OTHER 200531021: Organization loses charitable exemption for nonexempt activities

Plain-English summary

The IRS revoked an organization's section 501(c)(3) exemption effective on a redacted date. The letter says the organization operated substantially for nonexempt purposes during the period examined and therefore was not operated exclusively for charitable or other qualifying purposes. It refers to an attached examination report for the detailed facts, but that report is absent from this three-page public release. The IRS says contributions are no longer deductible and directs the organization to file Form 1041 for the first taxable year and later years.

Ruling snapshot

• Question: Was the organization operated exclusively for purposes qualifying under section 501(c)(3)?
• Outcome: Exemption revoked effective on a redacted date.
• Key authorities: IRC §§ 501(c)(3), 170, 7428; Treas. Reg. § 1.501(c)(3)-1(d)(2).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TAX EXEMPT AND
TE/GE: EO Examination
GOVERNMENT ENTITIES
625 Fulton Street, Room 503
DIVISION
Brooklyn, NY 11201

Number:200531021
Release Date: 8/05/2005
TE:GE:EO

UIL: 501.03-00
Date: February 10, 2005

Taxpayer Identification Number:
N
Person to Contact:
Redaction Legend:
O= Organization
Identification Number:
N= Employer Identification Number
Contact Telephone Number:
Date1= Effective Date
Date2= First Taxable Year

LAST DATE FOR FILING A PLEADING
WITH THE TAX COURT, THE CLAIMS
COURT, OR THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT
COLUMBIA:__May 11, 2005

Dear ---:

This is a Final Adverse Determination Letter as to the O’s exempt status under section 501(c)(3) of the Internal Revenue Code (the “Code”).

Our adverse determination was made for the following reasons:

During the period under examination, O operated substantially for non-exempt purposes. Accordingly, O was not operated exclusively for exempt purposes within the meaning of section 501(c)(3) of the Code. O is not a charitable organization within the meaning of Treasury Regulations section 1.501(c)(3)-1(d)(2). O is not an organization which operates exclusively for one or more of the exempt purposes which would qualify it as an exempt organization.

Please refer to the attached Form 886-A which sets forth the detailed facts, law, and analysis upon which this final adverse determination is based.

Based upon these reasons, we are revoking O’s section 501(c)(3) tax- exempt status effective Date1.
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Contributions to your organization are no longer deductible under section 170 of the Internal Revenue Code.

You are required to file Federal income tax returns on Form 1041. These returns should be filed with the appropriate Service Center for the year ending Date2, and for all years thereafter.

Processing of income tax returns and assessment of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Internal Revenue Code.

If you decide to contest this determination in court, you must file a pleading seeking a declaratory judgment in the United States Tax Court, the United States Court of Federal Claims, or the United States District Court for the District of Columbia before the 91st day after the date this final determination was mailed to you. Please contact the clerk of the appropriate court for rules regarding filing pleadings for declaratory judgments and refer to the enclosed Publication 892. You may write to these courts at the following addresses:

United States Tax Court
United States Court of Federal Claims
400 Second Street, NW
717 Madison Place, NW
Washington, D.C. 20217
Washington, D.C. 20005

United States District Court for the District of Columbia 333 Constitution Avenue, NW
Washington, D.C. 20001

You also have the right to contact the office of the Taxpayer Advocate. However, you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers.

You can call 1-877-777-4778 and ask for Taxpayer Advocate assistance. Or you can contact the Taxpayer Advocate from the site where the tax deficiency was determined by calling 1 (718) 488- 2080, or writing to: Internal Revenue Service Taxpayer Advocate –

Taxpayer Advocate assistance cannot be used as a substitute for established IRS procedures, formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determinations, nor extend the time fixed by law that you have to file a petition in the United States Tax Court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling.

We will notify the appropriate State Officials of this action, as required by section 6104(c) of the Internal Revenue Code.

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If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.

Thank you for your cooperation.

Sincerely yours,

Mark W. Everson
Commissioner

By

R. C. Johnson
Director, EO Examinations
Enclosures:
Form 886-A
Exhibit A to Form 886-A
Publication 892