201144031: IRS revokes exemption for failure to keep records and file reports

Plain-English summary

The IRS revoked an organization's exemption under IRC § 501(c)(3), effective January 1, 20XX. The organization failed to meet the recordkeeping and reporting requirements under IRC §§ 6001 and 6033, did not file Form 990 for the relevant tax period, and did not respond to IRS information requests. The IRS concluded that the organization had not established that it was operated for exempt purposes. The organization must file Form 1120 for the identified and subsequent periods, and state charity officials will be notified of the revocation.

Ruling snapshot

• Question: Does the organization continue to qualify for exemption under IRC § 501(c)(3) after failing to provide records and required reports?
• Outcome: Revocation
• Key authorities: IRC §§ 501(c)(3), 6001, 6033, 6104, 7428, and 170; Treas. Reg. §§ 1.501(c)(3)-1(d), 1.6001-1, and 1.6033-1(h)(2)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE
TE/GE: EO Examination
1100 Commerce Street 501.03-00
Dallas, Texas 75242
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: July 28, 2011

LEGEND

ORG - Organization name XX - Date Address - address

Number: 201144031
Release Date: 11/4/2011

ORG Employer Identification Number:
ADDRESS Person to Contact/ID Number:
Contact Numbers:
Voice:
Fax:

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:

Internal Revenue Code Section 6001 requires organizations exempt from tax to keep such records and render such statements as are required by such rules and regulations as the Secretary may prescribe. Treasury Regulations section 1.6033-2 (h)(2) requires organizations exempt from tax to submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into the organization’s exempt status.

You failed to meet the records keeping and reporting requirements under IRC 6001 and 6033.

You no longer meet the requirements of IRC section 501(c)(3) and Treas. Reg. section 1.501 (c)(3) -1(d) in that you failed to establish that you were operated exclusively for an exempt purpose.

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. Those returns should be filed with the appropriate Service Center.

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 of declaratory judgment in the United States Tax Court, the United States Claims 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 rules for initiating suits for declaratory judgment. You may write to the Tax Court at the following address:

You also have the right to contact the office of the Taxpayer Advocate. You can call 1-877- 777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact your local Taxpayer Advocate at:

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 or 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.

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

Thank you for your cooperation.

Sincerely yours,

Nanette M. Downing
Director, EO Examinations

Internal Revenue Service Department of the Treasury
TE/GE Exempt Organizations Examinations Division

915 Second Avenue, M/S 540
Seattle, Washington 98174

Taxpayer Identification Number:

Date: September 27, 2010
Form:
ORG

Tax Year(s) Ended:
ADDRESS

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 (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 you.

Thank you for your cooperation.

Sincerely,

Nanette M. Downing
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination
Form 6018

Form 4621-A

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

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended
ORG EIN December 31,
20XX
LEGEND
ORG - Organization name EIN - EIN XX - Date Address - address City - city State - state President - president ISSUE

Whether ORG qualifies for exemption under §501(c)(3) of the Internal Revenue Code (“IRC”). FACTS

ORG, Employer identification number EIN, a State non-profit corporation, recognized as exempt under IRC §501(c)(3) was requested by mail to provide documents to verify whether the organization ceased to operate or went out of business.

The information document request (IDR) dated July 29, 20XX, were issued to the following addresses:

1) Address, City, State
2) Address, City, State

On August 04, 20XX, the request issued to the address of Address, City, State was returned to the Internal Revenue Service as undeliverable.

The information document request (IDR) dated August 20, 20XX, were issued to the following addresses:

1) Address, City, State, c/o President
2) Address, City, State

On August 30, 20XX, the request issued to the address of Address, City, State was returned to the Internal Revenue Service as undeliverable.

To date, no response has been received from the organization.

According to the State Secretary of State website, ORG was inactive since January 01, 20XX. 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.

Form 886-A (1-1994) Catalog Number 20810W — Page_1 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A (1-1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended
ORG EIN December 31,
20XX

IRC §6033(a)(1) provides, except as provided in IRC §6033(a)(2), every organization exempt from tax under §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.

Treasury Regulation (“Regulation”)§ 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.

Regulation §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.

Regulation §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 (§501 and the following), chapter 1 of the Code and IRC §6033.

TAXPAYER’S POSITION
No response has been received from the organization to any correspondence issued to date. GOVERNMENT’S POSITION

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.

ORG has not filed Form 990 for the tax period ended December 31, 20XX. With respect to the forms, ORG has not provided records sufficient to determine whether the organization is operated for purposes as enumerated under IRC §501(c)(3), or to determine whether it is liable for any unrelated business income tax.

Form 886-A (1-1994) Catalog Number 20810W — Page_2 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A (1-1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended
ORG EIN December 31,
20XX

ORG has failed to establish that was and is operated for purposes exempt under IRC §501(c)(3). As such, the exempt status of ORG under §501(c)(3) is to be revoked, effective January 1, 20XX.

CONCLUSION

The exempt status of ORG is to be revoked effective January 1, 20XX, for failure to provide documents to establish that the organization is operated for exempt purposes under §501(c)(3) of the Internal Revenue Code.

The organization is liable to file Forms 1120 for the above mentioned tax periods and for all subsequent periods.

In accordance with §6104 of the Internal Revenue Code, state charity officials will be notified of the revocation.

Form 886-A (1-1994) Catalog Number 20810W — Page_3 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Enclosures:
Publication 892
Publication 3498
Report of Examination
Form 6018

Form 4621-A

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