Exemption revoked after failure to provide records

Plain-English summary

The IRS revoked an organization's section 501(c)(3) status after it did not respond to requests for information about its finances and activities. Without those records, the organization did not establish that it operated exclusively for exempt purposes or satisfied the reporting and recordkeeping requirements of sections 6001 and 6033. The revocation was effective from a redacted date, contributions ceased to be deductible under section 170 from that date, and the organization was required to file corporate income tax returns. The determination also explained the organization's right to seek declaratory relief under section 7428.

Ruling snapshot

• Question: Whether the organization continued to qualify for exemption under section 501(c)(3)
• Outcome: Revocation
• Key authorities: I.R.C. §§ 170, 501(c)(3), 6001, 6033, 7428; Treas. Reg. §§ 1.501(c)(3)-1(d), 1.6001-1, 1.6033-1(h)(2)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
1100 Commerce Street, MC 4920
Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION
Date: June 25, 2015
Release Number: 201539033 Person to Contact:
Release Date: 9/25/2015
UIL Code: 501.03-00 Identification Number:
Contact Telephone Number:
Telephone Number:
Fax:
EIN:

CERTIFIED MAIL — Return Receipt Requested
Dear

This is a final determination that your exempt status under section 501(c)(3) of the Internal Revenue
Code is revoked. Recognition of your exemption under Internal Revenue Code section 501(c)(3) is
revoked effective March 1, 20XX for the following reason(s):

You did not respond to our request for information about your finances and activities necessary to
complete the examination. You have not demonstrated that you are operated exclusively for exempt
purposes within the meaning of Internal Revenue Code section 501(c)(3).

As such, you failed to meet the requirements of Internal Revenue Code section 501(c)(3) and Treasury
Regulation Section 1.501(c)(3)-1(d), in that you failed to establish that you were operated exclusively for
an exempt purpose.

Contributions to your organization are no longer deductible under section 170 of the Internal Revenue
Code effective March 1, 20XX.

You are required to file Federal income tax returns on Form 1120. These returns should be filed with
the appropriate Service Center for the year ending February 29, 20XX, and for all subsequent years.

Processing of income tax returns and assessment 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 in court, you must initiate a suit for declaratory judgment
in the United States Tax Court, the United States Claim Court or the District Court of the United
States for the District of Columbia before the 91st day after the date this determination was mailed
to you. Contact the clerk of the appropriate court for the rules for initiating suits for declaratory
judgment. Please contact the clerk of the respective court for rules and the appropriate forms
regarding filing petitions for declaratory judgment by referring to the enclosed Publication 892.
Please note that the United States Tax Court is the only one of these courts where a declaratory
judgment action can be pursued without the services of a lawyer. You may write to the courts at the
following addresses:

United States Tax Court
400 Second Street, NW
Washington, DC 20217

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005

U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001

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. 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 the United States Tax 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 1-877-777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact
your local Taxpayer Advocate at:

Internal Revenue Service
Local Taxpayer Advocate

Telephone:

If you have any questions, please contact the person whose name and telephone number are shown

in the heading of this letter.

Sincerely yours,

Enclosures: Margaret Von Lienen
Publication 892 Director, EO Examinations
Envelope

3

Department of the Treasury Date:
Internal Revenue Service July 31, 2014

Tax Exempt and Government Entities Division Taxpayer Identification Number:
50 South 200 East
Salt Lake City, UT 84111 Form:

990-N

Tax year(s) ended:
February 29, 20XX
Person to contact / ID number:

Contact numbers:
Phone Number:

Fax Number:
Manager's name / ID number:

Manager's contact number:
Phone Number:
Response due date:

August 30, 2014
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

Phone Number:

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,

Barbara L. Harris
Acting Director, EO Examinations

Enclosures:

Report of Examination
Form 6018

Publication 892
Publication 3498

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


Schedule number or exhibit

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

Name of taxpayer Tax Identification Number Year/Period ended

February 29, 20XX

Is operating exclusively with an exempt purpose under I.R.C. § 501(c)(3)?
FACTS:

Overview
is State Tax Exempt Corporation effective on March 12, 19XX.

last known address is

Application for Recognition of Tax-Exempt Status
Form 1023 for § 501(c)(3) status was approved in September of 19XX.

Federal Returns

Filed Form 990, Return of Organization Exempt From Income Tax, for February 28, 19XX through February
28, 20XX. Form 990-N (e-Postcard), Annual Electronic Filing Requirement for Small Exempt
Organizations, was submitted for year ended February 29, 20XX

Failure to Respond

IRS did not receive a response from to Information and Document Requests
dated January 14, 20XX and February 13, 20XX. IRS did not receive a response to follow-up telephone
calls dated February 6, 20XX, February 13, 20XX, March 6, 20XX, March 18, 20XX, and March 27, 20XX
to the power of attorney.

LAW:

IRC § 6001 provides that every person liable for any tax imposed by the IRC, or for the collection thereof,
shall keep adequate records as the Secretary of the Treasury or his delegate may from time to time
prescribe.

IRC § 6033(a)(1) provides, except as provided in IRC § 6033(a)(2), every organization exempt from tax
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 purposes of carrying out the internal revenue laws as the
Secretary may by forms or regulations prescribe, and 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.

Treas. Reg. § 1.6001-1(a) in conjunction with Treas. Reg. § 1.6001-1(c) provides that every organization
exempt from tax under IRC § 501(a) and subject to the tax imposed by IRC § 511 on its unrelated business
income must keep such permanent books or accounts or records, including inventories, as are sufficient to
establish the amount of gross income, deduction, credits, or other matters required to be shown by such
person in any return of such tax. Such organization shall also keep such books and records as are
required to substantiate the information required by IRC § 6033.

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

February 29, 20XX

Treas. Reg. § 1.6001-1(e) states that the books or records required by this section shall be kept at all times
available for inspection by authorized internal revenue officers or employees, and shall be retained as long
as the contents thereof may be material in the administration of any internal revenue law.

Treas. Reg § 1.6033-1(h)(2) provides that every organization which has established its right to exemption
from tax, whether or not it is required to file an annual return of information, shall submit such additional
information as may be required for the purpose of enabling him to inquire further into its exempt status and
to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and IRC
§ 6033.

Rev. Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a
financial statement and statement of its operations for a certain year. However, its records were so
incomplete that the organization was unable to furnish such statements. The Service held that the failure
or inability to file the required information return or otherwise to comply with the provisions of IRC § 6033
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 exempt status.

The Commissioner may revoke a favorable determination letter for good cause. Treas. Reg. § 1.501(a)-
1(a)(2). Revocation of a determination letter may be retroactive if the organization omitted or misstated a
material fact or operated in a manner materially different from that originally represented. Treas. Reg. §
601.201(n)(6)(i), § 14.01.

GOVERNMENTS POSITION:

Per IRC Section 6001 did not provide support that it operated exclusively for
an exempt purpose in accordance with I.R.C. § 501(c)(3) and IRC Section 6033.

TAXPAYER'S POSITION:

position with respect to the issues, facts, applicable law, and government's
position as discussed in this report is unknown. will be allowed 30 days to review
this report and respond with a rebuttal if considered necessary.

CONCLUSION:

exemption under IRC § 501(c)(3) is revoked effective March 1, 20XX. Form 1120
returns should be filed for the tax periods ending on or after March 1, 20XX.

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