Animal sanctuary foundation loses exemption after repeated failed audit contacts

Plain-English summary

The IRS revoked a foundation's section 501(c)(3) exemption after it could not verify that the organization continued to operate for exempt purposes. The foundation had described animal sanctuary, education, advocacy, and related activities when it applied for exemption. During an examination, IRS letters sent to several addresses were returned as undeliverable, listed telephone numbers were out of service, and postal tracers did not produce a current address. Because the foundation provided no records or other documentation, the IRS concluded that it had not met the recordkeeping and information requirements of sections 6001 and 6033. The revocation was effective as of the redacted date stated in the determination.

Ruling snapshot

• Question: Did the foundation continue to qualify for exemption under section 501(c)(3) when it could not be contacted and supplied no records for examination?
• Outcome: Revocation.
• Key authorities: IRC §§ 170, 501, 509, 511, 6001, 6033, and 7428; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, and 1.6033-1; Rev. Rul. 59-95.

Full text (IRS public release)

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

Date AUG 08 2019

EIN:
Person to Contact:

Number: 202001020
Release Date: 1/3/2020
Identification Number:

UIL: 501.03-00 Telephone Number:

Fax:
CERTIFIED MAIL — Return Receipt Requested
LAST DAY FOR FILING A PETITION WITH THE TAX COURT:

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 01, 20XX. Your determination letter dated April 12, 20XX is revoked.

Our adverse determination as to your exempt status was made for the following reasons:

Organizations described in I.R.C. § 501(c)(3) and exempt under section 501(a) must
be both organized and operated exclusively for exempt purposes. You have not
demonstrated that you are operated exclusively for charitable, educational, or other
exempt purposes within the meaning of I.R.C. section 501(c)(3). An organization will
not be so regarded if more than an insubstantial part of its activities is not in
furtherance of an exempt purpose. You have not established that you have operated
exclusively for an exempt purpose. In addition, after being issued notice, you have
failed to use and exhaust available administrative remedies.

As such, you failed to meet the requirements of I.R.C. § 501(c)(3) and Treasury Regulation
§ 1.501(c)(3)-1(a), in that you have not established that you were organized and operated
exclusively for exempt purposes and that no part of your earnings inured to the benefit of private
shareholders or individuals.

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

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 was mailed to you. Please contact the clerk
of the appropriate court for rules and the appropriate forms for filing petitions for declaratory
judgment. Please refer to the enclosed Publication 892 for additional information. 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

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.

You may be eligible for help from the Taxpayer Advocate Service (TAS). 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 yours,

Enclosures:
Publication 892

Maria Hooke
Director, EO Examinations

Department of the Treasury Date:
Internal Revenue Service 11/28/2018
Tax Exempt and Government Entities Division Taxpayer ID number:
IRS Exempt Organizations Examination

Form:
Tax periods ended:

Person to contact:

Employee ID number:
Telephone number:
Fax:

Address:

Manager’s contact information:

Employee ID number:
Telephone number:
Response due date:

CERTIFIED MAIL — Return Receipt Requested

Dear

Why you’re receiving this letter

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.

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 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.

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

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.

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,

Maria Hooke
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended
December 31, 20XX
Issue:
Whether the tax-exempt status of be revoked as of

January 1, 20XX for failing to comply with the operational test within the meaning of
Section 501(c)(3) of the Internal Revenue Code (“the Code”).

Facts:

(hereinafter refers to “the Foundation”) was
incorporated in the state of in April 20XX. According to the determination
letter issued by the Internal Revenue Service (“IRS”) on April 12, 20XX, the
Foundation is an organization that is exempt from Federal Income Taxes under
Sections 501(c)(3) of the Code; the effective date of exemption is May 8, 20XX.

The Foundation is further classified as a public charity under Sections 509(a)(1) and
170(b)(1)(A)(vi) of the Code.

The Foundation’s Form 1023, U.S. TREASURY DEPARTMENT—INTERNAL
REVENUE SERVICE Exemption Application, states the following information:

“Attachment for Part IV—Narrative Description of Your Activities:

( ) was founded in 20XX to serve as a
model animal sanctuary for other organizations and an education center for those
with animals in their own homes. We exist to advance egalitarian interaction
between species in an effort to promote our hopeful evolution of human-animal

relationships.

offers a practical understanding of how to

create harmonious relationships with others, and with all life, through the practice

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

of unconditional love with those most dependent on us: animals. Our methods

create a real solution to the problems stemming from domestication.

Our mission is to advances the power of unconditional love, including equality for
all living beings. We provide permanent sanctuary to animals in need, with a
special expertise in horses. We also provide a safe space for humans to practice
the true nature of love in action through experiential education, eco-therapy, and

mindfulness training as described in Part VI 1a of the application.

Our Goals

• Raise Awareness: We are a vegan facility dedicated to spreading awareness of
the plight of animals used for consumption, focusing on the human and planetary
health consequences of consuming animal products.

• Education: Provide education and training in the biologically correct care needs
of horses and other animals, including holistic support and supplementation.

• Restore Connection: To provide experiential opportunities to experience the
connectedness of all life in an effort to facilitate true healing.

• Unconditional Love: To offer training in mindful awareness in order to explore the
true nature of love in action, using experiential relationship education with the
animals to understand the subtlety of power and control over others.

• Policy and Advocacy: To advocate on behalf of all animals, particularly horses
used in therapies for humans. We would like to promote policies in equine-
assisted therapy that recognize the harm caused by offering any kind of healing

through the exploitation and at the expense of another living being.”

The Foundation’s Articles of Incorporation dated April 26, 20XX attached to its Form
1023 define the following information:
• Article 1:

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

○ The name of the Foundation is

(‘the corporation’).
• Article 7:

○ A. The Corporation is organized to carry out exclusively charitable and
educational purposes. In pursuit of such purposes, the Corporation
shall be authorized to engage in any lawful activity for which
corporations may be organized and operated under the
Nonprofit Corporation Act, Including:

• Administer property donated to the Corporation for charitable
and educational purposes;

• Distribute property for such purposes in accordance with the
terms of gifts, bequests or devises to the Corporation for
charitable and educational purposes or in accordance with
determinations by the Board of Directors pursuant to these
Articles and the Bylaws of the Corporation;

• Distribute property to qualified charitable and educational
organizations and to governmental units; and

• Do and perform such acts as may be necessary or appropriate in
carrying out the foregoing purposes of the Corporation and, in
connection therewith, to exercise any of the powers granted to
nonprofit corporations by the Nonprofit Corporation Act,

as amended from time to time.

...

○ B. No part of the net earnings of the Corporation shall inure to the
benefit of, or be distributable to its directors, officers, or other private
persons, except that the Corporation shall be authorized and

empowered to pay reasonable compensation for services rendered and

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

to make payments and distributions in furtherance of the purposes set

forth in the preceding paragraph A. of this Article.

○ ...”

The Foundation’s Bylaws dated May 8, 20XX attached to its Form 1023 define the

following information:

• “Article 1:
○ Section 1.1. Name. The name of the Foundation is
(‘the corporation’).
○ Section 1.2 Mission Statement. The corporation’s mission is to
establish animal sanctuaries, including training and support for such

sanctuaries, based on a model of complete unconditional love and care.

○ ...”

The Foundation filed Form 990N, E-Postcard, for tax year ending December 31,
20XX.

On July 2, 20XX, the Internal Revenue Service (“IRS”) initiated an examination on the
Foundation for its Form 990N for the 20XX calendar year. The Revenue Agent
mailed the initial audit letter including Letter 3611 dated July 2, 20XX along with the
Information Document Request (“IDR”) #1 and Publication 1, Your Rights as a
Taxpayer, to the Foundation at . Via Letter 3611,
the Revenue Agent requested the Foundation to contact her within 10 business days
from the date of this initial appointment letter to confirm the appointment. The initial

audit letter was returned to the Revenue Agent on July 13, 20XX as undeliverable.

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

The Revenue Agent has made the attempt to contact the Foundation at

on July 13, 20XX but discovered that the number is no longer in service.

Shortly after the initial audit letter was returned, the Revenue Agent mailed the letter
to the Foundation again to the same address at
via certified mail on July 13, 20XX. On August 20, 20XX, the letter was returned to

the Revenue Agent as undeliverable.

The Revenue Agent conducted research to the Foundation’s current address and
mailed the initial audit letter to the address at

with certified mail on August 27, 20XX. RA has changed the date on Letter
3611 and IDR 1 to August 27, 20XX. However, the letter was returned to the

Revenue Agent on September 4, 20XX as undeliverable.

After the Revenue Agent did extensive research for the Foundation’s current address
on September 14, 20XX, the Revenue Agent mailed two Forms 4759, Address
Information Request—Postal Tracer, to Postmaster located in

, to obtain the Foundation’s current address. The Revenue Agent listed the
address of on the 1st Form
4759 and the address of -1900 on the 2nd Form
4759. The two postal tracers have been returned to the Revenue Agent on
September 25, 20XX. The 1st postal tracer shows that the Foundation closed the
address of ; and asked the
post office to forward its mails to from April 24,
20XX; the mail forwarding service expired in one year. The 2nd postal tracer shows
that the Foundation has “Moved, Left No Forwarding Address”. Per the postal
tracers, the Foundation’s last mailing address was

, but the Postmaster no longer has the Foundation’s current mailing address.

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

The Revenue Agent has made the last attempt to contact the Foundation at phone

number on November 16, 20XX but discovered that the number is no

longer in service.

Law:

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 that except as provided in section 6033(a)(2) of

the Code, every organization exempt from tax under section 501(a) of the Code 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.

Income Tax Regulations (Reg.) section 1.6001-1(a) in conjunction with Reg.

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 of the Code
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 of the Code.

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

Reg. section 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.

Reg. section 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 section 6033 of the Code.

Revenue Ruling (“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 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 exempt status.

Taxpayer's Position:

The Foundation’s position has not been provided.

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

Form 886-A Schedule number or exhibit
(Rev. January 1994) EXPLANATIONS OF ITEMS
Name of taxpayer Tax Identification Number | Year/Period ended

December 31, 20XX

Government’s Position:

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.

The Foundation has failed to provide documentation sufficient to determine whether it is
operating for the purpose of which it was originally granted tax-exempt status.
Numerous attempts have been made to contact the organization; however, all attempts
have failed.

Therefore, since the Foundation is not in compliance with the requirements set forth
under sections 6001 and 6033 of the Code, the Foundation should no longer be
granted tax-exempt status under section 501(c)(3) of the Code and described under
sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code.

Conclusion:

Based on the information noted above, the Service proposes the revocation of the
Foundation’s exempt status under section 501(c)(3) of the Code effective January 1,
20XX.

Form 1120 returns should be filed for the tax periods ending December 31, 20XX, and
all subsequent years.

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