Determination 200606040: Charity exemption revoked over bingo and member expenses

Plain-English summary

The IRS revoked an organization's section 501(c)(3) exemption after an examination found that its primary activity was operating bingo games and paying members' personal expenses. The organization had not shown that it operated for charitable or educational purposes rather than for the private benefit of its members. The revocation was retroactive to a redacted date. Contributions were no longer deductible under section 170, and the organization was directed to file corporate income tax returns for years beginning on that date.

Ruling snapshot

• Question: Did the organization's bingo and member expense activities satisfy section 501(c)(3)?
• Outcome: Exemption revoked retroactively to a redacted date.
• Key authorities: IRC §§ 501(c)(3), 170; Treas. Reg. § 1.501(c)(3)-1(d)(1)(ii).

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: 200606040
Release Date: 2/10/06
SE:T:EO
UIL:501.03-01

Org = ------------------------
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Num = ----------------
Date = -----------------
Petition = ------------------------
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Taxpayer Identification Number:
Num
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 : Petition

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 Date because it is determined that you are not operated exclusively for an exempt purpose.

2

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.

We have determined that you are not operating exclusively for charitable or educational purposes. Our examination reveals that your primary activity is operating bingo games and paying the personal expenses of your members. You have not demonstrated that you are not operated for the private benefit of your members as required by Treas. Reg. 1.501(c)(3)- 1(d)(1)(ii).

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

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 Date.

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

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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 too-free 1-877-777-4778 and ask for Taxpayer Advocate Assistance. If you prefer, you may contact your llocal Taxpayer advocate at: Internal Revenue Service, Local Office.

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