IRS revokes exemption for failure to file annual returns

Plain-English summary

The IRS revoked the section 501(c)(3) exemption of an organization that had stopped filing Form 990. The examination requested returns for two years, but the organization did not provide them and did not respond to the proposed revocation. Section 6033 requires exempt organizations to file annual information returns, and Revenue Ruling 59-95 states that noncompliance can support termination of exempt status. The IRS also concluded that the organization had not supplied the information needed to confirm that it still operated for exempt purposes. Revocation was effective October 1 of the redacted year, contributions were no longer deductible, and federal income tax returns were required.

Ruling snapshot

• Question: Could the organization retain section 501(c)(3) status after failing to file Form 990 and respond to IRS information requests?
• Outcome: Revoked.
• Key authorities: IRC §§ 170, 501(c)(3), 6033, 6104(c), 7428; Rev. Rul. 59-95.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury

Employer Identification No.:

Person to Contact:
Release Number: 201445011

Release Date: 11/7/2014 Employee ID Number:
Date: October 14, 2008
UIL Code: 501.03-00 Contact Phone number(s)
Tel:
Fax:
Form Required to be Filed:
Tax Years:

September 30, 20XX and subsequent
Last Day to File a Petition with the
United States Tax Court:

January 12, 20xx

Certified Mail

Dear

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 October 1, 20XX for the following reason(s):

You have not established you are operated exclusively for Charitable, Educational, Scientific, or Religious purposes because you failed to comply with the IRS’s requests for information to determine if your still qualify for tax exempt status under IRC 501(c)(3).

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, D.C. 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 or writing to:

IRS Taxpayer Advocate Office

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.

We will notify the appropriate State officials of this action, as required by IRC section 6104(c). 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, please contact the person whose name and telephone number are shown in the heading of this letter.

Sincerely,

Lois G. Lerner

Director, Exempt Organizations

Attachments:
Publication 892

DEPARTMENT OF THE TREASURY
Internal Revenue Service

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

July 2, 2008

Taxpayer Identification Number:
Form:

Tax Year(s) Ended:

September 30, 20XX
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 34809F

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,

Marsha A. Ramirez
Director, EO Examinations

Enclosures:
Publication 892
Publication 3498
Report of Examination

Letter 3618 (04-2002)
Catalog Number 34809F

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or Explanation of Items Exhibit Name of Taxpayer Year/Period Ended September 30, 20XX

FACTS:

The above-named organization was granted exemption under IRC Section 501(c)(3) in July 19XX. The organization has not filed Form 990 since year ended September 30, 20XX.

LAW:

IRC Section 6033 states that 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, Cumulative Bulletin 1959-1, page 627, prescribes that failure to comply with the provisions of Section 6033 of the Code may result in the termination of the exempt status of an organization on the grounds that the organization has not established that it is observing the conditions required for the continuation of its tax-exempt status.

GOVERNMENT’S POSITION:

As indicated above, the organization has not filed Forms 990 since year ended September 30, 20XX. Forms 990 for years ended September 30, 20XX and September 30, 20XX were requested in a written Information Document Request. As of this date, we have not yet received the returns.

As indicated in IRC Section 6033, “every organization exempt from taxation under section 501 (a) shall file an annual return.” Further, as indicated in Revenue Ruling 59-95, “failure to comply with the provisions of Section 6033 of the Code may result in the termination of the exempt status of an organization.”

Since the organization has not complied with IRC Section 6033 by filing Forms 990, we are proposing revocation of its tax exemption under IRC Section 501 (c)(3).

TAXPAYER’S POSITION:

The taxpayer did not respond to the 30-day report.

CONCLUSION:

We are proposing revocation of the organization’s tax exemption for failure to file Forms 990.

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