given foundation classification for many reasons including changes in activities or revenue sources.

    3. Requests a change in foundation classification by submitting Form 8940 and the appropriate user fee.

  2. Reclassification requests include:

    • Changing from one public charity classification to another (including requests from subordinate organizations) (IRM 7.20.3.3.1.1)

    • Correcting an error of private foundation classification to public charity classification (including an organization with an advanced ruling that expired before June 9, 2008 that did not submit Form 8734) (IRM 7.20.3.3.1.2)

    • Changing from public charity classification to private foundation classification (IRM 7.20.3.3.1.3)

    • Changing from private non-operating foundation classification to private operating foundation classification (IRM 7.20.3.3.1.4)

    • Requesting classification as an exempt operating foundation (IRM 7.20.3.3.1.5)

  3. See Instructions for Form 8940 for suggested documentation that organizations should provide for each type of reclassification request.

  4. For all reclassification requests, if the organization doesn’t meet the requirements for its request for reclassification of foundation classification, process as a proposed adverse amendment request (see IRM 7.20.3.3).

7.20.3.3.1.1  (10-02-2015)
Request Reclassification from One Public Charity Classification to Another

  1. An organization requesting a change from one public charity classification to another must submit sufficient supporting information to establish it meets its requested classification. A subordinate in a group ruling may request a reclassification from one public charity classification to another.

  2. Request additional information as necessary to determine whether the organization meets the requested classification (see IRM 7.20.3.2.1.4, Public Charity Technical Guidance). When you have sufficient information to make a determination:

    If you propose Then
    A favorable determination on the reclassification request Prepare Letter 4425, Change in Foundation Approval, and prepare the case for closing. Update the foundation classification when closing the case. (See below for additional requirements for a subordinate organization.)
    A favorable determination on the reclassification request for a subordinate organization Complete the steps for proposing a favorable determination described above and complete Form 2363-A to update the organization’s affiliation code to "9" and correct the foundation code using:
    • Document Code 80

    • Transaction Code 016

    • Definer Code C
      Complete fields 1, 2, 3, 4, 20, 23, 27, and 39-43

    An adverse determination on the reclassification request Process as an adverse amendment request (see IRM 7.20.3.3).

7.20.3.3.1.2  (10-02-2015)
Request Correction of Erroneous Classification as a Private Foundation

  1. An organization that claims it was erroneously classified as a private foundation or an organization with an advance ruling that expired before June 9, 2008, that didn’t timely submit Form 8734 to the IRS may request correction of the error and be classified as a public charity (Rev. Proc. 2015-10, Section 3.04 (updated annually)) if it:

    1. Submits Form 8940.

    2. Pays the appropriate user fee.

    3. Submits financial information for its five most recent years and/or other documentation supporting its public charity classification or otherwise shows it continuously met the public support tests.

    Note:

    An organization that is reclassified as a public charity may request a refund of paid investment income excise taxes (on open statutory periods) from the appropriate IRS office (Ogden).

  2. If additional information is needed, request any information necessary to determine whether the organization meets the applicable public support requirements. As necessary, also ask for a statement affirming the organization continuously met the public support test from inception, including years outside the most recent five years.

  3. If proposing a favorable determination on the erroneous classification request:

    1. Prepare Letter 4425, Change in Foundation Approval.

    2. Prepare the case for closing.

    3. Update the foundation classification and filing requirements when closing the case.

    4. Prepare Form 2363-A to eliminate the advance ruling information (enter “999999” in the advance ruling period field) if the organization displays an old advance ruling period on Master File.

7.20.3.3.1.3  (10-02-2015)
Voluntary Request for Private Foundation Classification

  1. An organization exempt under IRC 501(c)(3) and classified as a public charity can request to be reclassified as a private foundation by submitting Form 8940 and the appropriate user fee. An NECT classified under IRC 509(a)(3) may also request this reclassification.

    Note:

    A public charity can also notify the IRS of its private foundation status by filing Form 990-PF and checking "Initial return of a former public charity."

    Note:

    An NECT that no longer qualifies as an IRC 509(a)(3) supporting organization based on the Pension Protection Act of 2006 provisions was required to self identify and file Form 990-PF as of its first taxable year beginning on or after January 1, 2008 (see Notice 2008-6 and IRM 3.13.12.9.11, Form 990-PF).

  2. Determine the effective date of private foundation classification. The effective date is generally either:

    1. The first day after the tax year in which the organization fails the public support test (prior classification of IRC 509(a)(1) and 170(b)(1)(A)(iv) or (vi) or IRC 509(a)(2)).

    2. The date the organization no longer qualifies as a public charity or it voluntarily relinquishes its classification as one.

  3. If possible, the effective date should be the first day of a tax year to avoid partial information returns (i.e., Forms 990 and 990-PF).

    Note:

    If the organization appears to continue to meet a public charity classification, confirm that the organization is voluntarily requesting private foundation classification and understands the consequences of being reclassified (e.g., Form 990-PF, PF excise tax provisions, etc.).

  4. When reviewing the submitted information, consider developing:

    • IRC 508(e) (see IRM 7.20.3.2.2, Processing Initial and Reinstatement Private Foundation Classification Requests and Case Closing)

    • Private operating foundation classification (see IRM 7.20.3.2.2.1, Private Operating Foundation Considerations)

    • IRC 4945(g) (see IRM 7.20.3.3.6, Processing Advance Approval of Grant Making Procedures under IRC 4945(g))

      Note:

      IRC 4945(g) advance approval of grant making procedures requires a separate Form 8940 and user fee.

  5. If you propose a favorable determination on a voluntary request for reclassification from public charity to private foundation classification, prepare:

    1. Letter 4424, Private Foundation Status (do not use a legend for identifying information).

    2. The case for closing, entering filing requirements Form 990-PF - 1, Form 990 - 00, and the appropriate foundation code.

      Note:

      For an NECT, create a letter as necessary and prepare Form 2363-A to update Subsection to 92, Status Code to 12, and the appropriate filing requirements.

7.20.3.3.1.4  (10-02-2015)
Request for Private Operating Foundation Classification under IRC 4942(j)(3)

  1. A private non-operating foundation can request classification as a private operating foundation under IRC 4942(j)(3) by submitting Form 8940 and the appropriate user fee.

  2. To qualify as a private operating foundation, an organization must actively conduct its own exempt function programs and demonstrate how it meets the income test and either an asset, endowment, or support test.

  3. If you propose a favorable determination on private operating foundation classification:

    1. Prepare Letter 4425, Change in Foundation Approval.

    2. Prepare the case for closing.

    3. Update the foundation classification when closing the case.

  4. See 26 CFR 53.4942(b)-1 and IRM 7.26.6, Private Operating Foundations - IRC 4942(j)(3), for technical guidance on private operating foundations.

7.20.3.3.1.5  (10-02-2015)
Request for Exempt Operating Foundation Classification under IRC 4940(d)

  1. Certain private operating foundations qualify as exempt operating foundations. The term "exempt operating foundation" under IRC 4940(d) applies to any private foundation that meets all of these:

    1. Is an operating foundation (as defined in IRC 4942(j)(3)).

    2. Either has been publicly supported (IRC 170(b)(1)(A)(vi) or 509(a)(2)) for at least 10 taxable years or has qualified as an operating foundation as of January 1, 1983, or during its last taxable year ending before that date.

    3. Has a governing body that, at all times during the taxable year, (i) consists of individuals at least 75 percent of whom aren’t disqualified persons and (ii) is broadly representative of the general public.

    4. Doesn’t have an officer who is a disqualified person at any time during the taxable year.

  2. See IRM 7.27.14.2.2, Exempt Operating Foundation, for technical guidance.

  3. If you propose a favorable determination on exempt operating foundation classification:

    1. Prepare Letter 4425, Change in Foundation Approval.

    2. Prepare the case for closing.

    3. Update the foundation classification to 02.

7.20.3.3.2  (10-02-2015)
Private Foundation Terminations under IRC 507(b)(1)(B)

  1. Once an organization is classified as a private foundation, it can only terminate its private foundation classification under the provisions of IRC 507.

    Exception:

    An organization that was erroneously classified as a private foundation can request correction of the error using Form 8940 (see IRM 7.20.3.3.1.2).

  2. One way to terminate private foundation classification is by operating as a public charity for a continuous period of 60 months after appropriately notifying IRS before the 60-month period (IRC 507(b)(1)(B)). The private foundation must also notify the IRS that it has met the requirements of a public charity at the end of the 60-month period.

  3. A private foundation generally notifies the IRS by submitting Form 8940 and the appropriate user fee at the beginning and end of the termination period.

  4. See IRC 507, 26 CFR 1.507-2(b), and IRM 7.26.7, Termination of Private Foundation Status, for technical guidance.

7.20.3.3.2.1  (10-02-2015)
Processing Beginning of 60-Month Termination Period Request

  1. Before the beginning of the termination period (referred to as an advance ruling period), the private foundation must submit the following information with Form 8940:

    1. Name and address

    2. Statement of its intent to terminate its private foundation classification

    3. Date its regular (or new) tax year begins

    4. Date the 60-month period begins (must be after the date of the request)

    5. IRC section (e.g., 509(a)(1), (2), or (3)) under which it is seeking classification as a public charity

      Note:

      If IRC 509(a)(1) applies, the foundation must also submit the specific type of IRC 170(b)(1)(A) under which the organization is seeking classification.

    6. Description of how it intends to become a public charity (e.g., how it will attract the necessary public support including proposed budgets and anticipated sources of support or how it will operate to meet the requirements of its intended classification)

  2. The organization must complete and submit Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, to extend the period of limitations for assessment of Chapter 42 taxes (IRC 4940 through IRC 4945). The organization must extend the period for each of the five taxable years in the 60-month termination period such that the period doesn’t expire until 4 years, 4 months, and 15 days after the end of the final fiscal year in the 60-month termination period (see IRC 6501 and 26 CFR 1.507-2(d)(5)).

    Note:

    The organization must continue to file Form 990-PF during the advance ruling period.

  3. Request additional information as needed to determine if the organization is likely to meet the requirements of its public charity classification at the end of the 60-month period.

  4. Also, if the organization didn’t submit Form 872-B or completed it incorrectly, complete the following fields on Form 872-B (with suggested entries) and send it to the organization for a signature:

    1. Taxpayer Identification Number (top right of form) - enter EIN

    2. Name(s) - enter name of the organization

    3. Number, Street, City - enter address of the organization

    4. Kind - enter Chapter 42 Excise

    5. Section - enter 4940-4945 of the Internal Revenue Code

    6. Period - enter ending day of first fiscal year through ending day of last fiscal year in 60-month termination period

      Example:

      For an advance ruling beginning January 1, 2016, enter: ...for the period ended 12/31/2016, 12/31/2017, 12/31/2018, 12/31/2019, and 12/31/2020.

    7. Expiration date - 4 years, 4 months, and 15 days after end of the final fiscal year in the 60-month termination period

      Example:

      For an advance ruling beginning January 1, 2016, enter: ...anytime on or before May 15, 2025.

  5. If you propose a favorable determination on an advance ruling for termination of private foundation classification under IRC 507(b)(1)(B), prepare:

    1. Letter 2245, Advance Approval under 507(b)(1)(B) - Termination of Private Foundation Status.

    2. Form 2363-A:

      Field Number Field Element Field Input
      1 EIN NN-NNNNNNN (EIN)
      2 Name Control XXXX (Name Control)
      3 Document Codes 80
      4 Transaction Codes 016
      5 Def Codes B
      22 Status Code and Date 25YYYYMM (beginning of 60-month termination period – e.g., 25201601)
      31 Adv Ruling Date YYYYMM (end of 60-month termination period – e.g., 202012)
      39 Remarks Beginning of 60-Month Termination Period
      40 Prepared by Signature/Date (specialist name/date)
      41 Organization Symbols SE:T:EO:RA:D:AX:XXXX (Grp #)
      42/43 Group and Phone Numbers Group number and telephone number

      Reminder:

      Don’t update the filing requirement to Form 990. Although the organization is treated as a public charity by contributors during the 60-month termination, it continues to have a Form 990-PF filing requirement.

    3. Special Handling Notice (Form 2363-A) adding under Other: Stamp and attach copy of Form 872-B to Letter 2245.

7.20.3.3.2.2  (10-02-2015)
Processing Ending of 60-Month Termination Period Request

  1. The private foundation must submit the following information with Form 8940 within 90 days after the end of the 60-month termination period (see 26 CFR 1.507-2(b)(4)):

    1. A complete description of its current operations as well as any changes during the 60-month period

    2. Copies of its governing instruments, bylaws, and amendments during the 60-month period (if applicable)

    3. Complete copies of financial statements starting with the first day of the 60-month period and ending with the last day of the 60-month period

    4. If terminating its private foundation classification under IRC 509(a)(1) and IRC 170(b)(1)(A)(vi) or 509(a)(2), Form 990 Schedule A Part II or III (as applicable) for the 60-month period

  2. If terminating its private foundation classification as an IRC 509(a)(3) supporting organization, the organization must also submit:

    1. Details of any changes in its foundation managers (as defined in IRC 4946(b)(1)) during the 60-month period

    2. Details of the relationship between the organization and the supported organization(s) during the 60-month period

    3. All pertinent information to establish that the organization didn’t violate the control requirements in IRC 509(a)(3)(C) during the 60-month period

  3. Request additional information as necessary to determine if the organization meets the requirements as a public charity.

    Note:

    If the organization doesn’t appear to meet the requirements for its requested classification, consider and discuss alternate public charity classifications with the organization.

  4. If proposing a favorable determination that the organization has met the requirements of IRC 507(b)(1)(B) and qualifies as a public charity, prepare:

    1. Letter 4422, P-Case Final Ruling.

    2. Form 2363-A:

      Field Number Field Element Field Input
      1 EIN NN-NNNNNNN (EIN)
      2 Name Control XXXX (Name Control)
      3 Document Codes 80
      4 Transaction Codes 016
      5 Def Codes A, B
      17 Subsection Code NN
      18 Foundation Code NN
      19 Classification Code NN
      20 Affiliation Code N
      21 Type of Organization N
      22 Status Code and Date 01YYYYMM (beginning of 60-month termination period – e.g., 201601)
      38 Filing Requirements 990: NN and 990-PF:0
      31 Adv Ruling Date 999999
      39 Remarks End of 60-Month Termination Period
      40 Prepared by Signature/Date (specialist name/date)
      41 Organization Symbols SE:T:EO:RA:D:AX:XXXX (Grp #)
      42/43 Group and Phone Numbers Group number and telephone number
    3. Case for closing.

    4. Special Handling Notice (Form 2363-A).

  5. If the organization fails to meet the requirements for public charity classification, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.3  (10-02-2015)
Processing IRC 509(a)(3) Supporting Organization Requests for Determination of Type or Change in Type

  1. An existing IRC 509(a)(3) supporting organization (including a subordinate organization) can request a determination of Type (if not previously designated) or a change in Type, by submitting Form 8940 and the appropriate user fee. This includes whether a Type III supporting organization is functionally integrated or non-functionally integrated.

  2. Request additional information as necessary to determine if the organization meets the requested (or alternate) Type requirements (see IRM 7.20.3.2.1.4, Public Charity Technical Guidance).

  3. If you propose a favorable determination on initial or change in Type of supporting organization:

    1. Prepare Letter 4719, Initial Notification - 509(a)(3), or Letter 4716, Change in Type - 509(a)(3) Requirements Met.

    2. Prepare the case for closing.

    3. Update the foundation classification when closing the case.

    4. For a subordinate organization, also complete Form 2363-A using: Document Code 80, Transaction Code 016, and Definer Code C. Complete fields 1, 2, 3, 4, 20, 23, 27, and 39-43.

  4. If information submitted doesn’t meet the requirements for the requested (or alternate) Type of supporting organization, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.4  (10-02-2015)
Processing Requests for 509(a)(3) Classification from Non-exempt Charitable Trusts

  1. An NECT described under IRC 4947(a)(1) is a trust that:

    1. Hasn’t received an IRS determination that it’s exempt from federal income tax.

    2. Has had a charitable deduction allowed.

    3. All of the unexpired interests are devoted to one or more charitable purposes.

  2. See IRM 7.26.15, IRC 4947 Trusts, and IRM 4.76.5, Charitable Trusts (IRC 4947(a)(1) and 4947(a)(2)), for more information.

  3. IRC 508(b) doesn’t apply to NECTs; these trusts don’t have to notify the IRS about their foundation classification. However, an NECT is generally treated as a private foundation.

  4. See Rev. Proc. 72-50 for procedures for an NECT to request a determination letter that it is described in IRC 509(a)(3). These requests are not applications for exempt status.

  5. An NECT can request a determination that it is described in IRC 509(a)(3) by submitting Form 8940 and the appropriate user fee. The NECT must meet the same requirements as any organization requesting classification under IRC 509(a)(3).

    Note:

    The Pension Protection Act of 2006 (PPA) (P. L. 109-280) Section 1241(c) eliminated the alternative responsiveness test (charitable trust test) for IRC 509(a)(3) Type III supporting organizations. Consequently, as of August 17, 2007, NECTs previously classified as IRC 509(a)(3) Type III supporting organizations may be classified as private foundations. Based on PPA provisions, an NECT requesting a determination that it is described under IRC 509(a)(3) must demonstrate how it meets the requirements for classification as a Type I, Type II, or Type III supporting organization in the absence of relying on the charitable trust test.

  6. Request additional information as necessary to determine if the trust meets the requirements for classification as a IRC 509(a)(3) supporting organization and under which Type.

  7. If you propose a favorable determination for classification under IRC 509(a)(3), prepare:

    • Letter 1071, Favorable 509(a)(3) Letter to NECT.

    • The case for closing, completing Form 2363-A to update the Subsection to 91, Status Code to 12, and the Filing Requirement to 990:01.

  8. If the NECT requests a determination that it was described under IRC 509(a)(3) Type III through the transition period ending August 17, 2007; is described as a private foundation after August 17, 2007; and demonstrates that it met the requirements for IRC 509(a)(3) Type III up to August 17, 2007, prepare:

    1. Letter 4791, NECT Fails to Qualify Under Section 509(a)(3) but Qualified as Type III for Period Prior to August 17, 2007, or compose a letter to meet the facts and circumstances of the case.

    2. Form 2363-A:

      Field Number Field Element Field Input
      1 EIN NN-NNNNNNN (EIN)
      2 Name Control XXXX (Name Control)
      4 Transaction Codes 016
      5 Def Codes AB
      18 Foundation Code 04
      22 Status Code and Date 01YYYYMM
      38 Filing Requirements 990-PF - 01
      39 Remarks NECT
      40 Prepared by Signature/Date (specialist name/date)
      41 Organization Symbols SE:T:EO:RA:AX:D:XXXX (Grp #)
      42/43 Group and Phone Numbers Group number and telephone number
    3. The case for closing using closing code Status 12 (Other).

    4. Special Handling Notice (Form 2363-A).

  9. If the NECT requests a determination that it is described under IRC 509(a)(3) but doesn't meet requirements for Type I, Type II, or Type III for any period, continue to treat the organization as a private foundation and prepare:

    1. Letter 4790, NECT Fails to Qualify Under Section 509(a)(3) and Never Classified under Section 509(a), or compose a letter to meet the facts and circumstances of the case.

    2. The case for closing using closing code Status 12 (Other).

7.20.3.3.5  (10-02-2015)
Processing Advance Approval of Exclusion of Unusual Grants

  1. A publicly supported exempt organization (IRC 509(a)(1) and IRC 170(b)(1)(A)(vi) or IRC 509(a)(2)) that can’t meet the public support test because of one or more unusually large contributions may be entitled to exclude those contributions as support in computing whether it’s publicly supported.

    Note:

    An organization can entirely exclude unusual grants from the numerator and denominator of its public support calculation.

  2. Generally, unusual grants are substantial contributions or bequests from disinterested parties if the contributions:

    • Are attracted by the publicly supported nature of the organization.

    • Are unusual or unexpected in amount.

    • Would adversely affect, because of the size, the status of the organization as normally publicly supported.

  3. An organization can request:

    1. Advance assurance on whether a potential grant or contribution constitutes an "unusual grant" that won’t adversely affect its classification as a publicly supported organization. Grantors, contributors, and the exempt organization, can rely on the ruling (see Rev. Proc. 81-7).

    2. Consideration of unusual grants as part of its initial or reinstatement application for exemption, or it can request advance assurance of an unusual grant after recognition of exemption by submitting Form 8940 and the appropriate user fee. Requests submitted on Form 8940 are established as A cases.

  4. Contact the organization as necessary to secure information needed to make a determination. For factors to consider, see:

    • 26 CFR 1.509(a)–3(c)(3)

    • 26 CFR 1.170A-9(f)(6)(ii)

    • IRM 7.26.3.4.6, Exclusion of Unusual Grants

    • IRM 7.26.4.6, Exclusion of Unusual Grants

  5. If you propose a favorable determination that the potential grant or contribution constitutes an unusual grant, prepare:

    1. Letter 4787, Recognition and Approval of Unusual Grant, using a legend for any identifying information.

    2. The case for closing.

    3. Special Handling Notice (mandatory review) adding under Other: Ruling Request under IRC 6110 - Not Available for Public Inspection under section 6104.

  6. If information submitted doesn’t support a favorable determination on a request that a potential grant or contribution constitutes an unusual grant, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.6  (10-02-2015)
Processing Advance Approvals of Grant Making Procedures under IRC 4945(g)

  1. Under IRC 4945(g), private foundations must request advance approval of individual grant making activities intended to enhance an individual’s educational, artistic, or scientific abilities. Without advance approval, individual grants described in IRC 4945(g) are taxable expenditures under IRC 4945(d)(3). Under 26 CFR 53.4945-4(a)(2) "grants" include but aren’t limited to:

    • Scholarships

    • Fellowships

    • Internships

    • Prizes

    • Awards

    • Loans (for purposes described in IRC 170(c)(2)(B))

  2. A private foundation can request advance approval of individual grant procedures either:

    1. As part of its initial or reinstatement application for exemption (see IRM 7.20.3.2.2, Processing Initial and Reinstatement Private Foundation Classification Requests and Case Closing).

    2. By submitting Form 8940 and the appropriate user fee after the organization obtains exemption. A request submitted on Form 8940 is established as an A case.

  3. If a foundation properly submits a request for approval of grant making procedures and IRS doesn’t notify it within 45 days that its procedures aren’t acceptable, then those procedures are considered approved (see 26 CFR 53.4945-4(d)(3)). This tacit approval is effective from the date the foundation submits the request to the IRS until the organization receives actual notice that the procedures are unacceptable.

    Note:

    If you process a request under IRC 4945(g) for a private foundation that made grants prior to submitting the request for advance approval or after being notified that the procedures were not acceptable, consider a referral to EO Exam Classification to consider distributions as taxable expenditures (see IRM 7.20.1.4, Referrals.

  4. For advance approval, a private foundation must demonstrate:

    1. Its grant procedures include an objective and nondiscriminatory selection process.

    2. The procedures are reasonably calculated to result in the grantees performing the activities that the grants are intended to finance.

    3. It plans to obtain reports to determine whether the grantees performed the activities that the grants are intended to finance.

  5. A request for advance approval of individual grant making procedures must contain:

    1. A statement describing the selection process, sufficiently detailed as to prove whether the grants are made on an objective and nondiscriminatory basis.

    2. A detailed description of:

      1. The terms and conditions under which it ordinarily makes the grants, sufficient to demonstrate the procedures meet the requirements of IRC 4945(g).

      2. Its procedures for exercising supervision over the grants.

      3. Its procedures for review of the grantee reports and investigation of any diversion of grant funds from their proper purposes.

  6. The organization must specify whether the approval is requested under IRC 4945(g)(1) or (3).

    Note:

    This is to prevent the private foundation from later claiming protection under the 45-day rule when it requested approval under IRC 4945(g) and the IRS assumed the grant program was a scholarship, award, or specific grant.

  7. The Instructions for Form 8940 describe the information an organization should submit in support of its request. A completed Schedule H (Form 1023) may also provide information sufficient to make a determination.

  8. See or complete Form 14322, Guidesheet for Advance Approval of Individual Grant Procedures, for help to process advance approval of individual grant procedure requests.

7.20.3.3.6.1  (10-02-2015)
4945(g) Case Processing

  1. Process all requests for advance approval of grant making procedures under IRC 4945(g)(1) and IRC 4945(g)(3) as requests that require approval, without considering any previously approved procedures (e.g., don’t research the administrative file to review prior advance approval requests).

  2. If private foundation submits a request for advance approval for a program under both IRC 4945(g)(1) and IRC 4945(g)(3), process as a single request, requiring one user fee.

    Note:

    The Instructions for Form 8940 generally require an organization to submit a separate form and user fee for each type of request.

  3. When assigned a 4945(g) "A" case, contact the organization, if necessary, to solicit any additional information you need to make the determination, including confirmation whether the request is for approval under 4945(g)(1) or (3).

  4. If you propose a favorable determination on the advance approval of grant making procedures, prepare:

    1. The appropriate determination letter (or compose a letter) based on the case facts and circumstances, using a legend for any identifying information.

      Use Letter For
      Letter 4792 4945(g)(1) requests
      Letter 4793 4945(g)(1) employer related requests
      Letter 4779 4945(g)(3) requests
      Letter 4794 4945(g)(3) employer related requests
    2. The case for closing.

    3. Special Handling Notice (mandatory review) adding under Other: Ruling Request under IRC 6110 - Not Available for Public Inspection under section 6104.

  5. After your manager’s review and approval, email your letter to *TE/GE-EO-Determinations QA, entering the letter type as the subject line. List the name of the case, type of case, and case number in the body of the email.

  6. If information submitted doesn’t support a favorable determination on the request for advance approval of grant making procedures, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.6.2  (10-02-2015)
Other IRC 4945(g) Issues

  1. EO Determinations doesn’t issue an advance approval of grant making procedures under IRC 4945(g)(2). This type of a prize or award is subject to IRC 74(b) (see Rev. Rul. 77-380). If a request appears to be for advance approval of grant making procedures under IRC 4945(g)(2):

    1. Get your group manager’s agreement that the request was submitted in error.

    2. Prepare Letter 5239, Determination Request Submitted in Error/Organization Exempt.

    3. Close the case using closing code Status 12 (Other).

    4. Complete Form 14268, User Fee Refund Request (see IRM 7.20.2) and Special Handling Notice (user fee refund).

  2. If IDRS shows that an organization is classified as other than a private foundation (such as a public charity described in IRC 509(a)(3) or an NECT with a subsection code of 91), research IDRS (e.g., BMFOLI and BMFOLT) and/or EDS or TEDS as necessary to determine if the organization’s record is incorrect:

    If the organization Then the specialist will
    Is a private foundation based on filing Form 990-PF or a determination letter
    1. Prepare and submit Form 2363-A to update Master File to reflect the correct foundation classification.

    2. Continue to process the request but do not close the case until Master File is updated.

    Didn’t file Form 990-PF or otherwise request classification as a private foundation
    1. Notify the organization that our records indicate it is a public charity and determine why the organization submitted a request for advance approval of grant making procedures.

    2. If appropriate, get your group manager’s agreement that the request was submitted in error.

    3. For requests submitted in error, prepare Letter 5239, Determination Request Submitted in Error/Organization Exempt, close the case using closing code Status 12 (Other), complete Form 14268, User Fee Refund Request, and Special Handling Notice (user fee refund).

  3. A non-exempt charitable trust (NECT) that is classified as a private foundation must also request advance approval of its grant making procedures under IRC 4945(g).

    Note:

    The PPA changed the requirements for classification under IRC 509(a)(3). Many NECTs that were previously classified as supporting organizations are now classified or treated as private foundations and must request advance approval of their grant making procedures under IRC 4945(g).

  4. To avoid misinterpretation that the IRS is approving grants for prior years, if an NECT that is classified or treated as a private foundation made grants before receiving advance approval, issue the approval letter specifying an effective date (usually the postmark date of the request for advance approval).

7.20.3.3.7  (10-02-2015)
Processing Advance Approvals of Set-Asides under IRC 4942(g)(2)

  1. Certain amounts of a private foundation’s income may be set-aside, rather than currently distributed, for one or more purposes described in IRC 170(c)(2)(B) (IRC 4942(g)(2)). If the foundation meets the requirements of IRC 4942(g)(2), it may treat set-aside amounts as qualifying distributions.

  2. Non-functionally integrated Type III supporting organizations may also request advance approval to have certain set-asides count towards their distribution requirements (see 26 CFR 1.509(a)-4(i)(6)(v)).

  3. To request approval of a set-aside or an extension to a set-aside, an organization must submit Form 8940 and the appropriate user fee.

    Note:

    An organization can’t request advance approval of a set-aside as part of a Form 1023 application for initial or reinstatement of exempt status.

  4. For set-asides:

    1. See IRC 4942(g)(2) for requirements.

    2. See Instructions for Form 8940 for the information an organization should submit with its request.

  5. If necessary, request additional information necessary to make a determination. Use Form 14325, Section 4942 Set-Aside Guidesheet, for guidance when reviewing a set-aside request.

  6. If you propose a favorable determination on the set aside or set-aside extension request, prepare:

    1. Letter 4797, Section 4942(g)(2) Set-Aside Approval, Letter 4798, Section 4942(g)(2) Set-Aside Extension Approval, or a composed letter (for an NECT) using a legend for any identifying information.

    2. The case for closing.

    3. Special Handling Notice (mandatory review) adding under Other: “Ruling Request under IRC 6110 - Not Available for Public Inspection under section 6104.”

  7. After your manager’s review and approval, email the letter to *TE/GE-EO-Determinations QA, entering the letter type as the subject line. List the name of the case, type of case, and case number in the body of the email.

  8. If information submitted doesn’t support a favorable determination on the request for approval of a set-aside or set-aside extension, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.8  (10-02-2015)
Processing Advance Approvals of Voter Registration Activities under IRC 4945(f)

  1. An exempt section 501(c)(3) organization may engage in nonpartisan voter registration activities if the activities meet certain requirements. If the activities meet the requirements of IRC 4945(f), a grant from a private foundation to the organization won’t be a taxable expenditure for the foundation under IRC 4945(d)(2),even though the grant is earmarked for voter registration purposes generally.

  2. An organization may request advance approval of voter registration activities under IRC 4945(f) by submitting Form 8940 and the appropriate user fee.

    Note:

    An organization can’t request advance approval under IRC 4945(f) as part of a Form 1023 application for initial or reinstatement of exempt status.

  3. For advance approvals of voter registration activities, see:

    1. IRC 4945(f).

    2. Instructions for Form 8940 for information an organization should submit as part of its request.

    3. IRM 7.27.19.4, Public Elections and Voter Registration Drives

  4. If necessary, request additional information necessary to make a determination.

  5. If you propose a favorable determination on advance approval of voter registration activities under IRC 4945(f), prepare:

    1. Letter 4778, Approval of Voter Registration Activities under Section 4945(f), using a legend for any identifying information.

    2. The case for closing.

    3. Special Handling Notice (mandatory review) adding under Other: Ruling Request under section 6110 - Not Available for Public Inspection under section 6104.

  6. After your manager’s review and approval, email the letter to *TE/GE-EO-Determinations QA, entering the letter type as the subject line. List the name of the case, type of case, and case number in the body of the email.

  7. If information submitted does not support the request for advance approval of voter registration activities under IRC 4945(f), follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.9  (10-02-2015)
Processing Requests for Exception from Form 990 Filing Requirements

  1. Generally, tax-exempt organizations must file a Form 990-series information return or notice annually. However, IRC 6033 and certain revenue procedures (Rev. Proc. 83-23 supplemented by Rev. Proc. 95-48 and Rev. Proc. 96-10) give exceptions to filing Form 990.

  2. An organization can request to be recognized as excepted from Form 990-series filing requirements as part of an application for exemption (initial or reinstatement request). An organization (including a subordinate in a group ruling) can also request Form 990-series filing exception after obtaining exemption by submitting Form 8940 and the appropriate user fee. Requests submitted on Form 8940 are processed as A cases. The Instructions for Form 8940 describe suggested documentation that the organization should submit.

  3. Common exception requests include exception as:

    1. A church or an integrated auxiliary of a church

    2. A church affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs (Rev. Proc. 96-10)

    3. A school below college level affiliated with a church or operated by a religious order

    4. A church-affiliated mission society if more than half of its activities are conducted in, or are directed at persons in, foreign countries

    5. A governmental unit or an affiliate of a governmental unit that meets the requirements of Rev. Proc. 95-48

    Note:

    This list is not all-inclusive. See IRC 6033, 26 CFR 1.6033-2(g), and the revenue procedures listed above for more exceptions and the technical requirements for exception.

  4. Use these guidesheets to help you determine if an organization is excepted from filing a Form 990-series return or notice:

    Form number Description
    Form 14318 Guidesheet for Revenue Procedure 95-48 Form 990 Filing Exception
    Form 14319 Guidesheet for Revenue Procedure 96-10 Form 990 Filing Exception
    Form 14320 Guidesheet for Integrated Auxiliaries and Church-Affiliated Schools Form 990 Filing Exception
  5. If sufficient information isn’t submitted, request the information needed to make a determination.

  6. If you propose a favorable determination on the filing exception request:

    1. Prepare Letter 4715, EO-Exception to 990 Filing Requirements.

    2. Prepare the case for closing.

    3. Enter closing information based on current Master File data except enter Form 990 filing requirement "13" for religious organizations (non-church) or "14" for organizations excepted based on Rev. Proc. 95-48.

      Note:

      If Form 990 filing exception is granted to an organization during an initial determination of exempt status, enter "No" for the Form 990 filing requirement in the heading of the closing letter.

  7. If Form 990 filing exception is granted to an organization during an initial determination of exempt status because it is an exclusively religious activity of a religious order, add an addendum to the determination letter.

    Example:

    "This is a determination that your exclusively religious activity does not need to be reported on an annual return or notice required by IRC Section 6033. This is not a ruling under Revenue Procedure 91-20, 1991-10 I.R.B. 26, that you are a religious order for purposes of self-employment tax, the Federal Insurance Contributions Act (FICA) tax, and federal income tax withholding, respectively. To request such a ruling, see Rev. Proc. 2015-1, 2015-1 I.R.B. 1, or its successor."

  8. If a subordinate organization requests and receives a favorable determination on Form 990 filing exception, complete Form 2363-A to update the organization’s filing requirements using Document Code 80, Transaction Code 016, and Definer Code C. Complete fields 1, 2, 3, 4, 20, 23, 27, and 39-43.

  9. If information submitted doesn’t support the request for exception from Form 990 filing requirements, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.

7.20.3.3.10  (10-02-2015)
Processing Voluntary Termination of IRC 501(c)(3) by Government Entity

  1. A government entity can request voluntary termination of its recognition under IRC 501(c)(3) (see Rev. Proc. 2015-4 (updated annually)) by submitting Form 8940 (or a letter request) and the appropriate user fee payment.

  2. Generally accept a written statement from the organization attesting it is a government entity.

  3. Prepare these forms/letters to process the termination:

    1. Letter 5171, Government Entity Voluntary Termination of 501(c)(3) Recognition.

    2. Form 5666 to notify FSLG, indicating the organization has terminated its 501(c)(3) status based on its status as a government entity and attaching any documents submitted by the organization in support of its government entity status.

    3. Form 2363-A, to update the organization to Status 20 and remove Form 990 filing requirements (enter Form 990: 00).

    4. Special Handling Notice (Form 5666 to FSLG and Form 2363-A).

  4. Close the case Status 12 (Other).

7.20.3.3.11  (10-02-2015)
Processing Group Ruling Requests

  1. A group ruling is a determination letter issued to a parent organization (also known as a central organization) recognizing, on a group basis, the exemption under IRC 501(c) of subordinate organizations on whose behalf the parent organization has applied for recognition of exemption.

  2. An organization requests a group ruling by submitting a letter request, Form 8718, and the appropriate user fee. The request is processed per Rev. Proc. 2015-4 (updated annually) and Rev. Proc. 80-27 (modified by Rev. Proc. 96-40).

    Note:

    Pub 4573, Group Exemptions, also provides helpful information on group exemptions.

  3. Group rulings are intended to be an administrative convenience to the IRS and to relieve each of the subordinates covered by a group exemption from filing its own application for recognition of exemption. IRS has discretion whether to issue a group exemption letter.

  4. The parent organization must obtain recognition of its own exempt status before or concurrently with the group exemption request. If application is made concurrently, don’t start developing the group ruling request until a favorable determination on the parent organization’s exempt status appears likely.

    Note:

    The parent organization doesn’t have to be described under the same paragraph of IRC 501(c) as the subordinates, but the subordinates must all be described under the same paragraph.

    Note:

    The same specialist should generally work both cases. Request assignment of the other case after discussing with your manager.

  5. The following types of organizations may not be included as subordinates in a group exemption letter. Organizations that are:

    • Organized and operated in a foreign country (this does not include organizations formed in U.S. territories).

    • Private foundations defined in IRC 509(a), if a group exemption is requested under IRC 501(c)(3).

  6. An organization closely affiliated with a governmental entity (instrumentality) may obtain a group exemption if it meets the requirements in Rev. Proc. 80-27.

  7. Group ruling requests are established on TEDS/EDS as Form 1026 "A" cases.

  8. If a subordinate organization under a group exemption applies for individual exemption, see IRM 7.20.4, Special Determination Issues.

7.20.3.3.11.1  (10-02-2015)
Case Development

  1. Review the submitted information (using optional Form 14315, Group Ruling Guidesheet) to determine whether to:

    1. Develop the case (favorable determination appears likely).

    2. Decline to make a determination on the request (see IRM 7.20.3.3.11.3, Group Ruling Declinations).

  2. If you develop the case, ensure the letter request is signed by a principal officer of the parent organization under penalties of perjury and that the letter and attachments establish that its subordinates are:

    1. Affiliated with it.

    2. Subject to its general supervision or control (describe the control it has per written bylaws, policy, or agreement).

    3. All eligible to qualify for exemption under the same paragraph of IRC 501(c), though not necessarily the paragraph under which the parent organization is exempt.

    4. Not private foundations (if the subordinates are described under IRC 501(c)(3)).

    5. All on the same accounting period as the parent organization (if they are to be included in a group return).

    6. Organized within 27 months from the date of the submission (or if any are organized more than 27 months, all subordinates are willing to be recognized as exempt only from the date of application).

      Exception:

      Subordinates that are churches (described under IRC 509(a)(1) and 170(b)(1)(A)(i)) don’t have to be organized within 27 months of the submission date to be recognized as exempt from their formation dates.

  3. The request must include:

    1. A sample copy of a uniform governing instrument (charter, trust, Articles of Association, etc.) that the parent organization says will be adopted by all subordinates or, in the absence of a uniform governing instrument, a representative sample of the subordinates’ governing documents.

      Note:

      Review the governing instrument to determine if it meets the organizational requirements for the subsection requested.

    2. A detailed description of the purposes and activities of the subordinates including the sources of receipts and the nature of expenditures.

    3. An affirmation to the effect that, to the best of the officer’s knowledge, the purposes and activities of the subordinates are as stated in the detailed description of the purposes and activities and in the governing instrument ((a) and (b) above).

    4. A statement that each subordinate included in the group exemption has furnished written authorization, signed by a duly authorized officer of the subordinate, requesting inclusion in the group exemption request.

    5. A list of subordinates to be included in the group exemption to which the IRS has issued an outstanding ruling or determination letter related to exemption.

    6. Information to show that each subordinate that is a school claiming exemption under IRC 501(c)(3) has submitted the information required by Rev. Proc. 75-50.

    7. A list of the names, mailing addresses (including zip codes), actual addresses, if different than mailing addresses, and employer identification numbers of the subordinates to be included in the group exemption letter.

  4. Research IDRS for all subordinate organizations and include the printouts in your case file.

    Caution:

    Automatically revoked organizations can’t be included as subordinates in a group exemption request.

  5. If the letter request doesn’t contain sufficient information to show the requirements are met for a group exemption, request the missing information.

  6. After developing the request, discuss with your manager whether to approve (see IRM 7.20.3.3.11.2), process as a declination (more common) (see IRM 7.20.3.3.11.3), or propose an adverse determination (less common) (see IRM 7.20.3.3 and IRM 7.20.2).

7.20.3.3.11.2  (10-02-2015)
Closing Procedures for Group Rulings - Approvals

  1. When recommending approval of a group ruling, obtain the Group Exemption Number (GEN) from EDS. Enter “911” on the Inventory Control System Menu then press F1. The four digit GEN will display at the bottom of the screen.

    Note:

    Make a print screen of the GEN for reference in the case file.

  2. Prepare Form 2363-A (Pilot Voucher), writing the Group Exemption Number at the top and entering the information listed in the table below.

    • If the parent and subordinates have or will have the same information on Master File other than the affiliation code, prepare one pilot voucher which states "PARENT and SUBS" at the top.

    • If the parent has or will have different information (e.g., subsection, foundation classification, effective date, or filing requirement, etc.) on Master File than its subordinates, prepare two pilot vouchers. One voucher will state "PARENT" (and the GEN) at the top and will reflect the parent’s information. The other will state "SUBORDINATES" (and the GEN) at the top and will reflect the subordinates’ information.

      Form 2363–A Field(s) Data to Enter
      1. EIN XX-XXXXXXX
      2. Name Control XXXX
      3. Document Codes 80
      4. Transaction Codes 016
      5. Def. Codes ABC
      17. Subsection Code XX
      18. Foundation Code Complete if exempt under IRC 501(c)(3); otherwise leave blank
      20. Affiliation code
      1. 6 for a parent that is not a church or exempt under IRC 501(c)(1)

      2. 8 for a parent of churches under 501(c)(3), foundation code 10, or 501(c)(1) organizations

      3. 9 for a subordinate only pilot voucher

        Note:

        Subordinates will always be coded as "9" regardless of the parent’s affiliation code.

      22. Status code and date (YYYYMM) 01 YYYYMM

      Note:

      Leave date portion blank; EO Entity procedures determine date to be entered.

      23. Ruling date (YYYYMM) Ruling date of group exemption (based on closing date)
      25. Deductibility code and year (YYYY)
      1. 1 YYYY

        Note:

        Leave year blank; EO Entity procedures determine date to be entered.

      2. 2 followed by four zeros for organizations without deductibility

      27. New GEN 4 digit number (from EDS)
      34. Employment code W for 501(c)(3) organization(s); otherwise leave blank
      38. Filing Requirements Enter appropriate filing requirements
      39. Remarks Group Ruling Issuance - New GEN
      19, 21, 30, 35, 36, 37, 40, 41, 42, and 43 Enter appropriate information

    Note:

    Form 2363-A (Pilot Voucher) requirements are based on Ogden GEN input procedures listed in IRM 3.13.12.12, Group Rulings.

  3. Attach a copy of the list of subordinates to be included in the group exemption (e.g., list provided by the parent organization) to Form 2363-A (Pilot Voucher). The list should contain the subordinates’ names, addresses, EINs (and an annotation if any subordinates had an individual exemption letter).

    Note:

    Remove any subordinates from the parent’s list that are in Status 97 or otherwise are not being included in the group exemption.

  4. Prepare Letter 2419, Group Exemption Letter.

  5. Prepare the case for closing.

    Note:

    You must enter an affiliation code of 3 in EDS, as EDS will not accept an affiliation code of 6 or 8 for the parent organization. Enter the correct affiliation code on the pilot voucher.

  6. Prepare Form 1725, Routing Slip, to send to EO Entity Supervisor, Ogden Campus, once the case is approved in mandatory review. Check item 10, Necessary Action, and include the following information in the Remarks section:

    • Issue GEN # _____ to (name of parent organization) with EIN (EIN of parent organization)

    • Input GEN

    • Process Pilot Voucher(s) (Form(s) 2363-A) for Parent and Subordinates

  7. Prepare Special Handling Notice (mandatory review) adding under Other: If group exemption approved, forward Form(s) 2363-A (Pilot Voucher) to the Correspondence Unit.

7.20.3.3.11.3  (10-02-2015)
Group Ruling Declinations

  1. A group ruling request may be declined for one or more of these reasons:

    • Failure of the parent organization to qualify for recognition of exemption

    • Failure to satisfy Rev. Proc. 80-27 requirements

    • Issues/activities that have a historical problem with compliance

    • Failure of subordinate organizations to file information returns for three consecutive years (would be automatically revoked)

      Reminder:

      Group ruling declinations do not receive protest rights and are not subject to IRC 7428.

  2. Discuss a proposed declination with your group manager.

  3. If your manager agrees with the declination, call the parent organization to discuss:

    1. An explanation that subordinates may submit individual applications for exempt status and, if exempt status is then denied, the subordinates will have appeal rights.

    2. Refund of the user fee.

  4. To close the case, prepare:

    1. Form 14268, User Fee Refund Request

    2. Form 14261, Memorandum to File - EO Determinations Case Closing, explaining why the request is declined

    3. Letter 4778, Group Ruling Declination

    4. Case for closing, using closing code Status 12 (Other)

    5. Special Handling Notice (mandatory review and user fee refund)

7.20.3.3.12  (10-02-2015)
Commonly Used Guidesheets

  1. Use these guidesheets to help you process public charity classification, private foundation classification, and amendment case issues.

    Form Used to
    Form 14312, Church Guidesheet Recommend classification as a church under IRC 509(a)(1) and IRC 170(b)(1)(A)(i)
    Form 14313, Private School Guidesheet Process exemption applications from organizations operating or supporting private schools.
    Form 14314, Revenue Procedure 75-50 Guidesheet Determine whether an organization operating a school complies with the requirements of Revenue Procedure 75-50.
    Form 14315, Group Ruling Guidesheet Process requests for group exemption rulings under Revenue Procedure 80-27.
    Form 14316, Section 509(a)(3) Supporting Organization Guidesheet (Type I) Process requests to be classified as supporting organizations under Code section 509(a)(3) (Type I).
    Form 14316A, Section 509(a)(3) Supporting Organization Guidesheet (Type II) Process requests to be classified as supporting organizations under Code section 509(a)(3) (Type II).
    Form 14317, Section 509(a)(3) Supporting Organization Guidesheet (Type III) Process requests to be classified as supporting organizations under Code section 509(a)(3) (Type III).
    Form 14318, Guidesheet for Revenue Procedure 95-48 Form 990 Filing Exception Process request for determination that organization is not required to file annual 990 returns pursuant to Revenue Procedure 95-48.
    Form 14319, Guidesheet for Revenue Procedure 96-10 Form 990 Filing Exception Process request for determination that organization is not required to file annual 990 returns pursuant to Revenue Procedure 96-10.
    Form 14320, Guidesheet for Integrated Auxiliaries and Church-Affiliated Schools Form 990 Filing Exception Process request for determination that organization is not required to file annual 990 returns because it is an integrated auxiliary of a church.
    Form 14321, Public Support Test Computation Guidesheet - Section 170(b)(1)(A)(vi) Calculate public support test computation under section 509(a)(1) and 170(b)(1)(A)(vi).
    Form 14322, Guidesheet for Advance Approval of Individual Grant Procedures Process advance approval of individual grant making procedures under section 4945(g).
    Form 14323, Charter School Guidesheet Process request for classification as a charter school under section 509(a)(2) and 170(b)(1)(A)(ii).
    Form 14324, Organizations Closely Affiliated with State or Indian Tribal Governments Guidesheet Help determine if a section 501(c)(3) organization is closely affiliated with a state government or federally recognized Indian tribal government and, therefore, not required to file annual Forms 990.
    Form 14325, Section 4942(g)(2) Set-Aside Guidesheet Process section 4942(g)(2) set-aside requests.
    Form 14396, Public Support Test Computation Guidesheet - 509(a)(2) Compute public support test under section 509(a)(2).

7.20.3.3.13  (10-02-2015)
Commonly Used Letters

  1. Use these common letters to process public charity classification, private foundation classification, and amendment case issues.

    Letter Description
    Letter 1071, Favorable 509(a)(3) Letter to NECT Notifies non-exempt charitable trust that it is classified under section 509(a)(3).
    Letter 1079, Exemption Determination with Adverse Issue Informs an organization that it is exempt from federal income tax under 501(a) but specifying the organization did not meet the requirements for a requested foundation classification, Form 990 filing exception, or effective date of exemption.
    Letter 2245, Advance Approval under Section 507(b)(1)(B)-Termination of Private Foundation Status Advance approval of termination of private foundation classification under section 507(b)(1)(B) for 60-month period.
    Letter 2419, Group Exemption Letter Approves group exemption request.
    Letter 4422, P-Case Final Ruling Approves reclassification of private foundation to public charity after 60-month termination under section 507(b)(1)(B).
    Letter 4424, Private Foundation Status Reclassifies public charity to private foundation when organization indicates it no longer qualifies as public charity.
    Letter 4425, Change in Foundation Approval Approves change in public charity/private foundation classification of an exempt organization.
    Letter 4715, EO-Exception to 990 Requirement Exception to Form 990 filing requirement for affiliate of government unit, religious organization, or integrated auxiliaries.
    Letter 4716, Change in 509(a)(3) Type - Requirements Met Notification of requirements met for change in 509(a)(3) type.
    Letter 4719, EO - Initial Notification 509(a)(3) Initial notification of 509(a)(3) type classification.
    Letter 4778, Approval of Voter Registration Activities under Section 4945(f) Approves voter registration activities under section 4945(f).
    Letter 4779, Approval of Individual Grant Making Procedures under Section 4945(g)(3) Advance approval of individual grant making procedures under section 4945(g)(3).
    Letter 4785, AFP Case Withdrawal Withdrawal of A or P case request.
    Letter 4786, Adverse Amendment Requests, Foundation Follow-ups, and section 507 (Private Foundation) Termination Requests Adverse determination – A and P cases.
    Letter 4787, Recognition and Approval of Unusual Grant Approves a contribution as an unusual grant.
    Letter 4788, Group Ruling Declination Declination to issue group ruling.
    Letter 4790, NECT Fails to Qualify Under Section 509(a)(3) and Never Classified Under Section 509(a) Informs NECT that it does not qualify for classification under section 509(a)(3).
    Letter 4791, NECT Fails to Qualify Under Section 509(a)(3) - Type III Prior to PPA 2006 Informs NECT that it qualifies for classification as 509(a)(3) Type III for a particular period prior to August 17, 2008.
    Letter 4792, Advance Approval of Individual Grant Making Procedures under Section 4945(g)(1) Advance approval of individual grant making procedures under section 4945(g)(1).
    Letter 4793, Advance Approval of Individual Grant Making Procedures under Section 4945(g)(1) - Employer Related Advance approval of individual grant making procedures under section 4945(g)(1) - employer related program.
    Letter 4794, Advance Approval of Individual Grant Making Procedures under Section 4945(g)(3) - Employer Related Advance approval of individual grant making procedures under section 4945(g)(3) - employer related program.
    Letter 4797, Section 4942(g)(2) Set-Aside Approval Approval of section 4942(g)(2) set-aside.
    Letter 4798, Section 4942(g)(2) Set-Aside Extension Approval Approval of section 4942(g)(2) set-aside extension.
    Letter 5171, Government Entity Voluntary Termination of 501(c)(3) Recognition Government entity voluntarily relinquishes exemption under IRC 501(c)(3).
    Letter 5239, Determination Request Submitted in Error/Organization Exempt Organization submitted determination request not covered in Rev. Proc. 2015-4 (updated annually) or organization is already exempt; case is closed and user fee refund issued.

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