OTHER 200651035: Charitable exemption revoked for failure to substantiate qualifying operations

Plain-English summary

The IRS retroactively revoked an organization's section 501(c)(3) exemption because it failed to produce records establishing continued eligibility. The final letter says the organization did not substantiate exclusively exempt operations, the absence of prohibited private interests, or the absence of private inurement. The effective revocation date is redacted. Contributions are not deductible under section 170, and the organization must file Form 1120 for all open years. The release includes the earlier proposed-revocation letter but does not include the examination report referenced as an enclosure. The final letter provides a 90-day deadline from mailing for seeking a declaratory judgment.

Ruling snapshot

• Question: Can the organization retain charitable exemption without records establishing compliance with the exemption requirements?
• Outcome: Revocation: section 501(c)(3) recognition is retroactively withdrawn to a redacted date.
• Key authorities: IRC §§ 501(c)(3), 170, 7428(b)(2), 6104(c).

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Number : 200651035
Release Date: 12/22/06
Date: December 7, 2005 Taxpayer Identification Number: UIL501.03-01 Form: 990

Tax Year(s) Ended:

Person to Contact / ID Number:

CERTIFIED MAIL Contact Numbers:
Telephone:
Fax:

Dear

This is a final determination regarding your exempt status under section 501(c)(3) of the Internal Revenue Code (Code). Because you have not established that you are observing the conditions required to continue exempt status, recognition of your exemption from Federal income tax as an organization described in Internal Revenue Code section 501(c)(3) is retroactively revoked to '

Our determination was made for the reason that you have failed to produce documents, records, or other information to establish that you are operated exclusively for one or more exempt purposes set forth in section 501(c)(3), or that you were not operated for the benefit of private interests, or that a part of your net earnings did not inure to the benefit of private individuals.

Contributions made to your organization are not deductible under section 170 of the Code. Furthermore, you are required to file Federal income tax returns on Form 1120 for all open years.

If you decide to contest this determination in court, a petition for declaratory judgment proceeding in the United States Tax Court, the United States Court of Claims, or the United States District Court for the District of Columbia must be filed within 90 days from the date this determination was mailed to you. The enclosed Publication 892 provides information about filing suit in these courts.

If you have any questions, please contact the contact person at the telephone number shown in the heading of this letter.

Thank you for your cooperation.

Sincerely,

R. C. Johnson

Director, EO Examinations

Enclosure:
Publication 892

DEPARTMENT OF THE TREASURY
Internal Revenue Service

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Taxpayer Identification Number:

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:

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 Examination

Enclosures:
Publication 892
Publication 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F