IRS revokes exempt status after an organization failed to provide records and information

Plain-English summary

The IRS revoked an organization's exemption under § 501(c)(3), effective January 1 of the redacted year. The organization failed to establish that it operated exclusively for exempt purposes and that no earnings benefited private shareholders or individuals. It also failed to respond to repeated IRS requests to examine its records and submitted annual returns without meaningful financial or activity information. The IRS stated that contributions were no longer deductible under § 170 and required the organization to file Form 1120 returns.

Ruling snapshot

• Question: Did the organization establish that it continued to satisfy the requirements for exemption under IRC § 501(c)(3)?
• Outcome: Revocation.
• Key authorities: IRC §§ 501(c)(3), 170, 6001, 6033, 6104(c), 7428, and 6110(k)(3); Rev. Rul. 59-95.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

Internal Revenue Service

: TE/GE EO Examinations - ne
MS ore 1100 Commerce Street 501.03-00

Dallas, TX 75424

TAX EXEMPT AND

GOVERNMENT ENTITIES Date: August 19, 2010
DIVISION

Release Number: 201049045

Release Date: 12/1010 Address = address

Legend

ORG = Organization name xx = Date Person to Contact:

ORG Identification Number:

ADDREIESS Contact Telephone Number:

In Reply Refer to: TE/GE Review Staff
EIN:

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 reason(s):

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 91” 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,
510-637-2070, 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

cc.

Internal Revenue Service Department of the Treasury
TE/GE Division

Mail Stop SF 7-4-01
450 Golden Gate Avenue
San Francisco, California 94102-3412

Taxpayer Identification Number:

Date. November 18, 2009

Form:

ORG

Tax Year(s) Ended:
ADDRESS

Person to ContacvID 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, please sign and return the enclosed Form 6018. 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:

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 vou.

Thank you for your cooperation.
Sincerely,

Sunita B. Lough
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination

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

LEGEND

ORG = Organization name XX = Date City = city State = state co-1 = 1°
Company
Issue:

Is the ORG: “A Church Integrated Auxiliary” an organization exempt from tax under section 501(c)(3) of the
Internal Revenue Code?

Facts:

The ORG: “A Church Integrated Auxiliary” (the organization) received a letter from the Internal Revenue
Service dated March 11, 20XX, recognizing it as an organization exempt from tax under section 501(c)(3) of
the Internal Revenue code. During the process of applying for the determination, the organization submitted
documents indicating that it was not a church or an integrated auxiliary of a church.

The organization filed a form 990 for the year ending December 31, 20XX on June 14, 20XX. It filed form 990
for the year ending December 31 20XX on April 13 20XX. It filed a return for the year ending December 31,
20XX on May 9, 20XX.

None of these returns contained any financial information about the organization. Various lines on the returns
had entries such as “$ZERO”, “$gogiliad” “NA” “GOGLEPLEXIAN” ’Gogalplexian Index” and “Gogiliad

Index”
For the year 20XX the organization described its program service accomplishments as:

a. “40-65 persons homeless in City with temporary transitional free shelter in motor vehicles. Agreed to
follow rote academic solution to cause of the chronic hard time they are experiencing accessing the
essential health and hygiene services model program for numerous like set-ups worldwide; as ours.”

b, “Remittance of conflict resolution communications skills curriculae within international work areas. 000
United Nations Plaza free mobil soup kitchen program affiliation. U.N. homeless committee. World
Affairs Council of Northern State. CO-1 (City, State). Within context of newly met civilization
diplomacy instatement w/ financing included international.”

c, “Volunteer Employment arrangement workable For all design anonymous enrollment + international
range programization produces estimate of apx 20,000 participants”

d. “Low volume community wide detox educational with leadership remittance broadcast. AIDS HIV
epidemic recovery leadership remittance broadcast (two way) w/ international range approach”

The expenses for these programs were listed a zero or N/A.

The Internal Revenue Service sent a letter to the organization dated September 8, 20XX, asking for a
description of its activities and copies of financial records showing its total receipts for the year ending
December 31, 20XX. No response was received. The service sent a second letter dated October 13, 20XX
repeating the request for information. No response was received to this request.

Law:

Section 501(c)(3) of the Internal Revenue Code provides for exemption from tax for “Corporations, and any
community chest. fund, or foundation, organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary, or educational purposes, or to foster national or international amateur sports
competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for

the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any
private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or
otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does
not participate in, or intervene in (including the publishing or distributing of statements), any political campaign
on behalf of (or in opposition to) any candidate for public office.”

Section 6033 of the Internal Revenue Code provides that “every organization exempt from taxation 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 purpose of carrying out the internal revenue laws as the
Secretary may by forms or regulations prescribe,....”

Section 1.6033-2(a)(1) of the Income Tax Regulations provides that “Except as provided in section 6033(a)(2)
and paragraph (g) of this section, every organization exempt from taxation under section 501(a) shall file an
annual information return specifically setting forth its items of gross income, gross receipts and disbursements,
and such other information as may be prescribed in the instructions issued with respect to the return.”

Section 1.6033-2(i)(2) of the Income Tax 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
respeet to the books of accounts or records to be kept by such organizations.”

Revenue Ruling 59-95, 1959-1 CB 627, provides that “failure or inability to file the required information return
or otherwise to comply with the provision 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 an
exempt status.”

Government’s Position.

The organization has submitted three annual returns which do not contain any information about its finances or
activities. When contacted with a request for information about its 20XX year, it did not respond. Because it is
unwilling or unable to establish that it is observing the conditions required for continuation of exemption, the

exempt status of the organization should be revoked.

Taxpayer’s Position:
The taxpayer had not responded to any request for information or submitted its position.

Conclusion:
Exemption from tax under section 501(c)(3) of the Internal Revenue Code is revoked for The ORG: “A Church
Integrated Auxiliary” as of January 1, 20XX. The organization is required to file forms 1120 for 20XX and

subsequent years.