10 January 2018 IRS updates annual revenue procedure for exempt organizations seeking IRS rulings The IRS has issued its annual revenue procedure (Revenue Procedure 2018-5) describing the procedures relating to the issuance of determination letters on exempt status, private foundation status and other items regarding exempt organizations, including applicable user fees. Last year, the IRS consolidated much of the information applicable to the issuance of exempt organization determination letters into a single revenue procedure (Revenue Procedure 2017-5), while also making several notable changes to the applicable guidelines. See Tax Alert 2017-60. 1. Amending section 3.02 to state that the IRS will not issue a determination letter when an organization currently recognized as exempt under Section 501(c) (other than a specified government entity) requests a determination to relinquish its exempt status under Section 501(a) 2. Adding to the section 6.05 list of organizations ineligible to submit Form 1023-EZ organizations applying for retroactive reinstatement under section 4 of Revenue Procedure 2014-11 after being automatically revoked that are seeking a foundation classi?cation that is different from the classi?cation they had at the time of revocation 3. Updating the Schedule of User Fees in Appendix A to re?ect a change to a user fee of $600 for all Section 501 applications (other than Form 1023-EZ applications) and a $2,000 user fee for group exemption letters Taxpayers should now look to Revenue Procedure 2018-5 for understanding the IRS's procedures and guidelines for issuing determination letters. Exempt organizations should be aware of a few notable changes: 1. Excluding certain government entities, organizations exempt under Section 501(c) may not request determination, by specific form or by letter, that they are no longer tax-exempt under Section 501(a). This is in addition to the 2017 update that organizations currently recognized as described in Section 501(c)(3) cannot request a determination recognizing the organization as one described in a different subsection of Section 501(c). In both cases, these organizations must change Section 501(c) status by dissolving and reforming as a new entity. Organizations may, however, continue to use Form 8940 to request a change to their foundation status, including a voluntary request to change from a public charity to a private foundation, to terminate an organization's private foundation status, or to change the organization's Section 509(a)(3) supporting organization type. 2. Organizations whose tax-exempt status was previously revoked or that are successors to organizations whose tax-exempt status was previously revoked generally cannot request a new determination by filing Form 1023-EZ, unless revocation was due to the failure to file a Form 990 series return for three consecutive years. In such cases, the organization can request a streamlined retroactive reinstatement using Form 1023-EZ if it applies within 15 months of the date of revocation. However, Revenue Procedure 2018-5 clarifies that this option does not apply to organizations applying for streamlined retroactive reinstatement if the organization is also seeking a new foundation classification under Section 509(a). These filers must request a determination using Form 1023 or Form 8940. 3. Instead of paying a user fee of $400 (or $800 depending on the filer's annual receipts), all Form 1023 and Form 1024 (including Form 1024-A) filers will now have to pay a user fee of $600 (Form 1023-EZ filers have to pay a user fee of $275). Form 1024 filers must continue to complete Form 8718 when submitting their user fee. Also, user fees for group exemption letters have decreased by $1,000. — For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg
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