IRS denies exemption to a foreclosure referral organization

Plain-English summary

The IRS denied exemption under IRC § 501(c)(3) to an organization that referred homeowners to two for-profit affiliates for mortgage and foreclosure services. The organization received commissions for referrals, did not limit its services to a charitable class, and did not provide substantive educational or counseling programs. The IRS concluded that the organization failed both the organizational and operational tests, operated for a substantial commercial purpose, and served private interests. It also failed requirements applicable to credit counseling organizations under § 501(q), including governance and referral-fee rules. Contributions were not deductible under § 170, and the organization was required to file federal income tax returns.

Ruling snapshot

• Question: Does the organization qualify for exemption under §§ 501(c)(3) and 501(q)?
• Outcome: Denied.
• Key authorities: IRC §§ 501(c)(3), 501(q), 170, and 6104; Treas. Reg. §§ 1.501(c)(3)-1 and 1.501(a)-1.

Full text (IRS public release)

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

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Contact Person:

Release Number: 201405023
Release Date: 1/31/2014
Date: November 8, 2013

Identification Number:

UIL Code: 501.03-05 Contact Number:
501.35-00
501.36-00 Employer Identification Number:
501.36-01

Form Required To Be Filed:

Tax Years:

Dear

This is our final determination that you do not qualify for exemption from federal income
tax as an organization described in Internal Revenue Code section 501(c)(3). Recently,
we sent you a letter in response to your application that proposed an adverse
determination. The letter explained the facts, law and rationale, and gave you 30 days
to file a protest. Since we did not receive a protest within the requisite 30 days, the
proposed adverse determination is now final.

Since you do not qualify for exemption as an organization described in Code section
501(c)(3), donors may not deduct contributions to you under Code section 170. 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.

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, you should follow the instructions in Notice 437. If you agree with
our deletions, you do not need to take any further action.

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Catalog Number 47632S

2

In accordance with Code section 6104(c), we will notify the appropriate State officials of
our determination by sending them a copy of this final letter and the proposed adverse
letter. You should contact your State officials if you have any questions about how this
determination may affect your State responsibilities and requirements.

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,

Kenneth Corbin
Acting Director, Exempt Organizations

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

Letter 4038(CG) (11-2005)
Catalog Number 47632S

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

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION

Date: September 24, 2013 Contact Person:
Identification Number:
Contact Number:
FAX Number:
Employer Identification Number:

LEGEND: UIL:

B = individual 501.03-05

C = individual 501.35-00

D = individual 501.36-00

E = fund 501.36-01

F=LLC

g = dollar amount
h = dollar amount
j = dollar amount

O = state
P = date

Dear

We have considered your application for recognition of exemption from federal income
tax under Internal Revenue Code section 501(a). Based on the information provided,
we have concluded that you do not qualify for exemption under Code section 501(c)(3).
The basis for our conclusion with respect to your tax-exempt status is set forth below.

Issues
Do you qualify for exemption under section 501(c)(3) of the Code? No, for the reasons
explained below.

Do you meet the requirements under section 501(q) of the Code? No, for the reasons
described below.

Facts
You were formed in the state of O on P. Your Articles of Incorporation state you are a

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“foreclosure-defense referral firm helping homeowners locate the resources and
services necessary to save their homes.” Your articles do not contain a dissolution
clause. You have not adopted Bylaws.

You initially listed three individuals on your governing body, later changing that to only
two: B and C. B is listed as your president, CEO, and owner.

You will be providing referral services for ‘any and all’ homeowners in the state of O,
those in past due status, current status, or foreclosure. Your services are for any
homeowners looking for assistance, there are no limitations, including financial, for who
can participate. You do not solicit financial information from potential participants,
asking them to complete only a five to seven question survey. You meet with clients
only if they are a ‘walk-in’. You do not offer any workshops, classes or seminars. These
are provided, however, by your affiliates.

The affiliates are E and F, two for-profit entities. You make client referrals to E and F in
return for commission. F pays g dollars per referral including a 10% residual monthly
payment per client. When asked specifically how many referrals you have made since
your formation you stated, ‘many’, but also stated you refer 15-25 clients per month.

Both B and C are projected to receive compensation; however, you stated only B had
just begun to receive compensation - “E and F only paid me (B) h and j dollars this
year”.

You provided a contract showing you are a “contractor” and will market F’s services,
obtain information from clients and maintain client contact. The contract was signed by
B and D. While D is not on your governing body you indicated a connection with him as
you are ‘carrying out the welcoming and forward the call for E and F managed by D’.
You did not indicate you had a contract with E.

Your website includes the following statements:

We are a non-profit organization whose purpose is to help homeowners
who cannot afford their monthly mortgage payment fight to keep their
homes. We offer mortgage reduction through an affiliation of companies
determined to face your lender on your behalf. If you are undergoing an
eviction or foreclosure process, we can help! We guarantee you will
remain in your home for 18 to 24 months while our attorneys negotiate a
substantial reduction of your current principal mortgage. Also during this
time you are not responsible for paying taxes or insurance on the home
and you will not have to deal with your creditors, we will deal with them for
you! As for your credit, no negative remarks will be reported during this
period of time, being that you are taking legal actions regarding this

Letter 4034(CG) (11-2011) 2
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matter. Call us today and let our specialists take the tremendous pressure
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Did you know that 9 out of 10 people who have a “no document” or “stated
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Again, we guarantee our services!

You provided only limited financial information to us. Your receipts on Form 1023 are
only from investment income. When asked further about your sources of revenue you
stated “my annual gross receipts is not over $10000”, and referred instead to the
amounts E and F have paid B for commission. Your expenditures were for salaries and
wages as well as occupancy and professional fees.

Law
Section 501(c)(3) of the Code provides that corporations may be exempted from tax if
they are organized and operated exclusively for charitable or educational purposes and
no part of their net earnings inures to the benefit of any private shareholder or
individual.

Section 501(q) of the Code provides that organizations which provide “credit counseling
services” as a substantial purpose shall not be exempt from taxation under section
501(a) unless they are described in sections 501(c)(3) or 501(c)(4) and they are
organized and operated in accordance with the following requirements:

(A) The organization--

(i) provide credit counseling services tailored to the specific needs and circumstances of
consumers,

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(ii) makes no loans to debtors (other than loans with no fees or interest) and does not
negotiate the making of loans on behalf of debtors,

(iii) provides services for the purpose of improving a consumer's credit record, credit
history, or credit rating only to the extent that such services are incidental to providing
credit counseling services, and

(iv) does not charge any separately stated fee for services for the purpose of improving
any consumer's credit record, credit history, or credit rating.

(B) The organization does not refuse to provide credit counseling services to a
consumer due to the inability of the consumer to pay, the ineligibility of the consumer for
debt management plan enrollment, or the unwillingness of the consumer to enroll in a
debt management plan.

(C) The organization establishes and implements a fee policy which--
(i) requires that any fees charged to a consumer for services are reasonable,
(ii) allows for the waiver of fees if the consumer is unable to pay, and

(iii) except to the extent allowed by State law, prohibits charging any fee based in whole
or in part on a percentage of the consumer's debt, the consumer's payments to be
made pursuant to a debt management plan, or the projected or actual savings to the
consumer resulting from enrolling in a debt management plan.

(D) At all times the organization has a board of directors or other governing body-

(i) which is controlled by persons who represent the broad interests of the public, such
as public officials acting in their capacities as such, persons having special knowledge
or expertise in credit or financial education, and community leaders,

(ii) not more than 20 percent of the voting power of which is vested in persons who are
employed by the organization or who will benefit financially, directly or indirectly, from
the organization's activities (other than through the receipt of reasonable directors’ fees
or the repayment of consumer debt to creditors other than the credit counseling
organization or its affiliates), and

(iii) not more than 49 percent of the voting power of which is vested in persons who are
employed by the organization or who will benefit financially, directly or indirectly, from
the organization's activities (other than through the receipt of reasonable directors’
fees).

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(F) The organization receives no amount for providing referrals to others for debt
management plan services, and pays no amount to others for obtaining referrals of
consumers.

Section 501(q)(2)(A)(i) provides that if an organization is described in section 501(c)(3)
and is providing credit counseling services as a substantial purpose, it may be
exempted from tax only if it does not solicit contributions from consumers during the
initial counseling process or while the consumer is receiving services from the
organization.

Section 501(q)(4)(A) defines, for purposes of section 501(q), the term “credit counseling
services” to mean (i) the providing of educational information to the general public on
budgeting, personal finance, financial literacy, saving and spending practices, and the
sound use of consumer credit; (ii) the assisting of individuals and families with financial
problems by providing them with counseling; or (iii) a combination of the activities
described above.

Section 1.501(c)(3)-1(a)(1) of the Income Tax Regulations (“regulations”) provides that,
in order to be exempt as an organization described in section 501(c)(3) of the Code, an
organization must be both organized and operated exclusively for one or more of the
purposes specified in such section. If an organization fails to meet either the
organizational test or the operational test, it is not exempt.

Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be
regarded as “operated exclusively” for one or more exempt purposes only if it engages
primarily in activities that accomplish one or more of such exempt purposes specified in
section 501(c)(3) of the Code. An organization will not be so regarded if more than an
insubstantial part of its activities is not in furtherance of an exempt purpose.

Section 1.501(c)(3)-1(c)(2) of the regulations provides that an organization is not
operated exclusively for one or more exempt purposes if its net earnings inure in whole
or in part to the benefit of private shareholders or individuals. Section 1.501(a)-1(c) of
the regulations defines the words “private shareholder or individual” in section 501 of
the Code to refer to persons having a personal and private interest in the activities of
the organization.

Section 1.501(c)(3)-1(d)(1)(ii) of the regulations provides that an organization is not
organized or operated exclusively for one or more exempt purposes unless it serves a
public rather than a private interest. Thus, to meet the requirements of this subsection,
it is necessary for an organization to establish that it is not organized or operated for the
benefit of private interests, such as designated individuals, the creator or his family,
shareholders of the organization, or persons controlled, directly or indirectly, by such
private interests.

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In Rev. Rul. 69-441, 1969-2 C.B. 115, the Service found that a nonprofit organization
formed to help reduce personal bankruptcy by informing the public on personal money
management and aiding low-income individuals and families with financial problems
was exempt under section 501(c)(3) of the Code. The organization provided information
to the public on budgeting, buying practices, and the sound use of consumer credit
through the use of films, speakers, and publications. It aided low-income individuals
and families who have financial problems by providing them with individual counseling,
and if necessary, by establishing budget plans. The organization did not charge fees for
counseling services or proration services and relied upon contributions, primarily from
the creditors participating in the organization's budget plans, for its support. The Service
found that the organization was relieving the poor and was instructing the public on
subjects useful to the individual and beneficial to the community. Thus, the organization
was exempt from federal income tax under section 501(c)(3) of the Code.

In Better Business Bureau of Washington, D.C. v. U.S., 326 U.S. 279, 283, 66 S. Ct.
112, 90 L. Ed. 67 (1945), the Supreme Court held that the “presence of a single...
[nonexempt] purpose, if substantial in nature, will destroy the exemption regardless of
the number or importance of truly . . . [exempt] purposes.”

In Consumer Credit Counseling Service of Alabama, Inc. v. United States, 78-2
U.S.T.C. 9660 (D.D.C. 1978), the court held that an organization that provided free
information on budgeting, buying practices, and the sound use of consumer credit
qualified for exemption from income tax because its activities were charitable and
educational.

The professional counselors employed by the organizations spent about 88 percent of
their time in activities such as information dissemination and counseling assistance
rather than those connected with the debt management programs. The primary sources
of revenue for these organizations were provided by government and private foundation
grants, contributions, and assistance from labor agencies and United Way. An
incidental amount of their revenue was from service fees. Thus, the court concluded
that “each of the plaintiff consumer credit counseling agencies was an organization
described in section 501(c)(3) as a charitable and educational organization.” See also,
Credit Counseling Centers of Oklahoma, Inc. v. United States, 79-2 U.S.T.C. 9468
(D.D.C. 1979), in which the facts were virtually identical and the law was identical
to those in Consumer Credit Counseling Service of Alabama, Inc. v. United States,
discussed immediately above.

In People of God Community v. Commissioner of Internal Revenue, 75 T.C. 127 (1980),
the court found that part of an organization's net earnings inured to the benefit of private
individuals because their compensation was based on a percentage of the
organization's gross receipts with no upper limit. The court held that the petitioner was

Letter 4034 (CG) (11-2011) 6
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not exempt as an organization described in section 501(c)(3) of the Internal Revenue
Code of 1954.

In Easter House v. U.S., 12 Cl. Ct. 476, 486 (1987), affd, 846 F. 2d 78 (Fed. Cir.) cert.
denied, 488 U.S. 907, 109 S. Ct. 257, 102 L. Ed. 2d 246 (1988), the court found an
organization that operated an adoption agency was not exempt under section 501(c)(3)
of the Code because a substantial purpose of the agency was a nonexempt commercial
purpose. The court concluded that the organization did not qualify for exemption under
section 501(c)(3) because its primary activity was placing children for adoption in a
manner indistinguishable from that of a commercial adoption agency. The court rejected
the organization's argument that the adoption services merely complemented the health
related services to unwed mothers and their children. Rather, the court found that the
health-related services were merely incident to the organization's operation of an
adoption service, which, in and of itself, did not serve an exempt purpose. The
organization's sole source of support was the fees it charged adoptive parents, rather
than contributions from the public. The court also found that the organization competed
with for-profit adoption agencies, engaged in substantial advertising, and accumulated
substantial profits. Accordingly, the court found that the "business purpose, and not the
advancement of educational and charitable activities purpose, of plaintiffs adoption
service is its primary goal" and held that the organization was not operated exclusively
for purposes described in section 501(c)(3).

In Airlie Foundation v. Commissioner, 283 F. Supp. 2d 58 (D.D.C., 2003), the court
relied on the “commerciality” doctrine in applying the operational test. Because of the
commercial manner in which this organization conducted its activities, the court found
that it was operated for a non-exempt commercial purpose, rather than for a tax exempt
purpose. As the court stated: 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.

In Solution Plus, Inc. v. Commissioner, T.C. Memo. 2008-21, the Tax Court held that a
credit counseling organization was not exempt under section 501(c)(3) because it was
not organized and operated exclusively for educational or charitable purposes and
impermissibly served private interests. The organization did not have any meaningful
educational program or materials for providing to people who contacted the
organization, and its financial education seminars for students constituted an
insignificant part of the organization’s overall activities. The Court held that the
organization's purposes were not educational because its "activities are primarily
structured to market, determine eligibility for, and enroll individuals in DMPs." (Debt
Management Plans) The Tax Court also held that the organization's purposes were not

Letter 4034(CG) (11-2011) 7
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charitable because "its potential customers are not members of a [charitable] class that
are benefited in a 'non-select manner. The Tax Court further held the organization
would operate for the private interests of its founder because the founder and spouse
were the only directors, the founder was the only officer and employee, and his
compensation was based in part on the organization's DMP sales activity levels. Finally,
the Tax Court held that the facts in Credit Counseling Services of Alabama v. United
States, 78-2 U.S.T.C. 9660 (D.D.C. 1978) “stand in stark contrast” because “the sale of
DMPs is the primary reason for [Solution Plus's] existence, and its charitable and
educational purposes are, at best, minimal.”

Application of Law

Section 501(c)(3) of the Code sets forth two main tests for an organization to be
recognized as exempt. An organization must be both organized and operated
exclusively for purposes described in section 501(c)(3) as specified in section
1.501(c)(3)-1(a)(1) of the regulations. You fail both tests.

Organizational Test
To satisfy the organizational test an organization must have valid purpose and
dissolution clauses in its organizing document. Your Articles provide that your specific
purpose is to act as “a foreclosure-defense referral firm helping homeowners locate the
resources and services necessary to save their homes.” Your Articles do not limit your
purposes to one or more exempt purposes. Therefore, you do not have a valid purpose
clause. Your articles also do not contain a dissolution clause. Therefore, you do not
meet the organizational test.

Operational Test
To satisfy the operational test, an organization must establish that it is operated
exclusively for one or more exempt purposes, as stated in section 1.501(c)(3)-1(c)(1) of
the regulations. You failed to establish that you operate exclusively for one or more
exempt purposes.

Your Activities Are Not Educational
You are a contractor for E and F. You conduct your activities only to satisfy your
contract terms as specified in that contract. You do not conduct any educational
activities such as seminars or workshops. You are distinguishable from the
organizations in Consumer Credit Counseling Service of Alabama, supra, and Rev. Rul.
69-441 by the methodology you use to conduct your counseling activities. Unlike those
organizations, you offer no counseling or planning sessions, and disseminate no
information. You provided no evidence that your employee(s) does anything more than
review a client’s financial situation and refer them to E or F.

You do not operate a substantive on-going educational program. You do not dedicate
any revenue to activities involving educational programs. You do not allocate any

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expenses to training employees. Like the organization in Solution Plus, supra, you did
not provide evidence that you help clients develop an understanding of the cause of
their financial problems or a plan to address their financial problems. You provided no
evidence that you intend to establish long-term counseling relationships with your
clients. Your service consists of gathering a client’s personal information as required by
your contract with E or F for referral.

Your operational focus and efforts are on generating revenue in the form of fees from
your referral services. You refer your clients to E or F per your contract agreements for
a fee. Like the organizations described in Solution Plus, supra, Better Business Bureau,
supra, and Easter House, supra, your activities have an underlying commercial motive.
Thus, your activities are not educational within the meaning of section 501(c)(3).

Your Activities Are Not Charitable
Most of your time and resources are devoted to gathering a client’s personal information
for referral to E or F. F pays you a commission rate per each client referral. The
information gathering for referral does not provide relief to the poor and distressed or
serve any other purpose recognized as charitable. You state your services are available
to anyone regardless of their financial situation.

You represent that you offer your services free of charge to your clients. Your services
are referral services not support services. You submitted no evidence that you limit
your services to low income individuals or to any charitable class of individuals. “All” is
not synonymous with “poor and distressed”. Accordingly, you are unlike the
organizations described in Consumer Credit Counseling Service of Alabama, supra and
Rev. Rul. 69-441, supra, which aided low-income individuals and families who have
financial problems, thereby relieving the poor and distressed.

You are unlike the organizations in Consumer Credit Counseling Service of Alabama;
supra, and Rev. Rul. 69-441, supra, even though you do not charge a fee to your
clients. Your clients will be charged a fee by E or F. You, in turn, receive a referral fee
from E or F. Thus, you failed to establish that your activities are charitable within the
meaning of section 501(c)(3) of the Code.

You Have a Substantial Nonexempt Commercial Purpose
The courts have developed guidelines intended to help discern whether an organization
has a substantial nonexempt commercial purpose. (See Easter House, Airlie)
Generally, the factors proffered by courts focus on the nature of the activities and how
an organization conducts its business.

Your activities consist of gathering individuals’ personal information or data and
referring such individuals to for-profit entities. Providing referral services for
commission demonstrates that you are operating like a commercial organization

Letter 4034(CG) (11-2011) 9
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seeking to maximize profits, rather than a charitable or educational organization seeking
to serve the public. Thus, similar to the organization in Easter House, the profit-making
fee structure of your referral services overshadows any of your other purposes.

Your finance structure further demonstrates that you operate for a substantial
nonexempt commercial purpose. You indicated that you main source of support is from
the referral fees. There is also no evidence that you have received contributions or gifts
from disinterested members of the public. Accordingly, you are unlike the organizations
described in Consumer Credit Counseling Service of Alabama, supra, that received the
bulk of their support from government and private foundation grants, contributions, and
assistance from labor agencies and the United Way (only an incidental amount of their
revenue was from fees). Your operations are financed only by commissions from E or
F. As noted in Easter House, receiving support substantially from fees for services is
indicative of a nonexempt purpose.

Like the organizations in Easter House or Airlie, you are in direct competition with
commercial businesses because you conduct activities generally conducted for a profit.
You conduct many of your activities in the same manner as commercial enterprises.
Accordingly, your commercial activities evidence a substantial nonexempt commercial
purpose.

The activities you identify as “educational” are merely incidental to your business of
providing housing counseling. Thus, more than an insubstantial part of your activities is
in furtherance of a nonexempt purpose, in contravention of section 1.501(c)(3)-1(c)(1) of
the regulations. Therefore, you are not operated for an exempt purpose.

Inurement
Section 501(c)(3) of the Code and section 1.501(c)(3)-1(c)(2) of the regulations state
that an organization is not operated exclusively for one or more exempt purposes if its
net earnings inure in whole or in part to the benefit of private shareholders or
individuals.

You receive a set commission per referral made as well as a monthly residual. You
indicate no limits as to the compensation that could be earned as a result of this
arrangement. You have two board members, both of whom were projected to receive
compensation, and provided no evidence of compensation being decided without
conflict of interest. Compensation without limits has been held to be inurement in

‘People of God Community. Here, compensation is tied directly to the number of
referrals made to E or F, directly benefitting B and/or C without set limits, resulting in
inurement.

Private Benefit
An organization is not organized or operated exclusively for exempt purposes unless it

Letter 4034 (CG) (11-2011) 10
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serves a public rather than a private interest as stated in section 1.501(c)(3)-1(d)(1)(ii)
of the regulations. You are serving a private interest by providing referrals to individuals
for a fee. Your clients are not limited to a charitable class. Anyone can benefit from your
services if they want to improve their personal mortgage situation. Therefore, the benefit
of the service provided does not serve an exempt purpose, nor is the benefit incidental
because the referral services are main focus of the organization. The referral services
relieve your clients of the responsibility of securing a referral to E and/or F while E and F
both still benefit from those referrals. Therefore, you have not demonstrated that your
operations serve a public rather than a private interest as required by section
1.501(c)(3)-1(d)(1)(ii) of the regulations.

Section 501(q) of the Code

An organization that provides educational information on financial topics or financial
counseling is providing “credit counseling services” within the meaning of section
501(q)(4)(A) of the Code. Providing a credit counseling service and information
regarding credit may fall within the parameters of the above definition. Thus, even if
you had established that you engage in educational activities as a substantial purpose,
to be exempt from taxation you must, in addition to complying with the requirements of
section 501(c)(3), comply with the provisions of section 501(q). You do not comply with
certain provisions of section 501(q) of the Code.

IRC section 501(q)(1)(D) states that credit counseling organizations must be governed
by a board controlled by persons representing the broad interests of the public rather
than by persons who benefit from the organization's activities. All of the voting power of
your board of directors is vested in persons who are employed by or are related to you.
More than 20% of the voting power of your board is vested in individuals who will benefit
financially, directly or indirectly, from your activities (other than through the receipt of
reasonable directors' fees or the repayment of consumer debt to creditors other than the
credit counseling organization or its affiliates). In fact, all of your directors are paid or
will be paid. Accordingly, you do not have a board of directors that is controlled by
persons who represent the broad interests of the public as required by section
501(q)(1)(D)(i). You also fail to meet the requirements of sections 501(q)(1)(D)(ii) and
(iii), which generally specify the percent of voting power that is allowed to be vested in
financially interested persons.

Even though you do not charge a fee for your services from the clients you receive
referral fees from for-profit entities per client. Section 501(q)(2)(A)(i) states that an
organization providing credit counseling services as a substantial purpose may be
exempted from tax only if it does not solicit contributions from consumers during the
initial counseling process or while the consumer is receiving services from the
organization.

You failed to establish that you provide educational information on financial topics or

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financial counseling to homeowners who are at risk of foreclosure as an exclusive
purpose. In addition, your failure to satisfy the requirements of section 501(q) prevents
you from being exempt from taxation under section 501(a).

Conclusion

Based on the facts and information provided, you are not organized or operated
exclusively for exempt purposes. You fail both the organizational and operational tests,
you are operated for commercial rather than educational or charitable purposes, and
you are providing referral services to for profit affiliates. Your earnings will inure to
insiders and you are serving private not public interests. Also, you do not meet the
requirements of 501(q).

Accordingly, you do not qualify for exemption as an organization described in section
501(c)(3) of the Code and you must file federal income tax returns. Contributions to you
are not deductible under section 170.

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. If your statement does not provide a basis to reconsider our
determination, we will forward your case to our Appeals Office. You can find more
information about the role of the Appeals Office in Publication 892, How to Appeal an
IRS Decision on Tax Exempt Status.

Types of information that should be included in your protest can be found on page 1 of
Publication 892, under the heading Filing a Protest. The statement of facts (item 4) must
be accompanied by the following declaration:

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

The declaration must be signed by one of your officers or trustees with personal
knowledge of the facts.

Your protest will be considered incomplete without this statement.

If your representative submits a protest, a substitute declaration must be included
stating that the representative prepared the protest and accompanying documents; and
whether the representative knows personally that the statements of facts contained in
the protest and accompanying documents are true and correct.

Letter 4034 (CG) (11-2011) 12
Catalog Number 47628K

An attorney, certified public accountant, or an individual enrolled to practice before the
internal Revenue Service may represent you during the appeal process. To be
represented during the appeal process, 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.

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 to you. That letter will provide information about filing tax returns
and other matters.

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

Mail to: Deliver to:
Internal Revenue Service Internal Revenue Service
EO Determinations Quality Assurance EO Determinations Quality Assurance

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,

Kenneth Corbin
Acting Director, Exempt Organizations

Enclosure: Publication 892

Letter 4034(CG) (11-2011) 13
Catalog Number 47628K