Determination 200834023: Inactive ministry lost section 501(c)(3) status

Plain-English summary

An organization that had collected donated goods for needy people stopped operating and said it had distributed its remaining assets to other section 501(c)(3) ministries. The examination report stated that its president had admitted in court to filing false Forms 990 and participating in transactions involving inurement. The organization did not provide requested records documenting its activities and finances, and its corporate status had not been formally dissolved under state law. The IRS therefore treated the case as a revocation rather than a termination and revoked exemption retroactively to a redacted date. Contributions were no longer deductible, and the organization was required to file corporate income tax returns.

Ruling snapshot

• Question: Should the inactive organization retain section 501(c)(3) status?
• Outcome: Revocation, retroactive to the redacted effective date
• Key authorities: IRC §§ 170, 501(c)(3), 6104(c), and 7428; Treas. Reg. § 1.501(c)(3)-1(d)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TE/GE — EO Mandatory Review
1100 Commerce Street, MC 4920-DAL
Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
Release Number: 200834023
Release Date: 8/22/08
Legend Org= Organization Name XX = Date Address = address
Date February 11, 2008
UIL Code: 501.03-05 Employer Identification Number:
ORG Person to Contact:
ADDRESS Identification Number:

Contact Telephone Number:
In Reply Refer To:
TE/GE Review Staff
LAST DAY FOR FILING A
PETITION WITH TAX COURT:

CERTIFIED MAIL May 11, 20XX

Dear

This is a Final Adverse Determination revoking your exempt status under section 501(c)(3) of the Internal Revenue Code.

Our adverse determination was made for the following reasons:

ORG has failed to provide evidence you are currently operated exclusively for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3). You are not a charitable organization within the meaning of Treasury Regulations 1.501(c)(3)- 1(d) in that you failed to establish that you were operated exclusively for an exempt purpose. You did not respond to our request for documentation to substantiate your

activities and fiscal operations.

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 retroactively to January 1, 20XX.

Contributions to your organization are no longer deductible under section 170 of the

Internal Revenue Code.

You are required to file Federal income tax return Form 1120. These returns should be filed with the appropriate Internal Revenue Campus for the year ending December 31,

20XX and for all years thereafter.

Processing of income tax returns and assessment of any taxes due will not be delayed should a petition for declaratory judgment be filed under section 7428 of the Internal

Revenue Code.

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 Claim Court or the District Court of the United States for the District of Columbia before the 91st day after the date this determination was mailed to you. Contact the clerk of the appropriate court for the rules for initiating suits for declaratory judgment.

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. Or you can contact the Taxpayer Advocate from the site where the tax exempt status was determined by calling, or writing to: Internal Revenue Service, Taxpayer Advocates

Office.

Taxpayer Advocate assistance cannot be used as a substitute for established IRS procedures, formal appeals process, 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.

We will notify the appropriate State Officials of this action, as required by section 6104(c) of the Internal Revenue Code.

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

Sincerely,

Marsha A. Ramirez
Director, EO Examinations

Schedule number or exhibit

|
Form 886-A | EXPLANATIONS OF ITEMS |
(Rev. January 1994)
Name of taxpayer Tax Identification Number [Year/Period ended
|
ORG | December 31 20XX
LEGEND

ORG = Organization name XX = Date President = President Employee = employee
City=city State = State

Facts-- The case was originally closed as a termination due to a letter from the taxpayer indicating that the organization was no longer active and all assets were distributed to (¢)(3) organizations. Ra received the case back due to some procedural changes in the IRM. Per Exhibit 4.75.13-5 of the IRM Ra is following example six which indicates that since there is no information available to indicate that the corporate status was dissolved, (Ra checked web site indicates no dissolution of corporate status) and Ra has information that the organization was involved in Non exempt activities, the organization should be revoked with the approval of District Council. Ra requesting approval from council based on the following.

ORG was run by one person President which consisted of collecting donated goods to distribute to the needy, per the referral information and court documents Ra has determined that President admitted in court to filing false 990 returns and being involved in numerous transactions that constituted inurement. All records on the organization were confiscated by the authorities as part of the court procedures. Ra has determined that the organization ceased all operations sometime in mid and all assets were donated to other (c)(3) ministries. (only assets were donated goods for the needy) Ra contacted President who provided myself with a letter indicating the above and Ra closed out the case. When Ra received the case back President had moved and the other occupants of the home (half way house) indicated that he was Serving time in prison. Ra received a new address from the Post Office, in City State. Ra prepared form 6018 for revocation and sent out certified letter. Ra has received the certification back signed by employee. Ra has since received no response to the certified letter. Since the organization has not been active since —_ and Ra has determined there are no more assets to distribute and based the information noted above, Ra requests that District Council approve revocation of this organization in order to close out the case per the IRM.

Law--- per IRM 501(c)(3)--This organization is not operating exclusively for any exempt purposes and is no longer active.

Taxpayer's Position---The taxpayer provided a statement indicating that he closed the ministry in later part of 20XX and distributed the remaining assets. The corporate status was to be officially closed by the taxpayers accountant.

Goverments position--Per exhibit attached 4.75.13-5 since there has been no dissolusion of the corporate status at the state level the organization cannot be terminated but must be revoked.

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

DEPARTMENT OF THE TREASURY
| Internal Revenue Service

aerese
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: November 14, 2007 Taxpayer Identification Number:
ORG Form:
ADDRESS

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

2

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
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F