IRS revoked an organization's section 501(c)(3) exemption for failing to provide information

Plain-English summary

The IRS revoked an organization's exemption under IRC § 501(c)(3), effective January 1, 20XX. The organization did not provide information requested on numerous occasions to substantiate its Form 990 for the year ended December 31, 20XX. The IRS stated that the organization had not demonstrated that it operated exclusively for exempt purposes or provided information about its receipts, expenditures, and activities. The attached report concludes that the organization failed to meet the reporting requirements under IRC §§ 6001 and 6033.

Ruling snapshot

• Question: Did the organization qualify for continued exemption under IRC § 501(c)(3) after failing to provide requested information and records?
• Outcome: Revocation
• Key authorities: IRC §§ 170, 501(c)(3), 6001, and 7428; Treas. Reg. §§ 1.6001-1(a), 1.6001-1(c), 1.6001-1(e), and 1.6033-1(h)(2); IRC § 6110(k)(3) not-precedent notice

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

4920DAL: EO Mandatory Review
1100 Commerce Street
Dallas, TX 75242

Employer Identification No.:
Person to Contact:
Employee ID Number:

Release Number: 201035024
Tel:
Release Date: 9/3/10
Date: June 7, 2010
Fax:

LEGEND
Form Required to be Filed:
Tax Years:
December 31, 20XX

ORG = Organization name XX = Date

Address = address

501.03-00

ORG
ADDRESS

Certified Mail

Dear

This is a final adverse determination as to your exempt status under section 501(c)(3) of the
Internal Revenue Code (IRC). It is determined that you are no longer recognized as exempt from
Federal income tax under IRC section 501(c)(3), effective January 1, 20XX for the following

reason(s):

On numerous occasions, we requested information regarding and substantiation of your Form
990 for the year ended December 31, 20XX. We have not received the requested information.

You have not demonstrated that you are operated exclusively for charitable, educational, or other
exempt purposes within the meaning of I.R.C. section 501(c)(3). Organizations described in
I.R.C. section 501(c)(3) and exempt under section 501(a) must be organized and operated
exclusively for exempt purposes. You have provided no information regarding your receipts,
expenditures or activities, as required by Treas. Reg. 1.6033-2(h)(2). You have not established

that you have operated exclusively for an exempt purpose.
Contributions to your organization are not deductible under IRC section 170.

You are required to file Federal income tax returns on the form indicated above. You should file
these returns within 30 days from the date of this letter, unless a request for an extension of time
is granted. File the returns in accordance with their instructions, and do not send them to this
office. Processing of income tax returns and assessment of any taxes due will not be delayed
because you have filed a petition for declaratory judgment under IRC section 7428.

If you decide to contest this determination under the declaratory judgment provisions of IRC
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 within 90 days from
the date this determination letter 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 or you can contact your nearest Advocate's office, in this

case by calling or writing to:

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
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,

Douglas H. Shulman
Commissioner

By

Nanette M. Downing
Director, EO Examinations

Attachments:
Publication 892

DEPARTMENT OF THE TREASURY
Internal Revenue Service
1000 Commerce Street, Mail Code 4900
SE:T:EO:MA:7927
TAX EXEMPT AND Dallas, TX 75242-1027

GOVERNMENT ENTITIES
DIVISION

December 3, 2009

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,

Sunita Lough
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F

Form 886-A Schedule number or Exhibit
EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number | Year/Period Ended
ORG December 31, 20XX

LEGEND
ORG = Organization name XX = Date

Issue:

Whether ORG, 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, (hereinafter referred to as ORG), provide information and or documents to
show it continues to qualify for exemption under Section 501(c)(3) of the Internal
Revenue Code for the tax period ending December 31, 20XX. ORG failed to respond to
the Internal Revenue Service correspondence.

Law:

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

IRC § 6033(a)(1) provides, except as provided in IRC § 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.

Treas. Reg. § 1.6001-1(a) in conjunction with Treas. Reg. § 1.6001-1(c) provides that
every organization exempt from tax under IRC § 501(a) and subject to the tax imposed
by IRC § 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 IRC § 6033.

Treas. Reg. § 1.6001-1(e) 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
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period Ended
ORG December 31, 20XX

Treas. Reg. § 1.6033-1(h)(2) 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 IRC § 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 IRC § 6033 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
IRC §§ 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 Internal Revenue Service's position that ORG failed to meet the
reporting requirements under IRC §§ 6001 and 6033 to be recognized as exempt
from federal income tax under IRC § 501(c)(3). Accordingly, the organization's
exempt status is revoked effective January 1, 20XX.

Form 1120 returns should be filed for the tax periods ending on or after December
31, 20XX.

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