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irs-ltr-to-levin-re-501-c-4-s-june-4-2012

irs-ltr-to-levin-re-501-c-4-s-june-4-2012

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Number of Pages:26

Date Created:June 5, 2012

Date Uploaded to the Library:May 13, 2014

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DEPARTMENT THE TREASURY 
INTERNAL REVENUE SERVICE 
WASHINGTON, D.C. 20224 

DEPUTY COMMISSIONER 
June 2012 
The Honorable Carl Levin 
Chairman 

Permanent Subcommittee Investigations 
Senate Committee Homeland Security 
and Government Affairs 
United States Senate 
Washington, D.C. 20515 

Dear Senator Levin: responding your letter Commissioner Shulman dated March 30, 2012, requesting information about the tax-exempt sector. appreciate your interest and support the IRS efforts the administration the tax law applies tax-exempt organizations. This response follows the telephone conversation held with your staff May 2012. 
Question Are entities seeking tax-exempt status under Section 501(c)(4) required submit application the IRS for review and approval, can they hold themselves out having tax-exempt status without filing application undergoing IRS review? 
The law allows section 501 (c)(4) organizations hold themselves out tax-exempt. Organizations also can apply for IRS recognition tax-exempt. Whether organization self-declared under section 501(c)(4) has been determined the IRS meet the requirements section 501(c)(4), the organization must file Form 990 annual information returns. 
Question assist responding your specific sub-questions, are providing background information about our system for processing applications for tax-exempt status, well the statutory disclosure rules that govern public inspection IRS documents relating tax-exempt organizations. 
Application Process 
All applications for tax-exempt status, including applications for status under section 501 (c)(4), are filed with centralized IRS Submission Processing Center, which enters the applications into the EP/EO Determination System and processes the attached user fees. The application then sent the Exempt Organizations ("EO") Determinations office Cincinnati, Ohio for initial technical screening. 
This technical screening conducted experienced revenue agents who review the applications and, based that review, separate the applications into the following four categories: 
 	
Applications that can approved immediately based the completeness the application and the information submitted; 

 	
Applications that need only minor additional required information the file order approve the application; 

 	
Applications that not contain the information needed considered 
substantially complete; and 

 	
Applications that require further development agent order determine whether the application meets the requirements for tax-exempt status. 

Organizations whose applications fall into the fourth category are sent letters informing them that more development their application needed, and that they will contacted once their application has been assigned revenue agent. The applications are sent unassigned inventory, where they are held until revenue agent with the appropriate level experience for the issues involved the matter available 
1to further develop the case.
Once the case assigned, the revenue agent notifies the organization and reviews the 
application. Based upon established precedent and the facts and circumstances set 
forth the application, the revenue agent requests additional information and 2documentation complete the file pertaining the exempt status application materials
(the so-called "administrative record") and makes determination. Where 
application for exemption presents issues that require further development complete 
the application record, the revenue agent engages back and forth dialogue with the 
organization order obtain the needed information. This back and forth dialogue 
helps applicants better understand the requirements for exemption and what needed meet them, and allows the IRS obtain all the information relevant the 
determination. Enclosure describes the criteria used determine the appropriate level experience. The application for recognition tax exempt status, any papers submitted support the application, and any letter other document issued the IRS with respect the application. See IRC  6104(a), (d)(5). 
Tools are available promote consistent handling full development cases. For example, situations where there are number cases involving similar issues (such credit counseling organizations, down payment assistance organizations, organizations that were automatically revoked and are seeking retroactive reinstatement, and most recently, advocacy organizations), the IRS will assign cases designated employees promote consistency. Additionally, these cases, Technical (an office higher graded specialists Exempt Organizations), consultation with the IRS Office Chief Counsel, may develop educational materials assist the revenue agents issue spotting and crafting questions develop cases consistently. important develop complete administrative record for the application. Because the administrative record must either support exemption denial, important for the record complete. the application approved, not only the administrative record made publicly available (with certain limited exceptions outlined below), but organizations that act described the administrative record have reliance the IRS determination. the application denied, the organization may seek review from the Office Appeals. The Appeals Office, which independent Exempt Organizations, reviews the complete administrative record and makes its own independent determination whether the organization meets the requirements for tax-exempt status. the organization's benefit have all its materials the file the event Determinations denies exemption and the organization seeks Appeals review. If, based the information the administrative record, the Appeals Office decides the organization meets the requirements for tax-exempt status, the application will approved. the Appeals Office agrees that the application should denied, the organization may challenge its non-exempt status paying any tax owed taxable entity, and seeking refund federal court. those cases where the application raises issues for which there established published precedent for which non-uniformity may exist, Determinations may refer the application Technical. Technical, the applications are reviewed tax law specialists whose job interpret and provide guidance the law and who work closely with Chief Counsel attorneys the issues. 
Similar the process Determinations, Technical tax law specialists develop cases based the facts and circumstances the issues the specific application. Technical staff engages back and forth dialogue with the organization order obtain the information needed complete the administrative record. If, upon review all the information submitted, appears that organization does not meet the requirements for tax-exempt status, proposed denial explaining the reasons the organization does not meet the requirements issued. The organization then entitled "conference right" where may provide additional information. Following the conference right, final determination issued. the application approved, the administrative record made publicly available, and the organization acts described the application record, has reliance the IRS determination. the application denied, the applicant may challenge its non-exempt status paying any tax owed taxable entity, and seeking refund federal court. 

Statutory Disclosure Rules 

Public disclosure regarding tax exempt organization filings principally governed sections 6103, 6104 and 6110 the Internal Revenue Code. Generally, section 6103 the Code prohibits the disclosure information about specific taxpayers unless the disclosure authorized provision the Code. Section 6104 the Code requires the IRS make certain materials available for public inspection, including organization's approved application for recognition tax exemption and Form 990 annual information returns. the IRS approves organization's application for taxexempt status, section 6104(a) requires that the application and supporting materials made available for public inspection. The only exception that requirement found section 6104(a)(1 )(D), which exempts from disclosure information that the IRS determines relates any "trade secret, patent, process, style work, apparatus the organization" that would adversely affect the organization information that could adversely affect national defense. 
The long-standing statutory requirements regarding exemption applications, including 
Form 1024, are separate from those requiring public availability Form 990 annual 
information returns, which are contained section 6104(b). Under section 6104(b), 
Form 990 annual information returns are also subject public inspection, with the sole 
exception donor information contained Schedule the Form 990. The 
withholding names and addresses donors from public disclosure applies only 
Form 990; this exception does not extend information obtained from Form 1024 and supporting materials.4 light the statutory requirement make approved applications public, organizations are notified that information they provide will available for public inspection page two the Form 1024 instructions. This notice reiterated any development letters sent the organizations. The administrative record approved applications, including the application, supporting documents and correspondence between the applicant and the IRS are available upon request. 
Under section 6110 the Code, the IRS ultimately denies the application for 
recognition tax-exempt status, the denial letter and background information will 
open public inspection, with certain identifying and other information redacted. The disclosure rules have been place since 1958, and the legislative history provided the following rationale for public disclosure exemption applications: "[the] committee believes that making these applications available the public will provide substantial additional aid the Internal Revenue Service determining whether organizations are actually operating the manner which they have stated their applications for exemption." H.R. Rep. No. 85-262, 41-42 (1957). 1987, Congress added what now section 6104(d) the Code, that requires organizations make their returns available the public, and 1996 extended this rule application materials. The withholding exception does not apply donor information for organizations that file Form 
990-PF those section 527 organizations that are required file Form 990 990-EZ. 
For entities that submit application for tax-exempt status under Section 501(c)(4), please indicate: 
(a) 	the approximate average number days between the date which entity submits application for 501 (c)(4) tax-exempt status and the date which the application approved denied; 
The average case processing time for determination cases closed FY2011 was 104 days. However, difficult predict how long will take fully process any specific application. Case processing time can vary greatly depending number factors, including whether the case can closed through technical screening requires full development, the availability agent with the appropriate experience level fully develop the application, the particular issues and individualized facts and circumstances presented the application, the back and forth dialogue between the revenue agent and the applicant fully develop the application, and whether case transferred Technical. 
(b) not provided routine basis, approximately what percentage such applicants receive IRS questionnaire seeking information about any political activities, and how the IRS determines whether and when send that questionnaire; and understand that the reference your letter "questionnaire" intended relate development letters the IRS sends organizations the ordinary course the application process obtain the information the IRS deems necessary make determination whether the organization meets the legal requirements for tax-exempt status. There standard questionnaire used the determinations process seeking information about political activities. 
The IRS contacts the organization and solicits additional information when the organization does not provide sufficient information response the questions the Form 1024 make determination issues are raised the application. When application needs further development, the case assigned revenue agent with the appropriate level experience for the issues involved the application. 
The general procedures for requesting additional information develop application are included section 7.20.2 the Internal Revenue Manual. Although there template letter that describes the general information the case development process, the letter does not, and could not, specify the information requested from any particular organization because the broad range possible facts. Enclosure copy the template letter. 
The amount and nature development necessary process application ensure that the legal requirements tax-exemption are satisfied depends several factors, which include the comprehensiveness the information provided the application and the issues raised the application. Consequently, revenue agents prepare individualized questions and requests for documents relevant the application, which are attached the above described general template letter. With 
certain types applications where the issues are similar more complex, Technical, coordination with Chief Counsel, may develop educational materials 
assist the revenue agents issue spotting and crafting questions develop those cases consistently. 
The revenue agent uses sound reasoning based tax law training and his her experience review the application and identify the additional information needed make proper determination regarding the organization's exempt status. The revenue agent prepares individualized questions and requests for documents based the facts and circumstances set forth the particular application. 
The below chart provides the total number applications closed for 2008-2011,5 well preliminary information for part 2012.6 The below chart provides the percentage all exemption applications closed each year through the technical screening process (i.e., development letters sent). 
Fiscal Year 
2008 2009 2010 2011 2012 
Total number applications closed  84,220  77,305  65,590  61,004  28,570  
Percentage applications closed through  
technical screening  59%  57%  56%  60%  70%  

Although are able produce the number cases closed during this time period that received development letters, our systems not track the specific types questions asked the development letters for these cases. Therefore, manual review each file would necessary determine the particular organization and the development letters sent. Reports the IRS data requested are created and published Statistics Income (SOI) Division. The IRS Data Book provides information IRS activities conducted during fiscal year period (October through September 30). Data Book information updated annually. This SOI data from IRS Data Book, Table 24, Closures Applications for Tax-Exempt Status, 

years 2009-2011) This data reflects all case closures 
for the Exempt Organizations Determinations function. These include not only initial applications for tax-exempt status, but also other determinations, such public charity and private foundation status determinations, advance approval scholarship grant procedures, and group determinations tax-exempt status. The data for 2012 reflects the preliminary information available through the second quarter from October 2011 through March 30, 2012. SOI Data Book information updated annually, with the complete 2012 information expected March 2013. 
(c) approximately how many days after application filed that questionnaire typically sent. mentioned above, organizations whose applications fall into the fourth category are sent letters informing them that more development their application 
needed, and that they will contacted once their application has been assigned revenue agent. The applications are sent unassigned inventory, where they are held until revenue agent with the appropriate level experience for the issues involved the matter available further develop the case. Once the case assigned, the revenue agent notifies the organization and reviews the application. 
Based upon the established precedent and the facts and circumstances set forth the application, the revenue agent will request additional information and documentation complete the file. applicable, the revenue agent will coordinate with Technical and Chief Counsel develop requests for information issued the organization. For all these reasons, difficult predict the time frame between the filing application for tax-exemption and the issuance development letter. 
Question 1997 letter from the IRS denying tax-exempt status the National Policy Forum, copy attached, made public connection with Senate investigation into federal election campaigns, indicates that the IRS based its denial the fact that the organization was engaged partisan political activity, stating that "partisan political activity does not promote social welfare defined section 501(c)(4)," and "benefit[s] select individuals groups, instead the community whole." still the position the IRS that 501(c)(4) organization cannot engage any partisan political activity, even secondary activity? noted above, section 6103 the Internal Revenue Code prohibits the disclosure information about specific taxpayers unless the disclosure authorized some provision the Internal Revenue Code. Section 6104(a) the Code permits public disclosure application for recognition tax exempt status and supporting materials only after the organization has been recognized exempt. Under section 6110 the Code, the IRS ultimately denies the application for recognition taxexempt status, the denial letter subject public inspection, with identifying and other information redacted, assist the public understanding the IRS' reasoning while also protecting the identity the organization. Although you reference what appears proposed denial letter that may have been made available publicly sources other than the IRS, IRS Disclosure Counsel has advised that section 6103 continues apply and are legally prohibited from discussing taxpayer information.7 However, are able respond your question generally. qualify for exemption social welfare organization described section 501 (c)(4), Section 6103(f) the Code sets forth the means which congressional committees may obtain access return and return information (that not otherwise made publicly available under sections 6104 and 6110). are available discuss these rules more detail with your staff. 
the organization must primarily engaged the promotion social welfare, not organized operated for profit, and the net earnings which not inure the benefit any private shareholder individual.8 The promotion social welfare does not include direct indirect participation intervention political campaigns behalf opposition any candidate for public office.9 Nevertheless, section 501 (c)(4) social welfare organization can engage political activities long primarily engaged activities that promote social welfare.10 The regulations not impose complete ban political activity section 501(c)(4) organizations.11 Whether organization meets the requirements section 501 (c)(4) depends upon all the facts and circumstances the particular applicant, and one factor determinative. revenue agent must first determine whether activities undertaken the organization primarily further exempt purpose. the organization engaged some activities that not promote social welfare, then the agent must review the scope the activities determine whether, based all the facts and circumstances, the organization's exempt activities are the primary activities. the application unclear not sufficiently detailed whether the primary activity conducted the organization exempt social welfare activity, the revenue agent will need follow-up this issue development letter. also important note that section 611 O(k)(3) provides that determination letters (including both proposed and final letters) may not used cited precedent. Determination letters are based the specific facts and circumstances the applicant. 
Question the position the IRS that entity claiming tax-exempt status 
under section 501 (c)(4) can engage nonpartisan political activity 
secondary activity, and that political activity can consume 49% the 
entity's expenditures and resources. determine whether organization operates primarily for the promotion social 
welfare, the courts and the IRS consider all the facts and circumstances, including but 
not limited the organization's stated purposes, expenditures, principal source 
revenue, number employees and volunteers, and time and effort.12 The IRS has 
taken position fixed percentage any one factor precedential guidance. IRC  501 (c)(4); Treas. Reg.  1.501 (c)(4)-1. Treas. Reg.  1.501 (c)(4)-1(a)(2)(ii). 
Rev. Rul. 81-95, 1981-1 C.B. 332. 
Rev. Rul. 81-95, 1981-1 C.B. 332. Treas. Reg.  1.501 (c)(4)-1 (a)(2) (No percentage test established). Rev. Rul. 68-45, 1968-1 
C.B. 259 (Principal source income does not determine organization's primary activity under  501 (c)(4); all the facts and circumstances are considered). See, generally Haswell United States, 500 F.2d 1133, 1142, 1147 (Cl. Ct. 1974) ("A percentage test ... not appropriate. Such test obscures the complexity balancing the organization's activities relation its objectives and circumstances the context the totality the organization."). See, Contracting 
Plumbers United States, 488 F.2d 684, 686 (2d Cir. 1973) (multiple factors relevant applying this standard, including formative history, stated purposes, and actual operations). See generally Seasongood Commissioner, 227 F.2d 907, 909, 912 (6th Cir. 1955) (expenditures, employees, and organization's time and effort considered). 
Question Treasury regulation applicable 501 (c)(4) organizations states: 
"The promotion social welfare does not include direct indirect participation intervention political campaigns behalf opposition any candidate for public office." Treas. Reg. 1.501(c)(4)-1(a)(2)(ii). Would the IRS generally view violation that regulation 501(c)(4) organization: 
(a) 
Made cash contribution political organization which tax-exempt under Section 527 and functions campaign committee elect particular candidate public office? 

(b) 
Made cash contribution political action committee which was established under the Federal Election Campaign Act (FEC Act) and which routinely makes cash contributions campaign committees, each which was established elect particular candidate public office? 

(c) 	
Made cash contribution political action committee Section 527 political organization which makes independent expenditures behalf opposition one more candidates for public office? 

(d) 
Made cash contribution national political party which engages partisan political campaigns elect multiple candidates from the same political party public office? 

(e) 
Made cash contribution political action committee Section 527 political organization which engaged partisan political activity, but does not campaign behalf opposition any particular candidate for public office? 

(f) 	
Made cash contribution political action committee Section 527 political organization which engaged nonpartisan political activity and does not campaign behalf opposition any particular candidate for public office? noted previously, section 501 (c)(4) organization may directly indirectly 
participate intervene political campaign long primarily engaged 
activities that promote social welfare. Treasury regulations provide that promotion 
social welfare does not include certain activities, including political campaign

intervention.This regulation does not prohibit section 501 (c)(4) organization from 
engaging such activity. Rather, the political campaign intervention activity does not 
count towards the organization's exempt activities that promote social welfare. 
Therefore, the organization engages such activity, has "violated" rule under the 
regulations. discussed, all facts and circumstances are relevant determining 
whether the requirements for tax exemption are ultimately satisfied. 
The same legal requirements apply each the facts patterns articulated your 
questions. With respect each the fact patterns that you specify, while depending Treas. Reg. 1.501(c)(4)-1(a)(2)(ii). the facts and circumstances, political activity would not for social welfare 
purpose, the organization does not violate any Internal Review Code rule applicable 
section 501 (c)(4) organizations engages such activity. All the facts and 
circumstances need considered determine whether this activity affects the 
section 501(c)(4) organization's tax-exempt status.14 

Question Would the IRS generally view violation Treasury Regulation 
 1.501(c)(4)-1(a)(2)(ii), 501(c)(4) organization were coordinate its political activities with campaign committee, political action committee, national political party? Please explain. stated, section 501 (c)(4) organizations may engage some political campaign activity provided that such intervention, along with other activity that does not promote social welfare, does not constitute the organization's primary activities. The tax law does not explicitly prohibit section 501 (c)(4) organization from coordinating political activity. 
However, such coordination could raise issues primary activity, inurement private benefit. Thus, for example, organization's activities are conducted primarily for the benefit political party any other private group individuals, rather than the community whole, the organization not operated primarily promote social welfare. Accordingly, conferring sufficient amount private benefit select individuals will preclude exemption under section 501 (c)(4) that private benefit the primary activity the organization .15 
Question understand that some persons have petitioned the Treasury Department clarify revise Treasury Regulation 1.501 (c)(4)-1 (a)(2)(ii). Please indicate whether the IRS plans engage such rulemaking, whether would first solicit comments what should included that rulemaking, and whether when any such rulemaking effort has been scheduled begin. 
The IRS, collaboration with the Treasury Department's Office Tax Policy ("Treasury"), annually develops list the guidance that Treasury and the IRS intend work during the upcoming guidance plan year. Certain types guidance are issued proposed form allow opportunity for public comment. 
The IRS aware the current public interest this issue and will seriously consider 
any proposed changes. Treasury and the IRS have not yet established the list the Rev. Rul. 68-45, 1968-1 C.B. 259. See a/so, e.g. Contracting Plumbers Coop. Restoration Corp. U.S., 488 F.2d 684 (2d Cir. 1973) (There are multiple factors relevant applying this standard, including formative history, stated purposes, and actual operations). Note that tax may apply certain cases under Internal Revenue Code section 527(f). IRC  501 (c)(4); Treas. Reg. 1.501(c)(4)-1. See Contracting Plumbers Coop. Restoration Corp. U.S., 488 F.2d 684, 687 (2d Cir. 1973) (Organization was not primarily devoted the common good when provided substantial and different benefits both the public and its private members). American Campaign Academy Commissioner, T.C. 1053, 1078 (1989), section 501(c)(3) case, held that organization was not operated exclusively for exempt purposes when conferred substantial private benefits political party and its candidates. 
guidance that Treasury and the IRS intend work from July 2012, through June 30, 2013. The selection items for the 2012-2013 Guidance Priority List will made collaboration with Treasury after review and evaluation comments received. 
Question the IRS were deny entity's request treated taxexempt under Section 501 (c)(4), would the IRS automatically apply corporate income taxes that entity would allow the entity apply for tax-exempt 
status other grounds? 
When section 501 (c)(4) organization receives final determination letter denying its 
application for tax-exempt status, the letter advises the organization that must file 
Federal income tax returns for the years listed the letter within days the 
issuance the denial letter, unless the organization requests extension time 
file. Enclosure copy this standard final denial letter. the revenue agent assigned the case believes that the organization may not meet the requirements section 501 (c)(4) organization, but may meet the requirements another tax-exempt provision, the issue whether the organization wants considered for exemption under that other provision could discussed with the organization through development letters prior the final resolution the application. the organization indicates that does not want proceed under the other provision and continues pursue section 501(c)(4) exemption, the IRS would deny the application and the organization would treated taxable entity. 
Please note that some organizations withdraw their application for exemption when they learn that denial forthcoming. Others not formally withdraw, but not respond requests for information necessary develop their applications. After additional failed attempts get the information from the applicant, those applications are closed "failure establish." 
Question the IRS were determine that entity was impermissibly participating partisan political activity, does the IRS have unilateral authority reclassify Section 527 political organization instead Section 501(c)(4) social welfare organization? 
Whether organization fails qualify under section 501 (c)(4) does not determine 
whether political organization under section 527. Section 527 applies party, 
committee, other organization that organized and operated primarily for the 
purpose accepting contributions making expenditures for exempt function (as 
defined section 527(e)(2)). Subject certain exceptions, tax-exempt under 
section 527, political organization required give notice electronically the 
Service.16 Section 527(i)(1); Rev. Rul. 2003-49, 2003-1 C.B. 903. Section 527 also provides for the taxation certain organizations that not provide notice the IRS. IRC  527(f), (i)(4). noted above, the revenue agent assigned the case believes that the organization may not meet the requirements section 501 (c)(4) organization, but may meet the requirements another tax-exempt provision, the issue whether the organization wants considered for exemption under that other provision could 
discussed with the organization through development letters prior the final resolution the application. the organization indicates that does not want proceed under 
the other provision and continues pursue section 501 (c)(4) exemption, the IRS would deny the application and the organization would treated taxable entity. 
Question 10. entity were denied tax-exempt status the IRS under Section 501(c)(4), how would past contributions and income earned those funds generally treated under the tax code? organization denied tax-exempt status, the organization taxable entity 
the date the organization originated. The final adverse determination letter states that 
the organization required file Federal income tax returns, generally Form 1120, 
U.S. Corporation Income Tax. The tax treatment the organization's contributions and other income determined under normal rules Subtitle 
Question 11. What considerations does the IRS use determine when entity that denied tax-exempt status under Section 501(c)(4) should subject 
penalty? What penalties are available and how are they calculated? 
There penalty specifically applicable organization result denial tax-exempt status. organization that denied tax-exempt status advised the final denial letter that has days from the final denial letter either file its income tax returns request additional time file the taxable returns. the organization timely filed Form 990 annual returns during the period time that the application for tax-exempt status was pending and timely files its taxable returns once tax-exemption denied, the organization will not subject penalties. the organization does not timely file taxable returns, the organization may subject failure file failure pay penalties under section 6651 the Code. 
The failure file penalty under section 6651 (a)(1) the Code, calculated rate percent the amount required shown tax the return the failure file for not more than month, with additional percent for each additional month fraction thereof that the failure file continues, not exceed percent the aggregate. 
The failure pay tax penalty under section 6651 (a)(2) the Code, calculated rate 0.5 percent the amount the tax shown the return the failure pay for not more than month, with additional 0.5 percent for each additional month fraction thereof that the failure pay continues, not exceed percent the aggregate. 
Penalties assessed may abated the organization can show that the failure file failure pay was due reasonable cause and not due willful neglect.17 
Question 12. Please provide copy the standard questionnaire that the IRS sends entities claiming tax-exempt status under Section 501(c)(4) obtain information about their political activities. addition, please provide any written guidance provided IRS agents regarding the issue political activity connection with Section 501 (c)(4). 
There standard questionnaire used obtain information about political activities. Although there template development letter that describes the general information the case development process, the letter does not specify the information requested from any particular organization. Enclosure copy the template letter. The amount and type development necessary process section 501 (c)(4) application ensure that the legal requirements tax-exemption are satisfied depends several factors, which include the comprehensiveness the information provided the application and the issues raised the application. Consequently, revenue agents prepare individualized questions and requests for documents relevant the application, which are then attached the above described general template letter. connection with recent cases, Technical prepared draft educational guide sheet the issue political activity for section 501 (c)(4) applications that was shared for 
comment with some employees Determinations. That guide sheet was neither 
mandated nor finalized. 
Question 13. Please indicate how many letter rulings have been issued the IRS since January 2007, deny revoke the tax-exempt status organization under Section 501 (c)(4) due involvement with partisan nonpartisan political activity. the IRS has issued less such letter rulings, please provide copies all such letters. the IRS has issued more than such letter rulings, please provide sample containing discussions the widest variety issues related the denial tax-exempt status under Section 501 (c)(4) due partisan nonpartisan political activity. 
Preliminarily, previously stated, section 6103 the Internal Revenue Code prohibits the disclosure information about specific taxpayers unless the disclosure authorized some provision the Internal Revenue Code. Section 6104(a) the Code permits public disclosure application for recognition tax-exempt status and supporting materials only after the organization has been recognized exempt. Under section 6110 the Code, the IRS ultimately denies the application for recognition tax-exempt status, the denial letter and background information subject public inspection, with identifying and other information redacted, assist the public understand the IRS reasoning while also protecting the identity the organization. IRC  6651 (a). 
The application process for tax-exempt status does not involve the revocation taxexemption; rather, only concerns the denial applications. IRS data the denial applications kept reports published the IRS Statistics Income (SOI) Division. The Data Book provides information IRS activities conducted during fiscal year period (October through September 30). have attached these reports Enclosures D-1 through D-5. For your convenience, however, are replicating the total number determination denials for section 501 (c)(4) organizations for 20072012 the chart below. 
Note that the number denials does not reflect full picture applications not approved. Some organizations withdraw their application for exemption when they learn that denial forthcoming. Others not formally withdraw, but not respond requests for information necessary develop their applications. After additional failed attempts get the information, those applications are closed "failure establish." 
Fiscal Year  The Number Social Welfare Organization Applications that were Denied  
2007  
2008  

2009 
2010 
2011 
*Fewer than 
Please note that although IRS automated systems track the numbers applications closed denied, they not track the names the applicant organizations the reasons for the denials. Absent manual review the files, are unable state whether any these denials were issued due involvement with partisan nonpartisan political activity. The data for 2012 reflects the preliminary information available tor October 2011 through April 11, 2012. SOI Data Book information updated annually, with the complete 2012 information expected March 2013. hope this information helpful. you have questions, please contact have your staff contact Catherine Barre (202) 622-3720. 
Sincerely, 

Steven Miller 
Deputy Commissioner for Services and Enforcement 
Enclosures 
EXEMPT ORGANIZATION DETERMINATIONS CASE ASSIGNMENT GUIDE CASE GRADING CRITERIA  
CASE COMPLEXITY FACTORS  GS-11  GRADE LEVEL DISTINCTIONS GS-12  GS-13  

Analysis  Application basic; facts  Application complex and facts  Application extremely complex (e.g.,  
Application  regarding nature and purpose  must determined through  involves inurement, private benefit, related  
are easily discernible.  Private  analysis and questioning  entities) and significant additional  

benefit/inurement issues unlikely  applicant. Private benefit/inurement  documentation required applicant.  
but  issues  
Factual Complexity  Issues are average complexity  Issues may sensitive involve  Case development methods and procedures Issues  and sensitivity. Established  controversy. Case development  must adapted unique situations. Issues  
case development methods and  methods and procedures must  are novel and unusual and involve the largest  
procedures are usually  adapted case.  and most complex EO's.  
Application Tax  Tax laws are most cases  Tax laws are not always directly  Tax laws other legal issues involve points  
Law  applicable but occasionally  applicable. Research and analysis law without precedent with conflicting  
involve unusual interpretation  are required establish proper  precedents. Research and analysis are  
and application.  interpretation and use  necessary establish significant similarities  
with related issues.  
Interpersonal Skills  Contacts are with  Contacts are with variety  Contacts are with officials very large  
representatives applicants,  representatives and officers  prominent organizations and persons with  
organization members and  considerable prominence the  national reputations business, legal and  
contributors. Tact and  community including accountants  accounting circles and others outstanding  
diplomacy are required  and legal representatives.  political, social economic influence.  
resolve and elicit information and  Considerable tact and skillful  Considerable tact and discretion are required  
resolve questions and problems.  negotiations are necessary since  for resolution issues.  
issues discussed are sometimes  
controversial and sensitive.  
Impact Work  Determination decision may  Determination decision may affect  Determination decision may impact other  
impact other organizations;  larger organizations regional  organizations nationwide; applicant has  
applicant's sole source  national stature; applicant's income  significant resources and determination  
income may from donations; from variety sources; and  decision may have significant social and  
and, the likelihood media  media attention likely.  economic implications with recurring effects  
attention limited.  prior subsequent tax years; and,  
widespread media attention  

Revised November 25, 2002 

Internal Revenue Service Department the Treasury 
P.0. Box 2508 
Cincinnati, 45201 
Date:* 
Employer Identification Number: 
XX-XXXXXXX 

Person Contact -Group 
Specialist Name -XXXX 
ID#XXXXXXX 
Contact Telephone Numbers: 

XXX-XXX-XXXX Phone 
XXX-XXX-XXXX Fax (859-669-3783 for TEDS) 
Cases) 
Response Due Date: 
Dear Sir Madam: need more information before can complete our consideration your application for exemption. Please provide the information requested the enclosed Information Request the response due date shown above. Your response must signed authorized person officer whose name listed your application. Also, the information you submit should accompanied the following declaration: 
Under penalties perjury, declare that have examined this information, including 
accompanying documents, and, the best knowledge and belief. the 
information contains all the relevant facts relating the request for the information, 
and such facts are true, correct, and complete. approve your application for exemption, will required law make the application 
and the information that you submit response this letter available for public inspection. 
Please ensure that your response doesn't include unnecessary personal identifying information, 
such bank account numbers Social Security numbers, that could result identity theft 
other adverse consequences publicly disclosed. you have any questions about the public 
inspection your application other documents, please call the person whose name and 
telephone number are shown above. facilitate processing your application. please attach copy this letter and the enclosed 
Application Identification Sheet your response and all correspondence related your 
application. This will enable quickly and accurately associate the additional documents 
with your case file. Also, please note the following important response submission information: 

 

mail your response. Faxing and mailing your response will result unnecessary delays processing your application. Each piece correspondence submitted (whether fax mail) must processed, assigned, and reviewed Determinations specialist. 
Please don't fax 
 
Please don't fax your response multiple times. Faxing your response multiple times will delay the processing your application for the reasons noted above. 

Name EIN 
 
Please don't call verify receipt your response without allowing for adequate processing time. takes minimum three workdays process your faxed mailed response from the day received. don't hear from you the response due date shown above, will assume you longer want consider your application for exemption and will close your case. result, the Internal Revenue Service will treat you taxable entity. receive the information after the response due date, may ask you send new application 
-************** "*******
.......... ................ ******** DELETE NOT 501 (c)(3) APPLICATION** addition, you don't respond the information request the due date, will conclude that you have not taken all reasonable steps complete your application for exemption. Under Internal Revenue Code section 7428(b)(2), you must show that you have taken all the asonable steps obtain your exemption letter under IRS procedures timely manner and exhausted your administrative remedies before you can pursue declaratory judgment. Accordingly, you fail timely provide the information need enable act your application, you may lose your rights declaratory judgment under Code section 428. 
***********'"***************** DELETE POWER ATTORNEY****************** "************* have sent copy this letter your representative indicated Form 2848, Power 
Attorney and Declaration Representative. 
************************************************************************************************************ you have any questions, please contact the person whose name and telephone number are shown the heading this letter. 
Sincerely yours, 
Specialist Name 
Exempt Organizations Specialist 
Enclosure: 	Information Request Application Identification Sheet 
Letter 1312 (Rev. 05-2011) 
Additional Information Requested: 
Name EIN 
PLEASE DIRECT ALL CORRESPONDENCE REGARDING YOUR CASE TO: 
Selective: 
(EDS Cases) Mail: 
Internal Revenue Service Exempt Organizations Box 2508 Cincinnati, 45201 ATI: Specialist Name 
Room XXXX 
GroupXXXX 

(TEDS Cases) Mail: 
Internal Revenue Service Exempt Organizations Box 12192 
Covington, 41012-0192 

Street Address for Delivery Service: 
Internal Revenue Service Exempt Organizations 
550 Main St, Federal Bldg. Cincinnati, 45202 
ATI: Specialist Name 
Room XXXX 
GroupXXXX 
Street Address for Delivery Service: 
Internal Revenue Service 
Exempt Organizations 
201 Rivercenter Blvd 
ATIN: Extracting Stop 312 
Covington, 41011 

DEPARTMENT THE TREASURY 
INTERNAL REVENUE SERVICE 
WASHINGTON, D.C. 20224 

TAX EXEMPT AND GOVERNMENT ENTITIES 
DIVISION 
Date: Contact Person: (Specialist Name) 
Identification Number: (Specialist ID#) 
Contact Number: (Specialist Phone#) 
Employer Identification Number: Form Required Filed: 
Tax Years: 

Dear Applicant: 
This our final determination that you not qualify for exemption from Federal income tax organization described Internal Revenue Code section 501 (c)( )Recently, sent you 
letter response your application that proposed adverse determination. The letter explained the facts, law and rationale, and gave you days file protest. Since did not receive protest within the requisite days, the proposed adverse determination now final. 
You must file Federal income tax returns the form and for the years listed above within days this letter, unless you request extension time file. will make this letter and our proposed adverse determination letter available for public inspection under Code section 6110, after deleting certain identifying information. Please read the enclosed Notice 437, Notice Intention Disclose, and review the two attached letters that show our proposed deletions. you disagree with our proposed deletions, you should follow the instructions Notice 437. you agree with our deletions, you not need take any further action. you have any questions about this letter, please contact the person whose name and 
telephone number are shown the heading this letter. you have any questions about your 
Federal income tax status and responsibilities, please contact IRS Customer Service 
Letter 4040 (CG) (11-2005) Catalog Number 47635Z 
1-800-829-1040 the IRS Customer Service number for businesses, 1-800-829-4933. The IRS Customer Service number for people with hearing impairments 1-800-829-4059. 
Sincerely, 
Lois Lerner 
Director, Exempt Organizations Rulings Agreements 
Enclosure Notice 437 
Redacted Proposed Adverse Determination Letter 
Redacted Final Adverse Determination Letter 

Letter 4040 (CG) (11-2005) 
Catalog Number 47635Z 
Table 24. Tax-Exempt Organization and Other Entity Applications Disposals, Type Organization and Internal Revenue Code Section, Fiscal Year 2007 
Total  
Type organization,  applications  
Internal Revenue Code section disposals  Approved  Disapproved  Other [1]  

(2) (4) 
Tax-exempt organizations and other entities, total 91,742 72,869 1,628 17,245 
Section 501 (c) subsection, total [2] 91,689 72,856 1,628 17,205 
(1) Corporations organized under act Congress 
(2) Title-holding corpo rations 158 111 
(3) Religious, charitable, and similar organizations [3] 85,771 68,278 1,607 15,886 
(4) 
Social welfare organ izations 1,867 1,394 

(5) 
and agriculture organizations 233 188 

(6) 
Business leagues 1,615 1,370 239 

(7) 
Social and recreation clubs 1,036 711 

(8) 
Fraternal beneficiary societies 

(9) 
Voluntary employees' beneficiary associations 

286 
(10) Domestic fraternal beneficiary cieties 
(12) Benevolent life insurance associations 116 
com panies 174 156 
(14) 
State-chartered credit unions 

(15) 
Mutual insurance companies 

(17) 
Supplemental unemployment benefit trusts 

(19) 
War veterans' organizations 131 
(25) Holding companies for pensions and other entities 106 101 
Section 501 !d) Religious and apostolic ass ociati ons 
Section 521 Farmers' cooperatives 
Nonexempt charitable trusts 

d-Not shown avoid disclosure about specific taxpayers. However, data are included the appropriate totals. 
[1] Includes applications withdrawn the organization; applications which failed provide lhe required information; incomplete applications; IRS refusals rule applicatio ns; applications forwarded other than the IRS National Office; IRS correction disposals; and others. 
[2] applications were filed for teachers' retirement funds [sectioo 501 (c)(11 )]; corporations finance crop operations [section 501(c)(16)]; employee-funded 
pension trusts [section 501(c){18)]; black lung trusts (section 501(c)(21)]; multiemployer pension plans [section 501(c)(22)); veterans' associations founded prior 1880 [section 501(c)(23)]; trusts described section 4049 oflhe Employee Security Act 1974 (ERISA) (section 501(c)(24)]; State-sponsored high-risk health insurance organizations [section 501(c)(26)]; and Stale-sponsored workers' compensation reinsurance organizations [section 501 (c)(27)]. 
[3] Includes private foundations. Not all Internal Revenue Code section 501(c)(3) organizations are required apply for recognition tax emption, including churches, Integrated auxiliaries subordinate units, and conventions associations churches. 
SOURCE: Tax Exempt and Government Entities, Exempt Organizati ons, Rulings and Agreements, Determinations SE:T:EO:RA:D 

Table 24. Closures Applications for Tax-Exempt Status, Organization Type and Internal Revenue 
Type organization. 
Total Approved Disapproved Other (2] 
Internal Revenue Code section 
(1) (3) 

(2) Title-holding corporations 114 
(3) 
Religious, charitable, and similar organizations [4] 79,107 65,761 1,221 12,125 

(4) 
Social welfare organizations 1,492 1,202 

(5) 
Labor and agriculture organizations 

269 
(6) Business leagues  1,477  1,296  175  
(7) Social and reC



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