Organization loses exemption after failing to provide records

Plain-English summary

The IRS revoked an organization's section 501(c)(3) exemption because it did not provide records needed to examine its continued qualification. The IRS requested descriptions of its activities, financial statements, meeting minutes, publications, and other supporting documents. The organization's treasurer asked for additional time, and the revenue agent granted multiple 30-day extensions and reissued a delinquency notice after an earlier letter was returned refused. A later certified notice was signed for, but the organization still did not respond with the requested material. Sections 6001 and 6033 require an exempt organization to keep records available for inspection and to provide information the IRS needs to administer the exemption rules. The IRS therefore revoked exemption effective January 1 of a redacted year and required Form 1120 filings for later periods.

Ruling snapshot

• Question: Did the organization continue to qualify under section 501(c)(3) when it failed to provide requested records about its activities and finances?
• Outcome: Revoked effective January 1 of a redacted year.
• Key authorities: IRC §§ 501(c)(3), 6001, and 6033; Treas. Reg. §§ 1.6001-1 and 1.6033-1; Rev. Rul. 59-95

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR. Obvious scan misreads were corrected. One unreadable handwritten signature is marked as illegible; wording is otherwise verbatim.

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TEGE EO Examinations Mail Stop 4920 DAL
1100 Commerce St.
Dallas, Texas 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES

DIVISION
Date: December 19, 2018
Release Number: 201922032 Tax Year Ending:
Release Date: 5/31/2019 December 31, 20XX
Taxpayer Identification Number:

UIL Code: 501.03-00
Person to Contact:

Employee Identification Number:

Employee Telephone Number:
(Phone)

CERTIFIED MAIL — RETURN RECEIPT
Dear

This is a final determination that you do not qualify for exemption from Federal income tax under
Internal Revenue Code (the “Code”) section 501(a) as an organization described in Code section
501(c)(3) effective January 1, 20XX. Your determination letter dated May 7, 20XX is revoked.

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

Organizations described in section 501(c)(3) of the Internal Revenue Code and exempt from tax
under section 501(a) must be both organized and operated exclusively for exempt purposes. You
have failed to produce documents or otherwise establish that you are operated exclusively for
exempt purposes and that no part of your net earnings inure 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 sections 6001 and 6033(a)(1) and the regulations thereunder.

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

Organizations that are not exempt under section 501 generally are required to file federal income
tax returns and pay tax, where applicable. For further instructions, forms, and information, please

visit www.irs.gov.

If you decide to contest this determination, you may file an action for declaratory judgment under

the provisions of section 7428 of the Code in one of the following three venues: 1) United States
Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for
the District of Columbia. A petition or complaint in one of these three courts must be filed within
90 days from the date this determination letter was mailed to you. Please contact the clerk of the
appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment
by referring to the enclosed Publication 892. You may write to the courts at the following
addresses:

United States Tax Court
400 Second Street, N.W.
Washington, D.C. 20217

U.S. Court of Federal Claims
717 Madison Place, N.W.
Washington, D.C. 20439

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

Processing of income tax returns and assessments of any taxes due will not be delayed if you file
a petition for declaratory judgment under section 7428 of the Internal Revenue Code.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help
protect your taxpayer rights. TAS 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 TAS
assistance, which is always free, TAS will do everything possible to help you. Visit
www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

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

Sincerely,

Maria Hooke
Director, EO Examinations

Enclosure:
Publication 892

Date:
May 18, 2018
Taxpayer Identification Number:

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

Form:
990-N
Tax Year(s) Ended:
December 31, 20XX
Person to Contact:

Employee ID:
Telephone:
Fax:
Manager's Contact Information:

Employee ID:

Telephone:
Response Due Date:

June 18, 2018

CERTIFIED MAIL — Return Receipt Requested
Dear

Why you’re receiving this letter
We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we
propose to revoke your tax-exempt status as an organization described in Internal Revenue

Code (IRC) Section 501(c)(3).

If you agree

If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and
return it to the contact person shown at the top of this letter. We'll issue a final adverse letter

determining that you aren't an organization described in IRC Section 501(c)(3) for the periods

above.

After we issue the final adverse determination letter, we'll announce that your organization is no
longer eligible to receive tax deductible contributions under IRC Section 170.

If you disagree

1. Request a meeting or telephone conference with the manager shown at the top of this

letter.

2. Send any information you want us to consider.

3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or
send additional information as stated in 1 and 2, above, you'll still be able to file a protest
with IRS Appeals Office after the meeting or after we consider the information.

The IRS Appeals Office is independent of the Exempt Organizations division and
resolves most disputes informally. If you file a protest, the auditing agent may ask you to
sign a consent to extend the period of limitations for assessing tax. This is to allow the

Letter 3618 (Rev. 9-2017)
Catalog Number 34809F

IRS Appeals Office enough time to consider your case. For your protest to be valid, it
must contain certain specific information, including a statement of the facts, applicable
law, and arguments in support of your position. For specific information needed for a
valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-
Exempt Status.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process,
generally doesn’t apply now that we've issued this letter.

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt
Government Entities) if you feel the issue hasn't been addressed in published precedent
or has been treated inconsistently by the IRS.

If you’re considering requesting technical advice, contact the person shown at the top of
this letter. If you disagree with the technical advice decision, you will be able to appeal
to the IRS Appeals Office, as explained above. A decision made in a technical advice
memorandum, however, generally is final and binding on Appeals.

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 adverse determination letter.

Contacting the Taxpayer Advocate Office is a taxpayer right

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can
help protect your taxpayer rights. TAS 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 TAS assistance, which is always free, TAS will do everything possible to help you.
Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

For additional information
You can get any of the forms and publications mentioned in this letter by visiting our website at
www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).

If you have questions, you can contact the person shown at the top of this letter.

Sincerely,

[illegible signature]

For: Maria Hooke
Director, Exempt Organizations
Examinations

Enclosures:
Form 886-A
Form 6018

2 Letter 3618 (Rev. 9-2017)
Catalog Number 34809F

Form 886-A Department of the Treasury - Internal Revenue Service
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
20XX
Issue:
Whether continues to qualify for exemption under Section

501(c)(3) of the Internal Revenue Code (IRC).

1. Exhibit A provides copies of the Internal Revenue Service correspondence requesting
that submit documentation to provide a description of
their activities, financial statements, minutes, and publications.

2. On February 1, 20XX, the RA received a phone call from , the
Treasurer, who requested an extension of time. The RA granted a 30 day extension of
time to provide the requested information. The RA did not hear from the organization
again and issued a delinquency notice on March 5, 20XX. On March 23, 20XX, the
letter was returned refused. The RA called and left another message.
verified that the RA was sending correspondence to the correct address and reiterated
that she was not receiving any correspondence from the Service and needed a 30 day
extension. On March 30, the RA reissued the delinquency notice via certified mail

granting an additional 30 day extension. The letter was signed for by on
April 2, 20XX. As of the present, the organization has not responded to RA's request for
documents.

3. Exhibit B provides a copy of Form 1023., Application
for Exempt Status and all attachments.

4. Exhibit C provides a copy of Letter
947, Determination of Exempt Status.

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

Catalog Number 20810W Page 1 _ www.irs.gov Form 886-A (Rev. 5-2017)

Form 886-A Department of the Treasury - Internal Revenue Service
(May 2017) Explanations of Items

Name of taxpayer Tax Identification Number (last 4 digits)| Year/Period ended
20XX

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.

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 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.

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.

In accordance with the above cited provisions of the Code and regulations under IRC §§ 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.

Tax Payers Position:

Unknown- The taxpayer has not responded to the Service's request for documentation regarding their
exempt status, and correcting their purpose clause, despite numerous attempts made by the Service.

Governments Position:

It is the Internal Revenue Service's position failed to meet the
inspection requirements under IRC §§ 6001 and 6033 to be recognized as exempt from federal
income tax under IRC § 501(c)(3). Accordingly, the organization's exempt status is revoked
effective January 1, 20XX

Catalog Number 20810W Page 2 www.irs.gov Form 886-A (Rev. 5-2017)

Form 886-A Department of the Treasury - Internal Revenue Service
(May 2017)
Explanations of Items

Name of taxpayer

Tax Identification Number (last 4 digits)

Year/Period ended

20XX

Conclusion:

must file Form 1120 for the tax periods ending on or after

December 31, 20XX.

Catalog Number 20810W

Page 3_

www.irs.gov

Form 886-A (Rev. 5-2017)