IRS revokes an organization's tax exemption after repeated failures to provide records

Plain-English summary

The IRS issued a final adverse determination revoking an organization's exemption under IRC § 501(c)(3), effective January 1 of the redacted year. The organization did not provide records and other information requested during the examination, and the IRS had no record of receiving the organization's past-due returns. The determination also states that the organization carried on no charitable activities and therefore failed the operational test. Contributions to the organization were no longer deductible, and the organization was required to file federal income tax returns.

Ruling snapshot

• Question: Did the organization continue to qualify for exemption under IRC § 501(c)(3)?
• Outcome: Revocation
• Key authorities: IRC §§ 501(c)(3), 6033, 507, 7428, and 170; Treas. Reg. §§ 1.501(c)(3)-1(c) and 1.6033-2(i)(2)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Appeals Office

“_ Taxpayer Identification

Number:

Release Number: 201247025 Person to Contact:
Release Date: 11/23/2012
Date: August 28, 2012

Fax: ****

Tax Period(s) Ended:
UIL: 501.03-00

Dear

This is a final adverse determination regarding your exempt status under section
501(c)(3) of the Internal Revenue Code (the “Code”). It is determined that you do not
qualify as exempt from Federal income tax under section 501(c)(3) of the Code effective
January 1, 20XX.

The revocation of your exempt status was made for the following reason(s):

You have failed to provide documentation as required by section 6033(a){1) of the
Internal Revenue Code as well as section 1.6033-2(i)(2) of the Income Tax Regulations,
which provides that whether or not an exempt organization is required to file an annual
information return, it shall submit such additional information as may be required by the
Internal Revenue Service for the purpose of inquiring into its exempt status

In addition, since you carry on no charitable activities, you fail the operational test under
section 1.501(c)(3)-1(c) of the Income Tax Regulations.

Contributions to your organization are not deductible under section 170 of the Code.

You are required to file Federal income tax returns on Forms **** for the tax periods
stated in the heading of this letter and for all tax years thereafter. File your return with the
appropriate Internal Revenue Service Center per the instructions of the return. For further
instructions, forms, and information please visit www.irs.gov.

If you were a private foundation as of the effective date of revocation, you are
considered to be taxable private foundation until you terminate your private foundation
status under section 507 of the Code. In addition to your income tax return, you must
also continue to file Form 990-PF by the 15th Day of the fifth month after the end of your
annual accounting period.

Processing of income tax returns and assessments of any taxes due will not be delayed
should a petition for declaratory judgment be filed under section 7428 of the Code.

If you decide to contest this determination, you may file an action for declaratory
judgment under the provisions of section 7428 of the Code in one of the following three
venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3)
the United States District Court for the District of Columbia. A petition or complaint in
one of these three courts must be filed within 90 days from the date this determination
letter was mailed to you. Please 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. See also Publication 892.

You also 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 get prompt and proper handling. If you
want Taxpayer Advocate assistance, please contact the Taxpayer Advocate for the IRS
office that issued this letter. You may call toll-free, 1-877-777-4778, for the Taxpayer
Advocate or visit www. irs.gov/advocate for more information.

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

Sincerely Yours,

Acting Appeals Team Manager

Enclosure: Publication 892

Internal Revenue Service Department of the Treasury

TE/GE Division
450 Golden Gate Avenue MS SF 7-4-01
San Francisco, California 94102-3412

Date: March 22, 2011 Taxpayer Identification Number:
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 organization's exempt status is necessary.

If you do not agree with our position you may appeal your case. The enclosed Publication
3498, The Examination Process, explains 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.

If you request a conference, we will forward your written statement of protest to the Appeals
Office and they will contact you. For your convenience, an envelope is enclosed.

If you and Appeals do not agree on some or all of the issues after your Appeals conference, or if
you do not request an Appeals conference, you may file suit in United States Tax Court, the
United States Court of Federal Claims, or United States District Court, after satisfying
procedural and jurisdictional requirements as described in Publication 3498.

You may also request that we refer this matter for technical advice as explained in Publication
892, Exempt Organization Appeal Procedures for Unagreed Issues. If a determination letter is
issued to you based on technical advice, no further administrative appeal is available to you
within the IRS on the issue that was the subject of the technical advice.

If you accept our findings, please sign and return the enclosed Form 6018, Consent to
Proposed Adverse Action. We will then send you a final letter revoking your exempt status. If
we do not hear from you within 30 days from the date of this letter, we will process your case on
the basis of the recommendations shown in the report of examination and this letter will become
final. In that event, you will be required to file Federal income tax returns for the tax period(s)
shown above. File these returns with the Ogden Service Center within 60 days from the date of
this letter, unless a request for an extension of time is granted. File returns for later tax years
with the appropriate service center indicated in the instructions for those returns.

Letter 3610 (Rev 11-2003)
Catalog Number 34801V

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:

Oakland Area Office
1301 Clay Street, Suite 1030N
Oakland, CA 94612-5210

(510) 637-2070
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

2 Letter 3610 (Rev 11-2003)
Catalog Number 34801V

E 886A Department of the Treasury - Internal Revenue Service Schedule No. or
= Explanation of Items Exhibit _
Name of Taxpayer Tax Identification Number Year/Period Ended
ORG EIN Dec 31, 20XX
LEGEND
ORG - Organization name XX - Date EIN - EIN President - president
ISSUE:

Is ORG exempt from tax under Internal Revenue Code Section 5011(c)(3)?
FACTS:

Internal Revenue Service records show that ORG was recognized as exempt under section 501(c)
(3) of the Internal Revenue Code in August 20XX.

The Internal Revenue Service received Form 990 for the year ending December 31, 20XX from
ORG on December 16, 20XX. The Internal Revenue service has no record of receiving any
Forms 990 for any years since 20XX.

On March 1, 20XX, the Internal Revenue Service sent Letter 3611, Publication One and Form
4564, Information Document Request to ORG. The letter set an examination appointment for
March 30, 20XX.

President, President of ORG, met with the Internal Revenue Service on June 9, 20XX. He was
interviewed, but did not have any of the documents requested on March 1, 20XX.

On June 10, 20XX, the Internal Revenue Service sent another Form 4564, Information
Document Request to ORG. The form asked ORG to have the requested documents available at
the next appointment, set for July 19, 20XX.

President, President of ORG, met with the Internal Revenue Service on July 19, 20XX. He did
not have any of the documents requested on June 10, 20XX.

On July 19,20XX, the Internal Revenue Service sent another Form 4564, Information Document
Request to ORG. The form asked ORG to mail the requested documents by August 9, 20XX.

On August 9, 20XX, the Internal Revenue Service received some of the documents requested:
Bank statements and cancelled checks for 20XX, a copy of a loan note made to President, and
records of some of his payments on the note.

On September 20, 20XX, the Internal Revenue Service sent another Form 4564, Information
Document Request to ORG. The documents requested were for brokerage accounts, payments to
a credit card and records of any additional payments made on the loan to President. The form
asked ORG to mail the requested documents by October 12, 20XX.

On November 22, 20XX, the Internal Revenue Service sent another copy of the September 20,
Document Request with the notation stating "Second copy of this request Please respond."

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -1-

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit

Name of Taxpayer Tax Identification Number Year/Period Ended

ORG EIN Dec 31, 20XX

On November 29, 20XX, the Internal Revenue Service sent a letter by certified mail to ORG
noting that it had no record that the organization had filed Forms 990 for the years 20XX and
20XX and that the returns were past due. The letter asked that the organization file the returns
with the examining agent within 90 days or explain why they were not due.

On January 5, 20XX, the Internal Revenue Service sent Letter 1477 by certified mail to ORG
with copies of the last document request. Letter 1477 gives the organization 15 days to respond
and noted that failure to respond would result in revocation.

The Internal Revenue Service has no record of receiving the past due returns or the documents
requested by the last Form 4564, Information Document Request.

LAW:

Internal Revenue Code section 501(c)(3) 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.

Internal Revenue Code section 6033(a)(1) 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, and shall 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;..."

§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 I of subtitle A of the Code, section 6033, and chapter 42 of subtitle D of
the Code."

Revenue Ruling 59-95, 1959-1 CB 627, held 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

Form 886- Acrev.4-68) Department of the Treasury - Internal Revenue Service
Page: -2-

Department of the Treasury - Internal Revenue Service Schedule No. or
ahaa Explanation of Items Exhibit____
Identification Number | Year/Period Ende
ame of Taxpayer IN Tax Identifica Dec 31, 20XX

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.

GOVRNMENT'S POSITION:

Despite repeated requests, ORG has not responded to requests for information, has not filed past
due returns nor has it explained why returns for 20XX or 20XX might not be due. Because of its
failure to observe the conditions for the continuation of an exempt status, its exempt status
should be revoked as of January 1, 20XX.

TAXPAYER'S POSITION:

ORG has not submitted its position.

CONCLUSION:

Exemption under section 501(c)(3) of the Internal Revenue Code is revoked effective January 1,

20XX. The organization is required to file forms 1120, US Corporation Income Tax Returns, for
20XX and all subsequent years.

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -3-