Revenue Procedure 2018-32 has been issued by the IRS to provide consolidated guidance for taxpayers to gain assurance that an organization they are making a charitable contribution to qualifies to receive tax deductible contributions.  This ruling consolidates and updates prior guidance found in several prior procedures.

The prior procedures that have been modified and superseded are:

• Rev. Proc. 81-6, 1981-1 C.B. 620;
• Rev. Proc. 81-7, 1981-1 C.B. 621;
• Rev. Proc. 89-23, 1989-1 C.B. 844; and
• Rev. Proc. 2011-25 I.R.B. 887

As the procedure describes its uses and purpose:

This revenue procedure sets forth the extent to which grantors and contributors may rely on the listing of an organization in Internal Revenue Service (IRS) databases of organizations eligible to receive tax-deductible contributions under § 170, for purposes of determining whether the grants or contributions to such organizations may be deductible under § 170, and for certain other purposes. This revenue procedure also provides safe harbors for determining that a grantor's or contributor's grant or contribution will not cause the grantor or contributor to be considered to be responsible for, or aware of, an act that results in an organization's loss of public charity classification and for determining that a grant or contribution is considered an unusual grant.

Finally, this revenue procedure incorporates the modifications made in the transition from the use of Publication 78 to the use of IRS's database, Tax Exempt Organization Search (Pub. 78 data), reflects the changes to regulations eliminating the advance ruling process and changing the computation period for determining public support for organizations classified under §§ 170(b)(1)(A)(vi) and 509(a)(1) or under § 509(a)(2), and provides non-substantive modifications and changes throughout for clarity and readability purposes.

In general, if a taxpayer consults the IRS list of charitable organizations at the time of a contribution, the taxpayer’s deduction is preserved even if it is later determined that the organization no longer should have its charitable status.  However, if the taxpayer is aware of the events that would lead to termination of the status or the taxpayer is a party responsible for that loss of status, the taxpayer’s deduction will not be protected.

Prior to 2011 the IRS published a document (Publication 78) that contained the list of organizations eligible to receive deductible contributions.  In 2011 the IRS moved the information found in the Publication online, made available through the IRS website.

Currently that database can be accessed at:

https://www.irs.gov/charities-non-profits/organizations-eligible-to-receive-tax-deductible-charitable-contributions

As the IRS site notes, some organizations not required to apply for exemptions will not be in the database but will still be eligible to receive deductible contributions. These “missing” organizations include:

• churches,
• group ruling subordinates and
• governmental units

Other organizations should be available in the database.

The IRS also maintains information on these organization in the Exempt Organization Business Master File.  Information available online to be retrieved from this database is referred to as the EO BMF Extract.

The IRS describes this database as follows:

The EO BMF Extract is available to the public through the Tax Statistics section of the IRS website. The EO BMF Extract contains more information, in a slightly different format, than Tax Exempt Organization Search (Pub. 78 data) and includes information on most tax-exempt organizations, rather than just the tax-exempt organizations eligible to receive tax-deductible contributions under § 170 that are included in Tax Exempt Organization Search (Pub. 78 data). Among the data fields provided for organizations in the EO BMF Extract are an organization's name and Employer Identification Number (EIN), address, subsection code (the paragraph under § 501(c) under which the organization is recognized as exempt), ruling date, affiliation code (status as an independent, central, or subordinate organization), deductibility code, and foundation code (indicating whether an organization is a private foundation, private operating foundation, or public charity and, if applicable, the appropriate subparagraph of § 170(b)(1)(A)). For determination letters or rulings issued in 2011 and after, the foundation code generally includes an indication whether a § 509(a)(3) supporting organization is a Type I, Type II, or Type III functionally or non-functionally integrated supporting organization. Each version of the EO BMF Extract contains a posting date.

Information on using this database and obtaining an extract can be found at:

https://www.irs.gov/charities-non-profits/exempt-organizations-business-master-file-extract-eo-bmf

The ruling outlines the reliance rules related to these databases as follows:

If an organization listed in or covered by Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract ceases to qualify as an organization to which contributions are deductible under § 170 and the IRS revokes a determination letter or ruling concluding that the organization is one to which contributions are deductible under § 170, grantors and contributors to that organization may generally rely on the determination letter or ruling information provided in Tax Exempt Organization Search (Pub. 78 data) or the EO BMF Extract that contributions to the organization are deductible under § 170 until the date of a public announcement stating that the organization ceases to qualify as an organization contributions to which are deductible under § 170. The public announcement may be made via the Internal Revenue Bulletin, on the portion of the IRS website (at www.irs.gov) that relates to exempt organizations, or by such other means designated to put the public on notice of the change in the organization's status.

The procedure provides the following exceptions to the general reliance rule:

The IRS is not precluded from disallowing a deduction for any contribution made after an organization ceases to qualify under § 170(c) and prior to the public announcement or posting of the revocation if the grantor or contributor:

(1) Had knowledge of the revocation of the determination letter or ruling prior to the public announcement or posting;

(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.

The procedure goes on to provide additional reliance for rules for determining if the entity qualifies as a public charity, safe harbor rules that apply when an organization loses its public charity status and relying on information obtained from the EO BMF obtained by a third party.