Rev. Proc. 72-39

Section 1. Purpose.

This Revenue Procedure restates and amplifies the extent to which contributors may rely on the listing of an organization in Publication No. 78, Cumulative List, for purposes of deducting contributions under section 170 of the Internal Revenue Code of 1954. It also prescribes procedures when it is found necessary to suspend such reliance.

Sec. 2. Background.

.01 Section 170 of the Code, with certain limitations, allows deductions for Federal income tax purposes of contributions or gifts made to or for the use of an organization that qualifies as an organization described in section 170(c). In order for contributions by donors to be deductible, the organization must qualify at the time of the contribution. Thus, it is the responsibility of an organization receiving contributions to insure that its character, purposes, activities, and method of operation satisfy the qualification requirements of section 170(c) in order for contributors to have the assurance that their contributions at the time made are deductible.

.02 For many years the Internal Revenue Service has issued Publication No. 78, Cumulative List of Organizations described in Section 170(c) of the Internal Revenue Code of 1954. The listing of an organization in Publication No. 78 signifies it has received a ruling or determination letter (issued in accordance with established procedures, currently Revenue Procedure 72-3, C.B. 1972-1, 698, and Revenue Procedure 72-4, C.B. 1972-1, 706) stating that contributions by donors to the organization are deductible as provided in section 170 of the Code. Each such ruling or determination letter is based on a factual showing by the organization that its character, purposes, activities, and method of operation satisfy the statutory requirements for qualification at the time the ruling or determination letter is issued. If there is material change in the character, purposes, activities, or method of operation of an organization from those on which the ruling or determination letter was based and the change is such that the organization ceases, as a matter of law, to qualify under section 170(c), the ruling or determination letter also immediately ceases to be applicable (see also section 7.02 of Revenue Procedure 72-4, C.B. 1972-1, 706). Where this circumstance occurs, it is only by exercise of the authority under section 7805(b) of the Code that contributors to the organization may be allowed deductions for contributions made after the organization ceases to qualify under section 170(c).

Sec. 3. Effect of Publication No. 78.

01. Where an organization listed in Publication No. 78 ceases to qualify as an organization contributions to which are deductible under section 170 of the Code and the Service subsequently revokes a ruling or a determination letter previously issued to it, contributions made to the organization by persons unaware of the changes in the status of the organization generally will be considered allowable if made on or before the date of publication of the Internal Revenue Bulletin announcing that contributions are no longer deductible. However, the Service is not precluded from disallowing a deduction for any contribution made after an organization ceases to qualify under section 170, where the contributor (1) had knowledge of the revocation of the ruling or determination letter, (2) was aware that such revocation was imminent, or (3) was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification.

.02 The advance assurance of deductibility provided by paragraph .01 above applies only to contributions made to an organization listed or covered by Publication No. 78 in the organization's official name, its recognized popular name, or a contraction of either of these names that is reasonably identifiable or widely known. Therefore, the advance assurance of deductibility provided by paragraph .01 does not apply to contributions made nominally to an organization listed in Publication No. 78 but with the understanding or on a condition that they be made available to or for the use of an organization not listed in Publication No. 78.

.03 The provisions of paragraph .01 above do not apply to an organization that is not listed or covered by Publication No. 78. In such a case the effect of a ruling or determination letter concerning the deductibility of contributions to the organization is determined in the manner described in Revenue Procedure 72-3, C.B. 1972-1, 698.

Sec. 4. Procedures Under Which Reliance Upon Publication No. 78 May Be Suspended.

.01 Notwithstanding sections 3.01 and 3.02 above, advance assurance of deductibility of contributions to an organization may be suspended pending verification of the continued qualification of the organization as one described in section 170(c) of the Code. In such a case the provisions of this section apply.

.02 During the course of normal operations, a District Director may receive information which relates to an organization's qualification as one described in section 170(c). Normally, the effect of such information is not determined until the District Director has completed examination of the organization's activities.

.03 Notwithstanding paragraph .02 above, however, if at any time a District Director receives information which raises serious doubt concerning the continued qualification of an organization as one described in section 170(c), the District Director may consider whether immediate suspension of advance assurance of the deductibility of contributions to the organization is warranted, instead of awaiting the completion of an examination of the organization's activities. .04 If, upon consideration of information available to him, including the results of such preliminary examination as he deems necessary, the District Director concludes that the information does not clearly raise a serious doubt concerning the continued qualification of the organization, any further audit action will be completed in accordance with established procedures without regard to this section.

.05 If the facts and evidence available to the District Director, including the results of any preliminary examination, clearly raise serious doubt concerning the continued qualification of the organization to receive deductible contributions, and in the opinion of the District Directors there should be public notice to potential contributors, he will immediately advise the organization that he intends to recommend to the Assistant Commissioner (Technical) that the advance assurance of deductibility of contributions to the organization be suspended pending a complete examination of the qualification of the organization.

.06 The District Director shall afford the organization an opportunity for a written protest and a conference within 10 days of such advice before he takes action, except that the District Director may reduce the 10 day period and waive the requirement of written protest in any case where he finds time is critical. In such a case the organization will be permitted to present its views orally.

.07 If the organization declines a protest and conference or if after protest and conference the District Director adheres to his finding, he will immediately notify the organization in writing that he is recommending to the National Office that advance assurance be suspended pending final determination of the status of the organization. The District Director shall concurrently forward his recommendation to the National Office.

.08 The organization will be afforded an opportunity for an immediate conference, if desired, in the National Office if it appears from the record furnished by the District Director that advance assurance should be suspended.

.09 If the National Office concurs in his recommendation, the District Director will notify the organization of the decision and will also inform it that a notice of suspension of advance assurance of deductibility of contributions to the organization will be published in the Internal Revenue Bulletin. The notification to the organization will state that suspension of advance assurance by the Service has been taken only because the tax liability of contributors is affected by the organization's activities and is not finally determinative of the qualification of the organization as one described in section 170(c), and, if appropriate, its exemption under section 501. The Service may also, in its discretion, issue an announcement of notice of suspension of advance assurance in addition to publication in the Internal Revenue Bulletin.

.10 If, at any time during the course of the examination of the organization's activities after the suspension of advance assurance, the District Director finds the organization is not in violation of section 170(c), he shall request the National Office to rescind the suspension action.

.11 If it is finally determined that the organization does not qualify as an organization described in section 170(c), the date of the Internal Revenue Bulletin announcing suspension of advance assurance of deductibility will be the date after which contributions made to the organization are no longer deductible.

.12 Notwithstanding the preceding provisions of this section, in extraordinary circumstances for good cause shown the advance assurance of deductibility provided by section 3.01 may be withdrawn by notification to the organization by the Assistant Commissioner (Technical) followed by an announcement in the Internal Revenue Bulletin of suspension of advance assurance of deductibility of contributions to the organization without the preliminary advice to the organization and the opportunities for protest and conference referred to in sections 4.05 through 4.08 of this procedure.

Sec. 5. Effect on Other Documents.

This Revenue Procedure supersedes Revenue Procedure 68-17, C.B. 1968-1, 806, and is effective on the date of its publication in the Internal Revenue Bulletin. However, this Revenue Procedure has no effect on the provisions of Revenue Procedure 72-4, C.B. 1972-1, 706, relating to procedures on applications for exemption, and revocation or modification of rulings and determination letters, under sections 501 and 521 of the Code.