IRS revokes a 501(c)(3) that never responded to the audit or produced records

Plain-English summary

The IRS revoked the 501(c)(3) exemption of an organization that simply did not cooperate with its audit. The audit report walks through months of certified letters and phone calls to the group's president and director, several delivered to a new address and signed for, plus promises to send records that never materialized. Because the organization produced nothing, it failed to establish that it was operated exclusively for exempt purposes with no private inurement, and it had not kept the adequate books and records that IRC § 6001 requires or filed the annual returns that § 6033 requires. Citing Rev. Rul. 59-95 (an exempt organization that cannot or will not produce records to show it meets the conditions for exemption can have that exemption terminated), the IRS concluded the organization had not shown it was observing the conditions for continued exemption and revoked it. Contributions are no longer deductible under § 170, the organization must file Form 1120 corporate returns going forward, and it has 90 days to seek declaratory judgment under § 7428. The lesson: an exempt organization that ignores an IRS examination and cannot document its activities can lose its exemption on recordkeeping grounds alone, without the IRS ever reaching what the group actually did.

Ruling snapshot

• Question: Can the IRS revoke a 501(c)(3) exemption when the organization fails to respond to the audit, produce records, or keep adequate books and file required returns?
• Outcome: Revoked (final determination; 90 days to seek declaratory judgment under IRC § 7428); Form 1120 required going forward
• Key authorities: IRC § 501(c)(3); IRC §§ 6001, 6033, 511; Treas. Reg. §§ 1.501(c)(3)-1(a)(1), (c)(1), 1.6001-1(c), (e), 1.6033-1(h)(2), 1.61-1; Rev. Rul. 59-95; IRC § 170

Full text (IRS public release)

(Scanned document; OCR-proofread. Obvious scan misreads were corrected; wording is preserved verbatim. This release combines the final adverse determination (Letter 6337), the proposed revocation (Letter 3618), and the audit report (Form 886-A). Blanks where identifying details, amounts, and dates were redacted appear as gaps in the original. In the correspondence log, the OCR frequently rendered a capital "I" as "|"; these were restored.)

Department of the Treasury                    Date:
Internal Revenue Service                      February 23, 2023
Tax Exempt and Government Entities            Taxpayer ID number (last 4 digits):
Exempt Organizations Examinations
                                             Form:
Release Number: 202321007                    Tax periods ended:
Release Date: 5/26/2023
                                             Person to contact:
UIL Code: 501.03-00                           Name:
                                             ID number:
                                             Telephone:
                                             Fax:
Last day to file petition with United States
Tax Court: May 24, 2023

CERTIFIED MAIL - Return Receipt Requested

Dear

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 have failed to
produce documents to establish that you are operated exclusively for exempt purposes within the meaning of
IRC Section 501(c)(3), and that no part of your net earnings inure to the benefit of private shareholders or
individuals. Also, you have failed to keep adequate books and records as required by IRC Section 6001 and the
regulations thereunder.

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 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 can file an action for declaratory judgment under the provisions
of Section 7428 of the Code in either:

* The United States Tax Court,
* The United States Court of Federal Claims, or
* The United States District Court for the District of Columbia

You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this
determination letter to you. You can download a fillable petition or complaint form and get information about
filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one
of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee
with the petition or complaint.

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E

You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available
on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to
do so. You may also file your petition at the address below:

United States Tax Court
400 Second Street, NW
Washington, DC 20217
ustaxcourt.gov

The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain
instructions about how to file your completed complaint electronically. You may also file your complaint at one of
the addresses below:

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20439
uscfc.uscourts.gov

US District Court for the District of Columbia
333 Constitution Avenue, NW
Washington, DC 20001
dcd.uscourts.gov

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.

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:

Internal Revenue Service

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 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.

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E

You may fax your documents to the fax number shown above, using either a fax machine or online fax service.
Protect yourself when sending digital data by understanding the fax service's privacy and security policies.

Keep the original letter for your records.
Sincerely,

[illegible signature]
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E


Department of the Treasury                    Date:
Internal Revenue Service                      September 29, 2022

                                             Form:
                                             Tax periods ended:

                                             Person to contact:
                                             Name:
                                             ID number:
                                             Telephone:
                                             Fax:
                                             Address:

CERTIFIED MAIL - Return Receipt Requested    Manager's contact information:
                                             Name:
                                             ID number:
                                             Telephone:

                                             Response due date:
                                             October 31, 2022

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 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.

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F


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.

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 Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018
Form 4621-A
Publications 892 & 3498-A
State Information

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F


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

Name of Taxpayer    Year/Period Ended

Date of Notice:

Issues:
Whether (the organization), which qualified for exemption
from Federal income tax under Section 501(c)(3) of the Internal Revenue Code, should be
revoked due to its failure to respond and produce records?

Facts:
applied for tax-exempt status by filing the
, on , and was granted tax-exempt status as a
501(c)(3) on , with an effective date of

An organization exempt under 501(c)(3) needs to be organized and operated exclusively
for religious, charitable, scientific, testing for public safety, literary or educational purposes
and to foster national and amateur sports competition.

The organization was selected for audit to ensure that the activities and operations align
with their approved exempt status.

The organization failed to respond to the Internal Revenue Service attempts to obtain
information to perform an audit of for the tax year

The organization has not filed a series return for the tax years
and

The list the phone number of
for the president, of

Per the website, it lists the organization as active but has not filed
an annual report since it's organization. A copy is attached from the state website.

* Correspondence for the audit was as follows:
  o with attachments, was mailed to the organization
    on , with a response date of . This letter
    was not return by the post office as being undeliverable.

  o with attachments, was mailed certified to
    on , with a response date
    , Article Number . Per the
    tracking, this was picked up at the on
    at pm. The return receipt was received back at the
    Internal Revenue Service whose date stamp cannot be read.

  o ; , was mailed to
    , on , with a response date of
    . This letter was forwarded on to the organization's new address and
    shows as being received and signed for on . Letter sent certified
    with certificate number: . tracking service
    shows certified letter received on

  o with copy of , and
    other attachments was mailed to the organization on , to the
    new address of . It was sent certified
    with certified number: . Tracking report
    indicates certified was received on

  o with copy of , and
    , and enclosed. Letter was addressed to the
    organization's current address with a certified certificate attached. The
    certified number is: . tracking service
    shows it being delivered on

  o was sent to organization for them to complete the
    compilation of material requested be sent in. A copy of the
    was included with the letter since it had not been addressed yet. The
    letter was sent to the new address but was not sent certified.

* Telephone contact for the audit was as follows:

  o , Tax Compliance Officer (TCO) called the phone number
    listed on the and for for the
    President of and received
    Left a message for an officer of the organization to return my phone call.

  o , based on information received in a prior contact attempt, I
    called the president at and the Director,
    and left a voice message to call me back as soon as possible.

  o , called the phone number listed on
    and for the President of as well as
    the Director's number and received a voice message for
    numbers. Left a message for the president and the director to return my
    phone call.

  o , I called the president, and he did pick up the phone call and
    told me they moved, along with the organization and he gave me their new
    address as . He asked that I send a letter
    to him requesting the information again which I said I would do so. I called
    the director to let her know we would be sending along with the
    to their new address and asked her to call me back.

  o , I called the president and the director
    and left a message to inform them I tracked their
    and saw it was delivered to their new address and signed for on
    . I asked to give me a call as soon as it was possible.

  o , I called the president and the director
    and left a voice message to both to call me back otherwise I
    would be proceeding with revocation procedures.

  o , Upon receiving the with attachments the President
    of the organization called and asked me what we needed from them. I
    informed him everything requested was in the Form 4564 that was delivered
    with the sent to them shortly after was issued.

  o , I received a call from , who said she was
    of the directors of the organization. She asked if they still had time to send in
    the information I had request to avoid revocation. I told her if they sent me
    the information that was on the it would be helpful in completing
    the examination. She said they would try and get the information to me.

Law:

Internal Revenue Code (IRC) §501(c)(3) of the Code provides that an organization
organized and operated exclusively for charitable or educational purposes is exempt from
Federal income tax, provided no part of its net earnings inures to the benefit of any private
shareholder or individual.

IRC §511 of the Internal Revenue Code imposes a tax at corporate rates under section 11
on the unrelated business taxable income of certain tax-exempt organizations.

IRC §6001 of the Code provides that every person liable for any tax imposed by this title,
or for the collection thereof, shall keep such records, render such statements, make such
returns, and comply with such rules and regulations as the Secretary may from time to
time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require
any person, by notice served upon such person or by regulations, to make such returns,
render such statements, or keep such records, as the Secretary deems sufficient to show
whether or not such person is liable for tax under this title.

IRC §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, 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.

Treasury Regulations (Regulation) 1.501(c)(3)-1 In order to be exempt under
§501(c)(3) the organization must be both organized and operated exclusively for one or
more of the purposes specified in the section. (religious, charitable, scientific, testing for
public safety, literary or educational).

Regulation §1.501(c)(3)-1(a)(1) of the regulations 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.

Regulation 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will not be
regarded as "operated exclusively" for one or more exempt purposes described in section
501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance
of a 501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under
section 501(c)(3) of the Code.

Regulation §1.6001-1(c) of the Code provides that such permanent books and records as
are required by paragraph (a) of this section with respect to the tax imposed by section
511 on unrelated business income of certain exempt organizations, every organization
exempt from tax under section 501(a) shall keep such permanent books of account or
records, including inventories, as are sufficient to show specifically the items of gross
income, receipts and disbursements. Such organizations shall also keep such books and
records as are required to substantiate the information required by section 6033. See
section 6033 and §§ 1.6033-1 through 1.6033-3.

Regulation §1.6001-1(e) of the Code provides that the books or records required by this
section shall be kept at all time 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.

Regulation §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.

Regulation §1.61-1 of the regulations provides that Gross income means all income from
whatever source derived, unless excluded by law. Gross income includes income realized
in any form, whether in money, property, or services. Income may be realized, therefore, in
the form of services, meals, accommodations, stock, or other property, as well as in cash.

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.

Organization's Position
Taxpayer's position is unknown at this time.

Government's Position

Based on the above facts, the organization did not respond to verify that they are
organized and operated exclusively for one or more of the purposes specified in IRC
Section 501(c)(3). If an organization fails to meet either the organizational test or the
operational test, it is not exempt.

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.

Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations
shall submit additional information for the purpose on enabling the Internal Revenue
Service to inquire further into its exempt status.

Using the rationale that was developed in Revenue Ruling 59-95, the Organization's
failure to provide requested information should result in the termination of exempt
status.

Conclusion:

Based on the foregoing reasons, the organization does not qualify for exemption under
section 501(c)(3) and its tax-exempt status should be revoked.

It is the IRS's position that the organization failed to establish that it meets the reporting
requirements under IRC §§ 6001 and 6033 to be recognized as exempt from federal
income tax under IRC § 501(c)(3). Furthermore, the organization has not established
that it is observing the conditions required for the continuation of its exempt status or
that it is organized and operated exclusively for an exempt purpose. Accordingly, the
organization's exempt status is revoked effective .

Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods
after

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