Determination 200720029: Veterans organization's exemption revoked after missing Form 990

Plain-English summary

The IRS revoked an organization's exemption under IRC § 501(c)(19), which covers qualifying veterans' organizations. The released packet contains both a proposed revocation and a final adverse determination. The examination report says the organization did not provide a requested Form 990 or respond to IRS correspondence. The final letter says repeated requests went unanswered and treats the organization as unable to establish continued exempt status under IRC § 6033. It directs the organization to file corporate income tax returns for years after the redacted effective date.

Ruling snapshot

• Question: Could the organization retain its veterans' organization exemption without providing its requested Form 990?
• Outcome: Revocation, stated in the final adverse determination.
• Key authorities: IRC §§ 501(c)(19), 6001, 6033; Treas. Reg. §§ 1.6001-1, 1.6033-1, 1.6033-2.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
M/S 1112, P.O. BOX 12307

OGDEN, UT 84412

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Taxpayer Identification number:
Release Number: 200720029

Release Date: 5/18/07 Form(s): 990
Date: 3/19/07 Tax Year(s) Ended:

UIL Code: 501.19-00
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)(19) 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 (Rev. 11-2003)
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,

Marsha Ramirez
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Form 4621-A, Report of Examination
Form 886-A, Explanation of Items

Letter 3618 (Rev. 11-2003)
Catalog Number 34809F

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number Year/Period ended

ORG NUM

Issue Name: Tax Exempt Status under IRC 501(c)(19)

Per Return:
Per Exam:

Issue: Tax Exempt Status under 501(c)(19) of the Internal Revenue Code

Issue: Whether exempt organization qualifies for exemption under Section 501(c)(19) of the Internal Revenue Code.

Facts: Exhibit A provides copies of the Internal Revenue Service correspondence requesting that Exempt Organization file the Form 990 for the tax period. The Organization failed to respond to the Internal Revenue Service correspondence or file the Forms 990 for the tax period.

Law: Section 6001 of the Code provides that every person liable for any tax imposed by the Code, or for the collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate may from time to time prescribe.

Section 6033(a)(1) of the Code provides, except as provided in section 6033(a)(2), every organization exempt from tax under section 501(a) shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.

Section 1.6001-1(a) of the regulations in conjunction with section 1.6001-1(c) provides that every organization exempt from tax under section 501(a) of the Code and subject to the tax imposed by section 511 on its unrelated business income must keep such permanent books or accounts or records, including inventories, as are sufficient to establish the amount of gross income, deduction, credits, or other matters required to be shown by such person in any return of such tax. Such organization shall also keep such books and records as are required to substantiate the information required by section 6033.

Section 1.6001-1(e) of the regulations states that the books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law.

Form 886-A (1-1994) Catalog Number 20810W —— Page publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended ORG NUM

Section 1.6033-1(h)(2) of the regulations provides that every organization which has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the district director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and section 6033.

Rev. Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status.

In accordance with the above cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax- exempt status and to determine its liability for any unrelated business income tax.

Conclusion: It is the IRS's position that the organization failed to meet the reporting requirements under sections 6001 and 6033 to be recognized as exempt from federal income tax under 501(c)(19) of the Internal Revenue Code. Accordingly, the organization's exempt status is revoked.

Form 1120 returns should be filed for the tax periods.

Form 886-A (1-1994) Catalog Number 20810W Page publish.no.irs.gov Department of the Treasury-Internal Revenue Service

INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY

10 MetroTech Center

625 Fulton Street
Date: Brooklyn, NY 11201
Legend: UIL: 501.19-00

ORG = Name of Organization
NUM = EIN Number
Date1 = Effective Date

Person to Contact:

Identification Number:

Contact Telephone Number:

In Reply Refer to: TE/GE Review Staff
EIN: NUM

Dear

This is a Final Adverse Determination as to your exempt status under section 501(c)(19) of the Internal Revenue Code.

Our adverse determination was made for the following reasons:

The ORG fails to meet the requirement for exemption under 501(c)(19). For taxable years after September 3, 1982, IRC 501(c)(19) grants exemption to a post or organizations of past or present members of the armed forces of the United States, or an auxiliary unit or society of, or a trust or foundation for, any such post or organization — organized in the United States or any of its possessions, at least 75 percent of. the members of which are past or present members of the armed forces of the United States and substantially all of the other members of which are individuals who are cadets or are spouses, widows, or widowers of past or present members of the armed forces of the United States or of cadets and no part of which inures to the benefit of any private shareholder or individual.

Exemption from income tax is a matter of legislative grace and taxpayers have the burden of establishing their entitlement to exemptions. Section 6033 requires organizations exempt from tax to keep such records and render such statements as are required by such rules and regulations as the Secretary may prescribe. Treasury Regulations section 1.6033-2 (h)(2) requires organizations exempt from tax to submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into the organization’s exempt status.

Despite numerous requests to you to provide Form 990 for the year ended Date1, no requested information has been provided to us.

Based on the above, we are revoking your organization's exemption from Federal Income Tax under section 501(c)(19) of the Internal Revenue Code effective Date1

You are required to file Form 1120, U.S. Corporation Income Tax Return. These returns should be filed with the appropriate Service Center for all years beginning after day prior to Date1.

-2-

Form 1120 must be filed by the 15th day of the third month after the end of your annual accounting period. A penalty of $20 a day is charged when a return is filed late, unless there is reasonable cause for the delay. However, the maximum penalty charged cannot exceed $10,000 or 5 percent of your gross receipts for the year, whichever is less. This penalty may also be charged if a return is not complete, so please be sure your return is complete before you file it.

You 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 you 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 writing to: Internal Revenue Service, Local Taxpayer Advocate’s Office.

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.

If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter.

Sincerely yours,

Marsha A. Ramirez
Director, EO Examinations