Private foundation loses exemption after failing to complete dissolution records

Plain-English summary

A private foundation had no activity after donating its only property to a synagogue and wanted to terminate. It supplied the IRS with a recorded grant deed showing the transfer, and the IRS verified that the recipient had been a public charity for at least five years. The foundation did not provide the final signed Form 990-PF, a dissolution certificate, or a valid power of attorney despite repeated requests and extensions. After its attorney reported an address change and promised updated authorization, the IRS received no further response. The IRS concluded that the foundation had not supplied the information needed to establish continued exemption or complete its termination. It revoked the exemption effective on a redacted date.

Ruling snapshot

• Question: Could the foundation retain exempt status after failing to provide the final return and dissolution documents requested by the IRS?
• Outcome: Revocation.
• Key authorities: IRC §§ 501(c)(3) and 6033; Treas. Reg. § 1.6033-2(i)(2); Rev. Rul. 59-95.

Full text (IRS public release)

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations

Release Number: 201517009
Release Date: 4/24/2015
Date: June 26, 2013

UIL code: 501.03-00

Department of the Treasury

Taxpayer Identification Number:
Form:

Tax Year(s) Ended:

November 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 501(a) 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.

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

Letter 3618 (Rev 11-2003)
Catalog Number 34809F

2

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: '

Internal Revenue Service
Office of the Taxpayer Advocate

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
Report of Examination

Letter 3618 (Rev 11-2003)
Catalog Number 34809F

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)

Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX
LEGEND
ORG - Organization name XX - Date address - Address city - City
state - State president - President
ISSUE:

Should ORG’s (The ORG) Federal tax exempt status under section 501(c)(3) of the Internal
Revenue Code be revoked for failure to provide information to the Internal Revenue Service to

demonstrate that it is operating in accordance with its exempt purposes?

FACTS:

The ORG was incorporated as a State and established for charitable giving. In July 20XX, The
ORG applied for Federal tax exempt status under section 501(a) of the Internal Revenue Code.
On November 19, 20XX, The ORG was recognized as an organization exempt from Federal
income tax under section 501(a) of the Internal Revenue Code and was described in section
501(c)(3) of the Code.

The ORG has a filing requirement for Form 990-PF, Return of Organization Exempt from Income
Tax Private ORG. However, the ORG has not reported any activity nor had any activity since the
initial and only property donation to a synagogue on June 26, 20XX. The Forms 990-PF for tax
years 20XX through 20XX do not show any activity.

The Certification of Election to Wind Up and Dissolve and Certificate of Dissolution have not been
filed with the State Secretary of State. The final Form 990 to terminate the organization and a
written statement of the dissolution of assets has not been filed with the Internal Revenue Service.
The Attorney General of the State of State shows the charity organization registration status is
current. The agent is President, The ORG President, whose address is Address, City, State Zip

code.

Form 886-A (1-1994) Catalog Number 20810W Page 1 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A
(Rev. January 1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX

The Service mailed The ORG notification of the examination in a letter dated February 5, 20XX to
the address shown on the 20XX Form 990-PF, which is Address, City, State Zip code. The letter
explained the purpose of the examination and requested information needed for the examination.

On February 20, 20XX, the agent spoke with the ORG President, President who confirmed receipt
of the letter sent on February 5, 20XX. President stated the ORG had no activity. President
wished to terminate the ORG. President stated that no bank accounts were utilized and that all
assets were donated to a public charity.

On February 20, 20XX the agent mailed Information Document Request Number 2 to the ORG to

request information to verify the disposition of all assets to a public charity.

On March 5, 20XX the agent received a fax from the ORG’s attorney, Attorney, of Law Firm.
(Attorney does not have a current Form 2848, Power of Attorney and Declaration of
Representative on file.) The fax was in response to Information Document Request Number 2 and
provided a grant deed that was recorded on July 7, 20XX. The grant deed showed that all assets
had been donated to the Synagogue. The faxed letter also stated that the ORG did not
retain any rights or interests in any of the property donated to the synagogue.

A Private ORG can voluntarily terminate it if has transferred or donated all of its assets to a public
charity that has been such for at least five years (60 months). The agent verified that the
Synagogue has been a public charity for at least five years.

On March 7, 20XX the agent mailed Information Document Request Number 3 to request the final
signed Form 990-PF Return of Private ORG, a copy of Certificate of Dissolution, and a valid Form
2848, Power of Attorney and Declaration of Representative. The Information Document Request
Number 3 due date was April 26, 20XX.

Form 886-A (1-1994) Catalog Number 20810W Page 2 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)

Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX

On March 15, 20XX, the agent received a hard copy of the fax received on March 7, 20XX by

certified mail.

On May 1, 20XX the agent attempted to call the ORG President President. The voice mail did not

state the ORG or President’s name so the agent did not leave a message.

On May 1, 20XX the agent resent Information Document Request Number 3 to the ORG address
at Address, City, State Zip code. The revised due date was May 10, 20XX.

On May 10, 20XX the agent attempted to call ORG President President. The voice mail did not
state the ORG or President's name so the agent did not leave a message.

On May 23, 20XX the agent received a voice mail from the ORG attorney, Attorney that stated that
the ORG changed its address, had just received Information Document Request No. 3, and would ~
need more time to reply. The agent returned the call and left a voice mail requesting a valid Form
2848 and the new address.

On May 28, 20XX the ORG attorney, Attorney left a voice mail for the agent stating that the Form
2848 was expired. She would have the taxpayer complete a new Form 2848 and fax the Form
2848 to the agent the following week. The attorney also supplied the new address as: Address,
City, State Zip code.

May 28, 20XX was the last date the agent received contact regarding the taxpayer.

In the revocation notice letter dated July 1, 20XX, the Agent advised the ORG that section 1.6033-
2(i)(2) of the Regulation and Revenue Ruling 59-95, 1959-1 CB 627, requires every organization
which is exempt from tax to submit additional information upon request by the Internal Revenue
Service. Failure to comply with such request could result in the ORG’s Federal tax-exempt status

being revoked because the ORG has not established that it was observing the conditions required

Form 886-A (1-1994) Catalog Number 20810W Page 3 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)

Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX

for the continuation of exempt status. In order to avoid such adverse action, the ORG must
provide the requested information or contact the Agent to resolve the issue. To date, The ORG
has failed to provide the Agent with the requested information knowing that such failure could
result in loss of Federal tax-exempt status.

The Agent has made adequate attempts to contact the ORG, and its President, President. The
Agent has not received the requested information. To date, President has failed to respond to the
Agent.

LAW:

Section 501(c)(3) of the Internal Revenue Code exempts from Federal income tax corporations,
and any community chest, fund, or ORG, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national
or international amateur sports competition (but only if no part of its activities involve the provision
of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of
the net earnings of which inures to the benefit of any private shareholder or individual, no
substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to
influence legislation (except as otherwise provided in subsection (h)), and which does not
participate in, or intervene in (including the publishing or distributing of statements), any political

campaign on behalf of (or in opposition to) any candidate for public office.

Section 1.6033-2(i)(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 purposes of inquiring into its exempt status.

Revenue Ruling 59-95, 1959-1 CB 627 provides that a failure to file required information return or
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

Form 886-A (1-1994) Catalog Number 20810W Page 4 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)

' Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX

grounds that the organization has not established that it is observing the conditions required for

the continuation of an exempt status.

TAXPAYER’S POSITION:
The ORG’s position is not known at this time.

GOVERNMENT'S POSITION:
Treasury Regulation section 1.6033-2(i)(2) provides, in part, that every organization which is

exempt from tax, whether or not it is required to file an annual information return, must submit
additional information upon request by the Internal Revenue Service for the purpose of inquiring
into its exempt status and administering the provisions of subchapter F, Chapter 1 or subtitle A of
the Code, IRC section 6033, and Chapter 42 of subtitle D of the Code.

The information that the Service requested is material in establishing the ORG’s right to maintain
its exempt status. An organization, to be qualified as an entity described in section 501(c)(3) of
the Internal Revenue Code or in certain other categories of tax-exempt organization, must be
organized and operated so that no part of its net earnings inures to the benefit of any private
shareholder or individual. The essence of the concept is to ensure that a tax-exempt charitable

organization is serving a public interest and not a private interest.

Section 1.6033-2(i)(2) of the Regulation and Revenue Ruling 59-95, 1959-1 CB 627 requires
every organization which is exempt from tax to submit additional information upon request by the
Internal Revenue Service. The Service has requested the ORG to provide information for the
purposes of inquiring into its exempt status. The requested information was material in
determining whether the ORG continues to qualify for Federal tax exempt status under IRC
section 501(c)(3). The Service has given the ORG adequate opportunities to provide the
requested information and has advised the ORG of the consequences for failing to provide the
information. The ORG failed to respond to the Service’s request for information knowing that such

refusals to provide the requested information may result in the loss of its tax-exempt status. By

Form 886-A (1-1994) Catalog Number 20810W Page 5 publish.no.irs.gov Department of the Treasury-Internal Revenue Service

Schedule number or exhibit

Form 886-A EXPLANATIONS OF ITEMS
(Rev. January 1994)

Name of taxpayer Tax Identification Number Year/Period ended
ORG November 30,
20XX

not providing the requested information, The ORG has failed to demonstrate that it is observing
the conditions for continued exemption. Therefore, the ORG’s Federal tax exempt status under
IRC section 501(c)(3) should be revoked effective December 1, 20XX.

CONCLUSION:
By not providing the requested information, the ORG has failed to establish that it is observing the

conditions for continued exemption. Therefore, the ORG’s Federal tax exempt status under IRC
section 501(c)(3) should be revoked effective December 1, 20XX.

Form 886-A (1-1994) Catalog Number 20810W Page 6 publish.no.irs.gov Department of the Treasury-Internal Revenue Service