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Publication 557
taxmap/pubs/p557-002.htm#en_us_publink1000199846

Rulings and
Determination Letters(p6)

rule
taxmap/pubs/p557-002.htm#en_us_publink1000257497

Elimination of the advance public charity status.(p6)

rule
New regulations eliminate the advance ruling process for a section 501(c)(3) organization. Under the new regulations, a new section 501(c)(3) organization will be classified as a publicly supported organization and not a private foundation if it can show when it applies for tax-exempt status that it reasonably can be expected to be publicly supported. The new rules no longer require the organization to file Form 8734, Support Schedule for Advance Ruling Period, after completing its first 5 tax years. See Elimination of the Advance Ruling Process .
An organization must describe fully the activities in which it expects to engage. This includes standards, procedures, or other means adopted or planned by the organization for carrying out its activities, expected sources of funds, and the nature of its contemplated expenses.
When an organization does not supply the information previously mentioned under Application Procedures, or fails to furnish a sufficiently detailed description of its proposed activities to permit a conclusion that it will clearly be exempt, a proposed adverse determination letter or ruling may be issued.
taxmap/pubs/p557-002.htm#en_us_publink1000199848

Adverse determination.(p6)

rule
A proposed adverse ruling or determination letter will be issued to an organization that has not provided sufficiently detailed information to establish that it qualifies for exemption or if the information provided establishes that it does not qualify for exemption. An organization can appeal a proposed adverse ruling or determination letter. See Appeal Procedures, later.
taxmap/pubs/p557-002.htm#en_us_publink1000199849

Effective Date of Exemption(p6)

rule
A ruling or determination letter recognizing exemption is usually effective as of the date of formation of an organization if, during the period before the date of the ruling or determination letter, its purposes and activities were those required by the law. (See Application for Recognition of Exemption in chapter 3 for the special rule for organizations applying for recognition of exemption under section 501(c)(3).) Upon obtaining recognition of exemption, the organization can file a claim for a refund of income taxes paid for the period for which its exempt status is recognized.
If an organization is required to alter its activities or substantially amend its charter to qualify, the ruling or determination letter recognizing exemption will be effective as of the date specified in the letter. If a nonsubstantive amendment is made, such as correction of a clerical error in the enabling instrument or the addition of a dissolution clause, exemption will ordinarily be recognized as of the date of formation if the activities of the organization before the ruling or determination are consistent with the exemption requirements.
A ruling or determination letter recognizing exemption cannot be relied on if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization. Also, a ruling or determination letter cannot be relied on if it is based on any inaccurate material factual representations.
taxmap/pubs/p557-002.htm#en_us_publink1000199850

Revocation or Modification
of Exemption(p6)

rule
A ruling or determination letter recognizing exemption may be revoked or modified by:
  1. A notice to the organization to which the ruling or determination letter originally was issued,
  2. Enactment of legislation or ratification of a tax treaty,
  3. A decision of the United States Supreme Court,
  4. Issuance of temporary or final regulations, or
  5. Issuance of a revenue ruling, a revenue procedure, or other statement published in the Internal Revenue Bulletin or Cumulative Bulletin.
taxmap/pubs/p557-002.htm#en_us_publink1000199851

When revocation takes effect.(p6)

rule
If the organization omitted or misstated a material fact, operated in a manner materially different from that originally represented, or, with regard to organizations to which section 503 applies, engaged in a prohibited transaction (such as diverting corpus or income from its exempt purpose), the revocation or modification may be retroactive.
taxmap/pubs/p557-002.htm#en_us_publink1000199852

Material change in organization.(p6)

rule
If there is a material change, inconsistent with exemption, in the character, purpose, or method of operation of the organization, revocation or modification will ordinarily take effect as of the date of that material change.
taxmap/pubs/p557-002.htm#en_us_publink1000199853
Relief from retroactivity.(p6)
If a ruling or determination letter was issued in error or the IRS changed its position after issuing a letter or ruling, and if section 7805(b) relief is granted, retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination letter was modified or revoked. For more information on requesting section 7805(b) relief, see Revenue Procedure 2013-4, 2013-1 I.R.B. 126, sec. 13 (or later update).
taxmap/pubs/p557-002.htm#en_us_publink1000199854
Foundations.(p7)
The determination of the effective date is the same for the revocation or modification of foundation status or operating foundation status unless the effective date is expressly covered by statute or regulations.
taxmap/pubs/p557-002.htm#en_us_publink1000199855

Written notice.(p7)

rule
If an EO area manager concludes, as a result of examining an information return or considering information from any other source, that a ruling or determination letter should be revoked or modified, the organization will be advised in writing of the proposed action and the reasons for it.
The organization will also be advised of its right to protest the proposed action by requesting Appeals Office consideration. The appeal procedures are discussed next.