IRS denies section 501(c)(4) exemption to a facility rental organization

Plain-English summary

The IRS denied section 501(c)(4) exemption to a nonprofit that operated a large facility with office, conference, meeting, and lodging rentals. The organization rented to tax-exempt groups, ministry-related visitors, and the general public, advertised its services, and competed with commercial hotels and conference centers. The IRS concluded that these activities were a business carried on in a manner similar to for-profit organizations, rather than the promotion of social welfare. It also found that the organization had not shown that its activities combated community deterioration, promoted economic development, or lessened a government burden.

Ruling snapshot

• Question: Did the organization's facility-holding and rental activities qualify it for exemption under IRC § 501(c)(4)?
• Outcome: Denied
• Key authorities: IRC §§ 501(a), 501(c)(4), and 6110; Treas. Reg. §§ 1.501(c)(4)-1 and 1.501(c)(3)-1(d)(2)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Release Number: 201219030 Contact Person:

Release Date: 5/11/2012

Date: February 14, 2012 Identification Number:

XXXXXX

XXXXXX Contact Number:

XXXXXX

UIL Code: 501-04-00 Employer Identification Number:

Form Required To Be Filed:

Tax Years:

Dear

This is our final determination that you do not qualify for exemption from Federal income tax
under Internal Revenue Code section 501(a) as an organization described in Code section
501(c)(4).

We made this determination for the following reason(s):

You are primarily engaged in carrying on a business with unrelated section 501(c)(3) charitable
organizations and with the general public in a manner similar to entities that are operated for
profit. Therefore, you are not operated primarily for the promotion of social welfare within the
meaning of section 501(c)(4).

You must file Federal income tax returns on the form and for the years listed above within 30
days of this letter, unless you request an extension of time to file. File the returns in accordance
with their instructions, and do not send them to this office. Failure to file the returns timely may
result in a penalty.

We will make this letter and our proposed adverse determination letter available for public
inspection under Code section 6110, after deleting certain identifying information. Please read
the enclosed Notice 437, Notice of Intention to Disclose, and review the two attached letters that
show our proposed deletions. If you disagree with our proposed deletions, follow the
instructions in Notice 437. If you agree with our deletions, you do not need to take any further
action.

If you have any questions about this letter, please contact the person whose name and
telephone number are shown in the heading of this letter. If you have any questions about your
Federal income tax status and responsibilities, please contact IRS Customer Service at

1-800-829-1040 or the IRS Customer Service number for businesses, 1-800-829-4933. The
IRS Customer Service number for people with hearing impairments is 1-800-829-4059.

Sincerely,

Lois G. Lerner
Director, Exempt Organizations

Enclosure
Notice 437
Redacted Proposed Adverse Determination Letter
Redacted Final Adverse Determination Letter

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: May 16, 2011 Contact Person:

UIL: 501.04-00
Identification Number:

Contact Number:
FAX Number:

Employer Identification Number:

LEGEND
Parent =
Foundation =
Affiliate =
Subsidiary =
Facility =
State =
Area A =

x =

y =

z =

Dear

We have considered your application for recognition of exemption from federal income tax
under the Internal Revenue Code (“Code”) section 501(a). Based on the information provided,
we have concluded that you do not qualify for exemption under Code section 501(c)(4). The
basis for our conclusion is set forth below.

FACTS:

You are a nonprofit corporation organized under the laws of State. You state that you were
incorporated by Parent to operate and lease the Facility. The Facility is a 181,000 square-foot
building on 11 acres of land in the beach community of Area A, donated to Foundation for the
benefit of the Parent. Foundation is a section 501(c)(3) public charity. You indicated that
Facility is located next to a location designated for revitalization by Area A. However, Facility
was not made part of Area A's redevelopment plan.

Currently, your only activity is subleasing the Facility to Subsidiary, an entity wholly owned by
Affiliate, a related member of Parent. Subsidiary is your sole lessee, and the lease is for $ per
year. You hold the leasehold interest in Facility in order to protect it from liabilities arising from
activities of Subsidiary.

Previously, until 2008, pursuant to a 50-year lease, you leased the Facility from the Foundation
for $ per year, and you used the Facility to carry on office space, conference/meeting room
and lodging rental activities (rental activities).

The information you submitted shows that during this period, you rented your office space to 17
organizations. Out of these 17 organizations, one was a for-profit entity. Of the remaining 16
tax-exempt organizations, 13 were not affiliated with you. You state that your office rental
activity generated half of your revenues. Revenue from your office space rental activity totaled
$z, and this amount represents % of your office space rental activity operating cost
exclusive of depreciation. Your website advertises that you have over 43,000 square office
space. You indicated that you rent office space at approximately $y. An informal appraisal of
fair rental value conducted by you shows comparable space in the surrounding area rented out
at approximately $x.

You also rented conference and meeting space to Christian ministries, including those whose
offices are located in Facility for use in conducting conferences, retreats, meetings, training
seminars, and social events. You represent that other than set-up and clean-up of the
conference/meeting rooms, you rendered no direct services in connection with your
conference/meeting room rental activity. However, you state that in a limited number of
instances, and only upon the request of the tenants, you previously contracted with a food
caterer for its services and then passed that cost directly to your tenants. You state that you
generated 11.9% of your revenues from the rental of conference and meeting room space. This
amount also represents 59.4% of your conference/meeting room rental activity operating costs
exclusive of depreciation. You also rented out your conference/meeting room for private events
such as weddings, which generated 6% of your revenues. An informal comparison of the rate
charged by four nearby conference centers shows that your conference space rental charges
were lower than the rates charged by the other conference centers.

Furthermore, you operated a hotel and rented fully furnished rooms and suites to patrons of
your tenants and the public. The Facility’s website represents that the Facility has 74 guest
rooms and suites that are available for rent on a daily, weekly and monthly basis. The website
also states that rooms “come complete with all the conveniences of home” such as a hair dryer,
high-speed internet, cable TV, coffee maker and more. There are also two community lounges
per floor that include couches, Wi-Fi, big screen televisions, vending machines, a refrigerator,
microwave oven and a guests’ laundry room. The website also states that the Facility provides
a non-smoking and alcohol free environment, has numerous worship services onsite daily, and
guests to Facility also receive a complimentary breakfast. Fees for lodging to ministry-related
visitors and the general public generated 33% of your revenues. An informal comparison of
rates charged by seven nearby hotels shows that your rates were lower than those charged by
the other hotels.

You stated that lodging and conference facilities are prevalent in the local vicinity. The website
advertises that Facility is “ideal” for corporate meetings, church retreats, or social events. You
indicated that in addition to the website, you rely on word-of-mouth references and church
connections to advertise the services rendered. You also advertise the Facility as a “conference
and retreat center” in Christian directories and newspapers.

You indicated that in addition to the rental fees charged for the use of Facility, you relied on
loans from the Foundation and the Affiliate to operate. However, no formal loans ever existed
between you and the Foundation and between you and the Affiliate, and the loans have never
been repaid. Other than the funds from the Foundation and the Affiliate, you have not received
any grants or loans from any other sources, and you do not anticipate receipt of any grants or
loans in the future.

LAW:

Section 501(c)(4) of the Code provides that an organization will be recognized as exempt from
federal income tax under that subsection if it is a civic league or organization not organized for
profit but operated exclusively for the promotion of social welfare, and no part of the net
earnings of such entity inures to the benefit of any private shareholder or individual.

Section 1.501(c)(4)-1(a)(2)(i) of the Income Tax Regulations (“regulations”) provides that an
organization is operated exclusively for the promotion of social welfare if it is primarily engaged
in promoting in some way the common good and general welfare of the people of the
community. An organization embraced within this section is one which is operated primarily for
the purpose of bringing about civic betterments and social improvements. A "social welfare"
organization will qualify for exemption as a charitable organization if it falls within the definition
of "charitable" set forth in section 1.501(c)(3)-1(d)(2).

Section 1.501(c)(4)-1(a)(2)(ii) of the regulations provides that an organization is not operated
primarily for the promotion of social welfare if its primary activity is carrying on a business with
the general public in a manner similar to organizations which are operated for profit.

Section 1.501(c)(3)-1(d)(2) of the regulations provides that the term charitable is used in section
501(c)(3) of the Code in its generally accepted legal sense and is, therefore, not to be construed
as limited by the separate enumeration in section 501(c)(3) of other tax-exempt purposes which
may fall within the broad outlines of charity as developed by judicial decisions. Such term
includes, among others: advancement of religion; lessening of the burdens of Government, and
promotion of social welfare by organizations designed to accomplish any of the above purposes,
or to combat community deterioration.

Rev. Rul. 66-150, 1966-1 C.B. 147 concluded that an organization which holds title to a building
housing its parent, maintains the building, and operates the social facilities located in the
building does not qualify for exemption from federal income tax under sections 501(c)(2) or
501(c)(4) of the Code.

Rev. Rul. 69-572, 1969-2 C.B. 119, concluded that a nonprofit organization created to construct
and maintain a building for the exclusive purpose of housing and serving exempt member
agencies of a community chest is exempt under section 501(c)(3) of the Code. Because of the
close connection between the organization and the charitable functions of the tenant-
organizations and the rental of the facilities at rates substantially below fair rental value, the
organization furthers the charitable purposes of the tenants. The organization primarily relied
on charitable contributions from the public and loans from charitable organizations to pay
expenses and costs.

In Rev. Rul. 71-529, 1971-2 C.B. 234, an organization that managed the endowment and
investment funds of section 501(c)(3) organizations qualified for tax-exempt status under
section 501(c)(3) of the Code because the section 501(c)(3) member organizations managed
the organization and the organization relied on charitable contributions and grants to pay
expenses and costs. This organization also rendered these investment services at substantially
below cost.

In Rev. Rul. 76-419, 1976-2 C.B. 146, an organization that purchased blighted land, developed
it into an industrial park, and rented space in the park at favorable terms to industrial enterprises
that would not ordinarily locate in the area, was held to be organized and operated for the
charitable purpose of promoting social welfare, relieving the poor and distressed, and combating
community deterioration. The organization required tenants to hire a significant number of
presently unemployed persons and it required tenants to train workers in needed skills. Tenants
that hired low skill workers were favored over those who had high initial job skill requirements.

Rev. Rul. 77-111, 1977-1 C.B. 144 involved two situations. In the first situation, an organization
was formed to increase business patronage in a deteriorated area mainly inhabited by minority
groups. It provided information to the public on the area’s shopping opportunities, local
transportation and accommodations. The ruling concluded that the primary purpose of the
organization was to promote business, which was not an exempt purpose. As such, the
organization did not qualify for exemption under section 501(c)(3) of the Code. In the second
situation, the organization's purpose was to revive retail sales in an area suffering from
continued economic decline by constructing a retail shopping center. The organization
purchased land, which it sold to the city at no profit. The city acquired additional land for the
project. The city required that minorities be utilized in both the construction and the operation of
the project. Stores located within the project were also required to employ a certain percentage
of minority group employees. Nevertheless, the ruling concluded that the organization's
activities resulted in major benefits accruing to the stores that will locate in the shopping center.
The ruling concluded that the organization’s activities were directed to benefit the businesses in
the shopping center, rather than to accomplish exclusively 501(c)(3) purposes. Therefore, the
organization did not qualify for exemption under section 501(c)(3).

Rev. Rul. 77-366, 1977-2 C.B. 192 concluded that a nonprofit organization that arranges and
conducts winter-time ocean cruises during which activities to further religious and educational
purposes are provided in addition to extensive social and recreational activities is not operated
exclusively for exempt purposes and does not qualify for exemption.

Rev. Rul. 85-2; 1985-1 C.B. 178 sets out a two-part test for determining whether an
organization’s activities lessen the burdens of government. First, it is necessary to determine
whether the governmental unit considers the organization's activities to be its burden. The
second part of the test is whether these activities actually lessen the burdens of government.
An activity is a burden of government if there is an objective manifestation by the government
unit that it considers the activities of the organization to be its burden. The interrelationship
between the governmental unit and the organization may provide evidence that the
governmental unit considers the activity to be its burden. Whether the organization is actually
lessening the burdens of government is determined by considering all relevant circumstances.
Thus, an organization that provides legal assistance to guardians ad litem who represent
abused neglected children before a juvenile court that requires their appointment lessens the
burden of government and therefore, qualifies for exemption under section 501(c)(3) of the
Code.

In Comm'r v. Lake Forest, 305 F.2d 814 (4th Cir. 1962), the court concluded that an
organization that provided substantial and material advantages to its members did not have
exclusively social welfare purposes. The court also found that an organization seeking exempt
status under section 501(c)(4) of the Code must primarily offer or propose to offer a service or
program for the direct betterment or improvement of the community as a whole.

In People's Educational Camp Society, Inc. v. Comm'r, 331 F.2d 923 (2nd Cir.1964), cert.
denied, 379 U.S. 839 (1964), a nonprofit corporation supported its social welfare activities by
operating a commercial resort. The court held that the resort’s primary activities were business
activities and did not promote social welfare. The court noted that the corporation reinvested
a large portion of its revenue back into its commercial operation and concluded that the business
activities were of such magnitude in comparison with the social welfare activities that the
organization could not be said to be exclusively or primarily engaged in the promotion of social
welfare. The court held that the organization did not qualify for tax-exempt status as an
organization described under section 501(c)(4) of the Code.

In Schoger Found. v. Comm'r, 76 T.C. 380 (T.C. 1981), the court held that a not-for-profit
corporation that owned and operated a mountain lodge as a religious retreat facility and made
available to lodgers recreational and social activities comparable to activities offered by vacation
resorts does not qualify for tax-exempt status as an organization described under section
501(c)(3) of the Code.

In Mutual Aid Association of the Church of the Brethren v. U. S., 759 F.2d 792 (10th Cir. 1985),
aff'g 578 F. Supp. 1451 (D.Kan.1983), a church created an association to provide insurance to
members of the church and their families. The association also insured the church structures
and some small businesses owned by the church members against natural disasters, among
other casualties. Based on these activities, the association sought tax-exempt status as an
organization described under section 501(c)(4) of the Code. The court affirmed the district
court's holding that the association did not qualify as an organization described in section
501(c)(4). The court concluded that even if the advancement of religion is the promotion of
social welfare, here, regardless that the organization was formed and promoted by church
members and limited its policy sales to church members, it does not advance religion. Instead,

it sells insurance coverage, an admitted economic activity run similar to any mutual insurance
company.

In Junaluska Assembly Housing, Inc. v Comm’r, 86 T.C. 1114 (1986), the court held that an
organization formed to construct, sell, and lease additional housing for its parent's religious
retreat programs qualified for exemption under section 501(c)(3) of the Code. The court found
that the housing will predominately enhance its parent’s religious purposes. The court found
that the organization will house only individuals that are active participants in the church's
operations and religious programs; it has not advertised its services, and it is not competing with
commercial developers or operators of vacation homes in the area.

In Airlie Found. v. Comm’r, 283 F. Supp. 2d 58 (D.D.C. 2003), the court found that an
organization that operates its conference center in a manner consistent with that of a
commercial business does not qualify for tax-exempt status under section 501(c)(3) of the
Code. Although the organization carries out a number of charitable and educational activities,
the court found that the charitable and educational activities are incidental to its primary activity
of operating a conference center. The court relied on the "commerciality" doctrine in applying
the operational test. The court held that "among the major factors courts have considered in
assessing commerciality are competition with for-profit commercial entities; extent and degree
of below cost services provided; pricing policies; and reasonableness of financial reserves.
Additional factors include, inter alia, whether the organization uses commercial promotional
methods (e.g. advertising) and the extent to which the organization receives charitable
donations." While the court found that the fee structure and subsidization practices are
indicative of non-commercial activities, other factors, such as the nature of the clients and
competition with other local centers and fellowship halls, its advertising, and income from
weddings and special events, show commerciality.

RATIONALE:

To qualify for exemption from federal income tax under section 501(c)(4) of the Code, an
organization must establish that it operates exclusively for the promotion of social welfare.
Section 1.501(c)(4)-1(a)(2)(i) of the regulations provides that an organization is operated
exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way
the common good and general welfare of the people of the community. An organization
embraced within this section is one which is operated primarily for the purpose of bringing about
civic betterments and social improvements. In Comm’r v. Lake Forest, supra, the court
reaffirmed that an organization seeking tax-exempt status under section 501(c)(4) of the Code
must primarily perform activities that “directly” better or improve the community as a whole.

Your present activities, which consist of holding a leasehold interest in Facility and subleasing
the Facility to Subsidiary in order to protect Facility from liabilities arising from the activities of
Subsidiary, do not bring about civic betterment or improve the community as a whole and so do
not promote social welfare. This activity is similar to that of the organization in Rev. Rul. 66-
150, supra, which held title to a building housing its parent and was found not to qualify for
exemption under section 501(c)(4) of the Code. Your lease and sublease of Facility each for
only $1 per year was for protection against liabilities, not for a purpose of bettering the
community as a whole.

Your previous activities, which included renting office space, meeting/conference rooms, and
lodging to tax-exempt entities, ministry-related visitors, and the public, did not primarily promote
social welfare and were not charitable. Instead, through these activities you were carrying on a
business with the general public in a manner similar to organizations organized for profit. See
section 1.501(c)(4)-1(a)(2)(ii) of the regulations. You advertised Facility and your rental
activities on a website and marketed it to the general public and to non-affiliated organizations in
addition to tax-exempt organizations. Your advertisements do not state that Facility is restricted
to use by charitable tax-exempt organizations and churches. According to Facility’s website, the
Facility is “ideal” for corporate meetings, church retreats or social events. Advertisements in
Christian business directories and newspapers describe Facility as a “conference and retreat
center.” You operated your lodging facilities in a manner similar to for-profit commercial hotels.
The Facility's website states that rooms “come complete with all the conveniences of home.”
Unlike the organization in Junaluska Assembly Housing, Inc. v. Comm., supra, you advertised
your services to the general public, did not limit tenants, renters, or lodgers to church members
or participants, or even religious organizations, and you competed with other commercial hotels
and halls in the local area. Again unlike the situation in Junaluska, individuals, families, and
organizations or businesses renting space or lodging are not necessarily active participants in
related religious programs, or even religious programs in general. You offered amenities similar
to that provided by non-exempt resorts and hotels, similar to the organizations in People's
Educational Camp v. Society, Inc. v. Comm’r , Airlie Found., and Schoger Foundation v.
Comm'r., supra. See also Rev. Rul. 77-366, supra.

In Mutual Aid Ass’n of the Church of the Brethren v. U. S., the court concluded that even if an
organization advances religion, a substantial non-exempt purpose will bar tax-exempt status as
an organization described under section 501(c)(4) of the Code. In summary, your rental
activities were commercial business activities, and you carried them on in a manner comparable
to for-profit entities in Area A. Thus, we conclude that your activities did not promote social
welfare as required under section 501(c)(4) of the Code.

You assert that you operated the Facility in a non-commercial manner because you offered
services at substantially below market rate and below operating costs. While the information
you provided shows your rates are lower than the rates charged by a few nearby similar
businesses, similar to that described in Rev. Rul. 69-572, supra, there is no indication that your
rates are below market rate. As you pointed out, there are numerous similar facilities in the
area. In addition, you stated that Facility is located in a less desirable location. Therefore,
charging a discount rate may be necessary to compete against other similar businesses. In
addition, there is no indication that your rates are substantially below cost. Operating at below
market rate is not necessarily operating at below cost. Unlike the organization in Rev. Rul. 71-
529, supra, you have not provided information showing that your rates are nominal or that
substantially all of your operating costs are subsidized. You do not rely on donations. Instead,
the information shows that your revenue comes primarily from your rental fees.

You assert that you did not operate a business in a commercial manner because your activities
can be described as charitable under section 1.501(c)(3)-1(d)(2) of the regulations. You

maintain that you promoted social welfare through the advancement of religion because Facility
is a Christian-centered building, its tenants included churches, religious groups, and a Christian

pre-school. You state that as such, you served as a catalyst for your tenants to address the
social welfare of the surrounding community. You stated that the Christian atmosphere allowed
for evangelization, a central mission of advancement of religion. You further assert that without
the Christian atmosphere and discounted rent, many of the nonprofit tenants would not have
located to the area. We disagree. While many of your tenants may have religious purposes or
be Christian-centered, you were primarily engaged in commercial rental activities.

Section 1.501(c)(4)-1(a)(2)(ii) of the regulations provides that an organization is not operated
primarily for the promotion of social welfare if its primary activity is carrying on a business with
the general public in a manner similar to organizations which are operated for profit. In Mutual
Aid Ass'n of the Church of the Brethren v. U. S., the court held that even if an organization
advances religion, a substantial non-exempt purpose will bar tax-exempt status as an
organization described under section 501(c)(4) of the Code. Because you performed
substantial commercial activities (office space, conference/meeting room and lodging rental
activities) that did not promote social welfare, you do not qualify for tax-exempt status as an
organization described under section 501(c)(4). See also Schoger Found. v. Comm'r and Rev.
Rul. 77-366, supra. Therefore, we conclude that you did not primarily carry on activities that
promoted religion but, rather, primarily carried on business with the general public and your tax-
exempt patrons similar to organizations which are operated for profit.

You claim that your activities promoted social welfare by combating community deterioration
and promoting economic development. You state that operation of the newly renovated Facility,
which was vacant for many years, attracted visitors to the area. However, in order to establish
that your activities combated community deterioration and promoted economic development,
you must do more than show that you are operating in a blighted or economically depressed
area.

You must establish that you actually promoted social welfare by engaging in activities that
lessen neighborhood tensions. You have not shown that you assisted specifically targeted
groups, such as minorities, the unemployed, or the underemployed, or that you assisted
businesses, which have experience economic difficulty, either due to their minority composition
or to the deteriorated nature of the area where they are located. See Revenue Rulings 76-419
and 77-111, supra. Other than hiring your employees, you have not shown you carried on any
activity to create employment or improve employment skills. In Comm’r v. Lake Forest, Inc.,
supra, the court reaffirmed that an organization seeking tax exempt status under section
501(c)(4) must primarily perform activities that “directly” better or improve the community as a
whole. You have not provided sufficient information to establish that your primary activities
directly promoted social welfare as described in section 501(c)(4). Therefore, we conclude
that you did not promote social welfare by combating community deterioration and promoting
economic development.

Finally, you contend that you promoted social welfare because your activities lessened the
burdens of government. You state that because of the work by you and your related
organizations, the redevelopment project, with boundaries next to the Facility property, did not
include the Facility site since it was not necessary for the city to incur the expenses to redevelop
that site. You state that you and your related organizations took on that expense. Thus, you

and your related organizations lessened the burdens of the local government as to the
redevelopment expense of the Facility property. We disagree for the reasons stated below.

Pursuant to Rev. Rul. 85-2, supra, an activity lessens a burden of government if there is an
objective manifestation by the government that it considers such activity to be part of its burden.
The fact that the government sometimes undertakes the activity is insufficient to establish a
burden of government. Further, the fact that the government or a government official expresses
approval of an organization and its activities is also insufficient to establish that the organization
is lessening the burdens of government.

You have not established that a governmental unit considered your activities to be its burden.
You stated that there was no joint venture agreement between you and any governmental unit.
Nor have you provided additional information to show that there was an objective manifestation
by the government that it considered your activities to be part of its burden. Furthermore, you
have not shown that your activities actually lessened the burdens of any governmental unit.
You have not shown that you performed a duty that a governmental unit was required to
perform. Therefore, we conclude that your activities did not lessen the burdens of government.

Because you have not provided sufficient information to show that you were engaged in
activities that promoted social welfare, you do not qualify for tax-exempt status as an
organization described under section 501(c)(4).

CONCLUSION:

Based on the information you provided, you are not an organization described under section
501(c)(4) of the Code, and as such, you do not qualify for exemption from federal income tax
under section 501(a).

You have the right to file a protest if you believe this determination is incorrect. To protest, you
must submit a statement of your views and fully explain your reasoning. You must submit the
statement, signed by one of your officers, within 30 days from the date of this letter. We will
consider your statement and decide if the information affects our determination.

Your protest statement should be accompanied by the following declaration:

Under penalties of perjury, I declare that I have examined this protest statement, including
accompanying documents, and, to the best of my knowledge and belief, the statement
contains all the relevant facts, and such facts are true, correct, and complete.

You also have a right to request a conference to discuss your protest. This request should be
made when you file your protest statement. An attorney, certified public accountant, or an
individual enrolled to practice before the Internal Revenue Service may represent you. If you
want representation during the conference procedures, you must file a proper power of
attorney, Form 2848, Power of Attorney and Declaration of Representative, if you have not
already done so. For more information about representation, see Publication 947, Practice
before the IRS and Power of Attorney. All forms and publications mentioned in this letter can be
found at www.irs.gov, Forms and Publications.

10

If you do not intend to protest this determination, you do not need to take any further action. If
we do not hear from you within 30 days, we will issue a final adverse determination letter. That
letter will provide information about filing tax returns and other matters.

Please send your protest statement, Form 2848 and any supporting documents to this address:

Internal Revenue Service
[SE:T:EO:RA:T:3]
1111 Constitution Ave, N.W.
Washington, DC 20224

You may also fax your statement using the fax number shown in the heading of this letter. If
you fax your statement, please call the person identified in the heading of this letter to confirm
that he or she received your fax.

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

Sincerely,

Lois G. Lerner
Director, Exempt Organizations