IRS 501C3 Determination Letter [Sample]

The IRS will reply to your organization's request for 501(c)(3) tax-exempt status with a decision letter. You will get a positive decision letter, outlining your rights and obligations as a tax-exempt organization, if the IRS accepts your application.

Your decision letter may be requested by donors and Grantmakers as verification of your tax-exempt status.

As an alternative, the IRS will issue you an adverse decision letter if they reject your application.

The letter will outline the 501(c)(3) standards that your organization does not satisfy as well as your opportunity to appeal.

Dear applicant,

We are happy to notify you that after reviewing your application for tax-exempt status, we have found that you qualify for section 501(c)(3) of the Internal Revenue Code's exemption from paying federal income taxes. Section 170 of the Code permits deductions for contributions made to you.

By sections 2055, 2106, or 2522 of the Code, you are also eligible to receive gifts, devices, transfers, or bequests that are tax deductible.

You should save a copy of this letter with your permanent records since it can be useful in resolving any issues relating to your exempt status. Public charities or private organizations are the two additional categories for entities free from taxation under section 501(c)(3) of the Code.

You will be considered a public charity for the duration of your advanced ruling term. Your advance ruling period starts on the day your exemption takes effect and ends on the date indicated in the letter's header as the conclusion of the advance ruling period.

We will give you Form 8734, Support Schedule for Advance Ruling Term, just before the conclusion of your advance ruling period. The completed paperwork must be returned within 90 days after the conclusion of your advance ruling period.

Then, we will inform you in writing that your organization is a public charity. For further information on your duties as an exempt organization, please refer to the attached Information for Exempt Organizations Under Section 501(c)(3).

Warm regards,

[Name]

Contents of a Letter of Favorable Determination

Important details for your organization will be included in the decision letter if the IRS accepts your application, including:

The start date of the exemption. Donations made after the effective date are tax deductible, and the revenue your charity receives after the date is not subject to corporate income tax. The IRS will recognize your organization as tax-exempt as of the effective date. Your effective date of exemption will be backdated to the date of incorporation if you applied for exempt status within 27 months after establishing the organization. If not, the application's postmark date determines its effective date.

contribution deductions for taxes. The letter can mention that gifts and bequests to your charity are tax deductible and include the relevant tax code.

the conclusion of the accounting period. Your accounting period ending will be included in the letter; this date should coincide with the one you provided in your application. The time is crucial since your company's tax return is due on the 15th day of the fifth month after the conclusion of your accounting period (for example, if your accounting period ending is December 31, your return will be due on May 15).

Requirement for annual returns. The letter will outline the yearly filing requirements for your company (most nonprofits must file form 990, 990-EZ, or 990-N). Your organization may lose its tax exemption if you don't submit the proper paperwork three years in a row. See Nonprofit Annual Filing Requirements for further details.

group exclusion The letter can mention that the related NGOs are likewise tax-exempt if you named subordinate organizations in your application.

Steps to Take After a Letter of Favorable Determination

When you get your decision letter, keep it accessible and file it away with your nonprofit's other documents.

Determination letters are required to be disclosed to the public, therefore you must let them see and copy them upon request.

In addition, your 501(c)(3) status may be verified by contributors, grantors, and other parties that provide discounts to tax-exempt organizations upon request.

Look up the tax-exempt organization registration requirements in your state. You must submit documentation to your local tax office to request state tax exemption in many states since your determination letter does not automatically exempt your organization from state taxes.

For additional details on filing in your state, see our 50 State Guide on creating a nonprofit.

Obtaining Copies

You may ask the IRS for a new decision letter if you lost your original. On the Tax Exempt Organization Search, you may download the actual letter if the IRS issued your decision letter after January 1, 2014. (TEOS). By sending Form 4506-A to the IRS, older organizations may seek a copy of the decision letter.

As an alternative, you may ask for an affirmation letter, which will attest to the tax-exempt status of your organization as of the requested date. An affirmation letter performs the same function for grantors and donors as the first decision letter.

An officer or trustee may request the letter by getting in touch with IRS Customer Account Services via phone, mail, or fax. Include the name of the organization, the Employer Identification Number (EIN), and the approved signature of the officer or trustee if you submit the request in writing.

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letter of an adverse determination

You will get an unfavorable decision letter from the IRS if it determines that your organization does not fulfill the criteria for 501(c)(3) status or that there is insufficient evidence.

The IRS will explain in the letter why you don't fit the criteria for a 501(c)(3) organization.

There are three alternatives available to you at this point: submit a protest (also known as an appeal), start a new 501(c)(3) application from scratch, or reevaluate whether exempt status is a possibility for your group. An attorney can assess your circumstances and advise you on your options.

You must send the protest to the Exempt Organizations Rulings and Agreements office if you decide to appeal. They will send you a favorable determination letter if they concur with you.

If not, the office might issue a new adverse determination letter or send your protest to the Appeals Office.

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