Determination Letter
202248011
Released December 2, 2022
Revocation
Youth charity loses exemption after officers received personal benefits
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This page covers one taxpayer's ruling from 2022, which can't be cited as precedent. Ezel answers your situation under the current Code and IRS guidance, with citations.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It resolved one taxpayer's situation on its specific facts, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)
Plain-English summary
A youth charity conducted speaking programs and camps that furthered exempt purposes, but its records showed substantial personal payments to its two remaining officers beyond reasonable compensation. The organization paid personal transfers, checks, life insurance, retail purchases, groceries, entertainment, travel, medical costs, utilities, and other expenses, including payments to a company controlled by one officer. The officers acknowledged that personal expenses were commingled with the charity’s books and were not separately tracked. Because net earnings inured to insiders, the IRS concluded that the organization was not operated exclusively for exempt purposes. It revoked exemption effective January 1, 2017 and required corporate income tax returns from that year forward.
Ruling snapshot
- Question: Did the charity continue to qualify under section 501(c)(3) when its officers received personal payments and benefits beyond reasonable compensation?
- Outcome: revocation
- Key authorities: IRC § 501(c)(3); Treas. Reg. §§ 1.501(c)(3)-1(c) and 1.501(a)-1(c)
Full text (IRS public release)
Department of the Treasury Date: May 25, 2022
Internal Revenue Service
Tax Exempt and Government Entities Taxpayer ID number:
Number: 202248011 Form:
Release Date: 12/2/2022
Tax periods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
UIL: 501.03-00
CERTIFIED MAIL - RETURN RECEIPT REQUESTED
:
Why we are sending you this letter
This is a final determination that you don’t qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective
. Your determination letter dated , is revoked.
Our adverse determination as to your exempt status was made for the following reasons: You are not described
in IRC Section 501(c)(3) because you are not organized and operated exclusively for exempt purposes
within the meaning of IRC Section 501(c)(3) and Treasury Regulations Sections 1.501(c)(3)-1
(b)(1) and 1.501(c)(3)-1(c)(1). You do not engage primarily in activities that accomplish one or more of the
exempt purposes specified in Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(d).
Organizations that are not exempt under IRC 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.
Contributions to your organization are no longer deductible under IRC Section 170.
What you must do if you disagree with this determination
If you want to contest our final determination, you have 90 days from the date this determination letter was
mailed to you to file a petition or complaint in one of the three federal courts listed below.
How to file your action for declaratory judgment
If you decide to contest this determination, you may file an action for declaratory judgment under the provisions
of IRC Section 7428 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.
Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for
declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on
Tax-Exempt Status. You may write to the courts at the following addresses:
United States Tax Court U.S. Court of Federal Claims U.S. District Court for the District of Columbia
400 Second Street, NW 717 Madison Place, NW 333 Constitution Ave., N.W.
Washington, DC 20217 Washington, DC 20439 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 IRC Section 7428.
Letter 6337 (12-2020)
Catalog Number 74808E
We’ll notify the appropriate state officials (as permitted by law) of our determination that you aren’t an
organization described in IRC Section 501(c)(3).
Information about the IRS Taxpayer Advocate Service
The IRS office whose phone number appears at the top of the notice can best address and access your tax
information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate
Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't
working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects
taxpayer rights. Contact your local Taxpayer Advocate Office at:
Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights,
go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use
the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to
file an action for declaratory judgment.
Where you can find more information
Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for
more comprehensive information.
Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676).
If you have questions, you can call the person shown at the top of this letter.
If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best
time to call, and a copy of this letter.
Keep the original letter for your records.
Sincerely,
Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations
Enclosures:
Publication 1
Publication 594
Publication 892
cc:
Letter 6337 (12-2020)
Catalog Number 74808E
Date:
Department of the Treasury November 17, 2021
Internal Revenue Service Taxpayer ID number:
Tax Exempt and Government Entities
Form:
Tax periods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
Manager’s contact information:
Name:
ID number
Telephone:
Response due date:
CERTIFIED MAIL – Return Receipt Requested
:
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
Letter 3618 (Rev. 8-2019)
Catalog Number 34809F
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.
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,
for Sean E. O’Reilly
Director, Exempt Organizations
Examinations
Enclosures:
Form 886-A
Form 6018
2 Letter 3618 (Rev. 8-2019)
Catalog Number 34809F
Schedule number or exhibit
Form 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
ISSUES
Whether A Human Project (the Organization) qualifies for exemption from federal income tax under
Internal Revenue Code (IRC) Section (Sec.) 501(c)(3).
FACTS
Formation
The Organization was incorporated as a nonprofit corporation on March 16, 2015 in Nevada using the
generic Articles of Incorporation provided by the state and listed Wesley Chapman, Jodie Jensen and
Frank Shankwitz as the Board of Trustees/Directors.
On August 19, 2015, prior to its first meeting, the Organization submitted a “Certificate of Amendment to
Articles of Incorporation for Nonprofit Corporations” to the state of Nevada stating that its purpose was “to
give youth incentive to work toward goals and receive experiences that improve their lives and (to) operate
exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code.”
The Certificate of Amendment also included the requisite purpose and dissolution clauses, including the
requisite language restricting private inurement and political activity.
Application for Recognition of Exemption
On August 5, 2015 the Organization submitted a Form 1023, Application for Recognition of Exemption
Under Section 501(c)(3) of the Internal Revenue Code. Under Part IV, “Narrative Description of Your
Activities,” in the attachment to the Form 1023, the Organization provided the following:
A Human Project is a nonprofit corporation organized and operated
exclusively for educational and charitable purposes. The specific purpose
of this organization is to instruct or train individuals, with a focus on youth,
for the purpose of developing their goals and improving their lives.
The remainder of the three-page description provided a detailed explanation of how the Organization
would carry out its activities through Speaking Engagements and Online Empowerment, its two main
programs.
Exemption
On September 4, 2015 the Organization received recognition of exemption under IRC §501(c)(3) as a
public charity, effective March 16, 2015.
Activities
During the tax years ended December 31, 2017 and December 31, 2018 the Organization conducted
speaking engagements at schools where Mr. Chapman provided insights from his own life experiences as
a child living through an abusive relationship in order to reach out to children and youth who might be living
in similar abusive relationship. Afterwards, he met with those in need one on one to determine how to best
meet their needs. When possible, affected children and youth were invited to attend a three-day camp,
“Camp Human,” to participate in fun activities and informal counseling sessions to help them break down
the barriers created by abuse and empower them to move forward with their lives. These activities met the
tax-exempt requirements as prescribed under IRC Sec. 501(c)(3).
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
Financials Per Form 990
For the Tax Year Ended December 31, 2017
Revenue:
Fundraising Events $ 75,856
All Other Contributions, Gifts, Grants, & Similar Amounts $ 193,377
Total Revenue $ 269,233
Expenses:
Compensation of Current Officers, Directors, etc. $ 82,871
Management (Fees for Services, Non-employees) $ 120
Legal (Fees for Services, Non-employees) $ 2,993
Accounting (Fees for Services, Non-employees) $ 338
Other (Fees for Services, Non-employees) $ 118,076
Advertising and Promotion $ 1,478
Office Expenses $ 24,693
Occupancy $ 34,303
Travel $ 20,903
Depreciation, Depletion, and Amortization $ 8,691
Total Expenses $ 294,466
Assets: BOY EOY
Cash – non-interest-bearing $ 136,273 $ 125,718
Land, Buildings and Equipment less Accumulated Depreciation $ 28,614 $ 21,923
Total Assets $ 164,887 $ 147,641
Liabilities:
Accounts Payable and Accrued Expenses ($ 4,600) ($ 12,804)
Loans and Other Payables to Officers $ 27,975 $ 27,975
Unsecured Notes and Loans Payable to Unrelated Third Parties $ 145,365 $ 161,556
Total Liabilities $ 168,740 $ 176,727
[Note that the Organization didn’t file a Form 990 for the tax year ended December 31, 2018. Further, as
discussed in the Examination section below, the Organization didn’t consider the QuickBooks file provided
for 2018 to be complete or reliable. As such, no financials are provided herein for the tax year ended
December 31, 2018.]
Examination
On October 2, 2019, Revenue Agent Chow (RA Chow) issued an initial contact letter, Information
Document Request (IDR), and Publication 1 to inform the Organization of the examination and request an
Initial Interview on December 3, 2019.
The initial contact letter package was returned as undeliverable to RA Chow on October 16, 2019, so she
identified six different addresses for the officers as listed on the Form 990 and resent the package to those
addresses on October 16, 2019 requesting an Initial Interview on the same date, December 3, 2019.
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
Subsequently, RA Chow left the Service and the case was transferred to Revenue Agent Petkash (RA
) on November 25, 2019. [Note that the case was subsequently transferred to Revenue Agent
(the Examiner) on September 4, 2020.]
RA Petkash rescheduled the Initial Interview and conducted the interview on February 5, 2020 with Wesley
Chapman, the Organization’s Secretary and point of contact for the examination, Michael Whitmore, CPA
(POA Whitmore), and Jessica Wood, CPA (POA Wood).
During the Initial Interview, Mr. Chapman confirmed that the Board of Directors listed on the Form 990 for
the tax year ended December 31, 2017 was correct but explained that he and Jodie Jensen were currently
the only board members left. He also stated that he and Miss Jensen were now married. [Note that for
purposes of this document we will refer to Miss Jensen by her maiden name, as Jodie Jensen or Miss
Jensen, since that corresponds with her name of record for the years under examination.]
Mr. Chapman further stated during the Initial Interview that the Organization provided funds for his and
Miss Jensen’s personal expenses. In addition, he indicated these personal expenses were commingled
within the books and records of the Organization and that there was no form of tracking to bifurcate the
personal expenses from the Organization’s expenses.
As stated in the Organization’s Form 990 for the tax year ended December 31, 2017, and further
confirmed during the examination, Miss Jensen currently serves as the Organization’s President and Mr.
Chapman currently serves as the Organization’s Secretary.
The Organization’s Form 990 for the tax year ended December 31, 2017 listed $12,768.00 for Miss Jensen
and $18,777.00 for Mr. Chapman as “Reportable compensation from the organization (W-2/1099)” on Part
VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees,
and Independent Contractors.
RA Petkash noted that the Organization hadn’t filed a Form 990 for the tax year ended December 31, 2018
prior to the beginning of the examination, so he asked why this was the case during the Initial Interview.
Mr. Chapman stated that the Organization was still trying to figure out its books and records for 2017. He
explained that Jamie Templar, the Organization’s Treasurer, was responsible for the Organization’s books
and records and for all of its required tax filings. He stated that she had filed the Form 990 for the tax year
ended December 31, 2017 without allowing him or Miss Jensen to review or approve the Form 990. He
further explained that in 2018 he and Miss Jensen discovered that Miss Templar was misappropriating
funds. When confronted, Miss Templar departed abruptly and left the Organization’s books and records
that were still intact in disarray. As such, Mr. Chapman indicated that he and Miss Jensen weren’t sure if
the books and records or the Form 990 for the tax year ended December 31, 2017 were correct and were
in the process of researching this information when the examination began. Thus, the Form 990 for the
tax year ended December 31, 2018 wasn’t filed.
A review of the Organization’s records and documentation provided by Mr. Chapman revealed that Miss
Jensen received $20,926.76 and Mr. Chapman received $51,337.20 as reasonable compensation for
services provided in 2018. These amounts were included in the agreed Employment Tax examination for
the Organization with instructions to issue Forms W-2 to Miss Jensen in the amount of $20,926.76 and Mr.
Chapman in the amount of $51,337.20.
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
Examination of the Organization’s books and records and the Organization’s bank records indicated that
Miss Jensen was a signatory of the Organization’s bank account number 501020741233 and that she was
provided a debit card ending in number 6069 associated with the Organization’s bank account number
501020741259.
A review of the Organization’s books and records relative to this information revealed the following:
1. Besides the amount of reasonable compensation Miss Jensen received during the tax year ended
December 31, 2017, she also received bank transfers from the Organization’s bank accounts
totaling $18,295.00 and received checks written to her, or for personal items purchased or paid for
by her, from the Organization totaling $8,644.50.
2. Besides the amount of reasonable compensation Miss Jensen received during the tax year ended
December 31, 2018, she also received checks written to her, or for personal items purchased or
paid for by her, from the Organization totaling $13,322.61 and the Organization made a payment to
the IRS on her behalf in the amount of $128.00.
3. During the tax year ended December 31, 2018 the Organization transferred $3,632.94 and wrote
three checks totaling $25,836.38 to Wake The Hero, LLC, an entity controlled by Miss Jensen. As
such, these amounts have been included in the 2018 Bank Transfers and Checks as payments
made to Miss Jensen below.
Further examination of the Organization’s books and records for the tax year ended December 31, 2018,
taking into account the amount paid to her as compensation during 2018, indicated that the Organization
paid for the following purchases recorded on the aforementioned debit card assigned to Miss Jensen:
Tax
year Type Amount
2018 Amazon 4,548.51
2018 Groceries 269.21
2018 iTunes 665.46
2018 Meals 595.83
2018 Retail purchases 129.81
Total for 2018 6,208.82
As such, the examination of the Organization’s books and records for the tax years ended December 31,
2017 and December 31, 2018 revealed that Miss Jensen received additional income from the Organization
as follows:
Payments Made to Miss Jensen 2017 2018
Bank Transfers $18,295.00 $ 3,632.94
Checks $ 8,644.50 $39,158.99
IRS Payments - $ 128.00
Total Debit Card Purchases - $ 6,208.82
Totals: $26,939.50 $49,128.75
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
Examination of the Organization’s books and records revealed that Mr. Chapman was provided debit cards
ending in numbers 9249 and 4362 associated with the Organization’s bank account number
501020741233 and a debit card ending in number 4379 associated with the Organization’s bank account
number 501020741259.
A review of the Organization’s books and records relative to this information revealed the following:
1. Besides the amount of reasonable compensation Mr. Chapman received during the tax year ended
December 31, 2017, the Organization paid $1,096.86 for his life insurance and $3,826.00 to his
PayPal account.
2. Besides the amount of reasonable compensation Mr. Chapman received during the tax year ended
December 31, 2018, the Organization paid $1,095.32 for his life insurance.
Further examination of the Organization’s books and records for the tax years ended December 31, 2017
and December 31, 2018, taking into account the amount paid to him as compensation during 2017 and
2018, indicated that the Organization paid for the following purchases recorded on the aforementioned
debit cards assigned to Mr. Chapman:
Tax
year Vendor Amount
2017 Amazon 6,812.56
2017 Cable TV 144.96
2017 Groceries 565.92
2017 Insurance 1,529.12
2017 Meals and entertainment 2,128.44
2017 Medical 1,928.61
2017 Retail 16,328.24
2017 Ski & Snowboarding 117.74
2017 Travel 3,114.39
2017 Utilities in California 1,326.76
2017 Childcare 109.20
Total debit card purchases 34,105.94
Tax
year Vendor Amount
2018 Amazon 727.03
2018 Groceries 137.69
2018 Meals and entertainment 1,151.39
2018 Medical 632.42
2018 Retail 12,275.69
2018 Travel 1,118.59
Total debit card purchases 16,042.81
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
As such, the examination of the Organization’s books and records for the tax years ended December 31,
2017 and December 31, 2018 revealed that Mr. Chapman received additional income from the
Organization as follows:
Payments Made to Mr. Chapman 2017 2018
Life Insurance $ 1,096.86 $ 1,095.32
PayPal Account $ 3,826.00 -
Total Debit Card Purchases $34,105.94 $16,042.81
Totals: $39,028.80 $17,138.18
LAW
Internal Revenue Code (IRC)
IRC Sec. 501(c)(3) exempts from income tax entities organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or
international amateur sports competition (but only if no part of its activities involve the provision of athletic
facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of
which inures to the benefit of any private shareholder or individual, no substantial part of the activities of
which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise
provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public
office.
Treasury Regulations (Treas. Reg.)
Treas. Reg. Sec. 1.501(c)(3)-1(a)(1) states 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.
Treas. Reg. Sec. 1.501(c)(3)-1(c)(1) states that an organization will be regarded as operated exclusively
for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of
such exempt purposes specified in 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.
Treas. Reg. Sec. 1.501(c)(3)-1(c)(2) states that an organization is not operated exclusively for one or more
exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or
individuals. For the definition of the words private shareholder or individual, see paragraph (c) of section
1.501(a)-1.
Treas. Reg. Sec. 1.501(a)-1(c) states that the words private shareholder or individual in section 501 refer
to persons having a personal and private interest in the activities of the organization.
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
GOVERNMENT’S POSITION
It is the Government’s position that the Organization does not qualify for exemption under IRC Sec.
501(c)(3).
For an organization to qualify for exemption under IRC Sec. 501(c)(3), no part of the net earnings of the
organization can inure to the benefit of any private shareholder or individual.
Under Treas. Reg. Sec. 1.501(c)(3)-1(c)(1), an organization will be regarded as operated exclusively for
one or more exempt purposes only if it engages primarily in activities which accomplish one or more of
such exempt purposes specified in IRC Sec. 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.
Under Treas. Reg. Sec. 1.501(c)(3)-1(c)(2) an organization is not operated exclusively for one or more
exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or
individuals.
Under Treas. Reg. Sec. 1.501(a)-1(c) the words private shareholder or individual in section 501 refer to
persons having a personal and private interest in the activities of the organization.
Based on the facts and circumstances stated above, Miss Jensen and Mr. Chapman are individuals that
have a “personal and private interest in the activities of the organization” and, thus, are “private
shareholders and individuals” of the Organization.
Since Miss Jensen and Mr. Chapman received additional income from the Organization over and above
the amounts they received as reasonable compensation for services provided in 2017 and 2018, these
amounts represent net earnings which “inure in whole or in part to the benefit of private shareholders or
individuals,” Miss Jensen and Mr. Chapman.
As such, the Organization failed to meet the requirements for tax exemption under IRC Sec. 501(c)(3) and
the Regulations thereunder.
TAXPAYER’S POSITION
The Examiner discussed his findings with Mr. Chapman and POA Wessman and explained that the
Government will be recommending revocation of the Organization’s exemption under IRC Sec. 501(c)(3).
Mr. Chapman stated that the Organization ceased operations in mid-2020 due to COVID-19. As such, it
appears the Organization will accept the proposed revocation.
The Organization is being solicited for its position at this time.
CONCLUSION
The Organization does not qualify for exemption from federal income tax as it failed to substantiate that it
is operated exclusively for one or more exempt purposes due to inurement, resulting in its failure to comply
with the requirements of IRC Sec. 501(c)(3) and Treas. Reg. Sec. 1.501(c)(3)-1(c)(2).
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 886A EXPLANATIONS OF ITEMS
(Rev. January 1994)
Name of taxpayer Tax Identification Number Year/Period ended
12/31/2017 and
A Human Project 47-4575599 12/31/2018
It is the Government's position that the Organization failed to operate exclusively to accomplish one or
more of such exempt purposes specified in IRC Sec. 501(c)(3). Because the Organization was not
operated exclusively for the exempt purpose under IRC Sec. 501(c)(3), its Federal tax-exempt status
under such section should be revoked effective January 1, 2017. The Organization is liable for filing Form
1120, U.S. Corporation Income Tax Return, and paying any related tax liabilities for the tax year ended
December 31, 2017 and all years thereafter.
Form 886-A (1-1994) Catalog Number 20810W Page 8 publish.no.irs.gov Department of the Treasury – Internal Revenue Service
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