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

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

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).

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

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.

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).

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

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.

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.

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

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

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

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:

Commonly used abbreviations include:

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:

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.

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

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.

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).

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).

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.

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.

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.

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

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.

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.

If the NECT:

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.

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

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

Reclassification requests include:

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.

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

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).

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

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.

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.

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.

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.

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

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.

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).

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

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.

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

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.

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.

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).

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.

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

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:

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.

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

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).

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.

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:

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

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

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.

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:

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

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.

For advance approval, a private foundation must demonstrate:

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:

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

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.

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

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.

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) ).

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.

For set-asides:

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.

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

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.

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.

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

For advance approvals of voter registration activities, see:

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

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

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.

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.

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.

Common exception requests include exception as:

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

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.

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

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.

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.

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.

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

To process the termination:

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.

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).

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.

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.

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

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

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

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

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

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