Exemption revoked after organization failed to provide records

Plain-English summary

An organization recognized under Section 501(c)(3) did not maintain an available business office or representatives and repeatedly failed to arrange an examination or provide requested organizational and financial records. Without those records, the IRS could not verify that it operated for exempt purposes or avoided private inurement. The IRS concluded that the organization failed the reporting and examination requirements under Sections 6001, 6033, and 7605. It revoked the exemption under Revenue Ruling 59-95.

Ruling snapshot

• Question: Did the organization establish that it continued to qualify under Section 501(c)(3) when it failed to arrange an examination or provide requested records?
• Outcome: Revocation effective January 1, 20XX.
• Key authorities: IRC §§ 501(c)(3), 6001, 6033, 7605; Rev. Rul. 59-95

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
Date: APR 6 2018
Number: 201829016 Person to Contact:
Release Date: 7/20/2018 Identification Number:

Contact Telephone Number:
In Reply Refer to:

UIL: 501.03-00 EIN:
CERTIFIED MAIL — Return Receipt Requested

Dear

This is a final revocation letter as to your exempt status under section 501(c)(3) of the
Internal Revenue Code. The Internal Revenue Service’s recognition of your organization as
an organization described in section 501 (c)(3) is hereby revoked effective January 1, 20XX.

We have made this determination for the following reasons:

You have failed to produce documents to establish that you are operated exclusively
for exempt purposes within the meaning of Internal Revenue Code section 501(c)(3),
and that no part of your net earnings inures to the benefit of private shareholders or
individuals. You failed to respond to repeated reasonable requests to allow the
Internal Revenue Service to examine your records regarding your receipts,
expenditures, or activities as required by I.R.C. §§ 6001, 6033(a)(1) and Rev. Rul. 59-
95, 1959-1 C.B. 627.

As such, you failed to meet the requirements of I.R.C. section 501(c)(3) and Treasury
Regulation section 1.501(c)(3)-1(d), in that you failed to establish that you are operated
exclusively for an exempt purpose.

Contributions to your organization are no longer deductible under section 170 of the
Internal Revenue Code.

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 December 31, 20XX, and for all
years thereafter.

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.

• 2-

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 may call the IRS telephone number listed in your local directory. An IRS employee
there may be able to help you, but the contact person at the address shown on this letter is
most familiar with your case. You may also call the Internal Revenue Service Taxpayer
Advocate. The Taxpayer Advocate Service (TAS) is an independent organization within the
IRS that can help protect your taxpayer rights. We can offer you help if your tax problem is
causing a hardship, or you've tried but haven't been able to resolve your problem with the
IRS. If you qualify for our assistance, which is always free, we will do everything possible to
help you. Visit taxpayeradvocate.irs.gov or call 1-877-777-4778

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

Sincerely yours,

Maria Hooke

Director, EO Examinations ~
Enclosure:
Publication 892

Date: 6/30/2017

Internal Revenue Service
Tax Exempt and Government Entities
IRS Exempt Organizations Examinations

Department of the Treasury
Taxpayer Identification Number:

Form:
Tax Year(s) Ended:
Person to Contact / ID Number:

Employee ID:
Contact numbers:
Telephone:
Fax:
Manager's Name / ID Number:

Employee ID:
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 501(c)(3). 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

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

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

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

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,

Maria Hooke
Director, EO Examinations

Enclosures:

Report of Examination
Form 6018
Publication 892
Publication 3498

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

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit

Year/Period Ended
December 31, 20XX

Name of Taxpayer

ISSUES:

Whether qualifies for exemption under Section 501(c)(3) of the
Internal Revenue Code?

FACTS:

(Hereafter referred to as The Organization) was granted tax-exempt
status on July 21, 20XX under Internal Revenue Code Section as an organization described in §
501(c)(3).

Exhibit A provides copies of the Internal Revenue Service correspondence requesting that The
Organization file the Form 990 for the tax period ending December 31, 20XX. The Organization
failed to respond as requested to the Internal Revenue Service correspondence.

The Organization responded with a letter to the first initial contact letter stating that they did not
occupy a business office or have any representatives available to meet at the time stated in the
letter. The Organization did state in the letter to call and leave a message in order to for them to
provide the records. Multiple calls were made with no response.

LAW:

IRC § 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) of the Code, the organization must be one that is
both organized and operated exclusively for one or more of the purposes specified in that
section.

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 § 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.

IRC § 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.

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

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit

Year/ Period Ended
December 31, 20XX

Name of Taxpayer

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.

IRC § 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 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 IRC § 6033.

IRC § 7605. Time and place of examination

(a) Time and place.--The time and place of examination pursuant to the provisions of section
6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 shall be such time and place as may be fixed by the
Secretary and as are reasonable under the circumstances. In the case of a summons under
authority of paragraph (2) of section 7602, or under the corresponding authority of section
6420(e)(2), 6421(g)(2), or 6427(j)(2), the date fixed for appearance before the Secretary shall not
be less than 10 days from the date of the summons.

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.

TAXPAYER’S POSITION:
Taxpayer’s position is unknown at this time.

GOVERNMENT’S POSITION:

The Organization has failed repeatedly to respond to the Service’s request to set a time and
place of examination in contrast to IRC § 7605.

The EO also failed to provide records as is required in Code § 6033(a)(1) and Regulation §
1.6033-1(h)(2). They failed to provide any organizational or financial information that we
requested during the examination. We attempted to obtain these records numerous times by mail
and phone.

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -2-

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit

Name of Taxpayer Year/Period Ended
December 31, 20XX

Without the EO’s records, we cannot verify that they are operating according to their exempt
purpose. Our position is that the organization, then, is not operating for exempt purposes. They
have provided nothing to the contrary.

It is the Service's position that the organization failed to meet the reporting requirements
under IRC §§ 6001 and 6033 to be recognized as exempt from federal income tax under

IRC § 501(c)(3). Accordingly, it is proposed that the organization's exempt status be revoked
effective January 1, 20XX.

Government’s Position 2:

The Organization stated that it does not occupy a business office or have any representatives
available suggesting a lack of exempt activity. This coupled with the lack of response from the
information request and in ability to locate persons associated with The Organization suggests
the lack or absents of exempt activities. As such, The Organization fails to meet the
organizational and operational requirements within the meaning of 501(c)(3)-1(a)(1) in order to
continue its exemption status under IRC 501(c)(3).

CONCLUSION:

It is the Services position that the Organization does not qualify for exemption from federal
income tax under IRC §501(c)(3) and the organization's exempt status should be revoked.
The proposed date of the revocation is January 1, 20XX.

The Organization will no longer have tax-exempt status beginning January 1, 20XX; they are
liable for filing Form 1120, U.S. Corporation Income Tax Return, as of that date.

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -3-