Rev. Proc. 72-4

Section 1. Purpose

The purpose of this Revenue Procedure is to outline the procedures of the Internal Revenue Service with respect to applications for recognition of exemption from Federal income tax under sections 501 and 521 of the Internal Revenue Code of 1954 and with respect to revocation or modification of exemption rulings and determination letters, other than those subject to Revenue Procedure 72-6, page 710, this Bulletin (relating to pension, annuity, profit-sharing, and stock bonus plans). See Revenue Procedure 68-13, C.B. 1968-1, 764, for procedures under which exemption may be recognized on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization. Also see Revenue Procedure 72-5, page 709, this Bulletin, for information on applications for recognition of exemption filed by certain religious and apostolic organizations. Requests for rulings or determination letters generally are governed by the procedures outlined in Revenue Procedure 72-3, page 698, this Bulletin.

Sec. 2. General

For the purpose of this Revenue Procedure the term "determination letter" includes letters issued by a District Director on the basis of advice secured from the National Office pursuant to the procedures prescribed herein.

Sec. 3. Filing Applications for Recognition of Exemption

An organization seeking recognition of exempt status under section 501 or section 521 of the Code is required to file an application with the District Director of Internal Revenue for the district in which is located the principal place of business or principal office of the organization. Any application received by the National Office or by a District Director other than as provided above will be forwarded, without any action thereon, to the appropriate District Director. Sec. 4. Processing Applications for Recognition of Exemption

.01 Applications for recognition of exempt status under section 501 or 521 of the Code are referred by the district office where filed to one of 16 key Internal Revenue Service district offices or the Office of International Operations. Following are the 16 key district offices that process the applications and the area covered by each:

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Sec. 5. Standards for Issuing Rulings or Determination Letters With Respect to Exempt Status

.01 A ruling or determination letter will be issued to an organization, provided its application and supporting documents establish that it meets the particular requirements of the section under which exemption is claimed.

.02 Exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed. A mere restatement of purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy these requirements. The organization must fully describe the activities in which it expects to engage, including the standards, criteria, procedures, or other means adopted or planned for carrying out the activities; the anticipated sources of receipts; and the nature of contemplated expenditures. Where the Service considers it warranted, a record of actual operations may be required before a ruling or determination letter will be issued.

.03 Where an application for recognition of exemption does not contain the required information, the application may be returned to the applicant without being considered on its merits with an appropriate letter of explanation. In the case of an application under section 501(c)(3) of the Code, the applicant will also be informed of the time within which the completed application must be resubmitted in order for the application to be considered as a timely notice within the meaning of section 508(a) of the Code.

.04 A ruling or determination letter recognizing exemption will not ordinarily be issued if an issue involving the organization's exempt status under section 501 or 521 of the Code is pending in litigation or before the Appellate Division.

Sec. 6. Issuing Rulings or Determination Letters Recognizing Exemption

.01 Under the general procedures outlined in Revenue Procedure 72-3, key District Directors are authorized to issue determination letters involving applications for recognition of exemption under sections 501 and 521 of the Code.

.02 A District Director will refer to the National Office those applications which present questions the answers to which are not specifically covered by statute, Treasury Decision or regulation, or by a ruling, opinion, or court decision published in the Internal Revenue Bulletin. The National Office will consider each such application, issue a ruling directly to the organization, and send a copy of the ruling to the District Director. In the event of a conclusion unfavorable to the applicant, it will be informed of the basis for the conclusion and of its rights to file a protest and to a conference in the National Office. If a conference is requested, the conference procedures outlined in subsections 7.02, .03, and .04, of Revenue Procedure 72-3, page 698, this Bulletin, will be followed. After reconsideration of the application in the light of the protest and any information developed in conference, the National Office will affirm, modify, or reverse the original conclusion, issue a ruling to the organization, and send a copy of the ruling to the District Director.

Sec. 7. Effect of Rulings or Determination Letters Recognizing Exemption

.01 A ruling or determination letter recognizing exemption is usually effective as of the date of formation of an organization if its purposes and activities during the period prior to the date of the ruling or determination letter were consistent with the requirements for exemption. However, for special rules regarding organizations formed after October 9, 1969 applying for recognition of exemption under section 501(c)(3) of the Code, see section 508(a) of the Code. If the organization is required to alter its activities or to make substantive amendments to its enabling instrument, the ruling or determination letter recognizing its exemption will be effective as of the date specified therein.

.02 A ruling or determination letter recognizing exemption may not be relied upon if there is a material change inconsistent with exemption in the character, the purpose, or the method of operation of the organization.

Sec. 8. Withdrawal of Applications

Application for recognition of exemptions under section 501 or 521 of the Code may be withdrawn, upon the written request of a principal officer of the organization, at any time prior to the issuance of the ruling or determination letter. Even though the application is withdrawn, the application and all supporting documents will be retained in the Service and will not be returned to the organization.

Sec. 9. National Office Review of Determination Letters

The National Office will review determination letters to assure uniformity in application of the statutes, Treasury Decisions or regulations, or rulings, opinions, or court decisions published in the Internal Revenue Bulletin. Where the National Office takes exception to a determination letter, the District Director will be advised. If the organization protests the exception taken, the file and protest will be returned to the National Office. The referral will be treated as a request for technical advice and the procedures of Revenue Procedure 72-2 will be followed.

Sec. 10. Protest of Adverse Determination Letters

.01 Upon the issuance of a determination letter adverse to the applicant the District Director will advise the organization of its right to protest the determination by submitting a statement of the facts, law, and arguments in support of its application for recognition of exemption, and of its right to a district office conference. However, the organization will not be afforded protest and conference rights if the determination letter is based on technical advice.

.02 If, after considering the organization's protest and any information developed in conference, the District Director maintains his position and the organization does not agree, the file will be referred to the National Office. The referral will be considered a request for technical advice and the procedures of Revenue Procedure 72-2 will be followed.

.03 The adverse determination letter will serve to inform the organization of the pertinent facts and the question or questions proposed for submission to the National Office, and will be deemed to satisfy the requirements of section 4.02 of Revenue Procedure 72-2.

.04 The organization may waive its right to a district office conference and request referral of the matter directly to the National Office. The District Director will advise the organization in writing that the matter will be referred to the National Office in accordance with its request only after a statement is filed setting forth the facts, law, and arguments in support of its application for recognition of exemption. In addition, the organization will be requested to specify whether it desires a conference in the National Office in the event an adverse decision is indicated.

Sec. 11. Revocation or Modification of Rulings or Determination Letters Recognizing Exemption

.01 A ruling or determination letter recognizing exemption may be revoked or modified by a ruling or determination letter addressed to the organization, or by a Revenue Ruling or other statement published in the Internal Revenue Bulletin. The revocation or modification may be retroactive if the organization omitted or misstated a material fact, operated in a manner materially different from that originally represented, or engaged in a prohibited transaction with the purpose of diverting corpus or income of the organization from its exempt purposes, and such transaction involved a substantial part of the corpus or income of such organization. In any event, revocation or modification will ordinarily take effect no later than the time at which the organization received written notice that its exemption ruling or determination letter might be revoked or modified.

.02 If a District Director concludes, as a result of examining an information return or considering information from any other source, that a ruling or determination letter should be revoked or modified, the organization will be advised in writing of the proposed action and the reasons therefor. The District Director will also advise the organization of its right to protest the proposed action by submitting a statement of the facts, law, and arguments in support of continued recognition of exemption, and of its right to a district office conference.

.03 If the organization agrees with the proposed action, either before or after a district office conference, or if no protest is filed, the District Director will issue a determination letter revoking or modifying recognition of the organization's exemption.

.04 If, after considering the organization's protest and any information developed in conference, the District Director maintains his position and the organization does not agree with the proposed revocation or modification action, the file and protest will be referred to the National Office. The referral will be considered a request for technical advice and the procedures of Revenue Procedure 72-2 will be followed.

.05 The letter advising the organization of the proposed revocation or modification action will serve to inform the organization of the pertinent facts and the question or questions proposed for submission to the National Office, and will be deemed to satisfy the requirements of section 4.02, of Revenue Procedure 72-2.

.06 The organization may waive its right to a district office conference and request referral of the matter directly to the National Office. The District Director will advise the organization in writing that the matter will be referred to the National Office in accordance with its request only after it files a statement setting forth the facts, law, and arguments in support of continued exemption. In addition, the organization will be requested to specify whether it desires a conference in the National Office in the event an adverse decision is indicated.

.07 The provisions of this section relating to protest and conference rights before a revocation notice is issued are not applicable to matters where delay would be prejudicial to the interests of the Internal Revenue Service (such as in cases involving fraud, jeopardy, the imminence of the expiration of the statute of limitations, or where immediate action is necessary to protect the interests of the Government).

Sec. 12. Effect on Other Documents

Revenue Procedure 69-3, C.B. 1969-1, 389, is superseded.

Sec. 13. Effective Date

This Revenue Procedure is effective January 3, 1972, the date of its publication in the Internal Revenue Bulletin.