Determination 200540015: Charity exemption revoked for nonexempt operations

Plain-English summary

The IRS issued a final letter revoking an organization's section 501(c)(3) exemption, effective January 1, 2000. It said the organization operated substantially for nonexempt purposes and did not qualify as a charitable organization. The letter gives no details about the organization's activities. It says contributions are no longer deductible and instructs the organization to file corporate income tax returns for 2000 and later years. The organization could seek a declaratory judgment in court within the stated deadline.

Ruling snapshot

• Question: Did the organization continue to qualify for charitable tax exemption?
• Outcome: Revocation, effective January 1, 2000.
• Key authorities: IRC §§ 170, 501(c)(3), 7428; Treas. Reg. § 1.501(c)(3)-1(d).

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
GOVERNMENT ENTITIES
DIVISION

Number: 200540015
Release Date: 10/7/05
UIL:501.03-00
501.03-05

Date: 3/30/05

Taxpayer Identification Number:
Redaction Legend
Person to Contact:
X = Exempt Organization
Identification Number:

Contact Telephone Number:

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

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

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

Our adverse determination was made for the following reasons:

X has not been operating exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3). X is not a charitable organization within the meaning of Treasury Regulations section 1.501(c)(3)-1(d). X operates substantially for non-exempt purposes. X is not an organization which operates exclusively for one or more of the exempt purposes which would qualify it as an exempt organization. Based upon these reasons, we are revoking X IRC section 501(c)(3) tax exempt status effective January 1, 2000.

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 December 31, 2000, 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 (501) 324- 6269, or writing to: Internal Revenue Service Taxpayer Advocate Services

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
Enclosure:
Publication 892