Determination 200851030: Exemption revoked for silence, on a report the examiner marked as not final

Plain-English summary

The IRS revoked this organization's section 501(c)(3) exemption because it did not respond to requests for records needed to examine its returns. The examination report relies on the recordkeeping and information duties in sections 6001 and 6033. The final letter sets the effective date at January 1, while the report states January 26. The letter also says contributions are no longer deductible and requires the organization to file income tax returns.

Ruling snapshot

• Question: May the Service revoke recognition of exemption under section 501(c)(3) solely because the organization failed to respond to requests for the records needed to examine two years of Forms 990?
• Outcome: Yes. Exemption revoked, effective 1 January in the final letter and 26 January in the examination report, for failure to meet the record-keeping and information duties of sections 6001 and 6033. The organization also ceased to be described in sections 509(a)(1) and 170(b)(1)(A)(vi). Contributions are no longer deductible, four years of Forms 1120 are due within sixty days, and state officials are notified under section 6104(c).
• Key authorities: IRC sections 501(a), 501(c)(3), 509(a)(1), 170(b)(1)(A)(vi), 6001, 6033, 6104(c) and 7428; Treas. Reg. 1.6001-1(e) and 1.6033-1(h)(2); Rev. Proc. 82-39, 1982-2 C.B. 759.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
MC 4920 DAL
1100 Commerce Street
Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES September 19, 2008
DIVISION
UIL: 501.03-01

Number: 200851030
Release Date: 12/19/2008

EO
LEGEND
ORG = Organization name XX = Date Address = address
ORG Employer Identification #
ADDRESS Person To Contact/ID#:
Contact Telephone Number
CERTIFIED MAIL LAST DATE TO FILE A PETITION
IN TAX COURT
December 8, 20XX
Dear

This is a final adverse determination that you do not qualify for exemption from income tax under section 501(a) of the Internal Revenue Code (I.R.C.) as an organization described in I.R.C. § 501(c)(3). In addition, you do not qualify as an organization described in I.R.C. § 509(a)(1) & 170(b)(1)(a)(vi). Internal Revenue Service recognition of your status as an organization described in I.R.C. section 501(c)(3) is revoked, effective January 1, 20XX. Our adverse determination is made for the following reason(s):

You have not established you operated exclusively for exempt purposes within the meaning of I.R.C. § 501(c)(3). You failed to provide adequate documentation to confirm the organizations exempt activities.

An organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of the exempt purposes specified in IRC §501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Your organization has not provided any evidence you engaged in any activities that furthers your exempt purposes.

Contributions made to you are no longer deductible as charitable contributions by donors for purposes of computing taxable income for federal income tax purposes. See

Rev. Proc. 82-39 1982-2 C.B. 759, for the rules concerning the deduction of contributions made to you between January 1, 20XX and the date a public announcement, such as publication in the Internal Revenue Bulletin, is made stating that contributions to you are no longer deductible.

You are required to file income tax returns on Form 1120 for all years beginning after January 1, 20XX. Returns for the years ending December 31, 20XX, December 31, 20XX, December 20XX, and December 31, 20XX must be filed with this office within 60 days from the date of this letter, unless a request for an extension of time is granted. Send such returns to the following address:

Tax returns for subsequent years are to be filed with the appropriate Campus identified in the instructions for those returns.

If you decide to contest this determination in court, you must initiate a suit for declaratory judgment in 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 rules for initiating suits for declaratory judgment. You may write to the Tax Court at the following address:

The processing of income tax returns and assessment of any taxes due will not be delayed because a petition for declaratory judgment has been filed under I.R.C. section 7428. The last day for filing a petition for declaratory judgment is December 8, 20XX.

If you have questions about this letter, please write to the person whose name and address are shown on this letter. If you write, please attach a copy of this letter to help identify your account. Keep a copy for your records. Also, please include your telephone number and the most convenient time for us to call, so we can contact you if we need additional information.

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. Or you can contact the Taxpayer Advocate office located nearest you at the address and telephone number shown in the heading of this letter.

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.

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We will notify the appropriate State officials of this action, as required by I.R.C. section 6104(c). This is a final revocation letter. Sincerely,

Lois G. Lerner
Director, Exempt Organizations

Enclosures;
Pub. 892

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

DEPARTMENT OF THE TREASURY
Internal Revenue Service
TE/GE EO Examination
1100 Commerce St. Mail Code 4957:DAL
Dallas, TX 75242-1027

October 5, 2007

Taxpayer Identification Number:

ORG
ADDRESS 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:

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 A. Ramirez
Director, EO Examinations

Enclosures:

Form 6018 w/envelope
Pub 892 and 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS 990
Name of taxpayer Tax Identification Number Year/Period ended ORG 20XX12 LEGEND ORG = Organization name XX = Date

Issue Whether exempt organization qualifies for exemption under Section 501(c)(3) of the Internal Revenue Code.

Facts: Exhibit A provides copies of the Internal Revenue Service correspondence requesting that ORG provide documents for the tax periods ending 20XX12 and 20XX12. ORG failed to respond.

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 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.

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.

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.

Government’s Position: It is the IRS's position that the organization failed to meet the reporting requirements under sections 6001 and 6033 of the Code, and of the Regulations thereunder, which must be satisfied in order to be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Accordingly, the organization's exempt status should be revoked effective January 26, 20XX.

Taxpayer’s Position: The Taxpayer has not responded to requests for information.

Conclusion: Based upon the information noted above, it is proposed that the exempt status of the organization be revoked effective January 26, 20XX. Form 1120, U.S. Corporation Income Tax Return should be obtained for the year ended December 31, 20XX, and for future tax years.

Please note that this is not a final report. The draft report is subject to review and modification by our Mandatory Review staff. You will receive the final report from Mandatory Review.

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