The Advance Ruling Process

In the course of your research and talking to other people who have made successful applications for tax-exempt status, you have probably heard the term advance ruling. This process allowed a new organization that lacked years of documentation to obtain a favorable determination and then have five years to show that it was a publicly supported organization. At the end of those five years, the organization had to file another form showing that it met the standards and should be granted a final determination.

As of 2008, the rules changed for the better. The advance ruling process was eliminated. You still need to plan for and show in your budget that your organization is indeed a public charity. If your organization is relatively new, and thus has not been receiving public funds for several years, you need to show in your narrative and in your budget that you can reasonably expect to be publicly supported. You must meet that one-third threshold before the IRS will accept that you are a public charity.

The IRS will now accept that you are a public charity based on the documentation you provide. You must meet the established one-third threshold for five years. With your sixth taxable year, you must file your yearly Form 990, showing you meet the public support test.

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