OTHER 200531024: Charity loses exemption after failing to establish continued compliance

Plain-English summary

The IRS retroactively revoked an organization's section 501(c)(3) exemption. The letter says the organization had not established that it was meeting the conditions for continued exemption. It cites section 6033, which permits the IRS to request information about an exempt organization's status, and a revenue ruling about the consequences of failing to provide required information. The letter does not identify the particular information at issue. It says contributions are no longer deductible and directs the organization to file corporate income tax returns beginning with the redacted effective date.

Ruling snapshot

• Question: Had the organization established that it continued to meet the conditions for section 501(c)(3) exemption?
• Outcome: Exemption revoked retroactively to a redacted date.
• Key authorities: IRC §§ 501(c)(3), 6033; Treas. Reg. § 1.6033-2(i)(2); Rev. Rul. 59-95.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TE/GE: EO Examination
625 Fulton Street, Room 503
Brooklyn, NY 11201

TAX EXEMPT AND
Februrary 1, 2005
GOVERNMENT ENTITIES
DIVISION

Number: 200531024
Release Date: 8/05/2005
TE:GE:EO

Legend: UIL:501.03-00, 501.03-02
A= Organization
B=Effective Date
C=Employer Identification No.
D=Local Taxpayer Advocate

Taxpayer Identification Number: C
Person to Contact:
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Identification Number
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Contact Telephone Number:
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LAST DATE FOR FILING A PLEADING
WITH THE TAX COURT, THE CLAIMS
COURT, OR THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT
OF COLUMBIA:

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

This is a final determination regarding your exempt status under section 501(c)(3) of the Internal Revenue Code (IRC). Recognition of your exemption from Federal income tax as an organization described in Internal Revenue Code section 501(c)(3) is retroactively revoked to B because it is determined that you have not established that you are observing the conditions required for the continuation of an exempt status.

IRC 501(c)(3) exempts from taxation organizations which are organized and operated exclusively for charitable or educational purposes, no part of the net earnings of which inure to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation and which do not participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office.

Section 1.6033-2(i)(2) of the Income Tax Regulations provides, in part, that every organization which is exempt from tax, whether or not it is required to file an annual return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status.

Revenue Ruling 59-95, 1959-1 CB 627 held that failure or inability to file the required information return or otherwise to comply with the provision of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status.

In accordance with IRC 6033 and Revenue Ruling 59-95, we have determined that the organization has not established that it is observing the conditions required for continuation of exempt status.

We are revoking your exemption from Federal income tax as an organization described in section 501(c)(3) of the Internal Revenue Code effective B.

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 1120. These returns should be filed with the appropriate Service Center for all years beginning B.

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 have the right to contact the office of the Taxpayer Advocate. Taxpayer Advocate assistance is not a substitute for established IRS procedures, such as the formal appeals process. The Taxpayer Advocate cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to file a petition in a United States 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. You may call toll-free 1-877-777-4778 and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your local Taxpayer advocate at: D

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

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

Sincerely Yours,

R. C. Johnson
Director, EO Examinations
Enclosure:
Publication 892