Determination 200505023: Charitable exemption claim finally denied

Plain-English summary

The IRS issued a final adverse ruling on an organization's claim for tax exemption under IRC § 501(c)(3). The letter says the organization failed to establish that it operated exclusively for charitable or educational purposes or lessened government burdens. It also says the organization operated a business with a substantial commercial purpose that served private interests. Contributions to the organization were therefore not deductible under § 170, and the organization was required to file federal income tax returns. The letter offered a path to challenge the ruling in court under § 7428 within the stated deadline.

Ruling snapshot

• Question: Did the organization qualify for § 501(c)(3) exemption?
• Outcome: Denied in a final adverse ruling.
• Key authorities: IRC §§ 501(c)(3), 170, 7428.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E RV I C E
WAS H I N G TO N , D . C . 2 0 2 2 4

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Number: 200505023
Release Date: 02/04/05

Date: 11/09/04
Employer Identification Number:

Form:

UIL Index
Tax Years:
501.03-00
Contact Person:

Identification Number:

Telephone Number:

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 reason(s):

You have failed to establish that you are organized and operated exclusively for charitable or educational purposes. You have failed to establish that your activities lessen the burdens of government. You operate a business that furthers a substantial nonexempt commercial purpose and serves private, rather than public interests.

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 suit under section 7428 does not stay the processing of income tax returns and assessment of any taxes. 2

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