The Internal Revenue Service (the “IRS”) has updated the procedures applicable to the IRS Exempt Organizations Determinations unit (“EO Determinations”) requests for additional information in connection with applications for tax exemption and related determinations. Under these new rules, applicants have much less time to respond to requests for additional information (and IRS staff have less discretion in granting applicants extensions of time to respond to such requests).
Under prior procedures, an applicant seeking tax exemption or a related determination had 21 days to respond to a request for additional information, and this could be extended, as a matter of course, by an additional 14 days. (In practice, EO Determinations staff would often grant applicants additional extensions beyond the 21 + 14 day periods, depending on the circumstances.) If the applicant did not respond by the extended due date, EO Determinations would place the case in “suspense status” and give the applicant an additional 90 days to supply the requested information (this suspense status was communicated to the applicant in what was often referred to as the “90 day letter”). If the applicant did not supply the requested information to the IRS by the end of that 90-day period, EO Determinations closed the case for “Failure to Establish” and did not refund the applicant’s user fees submitted with the application.
Under the new procedures, instead of the 21 + 14 day extensions, EO Determinations provides applicants with an initial period of 28 calendar days to respond to information requests (unless stated otherwise in the request), with extensions granted on a case-by-case basis and subject to EO Determinations manager (rather than just agent) approval. Based on the new procedures, any additional extensions will typically be limited to 14 days or less but may be longer depending on the nature of the additional information requested. If the taxpayer has not provided the requested information by the end of the due date plus extension(s), there is no additional 90-day period: EO Determinations will close the case for “Failure to Establish” (or, in the case of Form 1023-EZ applications for exemption, the case will be closed as “non-accepted”), and the IRS will not refund the applicant’s user fees submitted with the application.
The procedures do not explain the practical effect of a case being “closed”, but it seems that an applicant would need to resubmit its application for tax exemption or related determination and pay another user fee in order to have its application reconsidered by EO Determinations. However, if an applicant submits the requested additional information after the case has already been closed, the new procedures instruct the EO agent to discuss next steps with his or her manager—which leaves open the possibility that such a case might be reopened without the applicant having to submit a new application and pay a new user fee.
To help organizations complete requests on time, the new procedures instruct EO Determinations employees to call the applicant before sending a request for additional information to explain that the request is coming (and to verify the applicant’s mailing address), and to place another call three (3) days prior to the response due date to remind the applicant of the upcoming deadline.
With these changes, it is critical for charities and their advisors to monitor their IRS determination applications to avoid inadvertently missing the window for responding to IRS requests for additional information or submitting requests for extensions of time to respond to such requests.
For additional information, please see the Internal Revenue Manual, Part 7, Chapter 20, Section 2 and IRS memorandum TEGE-07-0915-0022.