IRS revokes charity status for commercial purpose and private benefit

Plain-English summary

The IRS issued a final revocation of an organization's section 501(c)(3) exemption, effective January 1, 2002. The final letter says the organization operated for substantial commercial and private purposes, served private rather than public interests, and provided substantial private benefit. It does not describe the underlying activities in the published pages, though it refers to an examination report. The IRS said contributions were no longer deductible and required corporate income tax returns. The letter gave a deadline for seeking judicial review.

Ruling snapshot

• Question: Did the organization continue to qualify for section 501(c)(3) exemption?
• Outcome: Revocation, effective January 1, 2002.
• Key authorities: IRC §§ 501(c)(3), 170, 7428.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Appeals Office
1352 Marrows Road, Suite 104 Person to Contact:

Newark, DE 19711-5445

Release Number: 200832036 Employee ID Number:

Release Date: 8/8/08 Tel:

Date: May 13, 2008 Fax:

UIL Code: 501.03-05 Refer Reply to:
501.03-08
501.03-30
501.35-00 In Re:

A EO Revocation
Tax Period(s) Ended:
B

Form Number
1120
Employer Identification Number

CERTIFIED MAIL

Last Day to File a Petition with the
United States Tax Court: AUG 11 2008

Dear

This is a final adverse determination as to your exempt status under section 501(c)(3) of the Internal Revenue Code. It is determined that you are no longer recognized as exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code, effective January 1, 2002. Our adverse determination was made for the following reason(s):

1. You are not operated exclusively for charitable, educational, scientific, or any
   other exempt purpose, as is required by IRC section 501(c)(3).

2. You are operated for a substantial commercial purpose, which is not an exempt

purpose.

3. You are operated for a substantial private purpose, you serve private rather than
   public interests, and your activities result in substantial private benefit, which is not an exempt purpose.

Contributions to your organization are not deductible under code section 170. You are required to file Federal income tax returns on the form indicated 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 from the United States Tax Court, write to United States Tax Court, 400 Second Street, NW,

Washington, D.C. 20217.

AUG 11 2008

The last day for filing a petition for declaratory judgment is We will notify the appropriate State officials of this action, 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.

You also 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 is not able to reverse legally correct tax determinations, nor extend the time fixed by law that you have to file a petition in the U.S. 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 want Taxpayer Advocate assistance, please contact the Taxpayer Advocate for the IRS office that issued this notice of deficiency. See the enclosed Notice 1214, Helpful Contacts for Your “Notice of Deficiency”, for Taxpayer Advocate

telephone numbers and addresses.

Thank you for your cooperation.

Sincerely,

[illegible signature]

CHARLES FISHER
TEAM MANAGER

Enclosures:
Notice 1214 Helpful Contacts for your ‘Deficiency Notice’

DEPARTMENT OF THE TREASURY
Internal Revenue Service
1100 Commerce Street
Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

October 7, 2005

Taxpayer Identification Number:
Form:

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:

Taxpayer Advocate Service
575 North Pennsylvania Street
Room 581

Indianapolis, IN 46204

(317) 685-7795

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