Analysis comparing Formation Date (per Form 990, page 1, for tax years on or after 2008) and Ruling Date (per IRS Business Master File Extract of Exempt Organizations, or BMF) for determining organization ‘age.’
Analysis of Formation Date from the SOI 2009 Form 990 sample of Public Charities, vs. Ruling Date from the BMF 02/2012 extract of Public Charities, found that 40% of the organizations in SOI reported a Formation Date within 1-2 years of the BMF Ruling Date, and another ~14% were within 2-5 years of each other. That leaves almost 46% of organizations having date differences >5 years (or were missing either Formation Date or Ruling Date values). The majority of organizations with differences of >5 years had a Formation Date older than Ruling Date (almost 10% of all organizations had Formation Dates 50-200+ years prior to Ruling Dates).
See attached the table for the full break-out, plus examples of the outliers.
Ruling Date is literally the date on the current IRS ruling or determination letter recognizing orgs exempt status. Differences between Formation Date and Ruling Date are quite plausible when you consider:
· organizations must be legally formed prior to recognition of 501(c) status, so you would normally expect Formation Date < Ruling Date
· substantial changes in the nature or structure of an NPO may require a review and possible redetermination of status, resulting in an ‘old’ organization getting a ‘new’ ruling
· mergers may result in the formation of a ‘new’ organization that retains the EIN/determination of a surviving ‘old’ entity
· changes in legislation, Internal Revenue Code, or enforcement may affect an organization’s ‘ruling’ and the generation of a new ruling letter
· ability to meet the public support test may affect an organization’s status (e.g. changes between Public Charity and Private Foundation status)
· Rule Date values may have been impacted in any number of ways as the IRS computerized and modified their record systems over the past 40-50+ years
· other reasons?
Formation date is provided by 990 filers beginning tax year 2008, which is difficult to independently verify. Rule Date has been found on BMF extracts since 1995, so it is possible to assess the stability of Rule Date values and and determine possible causes for changes in Rule Date. Analysis of BMF 2000 vs. 2010 identified Rule Date changes for a relatively small number of EIN’s. The following table compares Rule Date Change=Yes/No to changes in other BMF fields. :
|
|
Rule Date Changed 5/2000 to 5/2010
|
NO Rule Date Change 5/2000 to 5/2010
|
|
|
Count
|
% Total
|
Count
|
% Total
|
|
Total EINs with Rule Date values in BMF 5/2000 and BMF 5/2010
|
28,022
|
100.0%
|
915,748
|
100.0%
|
|
Name Change
|
13,410
|
47.9%
|
137,454
|
15.0%
|
|
Address Change
|
13,957
|
49.8%
|
335,991
|
36.7%
|
|
Name and/or Address Change
|
20,413
|
72.8%
|
413,734
|
45.2%
|
|
IRS subsection code (501(c)(3),(c)(4), etc.) Change
|
6,576
|
23.5%
|
7,607
|
0.8%
|
|
Reason for 501(c)(3) public charity status Change
|
9,437
|
33.7%
|
33,106
|
3.6%
|
|
Subsection and/or 501(c)(3) Reason Change
|
10,765
|
38.4%
|
38,516
|
4.2%
|
|
* IRS subsection classification code Change
|
6,352
|
22.7%
|
14,802
|
1.6%
|
|
* Group Exemption Number Change
|
11,350
|
40.5%
|
2,531
|
0.3%
|
|
* Affiliation code Change
|
5,315
|
19.0%
|
1,649
|
0.2%
|
|
* IRS deductibility code Change
|
5,392
|
19.2%
|
1,578
|
0.2%
|
|
* Corporation, trust, assoc, etc. Change
|
8,437
|
30.1%
|
10,015
|
1.1%
|
|
* Filing Requirement Code Change
|
6,281
|
22.4%
|
144,137
|
15.7%
|
|
* IRS Activity Codes Change
|
8,004
|
28.6%
|
2,914
|
0.3%
|
|
* Any of the above Codes Change
|
21,643
|
77.2%
|
163,345
|
17.8%
|
|
Advance Ruling Expiration Date Change
|
2,918
|
10.4%
|
63,189
|
6.9%
|
|
Accounting period (MM) Change
|
5,955
|
21.3%
|
66,111
|
7.2%
|
|
NO Name, Address or other Changes
|
1,376
|
4.9%
|
379,077
|
41.4%
|
With the exception of ‘Filing Requirement Code,’ it appears that changes in most IRS classification code fields accompany changes in Ruling Date (generation of an IRS ruling or determination letter), while changes in name, address, and accounting periods appear to have no direct relationship to Ruling Date changes. Most Ruling Date changes are associated with NPO status and group exemption changes, followed by changes in legal structure (corporation, trust, etc.) and changes in activities (note - IRS no longer assigns/maintains 501(c) 'activity codes' found in the BMF).
General conclusion: strong argument for using Ruling Date to calculate age of exempt status, but given significant differences found between Formation Date and Ruling Date for some older established organizations, Formation Date may be a better measure of an organization's true age.