part7-31

7.20.2 
Determination Letter Processing of Exempt Organizations

7.20.2.1 
(11-01-2004)
Determination Processing

  1. Determination requests are processed in the following offices:

    • Cincinnati Submission Processing Center (CSPC)

    • EP/EO Determinations Processing Office (Processing Office)

    • Work groups in EO Determinations

    • Work groups in EO Technical

  2. The Cincinnati Submission Processing Center (CSPC) at the Covington,
    Kentucky, address shown in the instructions to Form 1023 receives all determination
    requests.

  3. No determination requests will be accepted by the Director, EO Examinations,
    in Dallas, Texas, or the Director, EO Technical, in Washington, DC. The organization
    seeking to submit an exemption application should be informed that the application
    needs to be submitted to the CSPC in Covington, Kentucky.

  4. The CSPC is responsible for establishing the determination request on
    the EP/EO Determination System (EDS) and processing the user fee, if required.
    See IRM 7.22.1, Exempt Organizations EDS User Manual, which provides procedures
    for processing determination applications on EDS from establishment to closing.

  5. CSPC will then forward the determination request to the Processing Office
    located in Cincinnati. See IRM 7.22.1.1.

    1. The case is held until requested for technical screening. See IRM 7.20.2.3.

    2. If the case is not closed by technical screening (or transferred to EO
      Technical based on criteria in IRM 7.20.2.2.3), then the Processing Office
      holds it as unassigned inventory.

  6. Each week the Processing Office sends cases in order of receipt to the
    work groups located in PODs outside of Cincinnati. The Cincinnati POD work
    groups can receive work up to three times a week. The number of cases sent
    to each group is based on a case request.

  7. When the Processing Office transfers a case to a work group, the group
    manager assigns it to an agent using the appropriate case assignment guidelines.

  8. A case closed in a work group (not requiring mandatory review) is forwarded
    to the group manager for review/signature/approval.

    1. If the group manager approves a proposed favorable case closing, the case
      is closed on EDS and mailed at the group level. The date on the letter is
      the date the case is closed on EDS.

    2. If the favorable case closing approved by the group manager is not selected
      for mandatory or sample review, it is forwarded to the Records Unit and microfiched.
      The case file is not stored. For further discussion, see IRM 7.20.2.13.

    3. If the group manager does not approve the proposed agents recommendation
      for case closing, the case will be returned to the agent in status 53 for
      correction or comment. The manager should include written guidance identifying
      items the agent needs to address if the case requires more than a minor correction.
      If the agent does not agree with the manager’s reasons for returning
      the case, then the agent will prepare a memo to the group manager explaining
      why the manager’s changes are not necessary before resubmitting the
      case to the manager. For a further discussion see IRM 7.20.2.13.

    4. If the group manager approves a proposed adverse closing, the case is
      forwarded to EO Determinations Quality Assurance for mandatory review. See
      IRM 7.20.5.

7.20.2.1.1 
(11-01-2004)
EO Returns Processing

  1. Exempt organizations, other than private foundations or excepted organizations,
    must file an annual information return on Form 990 or Form 990-EZ if their
    gross receipts normally exceed $25,000.

  2. All private foundations exempt under section 501(c)(3) must file Form
    990-PF.

  3. Regardless of their annual gross receipts, all exempt organizations
    that incur unrelated business income in excess of $1,000 are required to file
    Form 990-T.

  4. Returns are not generally solicited through the determination process.
    However, if an original return is received, it should be date stamped and
    forwarded to the Ogden Campus for processing. The contol date should be the
    postmark date on the envelope or the IRS received date if there is no postmark
    evident or legible. See IRM 7.4.3 Chapter 3. The agent will:

    1. Complete a routing slip (Form 1725) and forward the date-stamped return
      to: Ogden Campus, Ogden, UT 84201-0027.

    2. Keep a copy of the return if it contains vital information not found elsewhere
      in the open application under consideration. It is not necessary to keep a
      copy if there is no open case.

7.20.2.1.2 
(11-01-2004)
Establishing and Reestablishing Cases on EDS

  1. EDS is the computer system used by TE/GE to track and manage determination
    cases. Cases are assigned individual case numbers. See IRM 7.21.3, Screening,
    Controlling and Case Closing.

  2. Cases must be established or reestablished on EDS before agents may
    properly charge time to them. Agents need to be aware of these special situations:

    Note:

    For case-type definitions, see IRM 7.20.1.2.2.

    1. An A, F, P and/or T case needing to be worked simultaneously may require
      the establishment of a new case number for each determination. For example,
      an organization at the end of its advance ruling period states that it wants
      to terminate its operations; therefore, an F case would be worked simultaneously
      with a T case.

    2. The establishment of another I case is required for a change in subsection
      request when Form 1023 is submitted to replace the original Form 1024, or
      vice versa. For example, an organization that is applying for exemption under
      IRC 501(c)(4) withdraws its request and substitutes a Form 1023. No new case
      needs to be established when an organization is changing subsections on Form
      1024.

    3. Replies received in
      “Failure to Establish”
      (FTE) cases
      require reestablishment of an S case under the original subsection based on
      the original Form 1023 or Form 1024.

    4. An I case should be established in conjunction with an S case if a reply
      includes a request for a change in subsection based on a new Form 1023 to
      replace the original Form 1024, or vice versa. See IRM 7.20.2.4.2, Processing
      Withdrawals, for procedures on closing the S case in this situation. For example,
      this situation would arise when an organization, which had originally submitted
      a Form 1024 and its application was closed as an FTE, then requests exemption
      under IRC 501(c)(3) and submits a Form 1023. No new case needs to be established
      when an organization is only changing subsections on Form 1024

  3. The agent will prepare the
    “Establish on EDS”
    form
    to secure a new case number.

  4. The agent will research EDS and print case status information. If the
    case is in an open status (e.g., 55), the file must be retrieved by the group
    secretary and controlled back to the agent in status 52 (Case Assignment).

  5. Offices located in PODs other than Cincinnati may fax forms to the Processing
    Office at 513-263-3522 or e-mail their requests using secure messaging. The
    forms to be faxed will be a transmittal form, original fee source documents,
    “Establish on EDS”
    forms, and EDS print. See IRM 7.20.2.2(1)
    – Additional Fees.

  6. If the agent receives a reply on a previous FTE case with no user fee
    payment, then the agent will:

    1. Print a copy of the closed FTE cases Screen #1 from EDS—this should
      reflect status 11 or 12—and attach it to the top of the response.

    2. If the case is in an open status (e.g., 55), request the group secretary
      to retrieve the file and control it back to the agent in status 52.

    3. Place the above information in the designated bin in the group for case
      establishment and/or reestablishment.

  7. If an agent is assigned a case that was not established correctly and
    no time has been put on the case, then the agent will close the case using
    status 30 (Correction Disposal) and prepare an
    “Establish on
    EDS”
    form to correctly establish the case. If time has been charged
    to the case, then it should be closed status 12. The status 30 closure should
    be turned into the manager immediately so the case can be closed out on EDS.
    If not, the case may inadvertently remain in status 55 indefinitely.

  8. An organization may submit additional information after a case has been
    closed for failure to establish on EDS. The following procedures apply in
    handling these types of cases.

    IF THEN the agent will
    1. The organizations case was originally worked in the Cincinnati
    POD and the organization requests extensions to submit the requested information
    and the user fee within the 90-day period     		Prepare the necessary form and forward it to the user fee unit.
    2. The organizations case was originally worked in a POD other than
    Cincinnati and the organization requests extensions to submit the requested
    information within the 90-day period     		Pull the closed case, determine whether the extension should be granted,
    and document the Case Chronology Record (CCR).
    3. The organization is providing a status report Call the organization to acknowledge receipt and then forward the information
    to be associated with the file.
    4. The organization is providing previously requested information Prepare the
    “Establish on EDS”
    form and all applicable
    information as outlined in items (2) through (6) above.

7.20.2.1.3 
(11-01-2004)
IDRS Research

  1. IDRS is the acronym for the Integrated Data Retrieval System. It is
    a computer system used to retrieve/change data on the Individual Master File
    (IMF), the Business Master File (BMF), and the Exempt Organizations Master
    File (EOMF). See Document 6209, ADP and IDRS Information 2001, and Document
    6379, EO Management Information Systems Codes, for a description of the various
    codes contained on each Master File.

    1. The EOMF contains the EO submodule of exempt organizations or applicants.
      The EO submodule contains information regarding the name, address, status
      code, date, foundation status, organization type, etc.

    2. Generally, the EO submodule is created and updated by the preparation
      of Form 8670 on EDS when closing a case; however, Form 2363 or Form 2363-A
      may be required in some instances.

    3. The actual print of the research is commonly referred to as
      ”
      research.”

  2. The various types of Master File research that may be needed are as
    follows:

    EINAD: To secure the employer identification number.
    NAMEE: To secure the employer identification number (preferred).
    ENMOD: To verify that an employer identification number has been assigned
    and is active.
    INOLE: To verify the name and address of the organization and to determine
    information reflected on Master File.
    BMFOLO: Similar to INOLE, but more extensive EO submodule information (most
    common type of research requested).

7.20.2.2 
(11-01-2004)
User Fees

  1. CSPC and the tax examiners in the Processing Office process all user
    fees. See IRM 7.21.2. However, as requests are being processed in EO Determinations,
    screeners and agents need to determine if the correct user fee was paid based
    upon information received. The user fee schedule and rules for when to refund,
    waive, or request additional fees are set forth in Rev. Proc. 2004-8 (updated
    annually).

  2. Rev. Proc. 2004-8 provides guidelines on the types of determinations
    to be issued and the amount of the user fee required for each. Payments are
    recorded on the LINUS system. All organizations making an initial request
    for exemption under IRC 501(c) must pay a user fee.

    1. If an organization is newly formed, the user fee will normally be based
      on a two-year projected budget.

    2. User fees are not due in F, T or P cases. Fees are also generally not
      due in A cases, unless the organization is applying for a group ruling or
      seeking reclassification under another section of 501(c).

  3. If the application is received without a user fee, then the applicant
    will be requested to pay the fee. If the fee is not paid after the request
    is made, then the application will be returned to the applicant.

  4. Situations may arise when it is necessary for an agent to secure an
    additional fee during case processing.

  5. The screener in EO Determinations will initially identify problems with
    user fees and will designate those cases reserved for inventory. It is ultimately
    the agents responsibility to ensure that the correct user fee is paid.

  6. The user fee paid is reflected on Form 8718 and on EDS. Research may
    be obtained from the LINUS system. This research may be requested from the
    group secretary located in the Cincinnati POD or by calling the Processing
    Office at 513-263-3430.

    Note:

    Form 1023 is undergoing revisions and will incorporate
    Form 8718.

  7. User fees must be paid in advance for all determination letters. The
    agent is responsible for verifying that the correct user fee was paid. An
    agent may determine whether a fee has been paid by reviewing Form 8718.

  8. EO Determination personnel should be aware of the following issues relating
    to user fees, which are discussed in this subsection:

    • Dishonored Personal Checks

    • Additional Fees

    • Refund of User Fees

    • Waiver of User Fees

  9. Extensions: If an organizations file is closed
    based on
    “failure to establish,”
    it has 90 days in which
    to submit the additional information without incurring an additional fee.

    1. If a request for extension is received in the Cincinnati POD, it should
      be forwarded to the user fee adjuster. Use an extension request form; calls
      should not be forwarded for extensions of the user fee date to the user fee
      adjuster.

    2. If a request for extension is received in a POD other than Cincinnati,
      the agents may grant extensions as long as the 90-day period has not yet expired.
      A letter should be sent to the organization confirming the extended due date.

    Note:

    In the interests of good customer service, use every opportunity to
    remind organizations in FTE status of their need to request an extension if
    they cannot meet the 90-day period. If taxpayers call for any reason during
    the 90-day period and do not specifically ask for an extension, agents should
    remind them to do so.

  10. An applicant that submits an incorrect application form, but pays the
    correct user fee, does not need to pay an additional fee if the correct application
    is submitted while the case based on the incorrect application form is open.

    1. Close the incorrect application form case on EDS as 04 (Withdrawal).

    2. Establish the correct application form case on EDS.

  11. Use the following procedures when processing user fees.

    IF THEN
    a. A Form 1023 applicant that does not qualify for relief under Regs.
    301.9100 submits Page 1 of Form 1024 while the Form 1023 is still under consideration

    		 No additional fee is required to process the Form 1024.
    b. In a case closed FTE, the applicant responds and submits a user
    fee after the 90-day period has expired     		Follow the procedures described in paragraph (1) above to process the
    fee.
    c. In a case closed FTE, the applicant responds after the 90-day period
    has expired but does not submit a second user fee     		Determine from the facts of the case if an additional fee is due.

  12. In rare circumstances, an initial determination request may be incorrectly
    mailed to a work group rather than to the CSPC. If this situation arises,
    the group secretary will:

    1. Prepare User Fee Check Transmittal—
      • Indicate
      ”
      Initial application(s)”
      in Remarks section of transmittal
      •
      Complete all applicable columns on the transmittal for each fee received

    2. Forward transmittal(s), original fee, source document(s), and initial
      application(s) to appropriate area, as follows—
      •
      Cincinnati POD      : Hand carry to user fee adjuster
      •
      PODs other than Cincinnati      : Send to the CSPC daily via overnight mail

    3. Retain a copy of the completed transmittal to monitor and follow up acknowledgment
      by CSPC within 7 days.

7.20.2.2.1 
(11-01-2004)
Dishonored User Fee Checks

  1. During the processing of a determination request, it may occur that
    a user fee paid by a personal check may be dishonored by a bank and returned
    for insufficient funds.

  2. If the user fee check is dishonored while the application case is open,
    the user fee adjuster will notify the agent of the dishonored check. The letters
    “BBBB”
    will appear as the name control on EDS. The agent will
    advise the applicant of the requirement to pay the user fee by certified check
    or money order and allow a reasonable period for payment based on the facts
    of the case. The case cannot be approved or denied until the correct fee is
    paid.

  3. If a case is closed on merit, but is still in the group when the user
    fee adjuster notifies the agent of the dishonored check, the agent will attempt
    to secure the user fee.

    1. If the applicant does not pay the user fee within 3-5 days, the agent
      will update the case to status 52 and contact the applicant again to determine
      whether the applicant intends to pay the fee.

    2. If the applicant does not pay the user fee, the case will be closed on
      EDS with a status 03 (No Remittance).

  4. An agent should consult with his or her group manager if an applicant
    appears to have intentionally misrepresented its character or nature to qualify
    for the reduced user fee.

7.20.2.2.2 
(11-01-2004)
Additional Fees

  1. Group secretaries are responsible for opening incoming mail within a
    work group. The following table lists the responsibilities of the group secretary
    when an additional user fee check is received in the work groups mail:

    IF THEN the group secretary will
    1. A fee is secured on an open case a. Record receipt of the fee on the Form 5464 (Case Chronology Record)
    b. Process receipt of the fee
    • Research EDS and print case
    status information
    • Prepare a
    “dummy”
    Form 8718:
    Enter the payment amount, your initials, and the organizations name and EIN
    in the appropriate spaces.
    • Stamp Form 8718 with IRS received date
    c. Copy fee source document (personal check, money order, or cashiers
    check),
    “dummy”
    Form 8718, add EDS print, and associate
    with respective case file
    d. Prepare User Fee Check Transmittal
    • Indicate
    “Additional Payments”
    in
    “Remarks”
    section
    of the transmittal
    • Complete all applicable columns on the transmittal
    for each fee received
    e. Forward transmittal(s), original fee source document(s),
    “dummy”
    Form(s) 8718, and EDS print(s) to appropriate area:
    • Cincinnati POD: Hand carry to the User Fee Adjuster
    • PODs other than Cincinnati: Send to the CSPC daily via overnight
    mail
    f. Keep a copy of each completed transmittal to monitor and follow
    up acknowledgment by CSPC within 7 days
    IF THEN the group secretary will
    2. A fee is received on a closed
    “failure
    to establish”
    (FTE) case     		a. Research EDS and print case status information
    • If the
    case is in an open status (e.g., 55), retrieve the file
    b. Prepare User Fee Check Transmittal
    • Indicate
    ”
    Case Reestablishment”
    in
    “Remarks”
    section of the
    transmittal
    • Complete all applicable columns on the transmittal for
    each fee received
    c. Prepare the
    “Establish on EDS”
    form
    • PODs other than Cincinnati: If a new case was established
    prior to submitting the user fee for processing, enter
    “Case
    Established in Area Office—Process Payment Only”
    in
    ”
    Remarks”
    section and indicate new case number so payment may be properly
    applied
    d. Forward transmittal(s), original fee source document(s),
    ”
    Establish on EDS”
    form(s) (if appropriate), and EDS print(s) to appropriate
    area:
    • Cincinnati POD: Hand carry to user fee
    adjuster
    • PODs other than Cincinnati: Send
    completed transmittal(s), fee source document(s),
    “Establish
    on EDS”
    form (if appropriate), and EDS print(s) to the CSPC daily via
    overnight mail
    e. Keep a copy of completed transmittal to monitor and follow up acknowledgment
    by CSPC within 7 days

  2. If the applicant’s activities are inconsistent with its financial
    data and an additional user fee is due, the agent will ask the applicant to
    clarify the inconsistency.

    If the applicant Then the agent will
    a. Does not respond and the application can be otherwise approved Close the case, Failure to Establish (FTE), and caveat the letter to
    request the payment of the additional fee. The caveat will clearly state the
    basis for the additional fee.
    b. Requests to withdraw the application Follow the procedures in IRM 7.20.2.4.2.
    c. Pays the additional fee Process the case as usual and process the payment as described in paragraph
    (1) above.
    d. Responds but does not agree to the increased fee Discuss the case with the group manager and consider forwarding the
    case to the EO Determinations Quality Assurance Office for resolution of the
    fee issue.

7.20.2.2.3 
(11-01-2004)
Refunds of User Fees

  1. The user fee is not refundable if an organization withdraws its exemption
    application. However, the user fee is refundable if the application was filed
    based on erroneous advice from IRS personnel, or the application is withdrawn
    solely because the organization is unwilling to pay a higher user fee than
    that originally paid. Procedures for processing withdrawals are in IRM 7.20.2.4.2.

  2. The user fee should be refunded if the agent discovers the applicant
    is already exempt (other than under a group ruling) before completing an application
    under the same paragraph of IRC 501(c). The user fee will not be refunded
    if the previous exempt status is not discovered until the determination is
    completed. The user fee should be refunded if the agent discovers the applicant
    is covered by a group exemption and it wishes to remain in the group exemption.
    Procedures for processing withdrawals are in IRM 7.20.2.4.2.

  3. An agent outside the Processing Office should forward the refund authorization
    forms to the Processing Office for processing if the CSPC deposited the original
    fee.

  4. A partial refund of the user fee will be issued if the organization
    paid $500, but its gross receipts will not exceed $10,000.

  5. A partial refund of the user fee will be issued if the organization
    paid an incorrect dollar amount, one other than the appropriate $150 or $500.

  6. If the applicant claims a refund is due but the agent does not agree,
    the applicant may request reconsideration of the user fee by the Manager,
    EO Determinations Quality Assurance. Refer to IRM 7.20.5.8.

  7. If it is determined that a user fee was overpaid, the agent will:

    1. Prepare a routing slip addressed to the user fee adjuster stating the
      amount and briefly explaining the reason for the refund.

    2. Submit the routing slip to the group manager for review and approval.

    3. If the manager approves the refund, prepare Form 3198-A, TE/GE Special
      Handling Notice, and notate
      “User Fee Refund.”

    4. If the case is being closed favorably, notify the applicant (after the
      manager approves the refund) that the refund will be issued separately. Notification
      may be by telephone or correspondence.

    5. Document the contact in the Case Chronology Record.

    Note:

    If a screener forwards a case to unassigned inventory for more development,
    the screener should note possible refund on the screener checksheet, but should
    not notify the applicant of the potential refund.

7.20.2.2.4 
(11-01-2004)
Waiver of User Fee

  1. An organization may request a waiver of any additional fee. A request
    that a user fee be waived is approved or denied by the Manager, EO Determinations
    Quality Assurance (Quality Assurance) after reviewing a case forwarded by
    an agent.

    Exception:

    The following situation does not constitute
    a waiver request and is not subject to review: A resubmitted exempt organizations
    FTE case may clearly show that the initial user fee was correctly paid. The
    screener or agent to whom the case is reassigned may conclude that a second
    user fee is not required because the applicant either complied with the 90-day
    deadline, or failed to do so because of a Service error. To determine if Service
    error has occurred, the organization should be requested to provide chronological
    details as to the circumstances surrounding the request.

  2. The agent will secure the additional information necessary to determine
    whether there was Service error.

  3. In preparing a case for review by Quality Assurance, the agent will:

    1. Develop the facts of the case. If necessary, the organization needs to
      provide chronological details of the circumstances surrounding its request
      for waiver.

    2. Prepare a summary of the facts, and recommend whether the request should
      be approved or denied on Form 1725.

    3. Based on the recommendation, prepare a letter to notify the organization
      of the decision.

    4. Forward the entire case file to the group manager for review and approval.
      If the group manager agrees that the request is complete and the summary is
      accurate, then the manager will initial and date the Form 1725, and the case
      file will be forwarded via Form 3210 to the Manager, Quality Assurance, for
      assignment to a reviewer. EDS will be updated to status 31. Refer to IRM 7.20.5.8
      for processing of the request by Quality Assurance.

    5. Based on the recommendation from Quality Assurance, the applicable approval
      or denial letter will be mailed to the applicant.

7.20.2.3 
(11-01-2004)
Technical Screening

  1. Technical screening is a process of identifying and reviewing determination
    requests from organizations with historically demonstrated high levels of
    compliance and of closing them quickly on their merit as approvals, based
    on the information submitted. EO Determination agents work the technical screening
    cases. These agents are referred to as screeners.

  2. Determination requests that are subject to technical screening include:

    • Requests for determination letters

    • Foundation follow-ups

    • Terminations

    • Amendments established on EDS

  3. The variety of IRC 501(c) subsections, as well as the variety of organizations
    exempt under IRC 501(c)(3), makes categorizing the kinds of organizations
    that can be merit-closed very difficult. Thus, to ensure the quality of the
    merit screening process, only the most experienced determination agents will
    be assigned to technically screen applications. These agents will use sound
    reasoning based on training and experience to determine if the information
    in the application meets the organizational, operational, and other technical
    requirements of the Code and regulations.

  4. The screener will review the application.

    IF THEN
    1. The exemption application can be granted upon initial submission

    		 The screener may close the case as an approval.
    2. The application lacks only minimal, relatively non-complex items

    		 The screener may request additional information by telephone from the
    organization. Additional information letters will not be written on screening
    cases. See (7) below for further guidance.
    3. The additional information completes the application and the organization
    qualifies     		The screener may close the case as an approval.
    4. The screening agent cannot approve the case, and securing the information
    to approve the case would be time-consuming or would require research of issues

    		 The case must be returned to unassigned inventory for processing.

  5. If a determination request cannot be closed by the screener, the screener
    will:

    1. Enter the case grade per the case assignment guide on the input sheet.

    2. Notate the input sheet if the case should be classified as reserved inventory
      per IRM 7.20.1.2.3.

    3. Complete the Exempt Organizations Technical Screening Checksheet.

    Note:

    Forwarding a case to unassigned inventory means that the case file needs
    to be reviewed further. It does not necessarily mean that the applicant must
    be contacted.

  6. If a case can be approved in technical screening, the screener will
    process the case per IRM 7.20.2.13 with the following differences:

    1. Complete only Form 6038; no attachments are required in this instance.
      However, the Case Chronology Record should be documented in unusual or borderline
      cases.

    2. Use disposal code 06 (rather than 01) when closing the case.

  7. If the screener decides to request additional information by telephone,
    up to five days may be allowed for a response. A longer period may be granted
    based on the group managers discretion. If the applicant does not submit
    the information, the screener will telephone the applicant to explain that
    the case will be forwarded to an agent for further development. The applicant
    will be advised that the case may be worked in another office. The screener
    will forward the case to unassigned inventory.

  8. The items on the Exempt Organizations Technical Screening Checksheet
    are not intended to be all-inclusive, but identify the issues that preclude
    the application from being approved by the screener.

7.20.2.4 
(11-01-2004)
Case Processing

  1. EO Determination agents manage their inventory in a first-in first-out
    (FIFO) manner, (oldest date first) with the exception of approved expedite
    requests. Where an organization responds to an information request, that case
    takes precedence over cases that have not been started.

  2. The agent will review the determination request to ensure that no items
    are missing. The following is a list of items which should be submitted with
    the determination letter request:

    • Correct user fee, if applicable

    • Application Form 1023/1024 signed by an authorized person

    • Power of Attorney or other authorization form, if applicable, signed by
      an authorized person

    • An Employer Identification Number (EIN) or a completed Form SS-4, Application
      for Employer Identification Number

    • All applicable pages and schedules of the respective applications

    • A conformed organizing document

    • Bylaws, if adopted

    • Financial data as described in the Form 1023/1024 instructions

    • A narrative describing the organization’s past, current, and planned
      activities

  3. The agent will contact the organization to obtain any additional information
    or amendments necessary to process the application. See IRM 7.20.1.5 for authorized
    persons.

  4. The agent will determine, based on the facts of the case and clearly
    established rules in the statute, a tax treaty, the regulations, a revenue
    ruling, opinion or court decision, how the case should be closed (approved,
    adverse, failure to establish, other) and the proper EDS letter to be issued.

    • If technical advice or technical assistance is required, see IRM 7.1.3.

    • If an adverse closing, see IRM 7.20.2.9.

    • For case closing, see IRM 7.20.2.13.

    • For case file assembly, see IRM 7.20.2.6.

  5. The agent will submit the case for managerial review/signature. In addition,
    some cases may be subject to mandatory or sample review, TEQMS, or post-review
    by EO Technical. See IRM 7.20.5.

  6. No document submitted by an applicant should be marked or written on
    by anyone processing a determination request. If there is litigation with
    respect to the case, then the court may construe unnecessary markings on documents
    as inappropriate.

  7. If an application is being processed under IRC 501(c)(3) and the application
    does not contain all of the necessary information to allow a determination
    to be made under IRC 501(c)(3), then the 270-day period referred to in IRC
    7428(b)(2) begins with—

    • the postmark date on the incomplete application, or

    • if no postmark, the IRS stamped received date.

  8. Any missing information necessary to process an application to which
    IRC 7428 applies must be requested in writing from the organization to demonstrate
    that the IRS did not unreasonably delay processing the application. For example,
    information from a website will not become part of the administrative file
    on adverse determinations unless submitted in writing by the organization
    or shared in writing with the organization.

  9. Agents will provide identifying information about themselves so taxpayers
    will know whom to contact if they should have questions relating to their
    determination request. This requirement is mandatory, as provided in section
    3705 of the IRS Restructuring and Reform Act of 1998 (RRA 98). See IRM 21.3.3.4.19.1,
    Preparation of Outgoing Correspondence.

7.20.2.4.1 
(11-01-2004)
Amendments

  1. An
    “amendment”
    or an A-type case is a case in which
    a recognized exempt organization informs the Service of organizational or
    operational changes.

  2. Examples of changes that would be considered amendments include:

    • Change in purposes

    • Change in sources of financial support

    • Name change

    • Change in operations

  3. When an organization is recognized as exempt under IRC 501(a), the determination
    letter instructs it to report changes in name, address, purposes, operations,
    or sources of financial support to the TE/GE Customer Account Services Office
    (CAS).

  4. CAS receives and screens most amendments. CAS will only process amendments
    that do not affect an organizations exempt status, such as the number of
    directors, accounting period, name or address of the organization, or other
    amendments which CAS can review and determine that the change will not jeopardize
    the organizations exempt status. See IRM 21.3.8 for additional information.

  5. If the amendment cannot be processed by CAS, it will be forwarded to
    the Processing Office to have an A case established. Some specific determination
    requests that are treated as amendment cases are:

    • Group exemption requests

    • Requests for advance approval of grantmaking under IRC 4945(g) (see IRM
      7.20.3.7.8)

    • Requests by organizations to be reclassified as private foundations (see
      IRM 7.20.3.3.7)

    • Requests where changes have been completed

  6. The amount of development necessary in processing cases depends on the
    facts and circumstances of each situation. In general, there should be enough
    information to determine whether the new request may be granted and whether
    the changes affect the exemption or the foundation status of the organization.
    Information can be requested from the organization to obtain details about
    changes in its purpose, character, or method of operation by using a composed
    development letter. Following are examples of the information needed for various
    requests:

    1. If an organization has added or changed activities, sufficient detail
      about the activities should be secured so that it is clear the new activity
      is conducted in an exempt manner and is allowable under the applicable Code
      section.

    2. If the organizations sources of support have changed and the organization
      is a public charity, financial data for the last four years should be secured
      to verify that the organization continues to meet the public support test.
      Sufficient information should be secured to determine whether the organizations
      sources of support affect exempt status and whether they subject the organization
      to unrelated business income tax.

    3. If the organization requests a change in subsection, and is currently
      exempt, a new application must be submitted, and it should be worked as if
      it were an initial application. See IRM 7.20.2.2(b) for user fee issues.

    4. If an IRC 501(c)(9) organization submits an amendment to its plan document
      or trust agreement, information should be secured to ensure that the plan
      remains nondiscriminatory.

  7. Once an amendment case is assigned to an agent, it should be developed
    and processed based on all of the facts and circumstances. Additional information
    may be requested by the agent to obtain details about the changes in the organization’s
    purposes and methods of operation.

    IF the agent is working a(n) THEN the agent will
    Request for advance approval under section 4945(g) Issue the appropriate determination letter
    Private foundation reclassification Issue the appropriate determination letter
    Group ruling request Issue the appropriate determination letter
    Amendment case where the organization has made completed changes that
    will have an adverse impact on the organization     		Complete Form 5666 (see IRM 7.20.2.5.3) and write an acknowledgment
    letter to the organization informing it that there has been a referral of
    its submission to EO Exam
    Amendment case where the completed changes are based upon established
    rules, guidelines, and published tax law that will not jeopardize exempt status

    		 Issue the appropriate determination letter
    Amendment case not described above Consult his/her manager. Where sufficient information has not been
    provided about a completed change or the completed change is not clearly covered
    by the Internal Revenue Code, Income Tax Regulations, or other established
    rules and guidelines, a letter acknowledging receipt of the information may
    be appropriate along with a statement that it is not in the interest of the
    Service to issue a determination letter.

  8. Generally, if an organization described in IRC 501(a), but not in IRC
    501(c)(3), requests a termination of its exempt status, then the agent should
    acknowledge the organization’s request. The acknowledgment should inform
    the organization of its future responsibilities. The agent should update EDS
    and EOBMF to change the organization’s filing requirements.

  9. Generally an organization described in IRC 501(c)(3) may not voluntarily
    relinquish its exempt status. If an agent reviews such a request, then a Form
    5666 should be filled out and referred to EO Examinations.

  10. When an organization submits information about changes to its organizing
    documents, it should provide conformed copies of amendments to its articles
    of organization (such as corporate charter, trust instrument or constitution)
    or internal regulations (such as bylaws).

  11. EO Technical refers amendments it receives to EO Determinations.

  12. If a Federal credit union submits an amendment, the agent should return
    it and advise the credit union that the information should be submitted to
    the National Credit Union Administration (NCUA). The NCUA is the independent
    federal agency that makes an annual report to the Service, incorporating all
    the changes affecting all Federal credit unions. See IRM 7.25.1.4.4.

  13. Amendments filed by group exemption organizations are discussed at IRM
    7.20.2.7.1.

7.20.2.4.2 
(11-01-2004)
Processing Withdrawals

  1. An organization may request, in writing, to withdraw its application
    any time before the determination letter is issued. Even though the application
    is withdrawn, the application and all supporting documents will be retained
    by the Service and will not be returned to the organization. For user fee
    issues, see IRM 7.20.2.2.

  2. Exempt organization personnel will not take any direct or indirect action
    that may be interpreted as a solicitation of a withdrawal of an application.
    Agents may, however, discuss with an organization its option to withdraw its
    application because it does not appear to qualify for favorable determination.
    If the option of withdrawing its application is discussed with an organization,
    the agent will thoroughly document the discussion in the Case Chronology Record.

  3. A request for the withdrawal of its application for exemption must be
    secured in writing from the organization and must be signed and dated by an
    officer of the organization. The organization should be advised that there
    can be no refund of the user fee paid to process the application for exemption
    and that the application will not be processed further. The agent will:

    1. Issue Letter 2244 on EDS to the organization to acknowledge that the application
      has been withdrawn.

    2. Use the closing status 04 on Form 8670.

    3. Prepare Form 2363 to input the filing requirements on IDRS if the organization
      was operational and had taxable income. See IRM 7.20.5.3.

  4. If two applications (i.e., a Form 1023 and a subsequent Form 1024, or
    vice versa) are established on EDS due to a request for a change in subsection,
    the application that will not be processed further should be closed using
    status 04 on Form 8670. The organization will not be issued Letter 2244 in
    this situation. The EDS closing sheet for the case that will not be processed
    further will be given to the manager for closure on EDS even if processing
    of the remaining application is not yet complete. The new case should have
    an EDS control.

7.20.2.4.3 
(11-01-2004)
Termination of Exempt Status

  1. An exempt organization is required to notify the Service of changes
    to its organizational structure. The requirement to notify the Service is
    explained in the determination letter sent to the organization.

  2. If an organization notifies the EO Determinations Processing Office
    or the TEGE Customer Accounts Service Office of its dissolution, the case
    will be controlled on EDS as a Termination or T case. See IRM 3.11 for information
    received on dissolved organizations through information return filings or
    taxpayer delinquency investigations.

  3. The agent must secure evidence of the dissolution as follows:

    IF the organization THEN the agent will secure
    a. Is incorporated and has filed Articles of
    Dissolution with the State     		A complete copy of the filed Articles of Dissolution.
    b. Is incorporated and has not filed Articles
    of Dissolution with the State     		A resolution, signed by at least 2 officers,
    directors or trustees, stating the date of dissolution.
    c. Is an unincorporated association or a trust

    		 A resolution, signed by at least 2 officers,
    directors or trustees, stating the date of dissolution.
    d. Submits conflicting information about whether
    it has dissolved     		A statement signed by a majority of the officers,
    directors or trustees, stating they agree to dissolve the organization.

  4. If the organization is exempt under IRC 501(c)(3), the agent will secure
    a statement signed by an officer of the organization showing the disposition
    of any assets on hand at the date of dissolution. If the agent believes that
    there is a substantial distribution of assets not exclusively for IRC 501(c)(3)
    purposes, then the agent should refer the issue to EO Examination.

  5. The agent will take the following actions to close the case:

    IF THEN the agent will
    a. The organizations termination information
    is complete     		• Issue EDS letter 2242.
    • Prepare
    Form 2363-A to update IDRS to reflect status 20.
    • Prepare Form 3198-A,
    if necessary, to notify State officials.
    • Prepare a copy of this
    letter for the processing office.
    b. The organization did not provide sufficient
    information     		• Not issue EDS letter 2242.
    •
    Use closing code status 12 on Form 8670.
    • Prepare Form 3198-A, if
    necessary, to notify State officials.
    c. The organization is incorporated and has been
    administratively dissolved by the State     		• Issue EDS letter 2242 with an addendum
    to the effect that if the organization later becomes active and in good standing
    with the State, a new Form 1023 will be required to have its exempt status
    reinstated.
    d. The organization does not respond to the request
    for additional information     		• Not issue a termination letter.
    •
    Close the case on EDS using closing code 12.
    • Use Form 2363-A to
    update the Master File status to 20.
    • Prepare Form 3198-A and state
    in
    “Other Instructions”
    :
    “Termination –
    Do Not Notify State Officials.”
    e. The organization does respond to the request
    for additional information and verifies that the dissolution was proper     		• Issue EDS Letter 2242.
    • Prepare
    Form 2363-A to update the Master File status to 20.
    • Prepare Form
    3198-A with instructions to notify State officials.
    • Close the case
    on EDS with closing code 01.

  6. For mid- to large-sized IRC 501(c)(3) organizations (especially housing,
    health care, etc.), the agent will inquire whether tax-exempt bonds are outstanding
    at the time of the termination. If so, the agent will complete Form 5666,
    TE/GE Referral Information Report.

  7. See IRM 7.20.3.3.5 for instructions on processing a termination that
    occurs during the advance ruling period.

7.20.2.4.4 
(11-01-2004)
Mergers

  1. One type of termination occurs when an exempt organization merges with
    another exempt organization. When working a case involving a merger, at least
    two organizations will be involved: the merged organization(s) and the surviving
    organization. [For purposes of this discussion, a merger describes a situation,
    in which an existing organization combines its assets and operations with
    those of another existing organization; one predecessor organization survives,
    and one predecessor organization terminates its existence.]

  2. In a merger, an agent will verify that the activities are consistent
    with the exempt status of the survivor (such as conducting IDRS research to
    make sure neither organization is under examination) and will take the following
    actions:

    IF THEN the agent will
    a. The surviving organization is a corporation

    		 Secure a complete, filed copy of the Articles
    of Merger.
    b. The surviving organization is an association
    or trust     		Examine all the terms of the merger, which must
    indicate that the majority of the officers, directors, or trustees adopted
    it. The document must be signed by 2 officers, directors, or trustees, and
    it must show the effective date of the merger.
    c. The terminated organization is a 501(c)(3)
    organization classified as a public charity     		Verify that the organization into which it is
    merging is also a 501(c)(3) organization.
    d. Both organizations are private foundations

    		 Contact EO Technical to obtain the specialized
    language under IRC 507(b)(2) that should be provided to the surviving organization.

  3. If the request can be approved, the agent will:

    1. Prepare Form 2363-A to update the status of the merged organization to
      status 26, Termination Merger.

    2. Send Letter 2242 to the merged organization and a composed letter to the
      surviving organization.

    3. Prepare Form 3198-A and, if the merged organization is a 501(c)(3) organization,
      indicate in
      “Other Instructions”
      :
      “Termination/Merger –
      Notify State Officials.”
      For non-IRC 501(c)(3) organizations, indicate:
      “Termination/Merger – Do Not Notify State Officials.”

7.20.2.4.5 
(11-01-2004)
Expedite Requests

  1. EO Determinations processes applications/determinations based upon the
    date received in the CSPC. An exception to processing in the order of the
    date received is made if the application/determination is approved for expedited
    handling.

  2. “Expedited handling”
    means the immediate review
    and processing of a request ahead of the regular order. Expedited handling
    is limited to rare and unusual situations. The criteria for expedited handling
    are described in Rev. Proc. 2004-4 (updated annually) and in IRM 7.20.2.4.5.1.

  3. If the application has not been assigned to an agent, the request for
    expedited handling is approved or denied by CAS. A letter is issued to the
    organization to notify the organization of the decision. If expedited processing
    is approved, the case is placed in a pink folder.

  4. If a screener identifies an expedited handling request which has not
    been forwarded to CAS and is unable to approve exemption, the screener will
    copy the request and forward it to CAS. In addition, the screener will attach
    Document 5089, Expedite Tag, to the top of the case folder.

  5. If the request for expedited handling is received after the case has
    been assigned to an agent, the EO Determinations group manager will approve
    or deny the expedited handling request. This determination is based on the
    criteria in Rev. Proc. 2004-4 (updated annually). The agent will call the
    organization to notify it of the decision.

  6. EO Technical will honor an approval of expedited processing made by
    EO Determinations before the case was referred to EO Technical.

  7. The Service has discretion whether to grant a request for expedited
    handling. The Service’s discretion should be exercised consistently.

  8. Examples of circumstances that are within the applicant’s reasonable
    expectation or control and would not justify the granting of expedited handling
    include the following:

    1. The applicant was created to participate in a significant transaction
      (e.g., a bond issue), in which the deadline was established or scheduled by
      the applicant’s creators, directors, etc., without regard for the time
      it might take for the application to be approved.

    2. The application was submitted late in the calendar year and the organization
      seeks recognition of exemption before December 31, so that its founder can
      be assured of a charitable deduction for a contribution of appreciated stock.

  9. Approval of a request for expedited treatment does not include assurance
    that the organization will qualify for exemption.

7.20.2.4.5.1 
(11-01-2004)
Expedite Requests — Other

  1. If the expedite request is found/received when a case is assigned to
    an agent and there is no indication of approval or denial of the request from
    CAS, the agent should review the expedite request to ascertain the following
    pertinent information:

    1. Grant pending

    2. Grantor

    3. Amount of grant or property the organization will receive

    4. Date the organizations determination letter is needed

    5. Adverse impact on the organizations ability to continue operations if
      the application is not expedited by the requested date

    6. (If purpose is to provide disaster relief) Details of the immediate need
      for disaster relief and of the manner in which the organization will provide
      relief

    7. (If Service error) Nature of error(s) in detail, including dates

  2. The agent should make a recommendation to the group manager that explains
    whether expedited treatment is merited.

  3. If expedited treatment is not approved, the agent will notify the organization
    and process the case in control date order, as usual.

  4. If a case is assigned to an agent (status 52) after the expedite request
    has already been approved, the agent will:

    1. Process the case ahead of other cases in inventory.

    2. Attempt to secure additional information that may be required by telephone,
      but If the information needs to be confirmed in writing, then by FAX.

7.20.2.4.6 
(11-01-2004)
Employer Identification Numbers

  1. An employer identification number (EIN) is a number assigned to each
    organization by the Internal Revenue Service. All organizations seeking exemption
    must have an EIN that is uniquely theirs. See Rev. Ruls. 73-422 and 73-526.

  2. The agent is responsible for securing a correct EIN if there is an indication
    that an incorrect EIN has been provided, and agents should be alert to such
    problems. Generally, the organization will provide its EIN on page one of
    the Form 1023.

  3. If the organization does not have an EIN when it applies for exemption,
    an EIN is secured at the initial phase of processing in the CSPC.

  4. If the organization is not using the correct number, then the agent
    will determine whether it has an EIN of its own. If not, the agent will obtain
    one. The agent will request IDRS Master File research (NAMEE, ENMOD, INOLES,
    OR BMFOLO) from the group secretary. To obtain the EIN, the agent will:

    • Preferably secure a signed Form SS-4 from the organization. Alternatively,
      agents are authorized to complete and sign Form SS-4 for the organization,
      when securing one signed by an officer of the organization is not possible.

    • Once a completed Form SS-4 is secured, fax it to the TELE-TIN unit at
      the Cincinnati Accounts Management Center (CAMC) at 859-669-2079.

    • Include a fax cover sheet from TE/GE that provides identifying information
      (i.e., name, phone, and fax number of the agent) to enable the TELE-TIN unit
      to notify the agent of the assigned EIN. Include the following comments on
      the fax cover sheet:
      “Urgent—EO Office Needs EIN Assigned.
      ”
      Prior to faxing the Form SS-4, contact the TELE-TIN unit at 859-669-4284
      or at 859-669-4515.

  5. If an agent discovers that an organization has been assigned more than
    one EIN, the EINs will be merged. The following is the procedure the agent
    will follow if two (or more) EINs are assigned to one organization.

    Note:

    Be careful not to confuse this with two organizations merging into one.

    1. Obtain IDRS Master File research on all EINs (e.g., INOLES, ENMOD, BMFOLO,
      and EDS).

    2. Request the organization to confirm the EIN which is to survive. It is
      less problematic to retain the EIN under which any tax returns were filed
      or to which any tax payments were applied (BMFOLO will show this information).
      However, if the taxpayer prefers to retain the other EIN, the taxpayers preference
      should be honored.

    3. Prepare an
      “EIN Merger Memo”
      to be sent to the Ogden
      Campus, Entity Control Unit, to advise which EINs are to be consolidated.
      In addition, send to the Ogden Campus copies of the applicable research prints
      and a copy of the organization’s letter requesting consolidation of
      EINs (if applicable).

    4. Keep a copy of the
      “EIN Merger Memo”
      for the left
      side of the case file.

  6. An organization must secure a new EIN when it changes its form (e.g.,
    association or trust to a corporation), unless:

    • It is an unincorporated association applying simultaneously with a corporation;

    • It is changing from a for-profit to a non-profit corporation; or

    • It is merely reincorporating in a different State.

  7. If EDS shows an incorrect EIN, in addition to correcting the EIN shown
    on EDS, the agent must also correct the EIN on LINUS. The agent will complete
    a Form 3198-A to route the case to the user fee adjuster and a Form 1725 indicating
    the following:

    • Old EIN

    • New EIN

    • Reason for the change

    • Instruction to
      “Update LINUS”

7.20.2.5 
(11-01-2004)
Commonly Used Forms

  1. The following table lists the forms used in processing a determination
    case. The preparer should initial and date the upper right corner of every
    form and workpaper in the case file. See IRM 7.20.2.6
    , Case File Assembly, for specifics on where each of the following
    must be placed in or on the case file.

    Form Description/Use
    Form 8718, User Fee for Exempt Organization Determination Letter Request

    		 • Follow instructions on form for preparing and using this
    form.
    Form 3198-A, TE/GE Special Handling Notice • Provides handling/routing instructions for certain cases,
    e.g., mandatory review cases, cases transferred to EO Technical, cases in
    which notification of State officials is required, cases with user fee issues,
    termination cases, cases with Form 5768, Election/Revocation of Election by
    an Eligible Section 501(c)(3) Organization to Make Expenditures to Influence
    Legislation.
    • Complete Form 3198-A with the full legal name of the
    organization.
    • If Mandatory Review, check the
    “Mandatory
    Review”
    box under
    “Determination Cases.”

    •
    Indicate the reason for mandatory review and/or special handling.
    •
    Initial and date the bottom of the form. Attach it to the outside of the case
    file on top of Form 8670.
    • Use the
    “Other Instructions
    ”
    box for special handling instructions.
    Form 5464-A, Case Chronology Record • Included in all case files. Used to record all actions taken
    on the case, including, but not limited to, contacts, delays in processing,
    significant involvement by the group manager, and reasons for excessive or
    unusual time taken in a case.
    • Accurate and complete preparation
    of the Case Chronology Record (CCR) is vital to case processing. All entries
    must be legible. The entries include date, action code, time charged, and
    an explanation of the action. For every telephone call, show the name of the
    person spoken with in the space following the date.
    • The total time
    recorded on the CCR should agree with the time charged to the case on EDS
    and on the ETTS time report, Form 6490.
    Form 5666, EO Information Report • Used to refer information to an Area Office about a case
    that may require follow-up action.
    • The form is sent to the Director,
    EO Examination, in Dallas. When this form is utilized in case processing,
    Form 3198-A must be completed to advise the closing clerk to
    ”
    Forward the Attached Form 5666 to Processing Branch.”
    Form 6018, Consent to Proposed Adverse Action • A consent to proposed adverse determinations and to proposed
    adverse foundation classification cases.
    • However, it is not a waiver
    of the organization’s right to declaratory judgment under IRC 7428.
    Therefore, follow adverse processing procedures in cases that have a right
    to declaratory judgment even if the organization signs the Form 6018.
    •
    See IRM 7.20.2.5.3.
    Form 6038, Exempt Organization Determination Case Worksheet • A checklist of actions that must be completed in
    ”
    I”
    and
    “S”
    requests and any
    “A”
    case
    with a subsection change. It is added to the application in screening and
    remains part of the administrative file.
    • The agent who approves
    an application request must attach a narrative explaining the legal justification
    for approval on Form 6038.
    • See Exhibit
    7.20.2-1.    The attachment is not required for cases approved in technical
    screening.
    Form 8670, EO Control Sheet • EDS-generated closing sheet attached to all cases except
    those transferred to EO Technical.
    • The Form 8670 will reflect the
    closing data provided by the agent.
    • See IRM 7.22.6.
    Form 5768, Election/Revocation of Election by an Eligible Section 501(c)(3)
    Organization to Make Expenditures to Influence Legislation     		• This form is used by IRC 501(c)(3) organizations to make
    an election under IRC 501(h) regarding their expenditures for legislative
    activities.
    • If a Form 5768 is received by an agent, the agent will
    prepare a Form 3198-A with instructions to
    “Forward Form 5768
    to Ogden Campus”
    after the case is closed.
    Form 872-C, Consent Fixing Period of Limitation Upon Assessment of
    Tax Under Section 4940 of the Internal Revenue Code     		• This is a statute extension form for excise tax under Chapter
    42, section 4940.
    • This form is used only for organizations requesting
    exemption under IRC 501(c)(3) and requesting an advance ruling on their foundation
    status under IRC 509(a)(1) and 170(b)(1)(A)(vi), or under IRC 509(a)(2).
    •
    For more specific information, see IRM 7.20.2.5.1.
    Form 2363-A, Request for IDRS Input for BMF-EO Entity Change • This form is used to establish or change the EO submodule
    or entity information on the Business Master File (BMF).
    • If changes
    are needed to the EO submodule or Master File entity but the closing action
    on EDS does not provide a second screen, Form 2363-A may be needed.
    •
    Examples include Termination/Merger, Presumptive PF, Group Ruling, and IRC
    507 Termination closures. See IRM 4.75.16.
    Form 1725, Routing Slip • A transmittal sheet (also known as a buck slip).

7.20.2.5.1 
(11-01-2004)
Form 872-C

  1. The name that should appear on Form 872-C is the exact legal name of
    the organization as it appears in the organizing document. However, variations
    of the name can be accepted as long as they are substantially correct. For
    example, if the organizations name is The Promise Foundation, Incorporated,
    the following variations may be accepted: Promise Foundation, Incorporated
    (or Inc.); The Promise Foundation; and Promise Fdn., Inc. (or any other abbreviation
    for foundation).

    Note:

    Form 1023 is undergoing revision and will incorporate
    Form 872-C.

  2. The address of the organization should be as listed in part I, item
    1, on page 1 of the Form 1023 application. If the address differs, the organization
    should be asked to verify its address.

    Note:

    It is not necessary to delay
    the closing of an application for the correct address on this form as long
    as our records contain the correct address.

  3. The date on Form 872-C is the ending date of the first tax year of the
    organization based on its effective date. This date is based on 1) the date
    the Articles of Incorporation were filed, or if unincorporated, the date the
    organizing document was formally adopted; and 2) the month the organizations
    tax year ends. If an organization was incorporated on December 30, 1997, and
    its annual tax year ends in December, then the ending date of the first tax
    year for purposes of Form 872-C is December 31, 1997.

  4. An officer or an authorized representative of the organization must
    sign the form. A faxed copy of the form is acceptable. The original is not
    required.

    Note:

    If an agent requests an organization to complete or correct
    the form, then the corrections needed should be specified.

7.20.2.5.2 
(11-01-2004)
Form 6018

  1. This form is a consent to proposed adverse determinations and is used
    in denials and adverse foundation status cases.

    1. Form 6018 may be solicited prior to closing denials of exemption applications
      regardless whether such denials are subject to IRC 7428.

    2. Form 6018 should be solicited in adverse
      “F”
      cases
      only when the proposed effective date of the adverse foundation status is
      already established.

    3. Form 6018 should be solicited prior to developing the private operating
      foundation (POF) or IRC 4945(g) issue in an adverse foundation follow-up case.

    IF Form 6018 is secured THEN
    On an exemption application denial that is not subject
    to IRC 7428     		Issue an abbreviated agreed denial letter without the protest paragraph.
    The
    “Taxpayers Position”
    section of the letter should
    state that the organization agreed by signing Form 6018.
    On an exemption application denial that is subject
    to IRC 7428     		There is no change to the closing procedure. These denials are subject
    to declaratory judgment proceedings and, therefore, the adverse letter must
    contain the protest paragraph and be held in review for the 30-day period.
    On an adverse foundation follow-up case subject to mandatory review

    		 The adverse letter should contain this sentence:
    ”
    You agreed to private foundation status by signing Form 6018 dated ______;
    however, you may reconsider your position during the 30-day period starting
    on the date of this letter.”
    See IRM 7.20.3.5.1.2, Processing Adverse
    Foundation Follow-up Cases.

    Note:

    Under study are proposals for a revised Form 6018, Consent
    to Proposed Action—7428, to be used for denials subject to IRC 7428,
    and a separate, new Form 6018-A, Consent to Proposed Action, to be used for
    denials not subject to IRC 7428.

7.20.2.5.3 
(11-01-2004)
Form 5666

  1. Form 5666 will recommend examination for either the first year in which
    the organization is a tax-exempt entity or for an appropriate subsequent year.

  2. The decision to prepare Form 5666 is discretionary at the group manager
    level or above, based on the facts and circumstances, examination potential,
    possibilities of noncompliance, etc., in the particular case. The Form should
    be signed by the group manager.

  3. Information submitted with Form 5666 may include the following:

    1. A statement that the organizations exemption has been denied or that
      it failed to establish exemption

    2. The effective date of the adverse action

    3. A copy of the denial letter or FTE letter

    4. The date the organization was incorporated or, if unincorporated, the
      date the association was formed

    5. A statement that, as a taxable entity, the organization should be reporting
      any income, employment, and excise taxes for which it may be liable

    6. In cases where contributions to the organization were formerly deductible
      as charitable contributions, a statement that those contributions are no longer
      deductible as charitable contributions.

      Note:

      If available, include the names
      and social security numbers or EINs of substantial contributors to ease the
      retrieval of corporate or individual income tax returns, which may be needed
      to determine whether donors have properly claimed charitable contribution
      deductions.

    7. The effective date after which contributions are no longer deductible
      as charitable contributions

    8. Copies of any available tax returns or a statement that no tax returns
      have been obtained

    9. Any pertinent documents and financial or other information.

      Note:

      The
      determination case file after it is microfiched can be used to satisfy this
      requirement.

7.20.2.6 
(11-01-2004)
Case File Assembly

  1. Agents are responsible for properly assembling documents in the case
    file. Proper case file assembly:

    1. Helps managers, reviewers, conferees, and Appeals officers review the
      case.

    2. Reduces the risk of an improper disclosure by separating non-disclosable
      material from material that is available for public inspection.

    3. Assists in compiling the administrative record (as defined in Tax Court
      Rule 210(b)(12)) in cases that are litigated under IRC 7428.

  2. Minor deviations to the case assembly guide to provide for local forms
    or documents may be necessary in unusual situations.

7.20.2.6.1 
(11-01-2004)
Guide for Assembling a Determination Case File

  1. Proper assembly is required for case files involving applications for
    recognition of exemption. These files are divided into three basic categories:

    • Information open for public inspection (under IRC 6103 and 6104) on the
      right side

    • Information not open for public inspection on the left side

    • Items to be purged from the case file

  2. The following forms are to be attached to the front of
    the file in descending order:

    1. Form 3198-A, if necessary

    2. Form 8670 (if more than one, to be staggered with 1 of 2 and 2 of 2 written
      above the case number)

7.20.2.6.2 
(11-01-2004)
Case File Information Open for Public Inspection

  1. Agents will assemble the information that is open to public inspection
    on the right side of the case file in the following descending order:

    1. Determination letter(s) (1 for each recipient, including complete copy
      of letter to POA, and 1 copy of each for file)

    2. Form 872-C (original plus 1), if executed (one additional for each POA)

    3. Form 8718, User Fee for Exempt Organization Determination Letter Request

    4. Form 2848, Power of Attorney, if executed

    5. Form 872-C, if not executed (i.e., not signed by the organization and
      the IRS)

    6. Application Form 1023 or 1024, upon which the determination was made

    7. Application Form 1023 or 1024 (withdrawn)

    8. Organizing document

    9. Amendments to organizing document in chronological order

    10. Bylaws

    11. Financial information (not submitted as integral part of application form)
      (audit report)

    12. Documentation of nondiscriminatory policy required by Rev. Proc. 75–50
      (if applicant operates a school)

    13. All disclosable schedules or statements submitted as part of applications

    14. Correspondence received from the organization or issued to the organization
      relating to the determination of exempt status.

      Note:

      Correspondence should
      be organized in ascending chronological order with the oldest material on
      top. If the correspondence becomes an integral part of the application, it
      should be inserted as appropriate.

    15. Printed material, publications, etc., which support the approval of the
      application

    16. Envelope showing the postmark date for IRC 508/505 purposes

  2. In an adverse case, the case assembly of the right
    side of the case file is the same as in (1) above, except that the information
    listed below will be placed on top of the file in the following order:

    1. Proposed adverse letters (1 only for recipient)

    2. Form 6018 (2 only for recipient), if signature requested

    3. Publication 892 (1 for recipient)

    4. Copy of proposed adverse letter and Form 6018 (if signature requested)
      stapled together for Quality Assurance

    5. Form 6018, if executed

    6. Index

    Note:

    Quality Assurance will make a copy of the proposed adverse
    letter and the Form 6018 for the case file from the floppy disk that is enclosed
    with the case.

    Reminder:

    No documents are purged in
    a proposed adverse closing.

7.20.2.6.3 
(11-01-2004)
Case File Information Not Open for Public Inspection

  1. Agents will assemble the items that are not open for public inspection
    on the left side of the case file in the following descending order:

    1. Unexecuted memorandums to file pertaining to section 301.9100-1 relief

    2. Form 5060 requiring the reviewer’s signature and documents to be
      forwarded to other functions (e.g., Form 5768, Form 5666)

    3. Original EOMF/BMF documents to be input (e.g., Form 2363-A)

    4. Case Chronology Record, oldest date on top

    5. Copies of Form 2363 or 2363-A (includes the group exemption pilot voucher
      and list of subordinates)

    6. Copy of Form 5666

    7. Form 6038

    8. Attachments to Form 6038

    9. Worksheets, checksheets (private school, bond financing, IRC 501(c)(9),
      computation of private foundation status, EOMF research prints, copy of signed
      Form 5060, etc.)

    10. Copies of Form 8670 with different case numbers assigned to the organization

    11. Reviewer’s memorandums and other IRS memorandums or reports (Forms
      5456 and 5457, Form 12175, expedite requests, copy of the user fee waiver/refund,
      EO Technical Post Review memorandums, EO Technical Case History, EIN merger
      memo, and memorandums to file)

    12. Copies of user fee checks

    13. Any other non-disclosable information (e.g., patents, trade secrets, etc.)

7.20.2.6.4 
(11-01-2004)
Purged and Discarded Materials

  1. During the processing of a determination request, the agent may need
    to keep some materials that will be purged at case closing and others that
    may be discarded during processing. Some examples of items that are discarded at case closing are:

    • Technical Screening Sheet

    • Form 8327

    • EO Determination Input Sheet

    • Publications, booklets, brochures, pamphlets, newsletters, etc., which
      do not support the approval of the determination

    • Leases that do not support the approval of the determination

    • Completed Forms 872–C on definitive rulings

    Note:

    Nothing should be marked
    “Purge”
    in adverse cases.

  2. Some examples of items that may be discarded during processing are:

    • Duplicate forms and letters

    • Blank forms and pages

    • Envelopes with no IRC 508 or IRC 505 issues

7.20.2.7 
(11-01-2004)
Requesting Additional Information

  1. Requests for additional information in processing a determination should
    be thorough and relevant. Attachments or questionnaires may be used if they
    do not request information already submitted. EDS Letters 1312 and 1313 are
    usually used to request additional information in Type I and S cases requesting
    recognition of tax-exempt status.

  2. Information not critical to exempt status, e.g., clarification of an
    address, may be obtained by telephone. The agent will document the details
    of the conversation in the file.

  3. An applicant must submit information critical to tax-exempt status,
    e.g., a description of its proposed activities, a representation that it will
    not engage in political activity, etc., in writing, over the signature of
    an officer or authorized representative, regardless whether the agents request
    was made orally or in writing. The document may be faxed to the agent.

7.20.2.7.1 
(11-01-2004)
Time to Submit Information

  1. Applicants are allowed 21 days to submit additional information in reponse
    to an agents written request, except for requests for additional information
    during technical screening. Extensions should not be granted if solely by
    phone.

  2. In some situations, an organization may not be able to provide the additional
    information within the 21-day period.

    1. If the organization contacts the agent because it is unable to provide
      the information within the 21-day period, then the agent can grant an extension
      of up to 14 days.

    2. If the organization cannot respond within the 21-day period or the 14-day
      extended period, the agent should consult with the group manager as to whether
      any further extension request should be granted.

    3. After consulting with the group manager, the agent must contact and inform
      the organization whether the extension of time was granted or denied.

  3. If the applicant fails to respond to the request for additional information
    or does not request an extension of time by the end of the 21-day period,
    the agent will:

    1. Verify the applicants address and determine whether the additional information
      request was returned as undeliverable.

    2. Telephone the individual whose name and telephone number appear on the
      application, or the authorized representative, and inquire about the status
      of the information request. The agent may grant a 14-day extension.

    3. If the authorized representative or contact person cannot be reached by
      telephone, the agent will send a follow-up letter to the organization informing
      it that its determination request will be closed if the additional information
      is not received. The letter will give the organization 14 days to respond.

  4. In type I, S, and group exemption cases, in which the organization has
    not responded to the actions described in (3) above, the agent will:

    1. Clearly explain that if the organization does not provide the information
      requested in order for the Service to determine tax-exempt status, then its
      case will be closed, and the organization will have 90 days to submit the
      additional information without incurring an additional user fee and without
      having to submit a new application.

    2. Fully document the conversation with the organization in the case file.

    3. After a total of 35 days, close the case using status 11, Failure to Establish
      (FTE) unless it is a church, and issue the appropriate EDS letter.

    4. Complete as much of Form 6038 as possible. No attachment is required.

  5. Refer to IRM 7.20.3.5.1.1 for procedures for handling no-response foundation
    follow-up cases. Refer to IRM 7.20.2.4.3 for handling no-response Termination
    (T) type cases.

  6. No-response type A (other than group exemption requests) and P cases
    will usually be closed using status 12 (Other) on EDS. Whether or not to update
    the Master File will depend on the facts of the case. Form 3198-A will be
    prepared if special handling is required.

7.20.2.8 
(11-01-2004)
Effective Date of Exemption and Special Rules

  1. An exemption letter does not usually state an effective date if an organization
    is entitled to exemption from the date it was formed because the exemption
    is effective beginning with the date the organization was legally established.

    Note:

    Revised exemption letters will state an effective date to avoid any confusion
    concerning the effective date.

    1. An IRC 501(c)(9) or (c)(17) applicant must file its application within
      15 months from the end of the month in which it was organized for the effective
      date to be retroactive to the date of formation. See Treas. Reg. 1.505(c)-1T.

    2. An IRC 501(c)(3) applicant, except if described in IRC 508(c), must file
      its application within 15 months from the end of the month in which it was
      organized for the effective date to be retroactive to the date of formation.
      See Treas. Reg. 1.508-1(a). The filing date is the U.S. postmark date stamped
      on the envelope in which the exemption application is mailed. If the envelope
      is not postmarked, or the postmark is illegible, the filing date is the date
      the completed application is stamped received by the Service.

    3. If the IRC 501(c)(3) application is not filed within the 15-month period,
      then the applicant has an automatic extension of 12 months as provided in
      Rev. Proc. 92-85. If the applicant does not file the application within the
      initial 15 months plus the automatic 12-month period, it may request a discretionary
      extension beyond the 27-month period. See IRM 7.20.2.10.

    4. IRC 508(c) and Reg. 1.508-1(a)(3) list exceptions to the notification
      requirement of IRC 508(a), and the appropriate notation should be made on
      Form 6038 at case closing.

  2. If the organization was not described in any subsection of IRC 501(c)
    from the time it was formed, the letter must specifically state the effective
    date of exemption, which is the date when it was first described in IRC 501(c).
    The agent will include the appropriate EDS paragraphs in the closing letter
    to inform the applicant of the effective date of tax-exempt status.

    1. The agent may secure a written agreement from the organization similar
      to the following:
      “This refers to our conversation of _______
      when we discussed the effective date of our exempt status under section 501(c)(3)
      of the Internal Revenue Code. We agree with the conclusion of the Internal
      Revenue Service concerning the effective date of our exempt status under section
      501(c)(3) of the Code. We also agree with the conclusion of the Internal Revenue
      Service that from _____ through _____ this organization did not qualify for
      recognition of exemption from Federal income tax under section 501(c)(3) of
      the Code. We are in agreement with the Internal Revenue Service that from
      _________ through_________contributions to our organization are not deductible
      under section 170 of the Code.”

    2. If the applicant does not submit the statement within 21 days, the determination
      letter must include a protest paragraph and the paragraph on exhaustion of
      administrative remedies.

  3. If an IRC 501(c)(3) applicant does not meet the automatic 27-month period
    and does not specify in its application or in other communications whether
    it wants relief from IRC 508(a), the agent should contact the applicant to
    explain the IRC 508 issue completely.

  4. In the case of a non-IRC 501(c)(3) organization operated in an exempt
    manner as an unincorporated association before its incorporation, the exemption
    letter should state that the period of exemption includes the period during
    which the organization, now a corporation, operated in unincorporated status.
    See Rev. Rul. 54-134, 1954-1 C.B. 88. For IRC 501(c)(3) organizations, see
    Rev. Ruls. 73-422, 1973-2 C.B. 70, and 77-116, 1977-1 C.B. 155.

7.20.2.9 
(11-01-2004)
Adverse Determination Cases Overview

  1. Agents should attempt to resolve determination cases at the earliest
    possible time. Therefore, it is often advisable to hold an informal conference
    with an organization, during which concerns can be addressed, before issuing
    an initial adverse ruling or determination letter. The agent may hold the
    conference together with the group manager.

  2. Issues to discuss with the organization may include:

    • Clarification of activities or purposes that come within the exempt or
      foundation status requested

    • Clarification of the facts

    • Alternative tax-exempt status classification under IRC 501(a)

    • Alternative foundation classification under IRC 509(a)

  3. However, if the agent and group manager believe that the administrative
    record is sufficient to prepare an initial adverse determination letter without
    a discussion with the organization, then an initial adverse determination
    letter with protest rights may be prepared.

  4. If, after the discussion, the organization is expected to provide additional
    information describing its activities and/or purposes, then the agent should
    confirm such expectation by issuing an information letter to the organization.

  5. If, after the discussion with the organization and a review of the information
    submitted by the organization, the agent and group manager agree that the
    organization does not qualify for a favorable determination, then the agent
    should prepare an initial adverse determination letter with protest rights.
    The group manager should document his or her involvement in the case file.
    The initial adverse determination letter is subject to mandatory review (except
    in no-support F cases). See IRM 7.20.5.4.

7.20.2.9.1 
(11-01-2004)
Preparation of Initial Adverse Determination Letter

  1. All factual and legal issues should be fully developed in an initial
    adverse determination letter. The final case disposition depends on the quality
    of fact development and the correct application of law to those facts.

  2. Initial adverse determination letters must include or address the following:

    1. The material facts on which the determination is based

    2. The applicable statute, regulations, and other governing precedent

    3. The Services conclusion and a clear explanation of the underlying reasoning

    4. The denial of recognition status under any other paragraph of IRC 501(c),
      if exempt status is the issue; or under any other foundation classification,
      if foundation classification is the issue

    5. The organizations right to protest the proposed action; Publication 892,
      EO Appeal Procedures for Unagreed Issues, attached to the adverse letter

    6. The right of the organization to a conference

    7. A statement that the determination will become final if the organization
      does not submit a written protest within the allotted time

    8. A statement in an IRC 501(c)(3) exemption case that under IRC 6104(c)
      State officials will be notified

  3. Form 3198-A will be marked for mandatory review (in the
    ”
    Determination Cases”
    section of the form) when the agent prepares an
    initial adverse determination letter.

  4. The agent will prepare an index of the administrative record documents,
    attach the index to the inside right side of the case file folder, and update
    it as necessary. In a foundation follow-up case, or F case, an index should
    be prepared if the case is unusually large, complex, or likely to be protested.

7.20.2.9.2 
(11-01-2004)
Miscellaneous Issues Concerning Initial Adverse Determination Letters

  1. An agreed foundation follow-up case, in which the organization signs
    Form 6018, Consent to Proposed Adverse Action, is processed as an adverse
    case because Form 6018 does not contain the necessary language to waive the
    organization’s right to declaratory judgment. However, the proposed
    adverse letter and the administrative record need not be as detailed as in
    a case in which the organization does not sign the Form 6018. See IRM 7.20.3.5
    for a complete discussion of foundation follow-up cases.
    See IRM 7.20.2.5.2     for a further discussion of Form 6018.

  2. Protest appeal rights or court review are not extended to:

    • Determination cases closed based on
      “failure to establish
      ”

    • Foundation classification cases closed as presumptive private foundations

  3. Technical advice may be requested on issues in controversy. See IRM
    7.1.4, EO Technical Advice Procedures.

7.20.2.9.3 
(11-01-2004)
Adverse Ruling or Determination Not Sustained by Court

  1. If an organization exercises its right to file for a declaratory judgment
    under IRC 7428, it may obtain a favorable determination if:

    1. The Court issues a favorable decision, or

    2. Counsel agrees to a favorable determination in exchange for withdrawal
      of the action.

  2. Apart from filing a declaratory judgment action, an organization may
    also obtain a favorable determination by successfully challenging a tax assessment
    that resulted from a prior adverse determination.

  3. The procedures for the issuance of rulings or determination letters
    to organizations that have established in court their qualifications for exemption
    from federal income tax are contained in Rev. Proc. 80-28, 1980-1 C.B. 680.

  4. Counsel will return the file to the Director, Rulings and Agreements,
    for preparation of a favorable determination letter. If there has not been
    a change in the controlling law, the favorable determination letter (including
    signature and date stamp) will be forwarded to Area Counsel for delivery to
    the applicant. The administrative file should contain a brief statement over
    the signature of a principal officer that the organizations activities remain
    the same as in the period considered by the court, if that is the case.

    Note:

    The organization need not submit a new application if one has already been
    submitted.

7.20.2.10 
(11-01-2004)
IRC 508(a) Overview

  1. Organizations applying for exemption under IRC 501(c)(3) are subject
    to the notice provisions of IRC 508(a) and related regulations, which generally
    require an organization to submit Form 1023 within 15 months from the end
    of the month in which it was organized.

  2. IRC 508(c)(1) provides that the 15-month filing requirement described
    in IRC 508(a) does not apply if the organization is:

    1. Not a private foundation described in IRC 509(a) and its annual gross
      receipts are normally not more than $5,000 (see IRM
      7.20.2.10.1)      , or

    2. A church, integrated auxiliary, or convention or association of churches.

  3. If an organization is not described in (2)a) or (2)b) above, and does
    not file its Form 1023 within 15 months from the end of the month in which
    it was organized, then it may file for relief from the IRC 508(a) filing requirement
    pursuant to Rev. Proc. 92-85, 1992-2 C.B. 490. Relief is covered under Reg.
    301.9100-1.

7.20.2.10.1 
(11-01-2004)
“Gross Receipts of a Public Charity Normally Not More
Than $5,000″
Defined

  1. To determine whether an organization satisfies the exception for filing
    under IRC 508(c)(1)(B) because its annual gross receipts are normally not
    more than $5,000, the agent must review the organizations financial statements
    to verify that:

    1. In Year 1 of its existence, the organizations gross receipts did not
      exceed $7,500;

    2. The organizations gross receipts for Years 1 and 2 combined
       did not exceed $12,000; and

    3. The organizations gross receipts for all three years combined
       did not exceed $15,000, thus averaging not more than $5,000 annually.

    Note:

    This exception applies only if the organization does not
    apply for exemption within the first 27 months of its existence.

  2. The organization has 90 days from the end of the fiscal year, in which
    it fails the gross receipts test, to submit an application for relief from
    the IRC 508(a) filing requirement.

7.20.2.10.2 
(11-01-2004)
Relief under Section 301.9100

  1. Delegation Order 183 (as revised) authorizes group managers in Exempt
    Organizations to grant a reasonable extension of time for IRC 505(c) and 508(a)
    matters. This authority may not be redelegated. IRC 508 applies to organizations
    requesting exemption under IRC 501(c)(3). IRC 505(c) applies to organizations
    requesting exemption under IRC 501(c)(9) or (17).

  2. Treas. Reg. 301.9100-2 provides an automatic 12-month extension of the
    15-month period for filing Form 1023 to organizations requesting recognition
    of exemption under IRC 501(c)(3), and for filing Form 1024 to organizations
    requesting recognition of exemption under IRC 501(c)(9) or (17). See Rev.
    Proc. 92-85. The automatic 12-month extension applies if the organization
    submits a completed Form 1023 or Form 1024 within 12 months after the end
    of the initial 15-month filing period.

  3. An organization submitting a Form 1023 or 1024 must state at the top
    of page 1 of its application,
    “Filed Pursuant to Section 301.9100-2.
    ”
    If the application does not already contain this statement, the organization
    may be advised to add the statement to the Form 1023 or 1024, or the statement
    can be added to Form 6038 on the checksheet. The Form 6038 should contain
    a statement that the organization qualifies for an automatic extension.

  4. If the organization does not submit its application within 27 months
    from the time it was filed, then section 301.9100-3 provides that an additional
    extension of time may be granted if the applicant submits an affidavit demonstrating
    that it acted reasonably and in good faith, and that the granting of relief
    will not prejudice the interests of the Government. The affidavit should be
    signed and dated by an officer of the organization attesting to the facts
    surrounding the organizations failure to file.

  5. An organization may satisfy the affidavit requirement of section 301.9100-3
    if it:

    1. Meets the requirements for tax exemption from the end of the month in
      which it was created;

    2. Files its application before the Service discovers the organizations
      failure to timely file the Form 1023 or 1024; and

    3. Was not, or is not, under examination.

  6. The affidavit requirement of section 301.9100-3 is not automatically
    triggered if an organization files a Form 990 to meet its filing requirements,
    but has not filed an application form and is contacted by the Ogden Campus
    to resolve the unpostable condition.

  7. The question regarding Service contact with the organization for failure
    to file Form 1023 no longer appears on Form 1023; it is, therefore, no longer
    necessary to solicit this information from the customer if the organization
    answered
    “Yes”
    to question 4 on page 5 of Form 1023.

  8. When closing the case, the agent will state on Form 6038 that relief
    has been granted and briefly explain the reasons for granting the relief.

    Note:

    Rev. Proc. 93-28, 1993-2 C.B. 344, modifies Rev. Proc. 92-85 with respect
    to section 5.

7.20.2.10.3 
(11-01-2004)
Relief Not Granted

  1. If the agent recommends that section 301.9100 relief should not be granted,
    and the group manager agrees, the group manager should schedule a conference
    with the taxpayer before the issuance of any determination letter.

  2. If section 301.9100 relief is not granted by EO Determinations, then
    the applicant may request exemption under IRC 501(c)(4) for the period preceding
    the effective date of exemption under IRC 501(c)(3). The agent will review
    the following in order to process the applicants request:

    1. Page 1 of Form 1024 must be filed by the organization to receive consideration
      under IRC 501(c)(4).

    2. Exempt status under IRC 501(c)(4) will be effective from the date of formation
      until the date of recognition of exemption under IRC 501(c)(3).

    3. Two separate determination letters will be issued: one for IRC 501(c)(4)
      status and one for IRC 501(c)(3) status. Each letter will indicate the effective
      date of the exemption.

  3. If section 301.9100 is not granted by EO Determinations, and the applicant
    does not seek exemption under IRC 501(c)(4) for the period from formation
    until the effective date of exemption, then the case is subject to mandatory
    review. See IRM 7.20.5.

7.20.2.11 
(11-01-2004)
National Taxpayer Advocate Service Level Agreement
General Information

  1. National Service Level Agreements (SLAs) have been established between
    the Taxpayer Advocate Service (TAS) and each Operating Division. The SLAs
    contain basic requirements for handling TAS-referred cases and include specific
    actions to take on TAS referrals and specific time frames for completing those
    actions.

  2. The SLAs can be found at http://advocate.no.irs.gov/Library/Library.htm#Service,
    and procedures are contained in IRM 13, Taxpayer Advocate Service.

7.20.2.11.1 
(11-01-2004)
Congressional Inquiries

  1. For purposes of determination work, a congressional inquiry is an inquiry
    initiated by a congressional office. Typically, the inquiries are letters
    prepared on congressional letterhead inquiring about an organization’s
    application. A letter from an organization merely indicating that it has contacted
    its congressional office is not a congressional inquiry.

  2. The agent will normally receive a congressional inquiry in one of the
    following ways:

    1. The TAS office receives an inquiry from a congressional office and contacts
      the agent to resolve the inquiry.

    2. The congressional office contacts the agent assigned to a constituents
      case directly.

    3. The agent finds correspondence in the case file from a congressional office
      prior to contacting the organization.

  3. The agent should advise the group manager when a congressional inquiry
    has been made on a case.

  4. If the TAS office contacts the agent to resolve the congressional inquiry,
    it is typically to check on the status of the application, or to obtain a
    copy of the request for additional information or a copy of the final determination.

  5. If the congressional office contacts the agent directly, the agent should
    inform the congressional office that it should contact its Local Taxpayer
    Advocate’s office directly. However, if it is a simple question, the
    agent may resolve the issue, provided all disclosure requirements are satisfied.
    See IRM 13.1.8.12.

  6. If the agent finds correspondence in the case file from a congressional
    office, the agent must contact the TE/GE TAS Liaison at 513-263-3656. If the
    TE/GE TAS Liaison requests a copy of the letter, the agent must ensure there
    is sufficient information in the letter to identify the organization. If the
    information is not sufficient, a copy of page 1 of the application request
    should be submitted with the copy of the letter. The agent will attach this
    information to a Form 1725 and route it to TE/GE TAS Liaison, Room 2023, Group
    1, Cincinnati POD. It may also be faxed to 513-263-3756. The agent will not
    initiate contact with the congressional office.

7.20.2.11.2 
(11-01-2004)
Operations Assistance Requests (OARs)

  1. The Taxpayer Advocate Service (TAS) uses the Operations Assistance Request
    (OAR) process to refer cases when TAS lacks either the statutory or delegated
    authority to resolve a taxpayer’s problem. TAS utilizes Form 12412,
    Operations Assistance Request, to initiate the OAR process.

  2. In cases requiring an OAR, TAS will complete Form 12412 and forward
    the case to the TE/GE TAS Liaison via Form 3210. The TE/GE TAS Liaison will
    review the case, assign it to the appropriate area, and monitor the case to
    its conclusion.

  3. Every effort must be made to expedite the completion of OAR cases which
    meet expedite criteria. See IRM 7.20.2.4.5. Time
    frames for the assigned area to complete the case will be indicated on Form
    12412.

    1. If resolution of a taxpayer’s case cannot be completed by the requested
      completion date shown in Box 3, Section IV of Form 12412, the agent should
      contact the TAS employee assigned the case to negotiate an extension date.

    2. The agent will work with the TAS Liaison listed on Form 12412 to agree
      on time frames for follow-up based on the facts and circumstances of the particular
      case.

    3. The agent will discuss his or her findings and recommendations on the
      final disposition of the case with the assigned TAS employee. The TAS employee
      is responsible for communicating the final decision on the case to the taxpayer;
      however, this does not prohibit the agent from also communicating that decision
      to the taxpayer.

    4. If the TAS employee and the agent cannot agree on the resolution of the
      taxpayer’s problem, the TAS employee will elevate this disagreement
      to his or her manager who, in turn, will discuss it with the appropriate Operating
      Division manager. The agent will also elevate any disagreement to his or her
      manager.

  4. When the agent has completed the action requested in the OAR, the agent
    will complete Section VI of Form 12412. The completed form will be forwarded
    to the TE/GE TAS Liaison and a copy retained in the case file. This form can
    be accessed electronically. The agent may also complete Section VI and e-mail
    that page directly to the assigned TAS employee via secure messaging. If e-mail
    is used, the TE/GE TAS Liaison should be notified at 513-263-3656 that the
    OAR has been completed.

  5. For more detailed information, see IRM 13, Taxpayer Advocate Service,
    and the Service Level Agreements at http://advocate.no.irs.gov/Library/Library.htm#Service.

7.20.2.12 
(11-01-2004)
Microfiche and Record Storage

  1. The Processing Office Records Unit microfiches case files for retrieval
    for public inspection and reference.

  2. All A, F, I, P, R, S, and T cases controlled on EDS (except those closed
    as Correction Disposals) are microfiched.

  3. Additional information on closed cases should be forwarded to the Processing
    Office Records Unit for microfiching.

  4. Microfiche are filed in alphabetical order by State, according to the
    address of record. An EO Records Unit employee must retrieve the microfiche.

  5. To request microfiche:

    1. Fax a request to 513-263-3780; or

    2. Send a legibly completed Form 8057 through the group secretary to the
      Processing Office Records Unit.

  6. When preparing Form 8057, include:

    • Agents name and date

    • Group number

    • Telephone number

    • EIN

    • Organization’s name and address, including the State

  7. To advise the EO Records Unit to add/correct information on the microfiche,
    prepare the appropriate form. This form should be forwarded to the Records
    Unit through the group secretary. An agent will use this form in the following
    situations:

    1. When information is received from an organization on a closed case that
      will not change the final decision (approval of the application), it should
      be added to the microfiche for future reference.

    2. When an organization changes its name, the previous microfiche should
      be changed to reflect the organizations new name.

    3. When an organization changes its address of record to a new State, the
      previous microfiche should be refiled accordingly (under the appropriate State).

7.20.2.13 
(11-01-2004)
Case Closing

  1. When the processing of a case is completed and a determination is to
    be issued, each case status must be updated to a closed status on EDS to reflect
    the decision on the case. Each of the workpapers prepared for case closing
    must be initialed and dated by the preparer. This is generally done in the
    upper right-hand corner of each page.

  2. The following forms are required for case closing:

    1. Form 6038: This form is prepared only when closing an I or S case. The
      front of the form is the checklist. The agent will check each block appropriately.
      At the bottom of the front page is a section for other issues, comments, and
      conclusions. The agent will indicate
      “See Attached”
      in
      this section. In situations where the case involved significant issues, an
      additional section should be added to the Form 6038 identified as issues.
      The agent should explain what the significant issues in the case were and
      how they were resolved.

    2. The attachment to this form contains three sections: Activities, Law,
      and Conclusion. These are the headers for the narratives for justification
      of exemption. Under
      “Activities,”
      the agent will write
      a narrative, usually a paragraph, describing the activities of the organization.
      The
      “Law”
      section should contain a description of the
      precedent used to recommend exemption. This can be a revenue ruling, court
      case, public law, or regulation. The regulations should be cited only if there
      is no other available precedent on point. The
      “Conclusion”
      should
      contain a brief statement justifying exemption. Foundation status should describe
      the appropriate classification.

  3. The following types of cases require worksheets for case closing:

    1. Foundation follow-up cases to show how public support tests are met

    2. Initial approval of an IRC 501(c)(3) organization with a definitive ruling
      to show how the public support test is met

    3. IRC 509(a)(3) foundation classification to show how the criteria of this
      section are met

    4. Schools within the meaning of IRC 509(a)(1) and 170(b)(1)(A)(ii) to show
      how the criteria of these sections are met

    5. IRC 501(c)(9) organizations to show how the criteria of this section are
      met

  4. All closed cases require a National Taxonomy of Exempt Entities code.
    These codes are assigned to each IRC 501(a) organization based on organizational
    type. They are commonly referred to as the NTEE codes. Special care should
    be exercised in selecting the appropriate code for each organization as the
    NTEE coding structure is relied on as a source of data by the IRS Statistics
    of Income (SOI) Program, the Urban Institute, GuideStar, various grantmakers,
    and many other public- and private-sector entities. The NTEE codes can be
    found on the Internet website of the National Center for Charitable Statistics
    at http://www.nccs.urban.org/ntee-cc.

7.20.2.13.1 
(11-01-2004)
After Case Closing

  1. On the date that a case is closed and placed in status 55 (awaiting
    managerial review), it must be submitted for review. Each group has a designated
    space for cases closed by the agents.

  2. After the case is closed, it will be subject to review. Except for discretionary
    review of merit closures, the manager, on-the-job-instructor (OJI), or other
    designated individual may review the case. In addition, some cases are specifically
    identified for mandatory review and others are selected for TEQMS review.
    If correction of procedural errors or further technical development is necessary,
    the case will be returned for correction or development.

  3. Upon review, the manager, OJI, or other designated individual may:

    • Return the case in status 53 with written guidance provided as to needed
      corrections.

    • Post a note on the case file identifying minor corrections to be made.
      This type of case may be hand-carried for correction. The necessary changes
      should be made promptly and the case returned for closure the same day.

  4. Cases returned from the manager, OJI, or designated individual require
    the agent to complete the following actions:

    • Promptly review all status 53 cases

    • Address each item described by the manager.

    • If necessary corrections have been made, indicate next to each item what
      action was taken to correct the item and initial the remarks

    • Briefly explain any disagreement, citing current law or published procedures
      in the rebuttal

    • Discuss the case with the manager if what the reviewer is requesting is
      unclear

    • Once all necessary items have been completed, update the status of the
      case on EDS

    • Initial and date the checksheet at the bottom

    • Close the case once again to the manager and place it in the designated
      place in the group

Exhibit 7.20.2-1 
(11-01-2004)
Form 6038

Sample Attachment:
  Your Name
Date
Attachment to Form 6038
Name of organization
EIN 		 
Activities  
The above-named organization was formed
for the purpose of raising funds to be distributed to organizations that are
exempt under section 501(c)(3) of the Code.
Fundraising activities include
candy sales, Christmas bazaar, direct mail solicitations, and requests for
grants from corporations. The board of directors will determine to whom distributions
will be made.
Law  
Revenue Ruling 67-149 provides exemption
under section 501(c)(3) of the Code to an organization that provides financial
assistance to other charitable organizations, providing that the indirect
support of charity is of itself a charitable activity.
Conclusion  
This organizations activities are similar
to the activities conducted by the organization described in the revenue ruling
in that it is making distributions to section 501(c)(3) organizations; therefore,
exemption is recommended.
Foundation status  
A definitive ruling under sections 509(a)(1)
and 170(b)(1)(A)(vi) is being granted. Please see attached worksheet.

Note:
 This
form appears most professional when typed; however, if preferred, the attachment
may be handwritten on the back of the Form 6038. If this form is handwritten,
agents should ensure that their comments are legible.

Law Offices of Darrin T. Mish, PA

100 S. Edison Ave. Suite A, PO Box 3414, Tampa, FL 33606 (813) 229-7100
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