IRS revokes an arts-philanthropy charity whose main activity was investing in private secured loans

Plain-English summary

The IRS revoked the 501(c)(3) exemption of a nonprofit that had been incorporated to "promote philanthropy within the community through the Arts" and was recognized as a public charity after filing a streamlined Form 1023-EZ. On audit, the examiner found the group did almost nothing charitable: aside from a few grants, its primary activity was investing its funds in private secured loans (deeds of trust arranged informally through the organization's CFO and a related party), with no formal loan agreements, no investor documentation, and records the organization said were lost to a computer crash and a federal investigation. The IRS concluded the organization was not operated exclusively for exempt purposes, because more than an insubstantial part of its activity (the lending) did not further any charitable purpose, so it failed the operational test of Treas. Reg. § 1.501(c)(3)-1(c). The examiner also found the organization was never eligible for the Form 1023-EZ (its receipts, assets, and share of non-publicly-traded investments exceeded the worksheet limits) and that it failed the recordkeeping and annual-return requirements of IRC §§ 6001 and 6033. Exemption was revoked, contributions are no longer deductible under § 170, and the organization has 90 days to seek declaratory judgment under § 7428. The lesson: a charity that parks its money in private loans instead of pursuing its stated exempt mission can lose its exemption for failing the operational test.

Ruling snapshot

• Question: Does an organization recognized under IRC § 501(c)(3) still qualify when its primary activity is investing in private secured loans rather than charitable work, and it fails the exemption's recordkeeping and reporting requirements?
• Outcome: Revoked (final determination; 90 days to seek declaratory judgment under IRC § 7428)
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1(a), (c); IRC §§ 170, 6001, 6033, 7602; Treas. Reg. §§ 1.6001-1, 53.4958-3(a)(1)

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) with its exhibits. Blanks where identifying details, amounts, dates, and table values were redacted appear as gaps in the original. Heavily redacted numeric tables are noted [table; values redacted].)

Department of the Treasury                    Date:
Internal Revenue Service                      January 17, 2023

IRS Tax Exempt and Government Entities         Taxpayer ID number (last 4 digits):

Form:

Release Number: 202321012                      Tax periods ended:

Release Date: 5/26/2023

UIL Code: 501.03-00                            Person to contact:
                                               Name:
                                               ID number:
                                               Telephone:
                                               Fax:

Last day to file petition with United States
Tax Court: April 17, 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 not
demonstrated that you are both organized and operated exclusively for charitable, educational, or other exempt
purposes within the meaning of IRC Section 501(c)(3). Your primary activity was investing in security
instruments. This does not accomplish one or more exempt purposes under IRC Section 501(c)(3). As such,
you failed to meet the requirement of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(a).

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.

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:

Internal Revenue Service
Taxpayer Advocate Office

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.

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

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.

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]
Acting Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

cc:

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


Department of the Treasury                    Date:
Internal Revenue Service                      05/18/2022
Tax Exempt and Government Entities            Taxpayer ID number:

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:
                                              06/17/2022
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,

Digitally signed by Christopher M. Holmes
Christopher M. Holmes   Date: 2022.05.18 08:52:50 -0700

Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Form 4621-A
Form 886-A
Form 6018
Publication 892
Publication 3498

cc:

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


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

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

ISSUES:
Whether           continues to qualify for exemption from federal income tax
under Section 501(c)(3) of the Internal Revenue Code.

FACTS:

Formation
("the organization") was incorporated in the state of on
. According to clause II of the Articles of Incorporation filed by the organization, its specific
purpose is to "promote philanthropy within the community through the Arts".

The organization's bylaws that were adopted on , included the following items:

* Article II discusses shareholders of the organization.
* Article VI mentions certificates for shares and their transfer.

Form 1023-EZ
On , the organization filed a Form 1023-EZ, Streamlined Application for
Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. To be eligible to
file a Form 1023-EZ, the organization attested that it answered "no" to the thirty questions listed on
the Form 1023-EZ Eligibility Worksheet. Some of the pertinent questions asked on the eligibility
worksheet were:

  Q1. Do you project that your annual gross receipts will exceed $50,000 in any of the next 3
      years?
  Q2. Have your annual gross receipts exceeded $50,000 in any of the past 3 years?
  Q3. Do you have total assets the fair market value of which is in excess of $250,000?
  Q20. Is a substantial purpose of your activities to provide assistance to individuals through
       credit counseling activities such as budgeting, personal finance, financial literacy,
       mortgage foreclosure assistance, or other consumer credit areas?
  Q21. Do you or will you invest 5% or more of your total assets in securities or funds that
       are not publicly traded?
  Q26. Do you maintain or intend to maintain one or more donor advised funds?

The Form 1023-EZ listed two officers:

1.        , President
2.        , CFO.

In Part III of the Form 1023-EZ, the organization attested, by checking the applicable box, that it has
not conducted and will not conduct activities that violate the following prohibitions and restrictions.

* Ensure that its net earnings do not inure in whole or in part to the benefit of private
  shareholders or individuals (that is, board members, officers, key management employees, or
  other insiders).
* Not further non-exempt purposes (such as purposes that benefit private interests) more than
  insubstantially.
* Not to be organized or operated for the primary purpose of conducting a trade or business
  that is not related to its exempt purpose(s).

Additionally, the organization selected "no" to question 8 on whether it would engage in financial
transactions (such as, loans, payments, rents, etc.) with any of its officers, directors, or trustees, or
any entities they own or control.

The organization attested, by selecting the applicable box, that it qualified for public charity status
under Sections 509(a)(1) and 170(b)(1)(A)(vi); that it normally received at least one-third of its
support from public sources, or it normally received at least 10 percent of its support from public
sources and has other characteristics of a publicly supported organization. Under penalties of
perjury, the application was signed by         as CFO, declaring she had examined the
application and to the best of her knowledge it was true, correct, and complete.

On , the organization received its exemption from the Internal Revenue Service
("Service") as a public charity under Section 170(b)(1)(A)(vi) with a fiscal year ending of
.

The organization filed        , beginning with
the calendar year ending , and reported the following information:

[table; values redacted]
Revenue: Contributions; Investment Income; Total Revenue
Expenses: Grants; Legal fees; Accounting fees; Office expenses; Total Expenses
Revenue less expenses

[table; values redacted]
Assets: Cash; Savings; Notes & loans receivable; Total Assets
(Beginning of year / End of year, multiple tax periods)

On Part VII of the Form , the organization listed Officers:

1.        , President and CEO, worked an average of ( ) hours per week for the
   organization.
2.        , CFO, worked an average of ( ) hours per week for the organization.
No Form         was filed for the period covering , to .

Public Support Test
On Schedule A, Public Charity Status and Public Support, that was filed with the Form , the
organization selected that it was a public charity under section 509(a)(2) and normally receives (1)
more than 33 1/3% of its support from contributions, membership fees, and gross receipts from
activities related to its exempt functions-subject to certain exceptions, and (2) no more than 33 1/3%
of its support from gross investment income and unrelated business taxable income.

The organization reported the following support schedule in Schedule A, Part III, Section A:
[table; values redacted]
Gifts, grants, contributions, and membership fees received;
Amounts included on line 1 received from disqualified persons;
Total; Public support (Line 1 less Line 7)

On Schedule A, Part III, Section B, Line 10a, the organization reported no income from interest,
dividends, payments received on securities loans, rents, royalties and income from similar sources.
As a result, the organization reported a zero percentage for its investment income percentage in
Schedule A, Part III, Section D.

Per the Schedule B, Schedule of Contributors, filed with the Forms , the organization reported the
following sources of support:
[table; values redacted]
Contributor (e.g., Neilia LaValle); Total Contributions

Per Schedule I, Grants and Other Assistance to Organizations, Governments and Individuals in the
United States, the organization reported that it made the following grants that exceeded $5,000 for
any recipient.
[table; values redacted]
Name of Organization; Purpose of Grant; Total

Examination
On , the examining revenue agent ("agent") sent an initial contact letter to the
organization notifying them that their Form , ending for the fiscal period
, had been selected for examination. A Form 2848, Power of Attorney and Declaration of Representative, was
received for ("POA"), who had also prepared the organization's Forms .
In response to the information document request ("IDR"), the POA stated that the organization was
unable to provide electronic due to computer crashing and
losing all records. In lieu of the , the agent received bank statements and a summary
prepared by the POA. [EXHIBIT 1]

A phone interview was held on , with ("President") and the POA. The
President stated that her sister had suffered from disease and in memory of her sister
she wanted to raise funds for research. When asked why the organization used her
name, instead of her sister's name, the President stated it was how her friend had done it. The
President's friend, ("CFO"), had started her own nonprofit organization,
, and had given the President the idea to start a similar organization.

The President and POA were asked how they learned of the Form 1023-EZ and if they understood
the difference between a private foundation and a public charity under IRC Section 501(c)(3). The
POA stated they had discussed the options and the President added that an associate of the CFO
had handled all the paperwork, such as filing the articles of incorporation and Form 1023-EZ. This
associate, , was involved in real estate and nonprofits; he had helped or other
individuals set up their nonprofit organization in the same manner. When asked why the bylaws
included shares and shareholders, the POA speculated that had probably not
understood the difference between corporate and nonprofit bylaws but confirmed that the
organization did not have shareholders.

When asked to clarify the exempt purpose that was stated in the organization's articles of
incorporation, the President explained that she had wanted to auction her sister's artwork using a
silent or live auction, just like the fundraisers she had attended for her friends' nonprofit
organizations. In , the President had been in the process of selling her for-profit business and
planned to be involved in the organization, however, the sale did not go through. Due to the
President being occupied with running her for-profit business and , no
activities, aside from grant disbursements, were conducted by the organization from inception to
present day. The President explained that was the primary recipient for
grants and an initial pledge of $ a year for years had been made and was being fulfilled by
the organization. [EXHIBIT 2] Additionally, the organization had made grants at fundraisers the
President had attended for , , and a nearby clinic that provided
; along with a grant made to . [EXHIBIT 3]

In response to the $ discrepancy in assets between the and fiscal years, the POA
explained that he had not been aware of assets, known as , in the prior years and tried to
correct the balance sheet by reporting it in the exam year. When asked for the source of the funds to
purchase these the POA stated that the fiscal year Form was missing
additional donations made by the President. Additionally, the POA stated he had overlooked filing a
Form covering the period to ; however, there had been no
activity during that period.

The organization was the first person or lien holder on these and would receive monthly
interest payments until the loan was paid off. In instances of default, the collateral property would go
into foreclosure with eviction and the organization would anticipate a return of their principal, with the
possibility of back interest. It was the POA's suggestion that the President invest the organization's
funds in so the funds would grow until she had time to be active in the organization. The
President stated during the interview that the organization began investing in in the Fall
of and the typical time frame for these was to years. , President of
(" "), would approach the President with a and the
President would conduct online research to determine the appropriate loan to value, interest rate,
return, and time frame. The POA stated there was no guarantee on these but due to the
loan being only to % of the property value, there was a low probability of not receiving a return
of the principal.

The agent inquired as to why there was a from . POA
explained that the CFO had worked with at , her nonprofit may have not had
enough funds to make the investment, and that the President and CFO help each other. The
President added that the CFO has presented her with an opportunity. Unfortunately, the CFO and
Mr. had a falling out and the CFO was no longer associated with .

In the IDR dated , the agent requested a copy of that detailed the
following:

* Loan amount
* Due date of the loan
* Description of collateral used to secure the loan
* Interest rate and repayment terms
* Authorized names and signatures

The POA stated that the organization did not have copies of the with the above listed
information and provided an email from the CFO and a letter from to explain why the
were unavailable. [EXHIBIT 4] In lieu of the requested information, the POA provided a
spreadsheet prepared by himself and the CFO to explain the activities [EXHIBIT 5]

Additionally, during the interview the agent asked if there was an investor questionnaire or
investment criteria or list of fees for the organization's relationship with . The POA stated that
there was no formal documentation, it was based on personal relationships and a handshake.

LAW:

Internal Revenue Code ("IRC")

Section 501(c)(3) of the IRC 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.

IRC Section 7602(a) gives examiners the authority to examine any books, papers, records or other
data which may be relevant or material for the purpose of ascertaining the correctness of any return,
making a return where none has been made, determining the liability of any person for any internal
revenue or the liability at law of any internal revenue tax, or collecting any such liability.

IRC Section 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 Section 6033(a)(1) provides, except as provided in IRC Section 6033(a)(3), every organization
exempt from taxation 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 purpose of carrying
out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall keep
such records, render under oath such statements, make such other returns, and comply with such
rules and regulations as the Secretary may from time to time prescribe.

IRC Section 6033(b) provides further clarification by stating that every organization described in
section 501(c)(3) which is subject to the requirements of subsection (a) shall furnish annually
information, at such time and in such manner as the Secretary may by forms or regulations
prescribe, setting forth —
(1) Its gross income for the year,
(2) Its expenses attributable to such income and incurred within the year,
(3) Its disbursements within the year for the purposes for which it is exempt,
(4) A balance sheet showing its assets, liabilities, and net worth as of the beginning of such year,
(5) The total of the contributions and gifts received by it during the year, and the names and
    addresses of all substantial contributors
(9) such other information with respect to direct or indirect transfers to, and other direct or indirect
    transactions and relationships with, other organizations described in section 501(c) (other than
    paragraph (3) thereof) as the Secretary may require to prevent-
    (A) diversion of funds from the organization's exempt purpose, or
    (B) misallocation of revenues or expenses
(13) such information with respect to disqualified persons as the Secretary may prescribe,

Treasury Regulations ("Regulations")
Section 1.501(c)(3)-1(a) 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.

Regulations Section 1.501(c)(3)-1(c) 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.

Regulation Section 53.4958-3(a)(1) defines a disqualified person, with respect to any transaction, as
any person who was in a position to exercise substantial influence over the affairs of an applicable
tax-exempt organization at any time during the five-year period ending on the date of the transaction
(the lookback period). Paragraph (c) of this statute includes the following as persons having
substantial influence (1) voting members of the governing body, (2) presidents or chief executive
officers, and (3) treasurers and chief financial officers.

Regulation Section 1.6001-1(c) states that every organization exempt under section 501(a) shall
keep such permanent books of accounts or records as are sufficient to show specifically the items of
gross income, receipts and disbursements. Such organization shall also keep such books and
records as are required to substantiate the information required by section 6033.

Section 1.6001-1(e) of the Regulations states that the books or records required by this section shall
be kept at all times available for inspection by authorized Internal Revenue Service officers or
employees, and shall be retained as long as the contents thereof may be material in the
administration of any Internal Revenue law.

TAXPAYER'S POSITION:

Unknown at this time.

GOVERNMENT'S POSITION:

It is the Government's position that does not continue to qualify for
exemption under IRC Section 501(c)(3).

The organization should have not filed a Form 1023-EZ, since it was not eligible due to failing the
following items from the eligibility worksheet.

* Annual gross receipts exceeded $ in the years since filing the application, primarily
  due to donations from the President.
* Invested a substantial amount of its funds in in the fall of , these
  are loans which would be considered a form of consumer credit.
* for the property [EXHIBIT 5], which was created on ;
  had a principal amount of $ ; this exceeds the $ total asset fair market value
  limitation.
* The organization invested more than % of its assets in , which are not a publicly
  traded asset.

In addition to not being eligible to filing a Form 1023-EZ, the organization voided the attestations
required in the application by engaging in a substantial activity, the , that (1)
did not further their exempt purpose and (2) involved financial transactions with an officer, the CFO.

Based on the interview and a review of Forms and documentation, the organization's primary
activity is the investment in . These trusts or loans do not meet the criteria listed under
Section 501(c)(3) of the IRC as being an exempt activity. Per Regulation Section 1.501(c)(3)-1(c), if
more than an insubstantial part of the organization's activities is not in furtherance of an exempt
purpose, then it will not be regarded as operating exclusively for an exempt purpose.

Another requirement for an organization to be exempt under IRC Section 501(c)(3), is that it must
meet certain reporting requirements, such as filing a complete and accurate annual information
return and retaining records sufficient to determine whether such an organization is operated for its
exempt purpose. The Forms filed by the organization indicate the following cash flows based on
the reported revenue and expenses.

[table; values redacted]
Form 990: Contributions; Interest Income; Total Revenue; Grants; Fees; Total Expenses;
Net Cash Flow (Revenue less Expenses)

However, the net cash flow amounts do not support the amounts invested by the organization into
the . For example, in the organization had only $ net cash flow but the
provided schedule of shows that it had invested $ in in that year.

[table; values redacted]
Creation Date; Property; Total Investment Per Year

During the interview, the POA did acknowledge that there were items missing from the Forms
filed with the Service. Thus, the organization failed to meet the reporting requirements laid out in IRC
Section 6033(a)(1) and (b).

CONCLUSION:

The Organization does not meet the requirements for exemption under IRC Section 501(c)(3) and its
exemption from federal income tax should be revoked effective . The Organization is
liable for filing Form 1120, U.S. Corporation Income Tax Return, for the fiscal year ending
, and all years thereafter.

Catalog Number 20810W    Form 886-A (Rev. 5-2017)


Attachment to Form 886-A: Exhibit 1
Itemized Categories
through
Date  Account Num  Description  Tag  Memo  Clr  Amount
INCOME
Interest Inc
EXPENSES
Donations To
TOTAL DIFFERENTIAL INCOME TO EXPENSES

Attachment to Form 886-A: Exhibit 2
Dear ,
This letter serves as a confirmation that we have received the below listed contributions
from the account.
Please see the list of checks received including check date, amount, and check numbers.
Hoping this letter will suffice your request. Please let us know if you have any
questions.
Sincerely,
President & Chief Executive Officer

Attachment to Form 886-A: Exhibit 3
Donation Receipt
We acknowledge, with thanks, the receipt of
which you have so generously contributed.
Donor:
Received by:        Date:
is recognized as a nonprofit organization
by the IRS. IRS Code: Section 411 [illegible]
Tax Certification Number [illegible]

Attachment to Form 886-A: Exhibit 4
Date:
TO: ,
From: ,
Re:
In regards to the above files, all files were
confiscated as a result of a federal investigation
of a corporation that shared our office space. I
do not know when to expect our files back as it been
around years now without any communication.
by: , President

Attachment to Form 886-A: Exhibit 5
[table; values redacted]
PROPERTY ADDRESS; DATE CREATED; PERCENTAGE OWNERSHIP; PRINCIPAL AMOUNT; INTEREST RATE; DUE DATE

* all were written as year with an automatic renewal for up to years, due on sale