Tab 6: IRS Letter of Determination

Suggested Documents

• IRS determination letter

 

What if the name of my community foundation has changed since we received our IRS determination letter?

If your community foundation has changed its name since you received your determination letter and you do not have a letter with the new name on it, you should include sufficient evidence documenting the legal name change. Typical documentation might include a copy of the amended articles of incorporation or an official registration of name change form that you filed with the state. If you have not notified the IRS of your name change, you may encounter problems because the staff administering the National Standards Process may have difficulty confirming the validity of your exempt status on IRS Publication 78. If you believe the information on your IRS letter is missing, out of date, or incorrect, you should request a new one from the IRS. For more information, or to request an updated letter, contact IRS Exempt Organizations customer service at 1-877-829-5500.

What if my IRS determination letter does not explicitly mention section 501(c)(3)?

In some older documents, section 501(c)(3) is not specifically mentioned on the determination letter. This letter will still be sufficient if it contains language indicating that your organization meets the requirements of section 170(b)(1)(A)(vi).

What if my IRS determination letter does not explicitly mention section 509(a)(1)?

This letter will still be sufficient if it contains language indicating that your organization meets the requirements of section 170(b)(1)(A)(vi).

What if my IRS determination letter does not explicitly reference section 170(b)(1)(A)(vi)?

This letter will be insufficient to comply with National Standards and you will need to request a new determination letter from the IRS.

170(b)(1)(A)(vi)
An IRS designation indicating that the organization qualifies as a public charity because it meets a public support test.

501(c)(3)
The Internal Revenue Service code section for an organization that is a charitable and tax-exempt organization. This includes both private foundations and public charities.

509(a)(1)
The Internal Revenue Service code section for a Section 501(c)(3) public charity. Section 509(a)(1) organizations include, but are not limited to, religious organizations, schools, hospitals and publicly supported organizations.

Advance ruling letter
The IRS ruling provided to new organizations seeking public charity status as a publicly supported organization indicating that the IRS has agreed to treat the organization as a public charity for an initial five year period while giving the organization a chance to raise enough public support to show that it is, in fact, publicly supported. The IRS stopped issuing advance letter rulings in 2008. Temporary regulations, which are currently in effect, state that any IRS determination letter that contains an expiration date of June 9, 2008, or later should be treated as a permanent ruling.

Employer Identification Number
An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity.

Private foundation
A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family or corporation) and program managed by its own trustees or directors, established to maintain or aid social, educational, religious or other charitable activities serving the common welfare, primarily through grantmaking. U.S. private foundations are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and are classified by the IRS as a private foundation as defined in the code.

Public support test
There are two public support tests, both of which are designed to ensure that a charitable organization is responsive to the general public rather than a limited number of persons. One test, sometimes referred to as 509(a)(1) or 170(b)(1)(A)(vi) for the sections of the Internal Revenue Code where it is found, is for charities like community foundations that mainly rely on gifts, grant, and contributions. To be automatically classed as a public charity under this test, organizations must show that they normally receive at least one-third of their support from the general public (including government agencies and foundations). However, an organization that fails the automatic test still may qualify as a public charity if its public support equals at least 10 percent of all support and it also has a variety of other characteristics-such as a broad-based board-that make it sufficiently "public." The second test, sometimes referred to as the section 509(a)(2) test, applies to charities, such as symphony orchestras or theater groups, that get a substantial part of their income from the sale of services that further their mission, such as the sale of tickets to performances. These charities must pass a one-third/one-third test. That is, they must demonstrate that their sales and contributions normally add up to at least one third of their financial support, but their income from investments and unrelated business activities does not exceed one-third of support.

Tax-exempt
General term for an organization that does not have to pay taxes such as federal or state income tax or state sales tax. The rules for tax exemption vary depending on the type of tax and location.