Determination 200540014: Charity exemption revoked after bingo became sole activity

Plain-English summary

After examining an organization's activities and tax filing, the IRS found that its only activity was promoting bingo. The IRS concluded that it was not operated exclusively for exempt purposes and revoked its section 501(c)(3) status retroactively to a redacted date. The letter says contributions are no longer deductible and requires corporate income tax returns for the affected year and later years. It also explains the organization's option to challenge the final determination in court.

Ruling snapshot

• Question: Did an organization whose sole activity was promoting bingo qualify for charitable exemption?
• Outcome: Revocation, effective on the redacted date.
• Key authorities: IRC §§ 170, 501(c)(3), 7428; Treas. Reg. § 1.501(c)(3)-1(d).

Full text (IRS public release)

INTERNAL REVENUE SERVICE

Number: 200540014
Release Date: 10/7/05
UIL: 501.03-00
501.03-05

LEGEND: Person to Contact: --------------------
Date 1= Effective Date
Identification Number: ------------
Date 2= End of Effective Date Year
Contact Telephone Number--------------------
------------------------------------------------------------------------------------------------------------
Org = Name of Organization
EIN : NUM
NUM= Employer ID Number
In Reply Refer to: TE/GE Review Staff

LAST DATE FOR FILING A PETITION
WITH THE TAX COURT: __

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

This is a Final Adverse Determination as to your exempt status under section 501(c)(3) of the Internal Revenue Code.

Our adverse determination was made for the following reasons:

ORG. has not been operated exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3). You are not a charitable organization within the meaning of Treasury Regulations 1.501(c)(3)-1(d). As a result of a recent examination of your organization’s activities and Form 990 for the period ended Date 2, it was determined that your sole activity consisted of the promotion of bingo.

Based upon the above, we are revoking your organization's exemption from Federal income tax under section 501(c)(3) of the Internal Revenue Code retroactively to Date 1.

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 the year ending Date 2 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 initiate a suit for declaratory judgment in the United States Tax Court, the United States Claim Court or the District Court of the United States for the District of Columbia before the 91st day after the date this determination was mailed to you. Contact the clerk of the appropriate court for the rules for initiating suits for declaratory judgment.

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 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.

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