Other 1318018: IRS revokes an inactive organization's exemption

Plain-English summary

The IRS revoked an organization's exemption under section 501(c)(4) because it had stopped operating. During the examination, a representative said that the organization no longer conducted activities because most of its officers had died, and that its books and records could not be located. The IRS concluded that the organization no longer carried out activities serving an exempt purpose and revoked its status effective January 1, 20XX.

Ruling snapshot

• Question: Whether inactivity required revocation of the organization's exemption under section 501(c)(4).
• Outcome: Revocation.
• Key authorities: IRC § 501(c)(4); Treas. Reg. § 1.501(c)(4)-1.

Full text (IRS public release)

DEPARTMENT (: THE TREASURY

INTERNAL REVie JE SERVICE
TE/GE EO Examinations
1100 Commerce St.
Dallas, Texas 75242 501.04-00
TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
Date: April 26, 2012
Number: 201318018
Release Date: 5/3/2013
LEGEND
eee Det nadecce. address Taxpayer Identification Number:
Form:
Tax Year(s) Ended:
ORG Person to Contact/ID Number:
ADDRESS Contact Numbers:
Telephone:
Fax:

CERTIFIED MAIL — RETRUN RECEIPT REQUESTED
Dear

In a determination letter dated January, 19XX, you were held to be exempt from Federal
income tax under section 501(c)(4) of the Internal Revenue Code (the Code).

Based on recent information received, we have determined you have not operated in
accordance with the provisions of section 501(c)(4) of the Code. Accordingly, your exemption
from Federal income tax is revoked effective January 1°, 20XX. This is a final adverse
determination letter with regard to your status under section 501(c)(4) of the Code.

We previously provided you a report of examination explaining why we believe revocation of
your exempt status is necessary. At that time, we informed you of your right to contact the
Taxpayer Advocate, as well as your appeal rights. On April 6, 20XX, you signed Form 6018-
A, Consent to Proposed Action, agreeing to the revocation of your exempt status under
section 501(c)(4) of the Code.

You are required to file Federal income tax returns for the tax period(s) shown above. If you
have not yet filed these returns, please file them with the Ogden Service Center within 60
days from the date of this letter, unless a request for an extension of time is granted, or
unless an examiner's report for income tax liability was issued to you with other instructions.
File returns for later tax years with the appropriate service center indicated in the instructions
for those returns.

You have the right to contact to 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 contact the person whose name and telephone number
are shown at the beginning of this letter.

Sincerely,

Nanette M. Downing
Director, EO Examinations

DEPARTMENT OF THE TREASURY
Internal Revenue Service
TEGE EO Examinations
1100 Commerce Street
ae emcee coe Dallas, TX 75242

GOVERNMENT ENTITIES
DIVISION

March 10, 2011

Taxpayer Identification Number:

ORG
ADDRESS 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 an
adjustment 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.

Letter 3610 (04-2002)
Catalog Number 34801V

You may also request that we refer this matter for technical advice as explained in
Publication 892, Exempt Organization Appeal Procedures for Unagreed Issues. Ifa
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 modifying or revoking
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.

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.

Letter 3610 (04-2002)
Catalog Numbcr 34801V

Thank you for your cooperation.

Sincerely,

Nanette M. Downing
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Form 6018

Report of Examination
Envelope

Letter 3610 (04-2002)
Catalog Number 34801V

Form 886 A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
ORG December 31, 20XX
LEGEND
ORG - Organization name XX -— Date
ISSUES:

1. Whether revocation of the organization’s tax-exempt status, under IRC section 501(c)(4),
   is necessary because of inactivity.

FACTS:

The ORG is recognized as tax-exempt under section 501(c)(4) of the Internal Revenue Code. Ina
phone conversation on March 9, 20XX, stated that the organization no longer
conducts activities, due to the fact that the majority of the officers have passed away. He stated
that he does not have the books or records and he does not know where they are.

LAw:

An organization exempt under Internal Revenue Code section 501(c)(4) is a civic league or
organization not organized for profit but operated exclusively for the promotion of social
welfare, or local associations of employees, the membership of which is limited to the employees
of a designated person or persons in a particular municipality, and the net earnings of which are
devoted exclusively to charitable, educational, or recreational purposes.

Treasury Regulations section 1.501(c)(4)-1 describes a civic organization as a civic league or
organization that is not organized or operated for profit and is operated exclusively for the
promotion of social welfare.

TAXPAYER’S POSITION

The EO has agreed to the revocation by signing form 6018-A on April 6", 20XX.
GOVERNMENT’S POSITION

The ORG has not engaged in any activities which accomplish one or more of the exempt
purposes specified in IRC section 501(c)(4), in the year under examination. Since the

organization no longer operates any activities related to their exempt purpose we are proposing
revocation of the organizations exempt status.

CONCLUSION

The service is proposing revocation of the of the determination of the exempt status, under IRC
501(c)(4), of the ORG, with a revocation date effective January 1, 20XX, because the

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

Form 886A

Department of the Treasury - Internal Revenue Service
Explanation of Items

Schedule No. or
Exhibit

Name of Taxpayer

ORG

Year/Period Ended

December 31, 20XX

LEGEND

ORG —- Organization name XX - Date

organization has discontinued operations and no longer conducts any activities in accordance

with their exempt purpose.

Form 886-Arev.4-68)

Department of the Treasury - Internal Revenue Service

Page: -2-