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

Plain-English summary

The IRS revoked an organization's exemption under IRC § 501(c)(3), effective January 1, 20XX. The organization did not respond to repeated requests for information needed to examine its Form 990, and it did not provide records of its finances or operations. The report states that the organization’s representative indicated that the organization might be terminated, but the requested information and dissolution statement were not received. The IRS concluded that the organization failed to meet the reporting and recordkeeping 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 information for an IRS examination?
• Outcome: Revocation
• Key authorities: IRC §§ 170, 501(c)(3), 6001, and 7428; Treas. Reg. §§ 1.6001(a), 1.6001(c), 1.6001-1(e), and 1.6033-2(i)(2); IRC § 6110(k)(3) not-precedent notice

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

Internal Revenue Service

TE/GE EO Examinations
1100 Commerce Street 501.03-00

Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES Date: May 14, 2010

DIVISION

Release Number 201035025
Release Date: 9/3/10
LEGEND

ORG = Organization name

XX = Date Address = address

Person to Contact:
Identification Number:
In Reply Refer to: TE/GE Review Staff

EIN:

ORG

ADDRESS
LAST DATE FOR FILING A PETITION

WITH THE TAX COURT: August 12, 20XX

CERTIFIED MAIL — Return Receipt Requested

Dear

This is a Final Adverse Determination Letter as to your exempt status under section
501(c)(3) of the Internal Revenue Code. Your exemption from Federal income tax under
section 501(c)(3) of the code is hereby revoked effective January 1, 20XX.

Our adverse determination was made for the following reasons:

Organizations described in I.R.C. § 501(c)(3) and exempt under section
501(a) must be both organized and operated exclusively for exempt purposes.
You have failed to produce documents or otherwise establish that you are
operated exclusively for exempt purposes and that no part of your net earnings
inures to the benefit of private shareholders or individuals. You failed to
respond to repeated reasonable requests to allow the Internal Revenue Service
to examine your records regarding your receipts, expenditures, or activities as
required by I.R.C. § 6001, 6033(a)(1) and Rev. Rul. 59-95, 1959-1 C.B. 627.

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

Internal Revenue Code.

You are required to file Federal income tax returns on Form 1120. These returns should be
filed with the appropriate Service Center 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 deficiency was determined by calling,
Tel: (317) 685-7840, or write :

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.

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 yours,

Douglas H. Shulman
Commissioner
By

Nanette M. Downing
Director, EO Examinations
Enclosures:
Publication 892
Publication 1546
Notice 437

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
M/S 1112, P.O. BOX 12307
OGDEN, UT 84412

TAX EXEMPT AND

GOVERNMENT ENTITIES
DIVISION
Date: November 26, 2007 Taxpayer Identification number:
Form(s):
ORG Tax Year(s) Ended:
ADDRESS

Person to Contact/ ID Number:

Contact Numbers:
Telephone: (801) 620-
Fax (801) 620-

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 (Rev. 11-2003)
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
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

CC:

Letter 3618 (Rev. 11-2003)
Catalog Number 34809F

Form 886-A Schedule number or exhibit
(Rev. January 1994) REPORT OF EXAMINATION 0001
Name of taxpayer Tax Identification Number Year/Period ended
ORG December 31, 20XX
LEGEND
ORG = Organization name XX = Date POA = POA

Issue Name: Tax Exempt Status

Per Return: 990
Per Exam: December 31, 20XX

Issue:
Whether ORG qualifies for exemption under Section 501(c)(3) of the Internal Revenue Code

Facts:
ORG failed to respond to the Internal Revenue Service attempts to obtain information to perform an
examination of Form 990 for the above mentioned tax period.

This case started out as a compliance check worked by the Exempt Organization Compliance Unit
Tax Examiners. The tax examiner contacted the organization several times with the intent of
securing the delinquent Form 990's. After the tax examiner received no response the case was turned
over for examination.

This organization was contacted for examination on April 20, 20XX. Information was requested
using Letter 4055 with IDR. Initial contact letter was also sent to the Power of Attorney (POA) on
record, POA and POA.

On June 7, 20XX a reply had not been received so the 15 day letter was sent certified with a response
due date of June 21, 20XX. Certified letter was also sent to the POA on record. TCO received the
signed certification card back on June 20, 20XX.

On August 14, 20XX TCO spoke to POA POA. He has had some problems getting the information
together and believes that the organization is terminated. He will get the information together and
send it in with a dissolution statement within 10 days.

TCO spoke to POA on August 27, 20XX. Information has not been received. Form 990's should be
ready to send on August 30, 20XX.

TCO attempted to contact POA on October 3, 20XX. Information has not been received. POA was
not available; TCO requested a call back by October 5, 20XX.

As of November 20, 20XX a reply from the organization has not been received.

Because the organization has not cooperated with TCO attempts to secure information for the exam,
revocation is being proposed. No mail has been returned undeliverable. Return receipt was received

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
(Rev. January 1994) REPORT OF EXAMINATION 0001
Name of taxpayer Tax Identification Number Year/Period ended

ORG December 31, 20XX

and TCO has spoken to the organization's representative, which is evidence that they are receiving
correspondence.

Law:

Section 6033(a)(1) of the Code provides, except as provided in section 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.

Section 1.6033-2(i)(2) of the regulations provides that every organization which is exempt from tax,
whether or not it is required to file an annual information return, shall submit such additional
information as may be required by the Internal Revenue Service for the purpose of inquiring into its
exempt status and administering the provisions of subchapter F (section 501 and following), chapter 1 of
subtitle A of the Code, section 6033, and chapter 42 of subtitle D of the Code. See section 6001 and
§1.6001-1 with respect to the authority of the district directors or directors of service centers to require
such additional information and with respect to the books of accounts or records to be kept by such
organizations.

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 time 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.

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 section
6033 of the Code 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 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

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
CS cenit ta) ee) | REPORT OF EXAMINATION 0001
|
' Name of taxpayer Tax Identification Number Year/Period ended
ORG December 31, 20XX

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 IRS's position that the organization failed to meet the requirements under sections 6001 and

6033 to be recognized as exempt from federal income tax under 501(c)(3) of the Internal Revenue
Code. Accordingly, the organization's exempt status is revoked effective January 1, 20XX.

Form 1120 returns should be filed for the tax periods after January 1, 20XX.

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