IRS revokes exemption after an organization stopped responding and filing required returns

Plain-English summary

The IRS revoked an organization's federal tax exemption under IRC § 501(c)(3), effective as of the stated date in the final letter. The organization did not provide information requested during an examination, and the examination file stated that required returns had not been filed and that the organization was no longer providing services or performing charitable acts. The IRS said contributions were no longer deductible under § 170 and required federal income tax returns to be filed. The determination also described the organization's protest and court-petition rights.

Ruling snapshot

• Question: Did the organization continue to qualify for exemption under IRC § 501(c)(3)?
• Outcome: Revocation.
• Key authorities: IRC §§ 170, 501(c)(3), 6001, 6033, 6104(c), 6110, and 7428; Treas. Reg. §§ 1.501(c)(3)-1(d)(1)(ii) and 1.6033-2(h)(2); Rev. Proc. 90-27; Rev. Rul. 59-95

Full text (IRS public release)

Internal Revenue Service
4920DAL: EO Mandatory Review
1100 Commerce Street

Dallas, Tx 75242

Number: 201406017
Release Date: 2/7/2014

Date: July 22, 2009

LEGEND

ORG - Organization name

XX - Date Address - address
ORG

ADDRESS

Certified Mail

Dear

Department of the Treasury
Employer Identification No.:

Person to Contact:

Employee ID Number

Tel:
Fax:

Form Required to be Filed:
Tax Years:

Last date for filing a petition with the
Tax Court, the Claims Court, or the United
States District Court for the District of
Columbia:

October 20, 20XX

UIL: 501.03-00

This is a final adverse determination as to your exempt status under section 501(c)(3) of the
Internal Revenue Code (IRC). It is determined that you are no longer recognized as exempt from
Federal income tax under IRC section 501(c)(3), effective December 29, 1999, for the following

reason(s):

In your letter(s) dated March 12. 20XX and December 16, 20XX, we requested information
necessary to conduct an examination of your Form 990 for the year ended December 31, 20XX

We have not received the requested information

Section 1.6033-2(h)(2) of the Income Tax Regulations provides. in part. that every organization
which is exempt from tax, shall submit such additional information as may be required by the
Internal Revenue Service for the purpose of inquiring into its exempt status.

Since you have not provided the requested information, we hereby revoke your organization's
exemption from Federal income tax under section 501(c)(3) of the internal Revenue Code

effective January 1, 20XX.

Contributions to your organization are not deductible under IRC section 170.

You are required to file Federal income tax returns on the form indicated above. You should file
these returns within 30 days from the date of this letter, unless a request for an extension of time is
granted. File the returns in accordance with their instructions, and do not send them to this office.
Processing of income tax returns and assessment of any taxes due will not be delayed because

you have filed a petition for declaratory judgment under IRC section 7428.

If you decide to contest this determination under the declaratory judgment provisions of IRC
section 7428, a petition to the United States Tax Court, the United States Court of Claims, or the

district court of the United States for the District of Columbia must be filed within 90 days from
the date this determination letter was mailed to you. 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,
DC. 20217.

You also have the right to contact the Office of the Taxpayer Advocate However, you should
first contact the person whose name and telephone number are shown above since this person
can access your tax information and can help you get answers. You can call 1-877-777-4778 and
ask for Taxpayer Advocate assistance or you can contact your nearest Advocate's office, in this
case by calling (215) 861-1304 or writing to

Taxpayer Advocate assistance cannot be used as a substitute for established IRS procedures,
formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically
correct tax determinations, nor extend the time fixed by law that you have to file a petition in
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.

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

Sincerely,

Douglas H. Shulman
Commissioner

Sunita Lough
Director, EO Examinations
Attachments:

Publication 892

DEPARTMENT OF THE TREASURY
Internal Revenue Service
EO Examinations Mandatory Review
1100 Commerce Street

TAX EXEMPT AND
GOVERNMENT ENTITIES Dallas, Texas 75242

BIYESION

March 31, 2009

Taxpayer Identification Number:
Form:

Tax Year(s) Ended

December 31,
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 exempt status under section 501(c)(3) of the Internal Revenue Code
(Code) is necessary.

If you accept our findings, take no further action. We will issue a final revocation letter.

If you do not agree with our proposed revocation, you must submit to us a written
request for Appeals Office consideration within 30 days from the date of this letter to
protest our decision. Your protest should include a statement of the facts, the
applicable law, and arguments in support of your position.

An Appeals officer will review your case. The Appeals office is independent of the
Director, EO Examinations. The Appeals Office resolves most disputes informally and
promptly. The enclosed Publication 3498, The Examination Process, and Publication
892, Exempt Organizations Appeal Procedures for Unagreed issues, explain 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.

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

Letter 3618 (04-2002)
Catalog Number 34800F

If we do not hear from you within 30 days from the date of this letter, we will process
your case based on the recommendations shown in the report of examination. If you do
not protest this proposed determination within 30 days from the date of this letter, the
IRS will consider it to be a failure to exhaust your available administrative remedies.
Section 7428(b)(2) of the Code provides, in part: "A declaratory judgment or decree
under this section shall not be issued in any proceeding unless the Tax Court, the
Claims Court, or the District Court of the United States for the District of Columbia
determines that the organization involved has exhausted its administrative remedies
within the Internal Revenue Service." We will then issue a final revocation letter. We
will also notify the appropriate state officials of the revocation in accordance with section
6104(c) of the Code.

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,

Sunita Lough
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F

Schedule or
Form 886-A EXPLANATION OF ITEMS Exhibit No. 4
Name of Taxpayer: Year Ended
ADDENDUM
ISSUE:

Whether the organization continues to qualify for exemption from Federal income tax as an
organization described in section 501(c)(3) of the Internal Revenue Code.

FACTS:
The last Form 990 received from was for the year ended
December 31, Efforts to contact the organization for the purpose of setting a time, date,

and location for an audit were unsuccessful. Two letters mailed to the President were not
returned by the post office. However, the President did not respond, and the most recent letter
has been returned. All letters mailed to other officers of the organization have been returned
by the post office.

Two Forms W-2 were filed for the year ended December 31 totaling § wages
paid. Two Forms W-2 were filed for the year ended December 31 totaling J

wages paid. One Form W-2 was filed for the year ended December 31, totaling

$ wages paid. No Forms W-2 were filed for the years ended December 31,

paid.

The wages reported paid in exceed the $ requirement for filing Form 990.

LAW:

Operational Test
Section 501(c)(3) of the Internal Revenue Code provides that organizations must be organized

and operated exclusively for religious, charitable, and educational purposes, no part of the net
earnings shall inure to the benefit of private shareholders and individuals.

Section 1.501(c)(3)-1(d)(1)(ii) of the Income Tax 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, 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.

Department of the Treasury - Internal Revenue Service Form 886-A
Page 1 of 3

Schedule or
Form 886-A EXPLANATION OF ITEMS Exhibit No. 1
Name of Taxpayer: ; Year Ended

Rev. Proc. 90-27, 1990-1 C.B. 514 provides that where there is a material change inconsistent
with exemption, in the character, the purpose, or the method of operation of an organization,
revocation will ordinarily take effect as of such material change.

Returns and Reports

Section 6001 of the Code indicates the notice or regulations requiring records, statements, and
special returns means every person liable for any tax imposed by this title, or for the collection
thereof, shall keep such records, render such statements, make such returns, and comply with
such rules and regulations as the Secretary may from time to time prescribe. Whenever in the
judgment of the Secretary it is necessary, he may require any person, by notice served upon
such person or by regulations, to make such returns, render such statements, or keep such
records, as the Secretary deems sufficient to show whether or not such person is liable for tax
under this title.

Section 6033(a)(1) of the Code states in general --Except as provided in paragraph (2), 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.

Revenue Ruling 59-95, 1959-1 CB 627, (Jan. 01, 1959) 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 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.

GOVERNMENT’S POSITION:

The organization's exempt status is recommended for revocation based on the fact that it has
not complied with the requirements to maintain its exemption. It has not filed the required
returns to maintain exemption and is no longer offering any services or performing any
charitable acts.

TAXPAYER’S POSITION:

Taxpayer's position is unknown at the time of this report.

Department of the Treasury - Internal Revenue Service Form 886-A
Page 2 of 3

Schedule or
Form 886-A EXPLANATION OF ITEMS Exhibit No. 1
Name of Taxpayer: Year Ended
CONCLUSION:
Based on the above, we propose to revoke the exempt status effective January 1, . Any
contributions made to are no longer deductible as

charitable contributions.

If this proposed revocation becomes final, appropriate State officials will be advised of the
action in accordance with IRC 6104(c) and applicable regulations.

Department of the Treasury - Internal Revenue Service Form 886-A
Page 3 of 3