IRS 200812025: Organization denied charitable exemption under operational test

Plain-English summary

The IRS issued a final adverse determination on an organization's tax-exempt status under section 501(c)(3). It said the organization failed the operational test because its activities did not accomplish an exempt purpose. The released letter gives no further description of those activities. The IRS stated that contributions to the organization were not deductible under section 170 and that it had to file a federal corporate income tax return. The letter also described the deadline for seeking a declaratory judgment in court.

Ruling snapshot

• Question: Did the organization meet the operational test for exemption under IRC § 501(c)(3)?
• Outcome: Denied.
• Key authorities: IRC §§ 501(c)(3), 170, 7428; Treas. Reg. § 1.501(c)(3)-1(c)(1).

Full text (IRS public release)

200812025

Internal Revenue Service
Department of the Treasury
Appeals Division
CERTIFIED
1352 Marrows Rd.
Newark, DE 19711

Release Date: 3/21/08
UIL Code: 501-03-00
Date: DEC 27 2007

A
Taxpayer Identification Number:
B
C
Person to Contact:
Employee ID Number:
Tel:
Fax:
Refer Reply to:
AP:
In Re:
Exempt status
Tax Years: and subsequent years

Last Day to File a Petition with the
United States Tax Court:

Dear :

This is a final adverse determination as to your exempt status under section 501(a) as an organization described under section 501(c)(3) of the Internal Revenue Code. Our adverse determination was made for the following reason(s):

You did not meet the operational test as required by section 1.501(c)(3)-1 of the Treasury Regulations. Your activities did not accomplish one or more exempt purposes specified in section 501(c)(3) as required by Treas. Reg. § 1.501(c)(3)-1(c)(1).

Contributions to your organization are not deductible under Code § 170. You are required to file federal Form 1120 for the year(s) shown above.

If you decide to contest this determination under the declaratory judgment provisions of Code section 7428, a petition to the United States Tax Court, the United States Court of Claims, or the district court of the United States for the District of Columbia must be filed before the 91st (ninety-first) day after the date this determination was mailed to you. Contact the clerk of the appropriate court for rules for filing petitions for declaratory judgment. To secure a petition form from the United States Tax Court, write to the United States Tax Court, 400 Second Street, N.W., Washington, D.C. 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 can help you get answers. You can call 1-877-777-4778, and ask for Taxpayer Advocate assistance.

Taxpayer Advocate assistance cannot be used as a substitute for established IRS procedures, formal appeals procedures, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determinations, or 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 final adverse-determination of your exempt status, as required by Code section 6104(c).

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

Sincerely,

for Charles F. Fisher
Appeals Team Manager

cc: