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The author's firm recently obtained a private letter ruling for a client in which the 1RS determined that a certificate of formation filed by a tax-ex- empt organization more than 30 years after its cre- ation did not result in the creation of a new entity and did not necessitate the filing of a new Form 1023, 'Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code." In the ruling, the Service determined that a state-created entity that was recognized as exempt under Section 501(c)(3) was not required to file a new Form 1023 upon filing articles of conversion.1
The ruling has drawn quite a bit of attention. Some commentators welcome it as a departure from the Service's long-standing position that a new Form 1023 is required when a tax-exempt organization reincorporates. Others argue that the Service simply misapplied the law. In actu- ality, the Service's determination in Ltr. Rul. 201426028 is merely an interesting evolution of its application of Rev. Rul. 67-390.2 It is, how- ever, neither a drastic change in the Service's position nor a misapplication of the princi- ples-at least the Service's historic interpreta- tion-of Rev. Rul. 67-390.
The purpose of this article is first to explain the law related to when a conversion or a rein- corporation will necessitate the filing of a new Form 1023, why this is a significant issue, why the Service's position in Ltr. Rul. 201426028 is consistent with, and not contradictory to, its historic interpretation of Rev. Rul. 67-390, and to then describe situations where this ruling can be used by other organizations to reincor- pórate without undergoing the burden and ex- pense of filing a new Form 1023.
The problem
In 2012, the exempt organizations section of the ABA Section of Taxation issued a set of recom- mendations for the 2012-13 Treasury-IRS Guid- ance Priority List. Its fourth recommendation was "[g]uidance regarding how to obtain a revised de- termination letter without the need for filing a new exemption application on Form 1023 or 1024, where there is a mere change in the form or state of incorporation."3 The problem that the ABA Section of Taxation identified was related to the fact that, since the late 1960s, any organization recognized as exempt...