IRS revokes exemption after organization ceases operations

Plain-English summary

The IRS revoked an organization's Section 501(c)(3) exemption effective December 31, 20XX. The organization had stopped operating, so it was no longer operated exclusively for an exempt purpose. The examination report describes the organization's original plans to educate builders, architects, suppliers, and the public about research on home-building products, and to provide related training and certification. The taxpayer agreed to revocation, with the report identifying August 30, 20XX as the proposed effective date. Contributions after the effective date were no longer deductible, and the organization was required to file Form 1120.

Ruling snapshot

• Question: Did the organization continue to qualify for exemption under IRC § 501(c)(3) after ceasing operations?
• Outcome: Revocation. The final letter revoked exemption effective December 31, 20XX.
• Key authorities: IRC §§ 170, 501(a), 501(c)(3), 6110, and 7428

Full text (IRS public release)

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE

TEGE EO Examinations Mail Stop 4920 DAL
1100 Commerce St.
Dallas, Texas 75242

501-03.00

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: June 27, 2013

Release Number: 201349017
Release Date: 12/6/2013

LEGEND

ORG - Organization name

XX - Date

Address - address

Taxpayer Identification Number:
Person to Contact:
Employee Identification Number:
Employee Telephone Number:
ORG (Phone)
ADDRESS (Fax)

CERTIFIED MAIL - RETURN RECEIPT

Dear

This is a final adverse determination regarding your exempt status under section 501(c)(3) of the Internal Revenue Code. Our favorable determination letter to you dated November 20XX is hereby revoked and you are no longer exempt under section 501(a) of the Code effective December 31, 20XX.

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

Organizations described in IRC 501(c)(3) and exempt under section 501(a) must be both organized and operated exclusively for exempt purposes. You are no longer operating as of December 31, 20XX. Therefore, you are no longer operating exclusively for exempt purposes as described in IRC 501(c)(3).

Contributions to your organization are no longer deductible under IRC § 170 after December 31, 20XX.

You are required to file income tax returns on Form 1120. These returns should be filed with the appropriate Service Center for the tax year ending December 31, 20XX, and for all tax years thereafter in accordance with the instructions of the return.

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 Internal Revenue Code.

If you decide to contest this determination under the declaratory judgment provisions of section 7428 of the Code, a petition to the United States Tax Court, the United States Claims Court, or the District Court of the United States for the District of Columbia must be filed before the 91st day after the date this determination was mailed to you. Please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed Publication 892. You may write to the United States Tax Court at the following address:

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 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 in the heading of this letter.

Sincerely,

Nanette M. Downing
Director, EO Examinations

Department of the Treasury Date: April 10, 2013

Internal Revenue Service
Tax Exempt and Government Entities Division
1100 Commerce Street MS:4900:DAL
Dallas, Texas 75242

Taxpayer Identification Number:
Form:
Tax year(s) ended:
Person to contact / ID number:
ORG
ADDRESS
Contact numbers:
Manager's name / ID number:
Manager's contact number:
Response due date:

Certified Mail - Return Receipt Requested

Dear

Why you are receiving this letter

We propose to revoke your status as an organization described in section 501(c)(3) of the Internal Revenue Code (Code). Enclosed is our report of examination explaining the proposed action.

What you need to do if you agree

If you agree with our proposal, please sign the enclosed Form 6018, Consent to Proposed Action - Section 7428, and return it to the contact person at the address listed above (unless you have already provided us a signed Form 6018). We'll issue a final revocation letter determining that you aren't an organization described in section 501(c)(3).

After we issue the final revocation letter, we'll announce that your organization is no longer eligible for contributions deductible under section 170 of the Code.

If we don't hear from you

If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final revocation letter. Failing to respond to this proposal will adversely impact your legal standing to seek a declaratory judgment because you failed to exhaust your administrative remedies.

Effect of revocation status

If you receive a final revocation letter, you'll be required to file federal income tax returns for the tax year(s) shown above as well as for subsequent tax years.

What you need to do if you disagree with the proposed revocation

If you disagree with our proposed revocation, you may request a meeting or telephone conference with the supervisor of the IRS contact identified in the heading of this letter. You also may file a protest with the

Letter 3618 (Rev. 6-2012)
Catalog Number 34809F

IRS Appeals office by submitting a written request to the contact person at the address listed above within 30 calendar days from the date of this letter. The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally.

For your protest to be valid, it must contain certain specific information including a statement of the facts, the applicable law, and arguments in support of your position. For specific information needed for a valid protest, please refer to page one of the enclosed Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status, and page six of the enclosed Publication 3498, The Examination Process. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498 generally doesn't apply after we issue this letter.

You also may request that we refer this matter for technical advice as explained in Publication 892. Please contact the individual identified on the first page of this letter if you are considering requesting technical advice. If we issue a determination letter to you based on a technical advice memorandum issued by the Exempt Organizations Rulings and Agreements office, no further IRS administrative appeal will be available to you.

Contacting the Taxpayer Advocate Office is a taxpayer right

You have the right to contact the office of the Taxpayer Advocate. Their assistance isn't a substitute for established IRS procedures, such as the formal appeals process. The Taxpayer Advocate can't reverse a legally correct tax determination or extend the time you have, fixed by law, to file a petition in a United States court. They can, however, see that a tax matter that hasn't 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:

Internal Revenue Service
Office of the Taxpayer Advocate

For additional information

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,

Director, EO Examinations

Enclosures:

Report of Examination
Form 6018
Publication 892
Publication 3498

Letter 3618 (Rev. 6-2012)
Catalog Number 34809F

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or Exhibit #1

Explanation of Items

Name of Taxpayer Year/Period Ended
ORG EIN 20XX12

LEGEND
ORG - Organization name
EIN - EIN
XX - Date

Issue: Whether ORG qualifies for exemption under Section 501(c)(3) of the Internal Revenue Code of 19XX.

Facts: The Corporation is organized and shall be operated exclusively as a non-profit corporation pursuant to the Code and may not take any action prohibited by the Code. The purpose for which the Corporation is organized is exclusively charitable within the meaning of Section 501(c)(3) of the Internal Revenue Code.

1. To inform and educate commercial and residential builders, architects, trades people, suppliers and the public about evidence-based research concerning the impacts of various home building products on human health and safety;

2. To become the leading organization for the dissemination of research through seminars, web-based learning and media relations;

3. To design, develop, implement and provide training and certification programs in connection with the above purposes;

4. To raise funds necessary to provide non-biased research on materials, products and other environmental hazards; and

5. To raise funds; to provide such programs and to further the above mentioned purposes.

The organization is no longer an operational 501(c)(3) as of August 30, 20XX. Actions are being taken to propose revocation.

Government's Position: Based on the non-activity of ORG the organization is not operating primarily for social welfare within the meaning of IRC 501(c)(3).

Taxpayer's Position: ORG agrees to the revocation of its exempt status as an organization described in Section 501(c)(3). The proposed effective date of the revocation is August 30, 20XX.

Conclusion: Although ORG was granted exemption as an organization described in the Internal Revenue Code Section 501(c)(3), it is obvious that the organization is no longer operating as a 501(c)(3) since it closed its doors. This organization does not qualify for exemption under Section 501(c)(3) of the Internal Revenue Code of 19XX because it is not

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

Form 886-A

Department of the Treasury - Internal Revenue Service Schedule No. or Exhibit #1

Name of Taxpayer Year/Period Ended
ORG EIN 20XX12

promoting social welfare within the meaning of the IRC and Regulations. It is in the best interest of the government to propose revocation on the organization since they are no longer an active 501(c)(3) organization.

Form 886-A (Rev. 4-68)

Department of the Treasury - Internal Revenue Service
Page: -2-