7.20.3. Processing Foundation Classification and Miscellaneous Requests

(1) Exempt Organizations (EO) includes two primary operational areas: Rulings and Agreements (R&A) and Examinations (Exam).

(2) EO R&A is responsible for issuing determination letters on exempt status, private foundation status, and other determinations related to exempt organizations.

(3) Organizations submit Forms 1023, 1023-EZ, 1024, 1024-A, and 8940 electronically through Pay.gov. Organizations submit other applications for tax-exempt status to the Cincinnati Accounts Management Campus Support (Campus Support).

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

(5) Most determination letter requests are subject to a user fee (see Rev. Proc. 2023-5, updated annually, and modified by Rev. Proc. 2023-12). Requests submitted as part of an initial application (such as foundation classification, Form 990 filing exception, etc.) are considered part of the initial application and aren’t subject to an additional user fee.

(6) Campus Support processes the user fee payment in the Letter Information Network and User Fee System (LINUS) and scans the application/request into the Modified EP-EO Determination System (MEDS). MEDS transmits the information to the Employee Plans/Exempt Organizations Determination System (EDS).

(7) Campus Support sends open hard copy case files to an IRS facility in Ogden, UT.

(8) Cases are generally processed electronically in MEDS. See IRM 7.22.4, Modified EP-EO Determination System (MEDS) User Manual, for specific instructions on using MEDS, including how to process cases.

(1) Rev. Proc. 2023-5, updated annually, and modified by Rev. Proc. 2023-12, lists procedures for issuing determination letters on issues under the jurisdiction of the Director, EO Rulings and Agreements. It explains the procedures for issuing determination letters on exempt status in response to applications for recognition of exemption from federal income tax under IRC 501 or 521 (other than those subject to Rev. Proc. 2023-4, updated annually), private foundation classification, and other determinations related to exempt organizations. Rev. Proc. 2023-5 also provides guidance on the exhaustion of administrative remedies for purposes of declaratory judgement under IRC 7428 and guidance on applicable user fees for requesting determination letters.

(1) EO Rulings and Agreements is responsible for issuing determination letters on exempt status, private foundation status, and other determinations related to exempt organizations.

(1) Exempt Organizations Determinations Quality Assurance (EODQA) reviews cases to ensure:

1. Technical accuracy

2. Adherence to written procedures

3. Uniform and impartial treatment of exempt organizations' interests while protecting the government's interest

4. Identification of unfavorable case patterns, trends affecting processing quality, problem areas, unique issues, and new or novel techniques that EOD specialists develop

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

1. IRC 7428 declaratory judgment provisions

2. IRC 6104 or IRC 6110 disclosability

3. Protest/appeal rights on adverse determinations

(2) The following table identifies the different types of requests discussed in this IRM, how these rules apply to the type of request, and the closing letter for each type of request:

(3) Commonly used abbreviations include:

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

• Primary purpose

• Sources of support

• Requested classification/preference

(2) If the organization requests that the IRS select the best classification for them (see Form 1023, Part VII), choose either 509(a)(1) and 170(b)(1)(A)(vi) or 509(a)(2). If it appears they are best qualified as something else, the organization will likely have to provide more information, such as the appropriate schedule to Form 1023.

(3) If an organization requests a public charity classification for which it doesn’t meet the requirements:

1. Consider other public charity classifications.

2. Discuss with the organization, as appropriate.

(4) If the organization doesn’t meet the requirements of their requested classification and they don’t agree to change their requested classification, process the request as an adverse foundation classification. See IRM 7.20.3.2.1.2, Requested Public Charity Classification Requirements Not Met, and IRM 7.20.3.2.3, Processing Initial and Reinstatement Adverse Determinations on Foundation Classification.

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

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

(3) If a private foundation formed in New Mexico doesn’t include the following provisions in its organizing document, secure an amendment to the document. See the Streamline questions on the R&A Job Aids SharePoint site.

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

(5) A foundation can request advance approval on its Form 1023 application by completing Schedule H and providing a complete description of its scholarship/grant program (see IRM 7.20.3.3.6 for more information on IRC 4945(g)). If the organization is already exempt, Form 8940 must be used to request advance approval of certain grant making procedures.

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

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

• If the organization fully and completely discloses its grant making procedures that meet the requirements of Treas. Reg. 53.4945-4(c)(1), include the appropriate selective approval paragraphs in the determination letter.

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

1. Secure your manager’s agreement on the adverse position and document the concurrence in the CCR.

2. Call the organization and explain why they don’t qualify for the requested foundation classification and explain the classification you are giving them (such as the impact of being classified as a private foundation).

   Reminder: Document the telephone call in the CCR.

3. Prepare Letter 1079, Exemption Determination with Adverse Issue, detailing the reasons for the proposed adverse issue. Follow the format of proposed adverse determination letters in IRM 7.20.2, Determination Letter Processing of Exempt Organizations.

   Note: Don’t prepare a legend for the letter.

4. Follow the procedures for adverse determinations in IRM 7.20.2.4, Adverse Determinations.

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

   Reminder: Adverse determinations (including favorable determinations with adverse issues) are subject to mandatory review.

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

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

(3) If the NECT:

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

2. Doesn’t meet the IRC 501(c)(3) requirements for exemption, discuss the option of withdrawing the request for exemption with the organization. Process as a proposed adverse determination if the organization doesn’t withdraw its request (see IRM 7.20.2.4, Adverse Determinations, and IRM 7.20.2.5.6, Withdrawals).

(4) If you close Form 1023 from an NECT as a withdrawal or as a failure to establish (FTE) (if organization doesn’t respond to an additional information request), see IRM 7.20.3.2.4.1, Non-Exempt Charitable Trust Form 1023 Withdrawal or FTE.

(5) If an NECT requests a determination that it is described under IRC 509(a)(3) but doesn't meet requirements for any period:

1. Continue to treat the organization as a private foundation and follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4, Adverse Determinations.

2. A protest/appeal is available on a proposed adverse determination letter on classification of a Section 4947(a)(1) NECT described in Section 509(a)(3).

3. Prepare Letter 4786, Amendment Requests, Foundation Follow-ups, and section 508 (Private Foundation) Termination Requests Adverse. Include the selectable paragraph regarding appeal rights and remove references to disclosure under IRC 6110 from the letter.

4. Enter a proposed closing code of Status 12 (Other Closing) to retain the NECT’s current status information on Master File.

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

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

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

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

(2) Reclassification requests include:

• Changing from one public charity classification to another (including requests from subordinate organizations) (IRM 7.20.3.3.1.1, Request Reclassification from One Public Charity Classification to Another)

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

• Changing from public charity classification to private foundation classification (IRM 7.20.3.3.1.3, Voluntary Request for Private Foundation Classification)

• Changing from private non-operating foundation classification to private operating foundation classification (IRM 7.20.3.3.1.4, Request for Private Operating Foundation Classification under IRC 4942(j)(3))

• Requesting classification as an exempt operating foundation (IRM 7.20.3.3.1.5, Request for Exempt Operating Foundation Classification under IRC 4940(d))

(3) If an applicant is seeking classification or reclassification of public charity status as an educational organization under IRC Sections 509(a)(1) and 170(b)(1)(A)(ii), and the applicant’s primary function is not the presentation of formal instruction, the specialist must coordinate with TEGE Division Counsel.

(4) See Instructions for Form 8940 for suggested documentation that an organization should provide for each type of reclassification request.

(5) For all reclassification requests, if the organization doesn’t meet the requirements for its request for reclassification of foundation classification, process as a proposed adverse amendment request (see IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4, Adverse Determinations).

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

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

(3) An organization generally requests a ruling of termination of private foundation status by submitting Form 8940 and the appropriate user fee at both the beginning and end of the termination period. They will submit Form 8940 with Schedule H at the beginning of the 60-month termination period and Form 8940 with Schedule J at the end of the 60-month period.

(4) A private foundation alternatively may submit Form 8940 with a Notice Only of termination of private foundation status under Section 507(b)(1)(B). See IRM 7.20.3.3.2.3, Notice Only Terminations.

(5) The end of the 60-month termination period for both methods (8940 request with user fee or Notice Only) requires submission of Form 8940 and a user fee.

(6) See Treas. Reg. 1.507-2(b)(3), for technical guidance.

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

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

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

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

2. Prepare the case for closing.

3. Update the foundation classification when closing the case. Enter other closing information using current Master File information.

4. For a subordinate organization, also complete Form 2363-A using: Document Code 80, Transaction Code 016, and Definer Code C. Complete fields 1, 2, 3, 4, 20, 23, 27, and 39-43. In the MEDS Case Information, select the case category *Forward Form 2363-A.

(4) If information submitted doesn’t meet the requirements for the requested (or alternate) Type of supporting organization, follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4, Adverse Determinations.

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

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

2. Has had a charitable deduction allowed.

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

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

(3) See Rev. Proc. 72-50, superseded in part by Rev. Proc. 76-34, for procedures for an NECT to request a determination letter that it is described in IRC 509(a)(3). These requests are not applications for exempt status.

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

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

(6) If you propose a favorable determination for classification under IRC 509(a)(3):

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

• Complete Form 2363-A to update the Subsection to 91, Status Code to 12, and the Filing Requirement to 990:01. The foundation code is blank.

  Note: In the MEDS Case Information, select the case category *Forward Form 2363-A.

(7) If the NECT requests a determination that it is described under IRC 509(a)(3) but doesn't meet requirements for Type I, Type II, or Type III for any period, continue to treat the organization as a private foundation and follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4 , Adverse Determinations. Protest and appeal rights are available on a proposed adverse determination letter on classification of a Section 4947(a)(1) NECT described in Section 509(a)(3). To close as an adverse case:

1. Prepare Letter 4786, Amendment Requests, Foundation Follow-Ups, and Section 508 (Private Foundation) Termination Requests Adverse.

2. Include the selectable paragraph regarding appeal rights on Letter 4786.

3. Remove references to disclosure under Section 6110 from Letter 4786 before sending.

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

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

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

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

• Are unusual or unexpected in amount.

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

(3) An organization can request advance assurance on whether a potential grant or contribution constitutes an "unusual grant" that won’t adversely affect its classification as a publicly supported organization. Grantors, contributors, and the exempt organization can rely on the ruling (see Section 7.03 of Rev. Proc. 2018-32).

(4) Advance assurance of unusual grants can be requested as part of an initial or reinstatement application for exemption, or it can be requested after recognition of exemption by submitting Form 8940 and the appropriate user fee. Requests submitted on Form 8940 are established as A cases.

(5) If the organization submits Form 8940 requesting approval of an unusual grant, but received the grant prior to submitting the request, decline to rule. You must:

1. Discuss the request and whether to decline to rule with your manager. Consider Rev. Proc. 2023-5, Section 3.02, updated annually.

2. If the manager agrees that declining to rule is appropriate, call the organization or their representative (see IRM 7.20.1.5, Authorized Persons). Explain that the decision to decline to rule is because advance approval is not appropriate for a grant which was received and accepted prior to the date they submitted Form 8940.

   Reminder: Document the telephone call in the CCR, including the name of the individual you called and what was discussed.

3. Refund the user fee using Form 14268, User Fee Refund Request.

4. Close the case in status 12.

5. Consider preparing Form 5666, TE/GE Referral Information Report.

   Note: See IRM 7.20.1.3, Referrals, for instructions on preparing a referral.

6. Issue Letter 5239, No Determination Issued per Rev Proc or Organization Already Exempt, and include the following in a composed selectable paragraph:

Revenue Procedure 2023-5, updated annually, and modified by Rev. Proc. 2023-12, provides general procedures for issuing rulings on issues under the jurisdiction of the Office of the Commissioner, Tax Exempt and Government Entities Division. This includes rulings related to the recognition of exemption under IRC Section 501. Rev. Proc. 2023-5, Section 3.02 states that we may decline to issue a determination letter when appropriate in the interest of sound tax administration or on other grounds, whenever warranted by the facts or circumstances of a particular case.

Based on the facts and circumstances presented in your application, we're declining your request and closing your case.

We'll refund your user fee and send it to you in a separate communication.

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

• Treas. Reg.1.509(a)-3(c)(3)

• Treas. Reg.1.170A-9(f)(6)(ii)

(7) If you propose a favorable determination that the potential grant or contribution constitutes an unusual grant on an A case:

1. Prepare Letter 4787, Recognition and Approval of Unusual Grant, using a legend for any identifying information. Import letter into the MEDS Non-Disclosable folder.

2. In MEDS, click on Case Information and then File. Select Mandatory Review. From the drop-down menu, select the correct mandatory review type (IRC 6110).

(8) If information submitted doesn’t support a favorable determination on a request that a potential grant or contribution constitutes an unusual grant, follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2, Determination Letter Processing of Exempt Organizations.

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

• Scholarships

• Fellowships

• Internships

• Prizes

• Awards

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

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

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

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

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

(4) For advance approval, a private foundation must demonstrate:

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

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

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

(5) A request for advance approval of individual grant making procedures must contain a statement describing the selection process, sufficiently detailed as to prove whether the grants are made on an objective and nondiscriminatory basis, and a detailed description of:

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

2. Its procedures for exercising supervision over the grants, and

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

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

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

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

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

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

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

(4) For set-asides:

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

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

(5) If necessary, request additional information necessary to make a determination. There are pre-written questions available on the R&A Job Aids SharePoint site. Use Form 14325, Section 4942 Set-Aside Guidesheet, for guidance when reviewing a set-aside request.

(6) If you propose a favorable determination on the set-aside or set-aside extension request:

1. Prepare either Letter 4797, Section 4942(g)(2) Set-Aside Approval, Letter 4798, Section 4942(g)(2) Set-Aside Extension Approval, or a composed letter (for an NECT) using a legend for any identifying information. Import the letter into the MEDS Non-Disclosable folder.

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

3. Send the case for mandatory review. Highlight the Case Information line in MEDS. From the drop-down menu, select Mandatory Review. Select Send for Mandatory Review and click “OK.” Select IRC 6110 for the Mandatory Review Type.

(7) If information submitted doesn’t support a favorable determination on the request for approval of a set-aside or set-aside extension, follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4, Adverse Determinations.

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

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

(3) For advance approvals of voter registration activities, see:

1. IRC 4945(f)

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

(4) If necessary, request additional information necessary to make a determination. There are pre-written questions available on the R&A Job Aids SharePoint site.

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

1. Prepare Letter 4778, Section 4945(f) Voter Registration Activities Approval, using a legend for any identifying information. Import the letter into the MEDS Non-Disclosable folder.

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

3. .Send the case for mandatory review. Highlight the Case Information line in MEDS. From the drop-down menu, select Mandatory Review. Select Send for Mandatory Review and click “OK.” Select IRC 6110 for the Mandatory Review Type

(6) If information submitted does not support the request for advance approval of voter registration activities under IRC 4945(f), follow adverse case processing procedures in IRM 7.20.3.3, Processing Other Miscellaneous Determination Letter Requests, and IRM 7.20.2.4, Adverse Determinations.

(1) Generally, a tax-exempt organization must file a Form 990-series information return or notice annually. However, IRC 6033 and certain revenue procedures (Rev. Proc. 2011-15 supplemented by Rev. Proc. 95-48 and Rev. Proc. 96-10) give exceptions to filing Form 990.

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

(3) Common exception requests include exception as:

1. A church or an integrated auxiliary of a church

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

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

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

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

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

(5) If the organization doesn’t submit sufficient information, request the information needed to make a determination. There are pre-written questions available on the R&A Job Aids SharePoint site.

(6) If you propose a favorable determination on the filing exception request made on Form 8940:

1. Prepare Letter 4715, EO-Exception to 990 Requirement.

2. Enter closing information based on current Master File data except enter Form 990 filing requirement "06" for a church, "13" for a religious organization (non-church) or "14" for an organization excepted based on Rev. Proc. 95-48.

   Note: If a subordinate organization requests and receives a favorable determination on Form 990 filing exception, complete Form 2363-A to update the organization’s filing requirements using Document Code 80, Transaction Code 016, and Definer Code C. Complete fields 1, 2, 3, 4, 20, 23, 27, and 39-43. In the MEDS Case Information, select the case category *Forward Form 2363-A.

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

(8) If information submitted doesn’t support the request for exception from Form 990 filing requirements, follow adverse case processing procedures in IRM 7.20.3.3 and IRM 7.20.2.4, Adverse Determinations.

(1) A government entity can request voluntary termination of its recognition under IRC 501(c)(3) (see Rev. Proc. 2023-5, updated annually) by submitting Form 8940 (or a letter request) and the appropriate user fee payment.

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

(3) To process the termination:

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

2. Prepare Form 5666, TE/GE Referral Information Report, to notify FSL-ET, indicating the organization has terminated its 501(c)(3) status based on its status as a government entity and attaching any documents submitted by the organization in support of its government entity status.

   Note: See IRM 7.20.1.3, Referrals, for information on preparing From 5666.

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

4. In the MEDS Case Information, select the case category *Forward Form 2363-A.

5. Close the case Status 12 (Other).

   Note: If there is a Y indicator for pension plan on BMFOLO, prepare Form 5666, TE/GE Referral Information Report, to refer to EP.

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

(2) An organization requests a group ruling by submitting Form 8940 and the appropriate user fee. The request is processed per Rev. Proc. 2023-5, updated annually, and Rev. Proc. 80-27 (modified by Rev. Proc. 96-40).

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

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

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

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

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

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

(7) Group ruling requests are established in MEDS as Form 1026 "A" cases.

(8) If a subordinate organization under a group exemption applies for individual exemption, see IRM 7.20.4, Automatic Revocation and Special Determination Issues.

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

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