Determination 200503028: IRS denies charitable tax exemption for inadequate showing

Plain-English summary

The IRS issued a final adverse ruling on an organization's request for exemption under IRC § 501(c)(3). The letter says the organization did not provide enough information to show that it was organized and operated exclusively for exempt purposes, primarily carried out exempt activities, and avoided private inurement. It also states that, even if the organization qualified under section 501(c)(3), it would be a private foundation. The IRS said donors could not deduct contributions to it and instructed the organization to file income tax returns. The letter explains the deadline and courts available to contest the determination under section 7428.

Ruling snapshot

• Question: Did the organization establish eligibility for exemption under IRC § 501(c)(3)?
• Outcome: Denied: the IRS found the submitted information insufficient.
• Key authorities: IRC §§ 170, 501(c)(3), 509(a), 7428; Treas. Reg. § 1.501(c)(3)-1(c)(1).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Number: 200503028
Employer Identification Number:
Release Date: 01/21/2005

Date: 10/29/04

Form:
1120
Tax Years:
All
Contact Person:

Identification Number:

Telephone Number:

UIL No.: 501.03-30

Dear ------------:

This letter constitutes a final adverse ruling with respect to your claim of exemption from federal income taxation under section 501(c)(3) of the Internal Revenue Code.

We make our ruling for the following reasons:

You have failed to establish that you are organized and operated exclusively for exempt purposes under section 501(c)(3) of the Code, and that no part of your net earnings will inure to the benefit of any private shareholder or individual. You have not supplied sufficient information to establish that you will engage primarily in the activities that accomplish exempt purposes within the meaning of Treas. Reg. section 1.501(c)(3)- 1(c)(1). Even if you were described in section 501(c)(3), we rule that you are a private foundation within the meaning of section 509(a) of the Code.

Donors may not deduct contributions to your organization under section 170 of the Code.

The Code and the regulations issued thereunder require that you file federal income tax returns.
Based upon the financial information that you furnished, you should file returns on the Form and for the tax years indicated above within 30 days from the date of this letter, unless you request and are granted an extension of time to file the returns. You should attach a copy of this letter to the returns you file. Questions concerning the filing of returns should be directed to the Ohio Tax Exempt and Government Entities (TE/GE) office at 877-829-5500 (a toll free number).

If you decide to contest this ruling under the declaratory judgment provisions of section 7428 of the Code, you must initiate a suit in the United States Tax Court, the United States Court of Federal Claims, or the District Court of the United States for the District of Columbia before the 91st day after the date that we mailed this ruling to you. Contact the clerk of the appropriate court for rules for initiating suits for declaratory judgment. The filing of a declaratory judgment

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suit under section 7428 does not stay the processing of income tax returns and assessment of any taxes.

In accordance with section 6104(c) of the Code, we will notify the appropriate State officials of this action.

This ruling will be made available for public inspection under section 6110 of the Code after certain deletions of identifying information are made. For details, see enclosed Notice 437, Notice of Intention to Disclose. A copy of this ruling with deletions that we intend to make available for public inspection is attached to Notice 437. If you disagree with our proposed deletions you should follow the instructions in Notice 437.

If you have any questions concerning the reasons for this ruling, please contact the person whose name and telephone number appear in the heading of this letter.

Sincerely,

Martha Sullivan
Director, Exempt Organizations

Enclosure
Notice 437