Revocation 200631028: Inactive housing charity loses tax exemption

Plain-English summary

An organization had been recognized as a charity for work intended to improve life for public housing tenants. Its examination report says it stopped all activities, primarily after its president died, and had no assets when the case was referred for review. The IRS issued a final letter revoking its exemption under IRC § 501(c)(3) because it no longer met the requirement to operate for exempt purposes. The letter states that contributions are no longer deductible and that the organization must file corporate income tax returns if it resumes operations. The released PDF includes the final letter, an earlier proposed revocation letter, and the examination report.

Ruling snapshot

• Question: Does an inactive organization still meet the operating requirements for charitable exemption?
• Outcome: Exemption revoked.
• Key authorities: IRC §§ 501(c)(3), 170, 7428; Treas. Reg. § 1.501(c)(3)-1.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, DC 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEC 2 0 2005
Number: 200631028

Date: 8/4/06
UIL: 501.03-01 —

Date: Form Number: 990
Tax Period Ended:
, Person to Contact/ID#:
c/o

Contact Telephone Number:

Contact Address:
EIN: _ -
CERTIFIED MAIL
Deadline to Petition Tax Court:
March 20,
Dear

This is a final adverse determination as to your exempt status under section 501(c)(3) of the Internal Revenue Code. In a letter dated , you were held to be exempt from Federal income tax as an organization described in section 501(c)(3) of the Internal Revenue Code (IRC).

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 inures 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 does not participate in, or intervene in, any political campaign on behalf of (or in opposition to) a candidate for public office.

As a result of our examination of your activities and financial records for the year ending October 31, it was determined that your organization has been inactive for several prior years and that there have been no operations or financial activities conducted. As such,

, __- fails to meet the operational requirements for continued exemption under IRC 501(c)(3).

31 Hopkins Plaza, Room 1520, Baltimore, Maryland 21201

TP: . Page 2

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 effective November 1,

Contributions to your organization are no longer deductible under section 170 of the Internal Revenue Code,

If you start up your operations again, you will be required to file Federal income tax returns on Form 1120, US Corporation Federal Income Tax Return. These returns should be filed with the appropriate Internal Revenue Service Center for all taxable years on or after November 1, .

The processing of corporate income tax returns and assessment of any taxes due will not be delayed because a petition for declaratory judgment has been filed under Internal Revenue Code section 7428.

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 Claims Court, or the district court of the United States for the District of Columbia before the (ninety-first) 91st day after the date that this determination was mailed to you. Contact the clerk of the appropriate court for rules for initiating suits for declaratory judgment. You can get a copy of the rules for filing a petition in the United States Tax Court and a petition form by writing to the address below:

United States Tax Court
400 Second Street
Washington, DC 20217

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 help you obtain answers. You can call 877-777-4778 and ask for Taxpayer Advocate Assistance or you can contact the Taxpayer Advocate from the site where this determination was made.

Taxpayer Advocate Office
31 Hopkins Plaza, Room 1130
Baltimore, MD 21203

Taxpayer Advocate assistance, cannot be used as a substitute for established Internal Revenue Service procedures, formal appeals processes, etc. The Taxpayer Advocate is not able.

31 Hopkins Plaza, Room 1520, Baltimore, Maryland 21201

TP: . Page 3
EIN:_-

to reverse legally 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 of Massachusetts officials of this action, as required by section 6104(c) of the Internal Revenue Code.

This letter should be kept within your permanent records. If you have any questions, please call or write the contact person whose name and telephone

number are shown above. If you write, please include your telephone number, the best time to call you if we need more information, and a copy of this letter to help us identify your account.

Sincerely,

Marsha Ramirez
Director, EO Examinations

Enclosure:
Publication 892

31 Hopkins Plaza, Room 1520, Baltimore, Maryland 21201

DEPARTMENT OF THE TREASURY
Internal Revenue Service
TE/GE: EO Examinations
1100 Commerce St - Stop 4920
TAX EXEMPT AND Dallas, TX 75242

GOVERNMENT ENTITIES
DIVISION

Taxpayer Identification Number:
UIL: 501.03-01
Form:
990
Tax Year(s) Ended:

Person to Contact/ID Number:

Contact Numbers:
Telephone:
Fax:

Certified Mail - Return Receipt Requested

Dear ,

We have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under section 501(c)(3) of the Internal Revenue Code (Code) is necessary.

If you accept our findings, take no further action. We will issue a final revocation letter.

If you do not agree with our proposed revocation, you must submit to us a written request for Appeals Office consideration within 30 days from the date of this letter to protest our decision. Your protest should include a statement of the facts, the applicable law, and arguments in support of your position.

An Appeals officer will review your case. The Appeals office is independent of the Director, EO Examinations. The Appeals Office resolves most disputes informally and promptly. The enclosed Publication 3498, The Examination Process, and Publication 892, Exempt Organizations Appeal Procedures for Unagreed Issues, explain how to appeal an Internal Revenue Service (IRS) decision. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process.

You may also request that we refer this matter for technical advice as explained in Publication 892. If we issue a determination letter to you based on technical advice, no further administrative appeal is available to you within the IRS regarding the issue that was the subject of the technical advice.

Letter 3618 (04-2002)
Catalog Number 34809F

If we do not hear from you within 30 days from the date of this letter, we will process your case based on the recommendations shown in the report of examination. If you do not protest this proposed determination within 30 days from the date of this letter, the IRS will consider it to be a failure to exhaust your available administrative remedies. Section 7428(b)(2) of the Code provides, in part: "A declaratory judgment or decree under this section shall not be issued in any proceeding unless the Tax Court, the Claims Court, or the District Court of the United States for the District of Columbia determines that the organization involved has exhausted its administrative remedies within the Internal Revenue Service.” We will then issue a final revocation letter. We will also notify the appropriate state officials of the revocation in accordance with section 6104(c) of the Code.

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:

Local Taxpayer Advocate

If you have any questions, please call the contact person at the telephone number shown in the heading of this letter. If you write, please provide a telephone number and the most convenient time to call if we need to contact you.

Thank you for your cooperation.

Sincerely,

R.C. Johnson
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or Explanation of Items Exhibit Name of Taxpayer Year/Period Ended A Datel

Legend:
A=Name of Organization

B=Name of Public Housing Development
Datel= Year End of Fiscal Year

ISSUE

Should the tax exempt status of an organization conducting no activities be revoked?

FACTS

This organization is presently recognized as a section 501(c)(3) tax-exempt organization. According to its articles of organization, the primary purpose of the organization is to improve the standard of living available to the tenants of the B development by educating them as to their rights and responsibilities as tenants in public housing, and by obtaining and maintaining adequate housing facilities and services designed to meet the physical, social, educational, recreational, employment, health, legal and psychological needs of the tenants of the B development.

Primarily due to the death of their President, this organization has ceased all activities and is no longer in existence. The last Form 990 filed by the organization for the period ended . According to Revenue Officer,the organization had no assets when he made the referral to the exempt organization division in

to revoke the organization.

LAW

Section 501(c)(3) of the Code exempts from federal income tax organizations organized and operated exclusively for charitable, educational, and other exempt purposes, provided that no part of the organization’s net earnings inures to the benefit of any private shareholder or individual.

Section 1.501(c)(3)-1(a)(1) of the regulations provides that in order to be exempt as an organization described in section 501(c)(3) of the Code, the

Form 886-A (Rev.4-68) ’ Department of the Treasury - Internal Revenue Service Page: -1-

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or Explanation of Items -| Exhibit Name of Taxpayer Year/Period Ended Datel

organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section.

Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be regarded as “operated exclusively” for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3).

TAXPAYER’S POSITION
This organization has no position because it is no longer in existence.

GOVERNMENT’S POSITION

Based on the facts of the examination, the organization does not qualify for exemption since it is no longer conducting any activities. The organization presently is an active corporation according to The State. Therefore, a final letter should be sent to the Secretary of the State informing them of the revocation.

CONCLUSION

The organization does not qualify for exemption under section 501(c)(3) and its tax exempt status should be revoked.

Form 886-A (Rev.4-68) ; Department of the Treasury - Internal Revenue Service Page: -2-