Veterans organization loses exemption over unsupported gift-in-kind activities

View official IRS release (PDF)

Plain-English summary

A veterans organization was recognized as exempt based on plans to provide training, job-placement help, and related support. Its return later described assistance to disabled and homeless veterans, including medical supplies, clothing, hygiene products, and a booklet about post-traumatic stress disorder. Most reported program-service expenses involved gift-in-kind activities handled by a paid for-profit coordinator. The organization omitted required gift-in-kind disclosure schedules, did not produce complete shipping and inventory records, and provided records that conflicted with its accountant’s records and third-party responses. Two shipment confirmations used the same date and reference number but named different recipients, while another claimed gift-in-kind amount was absent from the return and accountant reports. The organization also failed to answer repeated requests for program, expense, loan, payment, and gift-in-kind documentation. The IRS concluded that the organization did not substantiate its charitable activities, did not satisfy recordkeeping and reporting requirements, and operated for private rather than public interests, so its section 501(c)(3) status was revoked.

Ruling snapshot

• Question: Did the organization remain exempt when it could not substantiate its veterans programs or gift-in-kind transactions and failed required reporting and recordkeeping duties?
• Outcome: Revocation
• Key authorities: IRC §§ 501(c)(3), 6001, 6033; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, 1.6033-1; Rev. Rul. 59-95; Rev. Proc. 80-25

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TE/GE: EO Examinations
1100 Commerce Street, MC 4920 DAL
Dallas, TX 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION August 7, 2015
Number: 201544027 Taxpayer Identification Number:

Release Date: 10/30/2015
Person to Contact:

Identification Number:

UIL Code: 501.03-00
Contact Telephone Number:

CERTIFIED MAIL — RETURN RECEIPT REQUESTED
Dear

This is a final adverse determination regarding your exempt status under section
501(c)(3) of the Internal Revenue Code (the Code). Our favorable determination letter
to you dated May 10, 20XX is hereby revoked and you are no longer exempt under
section 501(a) of the Code effective January 1, 20XX.

The revocation of your exempt status was made for the following reason(s):

You have failed to demonstrate that you are operated exclusively for exempt purposes,
and that no part of your net earnings inures to the benefit of your officers, directors, or
other private shareholders and individuals, as required by section 501(c)(3) of the
Code. In addition, your activities more than insubstantially further non-exempt
purposes in that you operate primarily for the benefit of private rather than public
interests, including private fundraising entities, a professional management company,
and a for-profit vendor and coordinator of non-cash “gift-in-kind” services.

Contributions to your organization are no longer deductible under IRC § 170 after
January 1, 20XX.

You are required to file Form 1120 U. S. Corporation Income Tax Return. These
returns should be filed with the appropriate Service Center for tax year ended
December 31, 20XX and for all years thereafter in accordance with the instructions of
the return.

Processing of income tax returns and assessments 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 under the declaratory judgment provisions of
section 7428 of the Code, a petition to the United States Tax Court, the United States
Claims Court, or the district court of the United States for the District of Columbia must
be filed before the 91st Day after the date this determination was mailed to you. Please
contact the clerk of the appropriate court for rules regarding filing petitions for
declaratory judgments by referring to the enclosed Publication 892. You may write to
these courts at the following addresses:

United States Tax Court United States Court of Federal Claims
400 Second Street, NW 717 Madison Place, NW
Washington, D.C. 20217 Washington, D.C. 20005

United States District Court for the District of Columbia
333 Constitution Avenue, NW
Washington, D.C. 20001

You also 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
Taxpayer Advocate

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

Sincerely,
Margaret Von Lienen
Director, EO Examinations

Enclosure:
Publication 892

Letter 3607(04-2002)
Catalog Number: 34198J

Internal Revenue Service Department of the Treasury
Tax Exempt and Government Entities Division

Exempt Organizations: Examinations

7850 SW 6th Court

TEGE Group 7954

Plantation, FL 33324

Date:
December 11, 2014
Taxpayer Identification Number:

Form:
Tax Year(s) Ended:

Person to Contact/ID Number:

Contact Numbers:
Telephone:
Fax:

Manager’s name/ID number:

Manager’s contact number:

Response due date:

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.

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

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 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

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.

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

Thank you for your cooperation.

Sincerely,

Stephen A. Martin
Acting Director, EO Examinations

Enclosures:

Report of Examination
Form 6018
Publication 892
Publication 3498

3 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

December 31, 20XX

ISSUES:
Whether is operated exclusively for exempt purposes described within
Internal Revenue Code section 501(c)(3)?
Whether is engaged primarily in activities that accomplish an exempt
purpose?
Whether complied with record keeping requirements as required under
Internal Revenue Code sections 6001 and 6003?

FACTS:
Background:
On February 28, 20XX, filed original articles of
incorporation with the Secretary of State. The articles of incorporation provided that its purpose

was to promote charity, education, and charitable causes by assisting United States Military Veterans in
their education, training, employment placement and general assimilation into civilian life through any and
all means consistent with its classification as an organization exempt from federal income taxation under
Section 501(c)(3) of the Internal Revenue Code. The articles also state the corporation may receive
property by gift, devise or bequest, invest or reinvest the same, and apply the income and principal thereof,
as the Board of the Directors may from time to time determine, either directly or through contributions to
any charitable organizations, exclusively for charitable and educations purposes.

filed several articles of amendment with the
Secretary of State for the following:
• November 26, 20XX — Name changed to
• May 28, 20XX — New assumed named changed to
• March 7, 20XX — Principal address changed from to

On August 8, 20XX, filed articles of incorporation with the Secretary of
State. The articles of incorporation provided that its purpose was to promote charity, education, and
charitable causes by assisting United States Military Veterans in their education, training, employment
placement and general assimilation into civilian life.

Form 1023 Application:

On March 5, 20XX, filed a Form 1023,
Application for Recognition of Exemption under Section 501(c)(3) of the Internal Revenue Code, with the
Internal Revenue Service. As indicated above

would later become

stated the following in its 1023:

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

Name of taxpayer Tax Identification Number Year/Period ended

December 31, 20XX

• Primary activity- Training classes will be provided directly and the organization further intends to
develop in-home classes via videos primarily created and disseminated in DVD format; anticipated
that activity will compromise 75% of the organization’s overall time and program service expense.
Organization will also provide services designed to assist veteran in obtaining job placement, either
directly or in cooperation with other similar organization; anticipated that activity will compromise
25% of its overall time and program service expenditures.

• Fundraising Programs- Personal solicitation, foundation and government grant appeals, internet,
and email

In a letter dated May 10, 20XX, was recognized by the Service as exempt from
Federal income tax as an organization described in section 501(c)(3) of the Internal Revenue Code.

Program Activities:

In a letter dated November 4, 20XX, was notified that its Form 990 for the
tax year ended December 31, 20XX had been selected for examination. The examination was conducted
via office correspondence because , the president of , had
recently relocated the organization from to

After several extension requests, I received responses to Information Document Requests #1-3 from the

Power of Attorney at that time, , on February 18, 20XX. On June 2, 20XX, I conducted
a telephone interview with , President of , to get an
understanding of the organization’s activities during the tax year ended December 31, 20XX. I transcribed
the interview I conducted with on Information Document Request #4 and mailed it to
and on July 2, 20XX, for comments, clarification, or
additional documentation. During the interview, there were several questions that did not

know the answers to and he referred me to the accountant,
submitted a new Form 2848 on July 18, 20XX, to take over as Power of Attorney for

. In an email dated October 20, 20XX, stated that there are many issues and
determinations made by IRS that we dispute the factual basis. has not provided any
documentation to support his claim to date and has not responded to the numerous outstanding
Information Document Requests issued.

There were several Information Document Requests issued to during the course of the
examination and to date has not responded completely to the document
requests.

Specifically the following requested information has not been furnished:

IDR 1 Identify and explain each of the programs, events and/or activities you conducted during the tax year ended December 31,
(Exhibit #1) 20XX.
Please provide details and supporting documentation for the following Expense items:

o Management Fees $

o Legal $

o Accounting $

o Other $

o Travel $
IDR 3 Provide copies of inventories of gifts-in-kind you acquired or received, and inventories of gifts-in-kind that you donated or
(Exhibit #2) delivered to end users. Provide bills of lading or other shipping invoices to and from your facilities, facility rental contracts

or other storage contracts / agreements, and other documents relating to the collections or transfer of these gifts-in-kind,
both from donors to you and from you to other donees.

IDR 4 I conducted a telephone interview with on June 2, 20XX and have attached the transcript below. There

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
December 31, 20XX
(Exhibit #3) were several questions that he did not know the answers and he referred me to the accountant, I
have attempted to contact several times and left several messages but have not received a return call to date.

Please review the interview transcript and provide any comments, clarification, or additional documentation as you deem

necessary.
IDR 5 I am unable to make a determination on whether your organization continues to operate in accordance with 501(c)(3)
(Exhibit #4) qualifications based on the information received thus far and from conducting an interview with your president,

I have attached your organization's determination application filed with on March 5, 20XX, for your records.

Please thoroughly review the attached determination application and provide the following:

¢ A detailed written description of each program and activity your organization conducted during the examination year
ended December 31, 20XX.

• Provide documentation to support to each program and activity your organization conducting during the examination
year ended December 31, 20XX.

IDR 6 I obtained a promissory note between (borrower) and (lender) in

(Exhibit #5) the amount of $ entered into on September 1, 20XX. Repayments to , without

interest, were to be as follows:

*$ on or before September 10, 20XX

*$ on or before December 10, 20XX

*$ on or before March 10, 20XX

°$ on or before June 10, 20XX.

*The entire amount of principal shall be repaid by June 10, 20XX

• What was the purpose of the loan from to ?
¢ Provide a copy of the cancelled check, wire transfer, etc. to substantiate loan from

to in 20XX.
• Provide schedule of loan repayments from to

° Please provide invoices, receipts, expense reports, etc. for the following expenses:
o Travel expenses $

o Meals $
o Insurance $
IDR 7 During the examination of your books and records for the year ended December 31, 20XX, I determined that you paid the
(Exhibit #6) following individuals and attorney fees in excess of $ for services provided and did not issue Forms 1099-MISC as
required:
Name Amount
$
$
$

Please provide the following:

• Submit delinquent Forms 1099-MISC and Forms 1096 for the individuals and corporation you have obtained a valid
TIN for payments made during 20XX.

• Also submit a check in the amount of $__, payable to the United States Treasury for penalties under Section
6721(a)/(b) for Failure to File Correct Forms ($100 for each 1099 for 2011) and Section 6722(a) for Failure to Furnish
Correct Returns ($100 for each 1099 for 2011).

IDR 8 On July 18, 20XX, submitted a Form 2848 to takeover Power of Attorney for

(Exhibit #7) I contacted on July 21, 20XX, and requested that he make minor changes to the Form 2848 in order for me

to submit the form for processing. To date has not submitted the requested Form 2848. I have spoken to

and left voicemails on several occasions to get the corrected Form 2848. I cannot discuss specific matters about your
examination with until and valid Form 2848 is submitted.

If your organization still wants to represent you, a new Form 2848 with new signatures and a current date
must be submitted. I have included the suggested line items to include on new Form 2848 below:

Description of Matters Tax Form Number Years or Periods
20XX-20XX
20XX-20XX

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

December 31, 20XX

Your organization has not submitted requested documents for the following Form 4564, Information Document Requests:

Information Document Request # Date Submitted Information Due Date
IDR #4 July 2, 20XX July 22, 20XX
IDR #5 July 9, 20XX July 22, 20XX
IDR #6 July 9, 20XX August 8, 20XX
IDR #7 July 9, 20XX August 8, 20XX
Your organization was granted a 60 day extension as requested by on July 18, 20XX.

Please submit your responses to IDRs #4-7 no later than October 1, 20XX.

Failure to provide the requested documentation may result in the revocation of your organization’s tax-exempt status.

IDR 9 On July 21, 20XX, I sent third party contact letters to all the organizations either received or
(Exhibit #8) donated gifts in kind to during 20XX. ! requested all documentation related to any gift in kind donations they made or
received from during 20XX including, but not limited to, inventory list of donated items, Fair

Market Value of items donated, contracts, acknowledgement letters, emails, bills of lading or other shipping invoices, etc.
I have enclosed copies of the responses received from your gifts in kind donors and recipients.

Please thoroughly review the attached documents and submit any comments regarding the accuracy of the documents
within 10 days from the date of this letter.

IDR 10 has several Information Document Requests that are extremely past due. (Please see
(Exhibit #9) attached IDRs #4-9) Neither nor your Power of Attorney, , has responded
to any of my phone calls or letters.

Please provide outstanding information as soon as possible. Failure to provide the requested documentation may result in
the revocation of your organization’s tax-exempt status.

On its Form 990 return for the tax year ended December 31, 20XX, has
described its primary purpose and program achievements as follows.

Organization's mission: Program Service
Mission is to help motivate and offer assistance programs to disabled veterans in order to assist the service | Expenses
related disabled veterans in regaining their position back into society.

Exempt Purpose Achievements: $
Support and help service related veterans facilitated donations of clothing, personal health and hygiene
products to the in addition provided medical supplies to

homeless veterans promoted and provided to the public through its website a booklet designed to help
veterans deal with Post-Traumatic Stress Disorder

Gifts-in-Kind activities accounted for $ of the $ in program service expenses
mentioned above.

Gifts-in-Kind:

entered into a contract with to handle gifts-in-
kind services on their behalf. acted as an in-house gifts-in-kind department
which enabled to receive donated good.
requested to obtain donations of medicine, medical supplies, medical

equipment, food and food supplements, clothing, shoes, shelters, and disaster relief items
provided the following services:

1. Find and process, at the request of , specified goods available for
   donation that are listed in request for donation letter.

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
(Rev. January 1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended

December 31, 20XX

2. Audit the value of donated goods according to fair value measurements as explained in FASB 157.

3. Handle logistics and arrange the shipping and handling of goods to the
   consignee of their choice

4. Handle the processing of all documentation.

did not submit required Schedule B — Schedule of Contributors, Schedule I —
Supplemental Information on Grants and Other Assistance to Organizations, Governments, and Individuals
in the United States, or Schedule F — Statement of Activities Outside of the United States, with the Form
990 filed for the tax year ended December 31, 20XX to disclose gifts-in-kind donors and recipients. During
the year under examination, records showed it incurred the following gifts-
in-kind expenses:

Shipping costs and refund
Gifts-in-Kind:

Total Gifts in Kind
Total program services

records also showed the same $ in gifts-in-kind as non-cash
contributions from the following sources:

Gifts-in-Kind:

Total Gifts in Kind,

The gifts-in-kind amounts reported as revenue and expenses on Form 990
could not be verified based on all documentation obtained from various sources during the examination.
The records provided by were incomplete and some were contradictory.

did not provide complete shipping documentation to verify what was shipped
and signatures of recipients. The records also contained two confirmations of shipment letters with the

same date from to addressing the same gifts-in-
kind reference number, , but listing different recipient organizations. In addition,
provided records for $ in gifts-in-kinds it claims it received and distributed in the

examination year, but this amount was not included on the Form 990 or any of the accountant’s reports.
(Exhibit #10)

Third party contact letters were mailed to all donor and recipient organizations
stated it conducted gifts-in-kind activities with during the tax year December 31, 20XX, after several
attempts were made to obtain complete documentation from . A majority of the

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
(Rev. January 1994) EXPLANATIONS OF ITEMS

Name of taxpayer Tax Identification Number Year/Period ended

December 31, 20XX

responses received from the third parties were also incomplete and inconsistent with

records (See Exhibit # 8 for third party responses). was the only organization that
provided the exact records as . The other responders provided incomplete,
irrelevant, wrong information. On October 10, 20XX, Information Document Request #9 along with copies
of third party responses was mailed to requesting comments regarding the
accuracy of the documents. Neither nor its Power of Attorney has responded to
date.

LAW:

Section 1.501(c)(3)-1(a)(1) of the regulations provides that, in order to be exempt as an organization
described in section 501(c)(3), 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 6001 of the Code provides that every person liable for any tax imposed by the Code, or for the
collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate may from
time to time prescribe.

Section 6033(a)(1) of the Code provides, except as provided in section 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, as 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.

Section 1.6001-1(a) of the regulations in conjunction with section 1.6001-1(c) provides that every
organization exempt from tax under section 501(a) of the Code and subject to the tax imposed by section
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 section 6033.

Section 1.6001-1(e) of the regulations 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, an shall be
retained as long as the contents thereof may be material in the administration of any internal revenue law.

Section 1.6033-1(h)(2) of the regulations 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 by the district director 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 section 6033.

Revenue Ruling 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 section 6033 of
the Code and the regulations which implement it, may result in the termination of the exempt status of an

Form 886-A (1-1994) Catalog Number 20810W Page 6 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

December 31, 20XX

organization previously held exempt, on the grounds that the organization has not established that it is
observing conditions required for the continuation of exempt status.

In accordance with the above cited provisions of the Code and regulations under sections 6001 and 6033,
organizations recognized as exempt from federal income tax must meet certain reporting requirements.
These requirements relate to the filing of a complete and accurate annual information (and other required
federal tax forms) and the retention of records sufficient to determine whether such entity is operated for
the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated
business income tax.

Revenue Procedure 80-25, 1980-1 CB 667, Section 12.02 states that a ruling or determination letter
recognizing exemption may not be relied upon if there is a material change, inconsistent with exemption, in
the character, the purpose, or the method of operation of the organization. Section 13.01 further states that
where there is a material change, inconsistent with exemption, in the character, the purpose, or the method
of operation of an organization, revocation or modification will ordinarily take effect as of the date of such
material change.

GOVERNMENT’S POSITION:

In order for an organization to retain its exempt status it must demonstrate to the Service that it meets both
the organizational and the operational tests. described what it had done on its
Forms 990. However, the records did not support the existence of most of the activities

did not provide any documentation to justify its stated exempt purpose achievements of providing
support and help service related veterans facilitated donations of clothing, personal health and hygiene
products to the in addition provided medical supplies to
homeless veterans promoted and provided to the public through its website a booklet designed to help
veterans deal with Post-Traumatic Stress Disorder, as reported on the Form 990 for the tax year ended
December 31, 20XX.

Gifts-in-kinds activities conducted by a paid for-profit organization appeared to be

primary exempt activity. failed to appropriately disclose these
activities by filing required Schedules B, I, and F. The fact that these schedules were not included renders
the 990 incomplete. Additionally, was unwilling or unable to produce the
records necessary to support and substantiate the gifts-in-kind activities. The gifts-in-kind records provided
by , its accountant, and third-party sources were incomplete and inconsistent.

Revenue Ruling 59-95 states that the 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.

TAXPAYER’S POSITION:

position has not been determined.

Form 886-A (1-1994) Catalog Number 20810W Page 7 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

December 31, 20XX

CONCLUSION:

is not operated exclusively for 501(c)(3) exempt purposes. An organization
cannot be recognized as exempt under section 501(c)(3) of the Code unless its shows that it is operated
exclusively for charitable, education, or other exempt purposes. Among other things,
activities must demonstrate conclusively that it meets the operational test of section 1.501(c)(3)-1(c)
of the Regulations.

Based on the information secured during the examination, we conclude that

did not meet the operational test. also failed to comply with the recording requirements
specified under the Code sections 6011 and 6033 the Regulations thereunder. Therefore, the exempt
status granted to should be revoked effective from January 1, 20XX.

If the revocation is sustained, is required to file Forms 1120 for the years

ending December 31, 20XX and after.

Form 886-A (1-1994) Catalog Number 20810W Page 8 publish.no.irs.gov Department of the Treasury-Internal Revenue Service