IRS revokes a seafarer center's section 501(c)(4) exemption

Plain-English summary

The IRS revoked an organization's exemption under IRC § 501(c)(4), effective January 1 of the specified year. The organization operated a center serving crew members of cruise ships docking at a port and had previously offered services such as low-cost calls, internet, mailing, money transfer, food, and sports activities. During the examined years, its income came from rental income and fees paid per ship call, while its expenses were tied to rented facilities and it did not conduct activities for its members. The IRS concluded that the organization had changed its operations in a way that was inconsistent with exemption and revoked its status.

Ruling snapshot

• Question: Did the organization continue to qualify for exemption under IRC § 501(c)(4)?
• Outcome: Revocation of the organization's section 501(c)(4) exemption, effective January 1 of the specified year.
• Key authorities: IRC §§ 501, 170, 503, and 6110; Treas. Reg. §§ 1.501(c)(4)-1, 1.501(c)(12)-1, and 1.274-2.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

1100 Commerce, MC 4920 DAL

Dallas, TX 75242

501-04.00

TAX EXEMPT AND

GOVERNMENT ENTITIES

DIVISION

Release Number: 201335017 Taxpayer Identification Number:

Release Date: 8/30/2013

LEGEND Form:

ORG - Organization name Tax Year(s) Ended:

XX - Date Address - address Person to Contact/ ID Number

Date: May 1, 2013 Contact Numbers:

Phone:

Fax

CERTIFIED MAIL — RETURN RECEIPT REQUESTED

Dear

In a determination letter dated March 11, 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 letter with regard to your exempt
status.

We previously provided you a report of examination explaining why we believe revocation of your
exempt status was necessary. At that time, we informed you of your right to contact the Taxpayer
Advocate, as well as your appeal rights. On February 27, 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. 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:

[illegible]

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

Thank you for your cooperation.

Sincerely,

Nanette M. Downing

Director, EO Examinations

Internal Revenue Service Department of the Treasury

Tax Exempt and Government Entities Division

Exempt Organizations: Examinations

801 Tom Martin Dr. Room 263

Birmingham, AL 35211

Date: February 8, 2013 Taxpayer Identification Number:

Form:

Tax Year(s) Ended:

Person to Contact/ID Number:

ORG Contact Numbers:

ADDRESS 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

Letter 3610 (Rev 11-2003)

Catalog Number 34801V

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.

Thank you for your cooperation.

Sincerely,

Nanette M. Downing

Director, EO Examinations

Enclosures:

Publication 892

Publication 3498

Form 6018-A

Report of Examination

Envelope

2 Letter 3610 (Rev 11-2003)

Catalog Number 34801V