A letter of determination, usually called a determination letter, is a written answer the IRS gives one taxpayer about one set of facts, applying rules that are already settled. It is not a new interpretation and it is not general guidance, which is why the same question from a different organization needs its own letter.
The best known kind confirms that an organization is exempt from federal income tax, and a second kind confirms the qualification of a retirement plan. Both are the same instrument doing the same job.
The Definition Is in the Procedural Rules
A determination letter is a written statement issued by a district director in response to a written inquiry by an individual or an organization that applies to the particular facts involved the principles and precedents previously announced by the National Office (26 CFR 601.201(a)(3)).
The next sentence is the one that decides whether an application will succeed at all. A determination letter is issued only where a determination can be made on the basis of clearly established rules as set forth in the statute, Treasury decision, or regulation, or by a ruling, opinion, or court decision published in the Internal Revenue Bulletin, and where such a determination cannot be made, for example where the question presented involves a novel issue, a determination letter will not be issued (26 CFR 601.201(a)(3)).
A novel question does not get a slower answer. It gets no determination letter.
The Family It Belongs To
The same regulation defines five instruments that clients and their advisers routinely mix up.
| Instrument | What it is |
|---|---|
| Ruling | A written statement issued to a taxpayer or an authorized representative by the National Office, interpreting and applying the tax laws to a specific set of facts |
| Determination letter | A written statement applying previously announced principles and precedents to particular facts, issued only where the rules are clearly established |
| Opinion letter | A written statement by the National Office as to the acceptability of the form of a master or prototype plan, and any related trust or custodial account |
| Information letter | A statement that does no more than call attention to a well-established interpretation or principle of tax law, without applying it to a specific set of facts |
| Revenue Ruling | An official interpretation by the Service published in the Internal Revenue Bulletin, for the information and guidance of taxpayers and others |
Source: 26 CFR 601.201(a)(2) through (a)(6).
The distinction that matters in practice is the last one. A Revenue Ruling is published and everybody may use it. A determination letter is correspondence between the Service and one taxpayer.
What It Actually Protects
Only the recipient. A taxpayer may not rely on an advance ruling issued to another taxpayer (26 CFR 601.201(l)(1)), and a determination letter is given the same effect on examination as a ruling issued to that taxpayer (26 CFR 601.201(m)).
The protection is also not permanent. A ruling may be revoked or modified at any time in the wise administration of the taxing statutes, and where that happens the revocation or modification applies to all open years, unless the Commissioner exercises the discretionary authority under section 7805(b) to limit its retroactive effect (26 CFR 601.201(l)(1)).
There is a condition sitting under all of it. On examination it is the responsibility of the district director to ascertain whether a previously issued ruling has been properly applied, which means checking whether the representations the ruling was based on were an accurate statement of the material facts and whether the transaction was actually carried out substantially as proposed (26 CFR 601.201(l)(2)). A letter obtained on facts that then changed is protecting nothing.
The Paragraph Is Old, and It Shows
The regulation is written around a district director, a National Office and an Assistant Commissioner (Technical), it defines the opinion letter by reference to the Internal Revenue Code of 1954, and it still points readers at Revenue Procedure 68-13 and Revenue Procedure 72-5 (26 CFR 601.201).
Treat it as the source of the definitions and never as a routing instruction. Where to file, on which form, at what user fee and within what processing time all come from the current annual revenue procedures and from the IRS website.
Retirement Plans Have Their Own Paragraph
The general definition says so itself, sending determination letters in the pension trust area to a separate paragraph of the same regulation (26 CFR 601.201(a)(3)). That paragraph provides the procedures relating to the issuance of determination letters with respect to the qualification of retirement plans (26 CFR 601.201(o)(1)).
That is also where the opinion letter earns its place. A plan built on a master or prototype document relies on an opinion letter about the form of that document, while an individually designed plan is the one that needs a determination letter of its own (26 CFR 601.201(a)(4)).
When the Letter Cannot Be Found
Losing the original is common and it does not undo anything. An exempt organization that needs a letter confirming its tax-exempt status, or reflecting a change of name or address, may generally contact Customer Account Services by phone, letter or fax to request an affirmation letter, and a written request has to carry the organization’s full name, its employer identification number and an authorized signature from an officer or trustee, with the signer stating the capacity in which they sign (IRS, Exempt organizations, Affirmation letters).
An affirmation letter is not a reissued determination letter. It confirms the current status on the Service’s records, which is usually what the bank, the grantmaker or the state registrar actually wanted.
Common Questions
A written IRS statement applying already settled rules to one taxpayer’s facts. For a nonprofit it is the letter recognizing exemption, and for a retirement plan it is the letter approving the plan’s form.
If the organization still holds the original, that is the document. If not, an exempt organization requests an affirmation letter from Customer Account Services rather than a duplicate (IRS, Exempt organizations, Affirmation letters).
No. A ruling comes from the National Office and interprets the law for a specific set of facts, while a determination letter applies principles the National Office has already announced (26 CFR 601.201(a)(2) and (a)(3)). A novel question is ruling territory, and a determination letter will not be issued on it.
Yes, and the effect reaches open years rather than starting from the revocation date, unless relief under section 7805(b) is granted (26 CFR 601.201(l)(1)).
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can grade a real block of its own exempt organization work through a trial task before anything client facing depends on it.
