Missing records and articles led to retroactive revocation

Plain-English summary

A Section 501(c)(3) organization was examined to determine whether its activities and finances remained consistent with exempt status. It provided descriptions of activities, revenue material, and some expense information, but it did not provide state-approved amended articles, a trial balance, financial statements, a general ledger, or bank statements. The IRS repeatedly explained and renewed its information requests by mail, fax, and telephone. The organization's director eventually said she would not respond further because the IRS was requesting too much information. Without the governing document and complete financial records, the IRS concluded that the organization had not established compliance with the organizational and operational tests or ruled out private inurement. It revoked exemption effective January 1, 2020, and directed the organization to file Form 1120 for later periods.

Ruling snapshot

• Question: Did the organization establish continued Section 501(c)(3) qualification after declining to provide the requested governing and financial records?
• Outcome: revocation
• Key authorities: IRC §§ 501(c)(3), 6001, 6033; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, 1.6033-1; Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service
IRS Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):

Release Number: 202327018 Tax periods ended:
Release Date: 7/7/2023
UIL Code: 501.03-00

Form:

Person to contact:

Last day to file petition with United States
Tax Court:

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
January 1, 2020. Your determination letter dated December 3, 2020, is revoked.

Our adverse determination as to your exempt status was made for the following reasons: Organizations must be
both organized and operated exclusively for charitable, educational, or other exempt purposes within the
meaning of IRC Section 501(c)(3). Treasury Regulation (Treas. Reg.) Section 1.501(c)(3)-1(a)(1). You have not
demonstrated that you are organized exclusively for exempt purposes because your articles of incorporation do
not meet the requirements of Treas. Reg. Section 1.501(c)(3)-1(b)(1). Further, during our examination, you did
not produce records sufficient to demonstrate that you were operated exclusively for charitable, educational, or
other exempt purposes within the meaning of IRC Section 501(c)(3), nor that your net earnings did not inure in
whole or in part to the benefit of private shareholders or individuals. See Treas. Reg. Section 1.501(c)(3)-1(c)(1)
and (2); IRC Sections 6001, 6033; Revenue Ruling 59-95.

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

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


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.

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:

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.

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


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.

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,

Lynn A. Brinkley

Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

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


Department of the Treasury Internal Date:

Revenue Service October 26, 2022
IRS Tax Exempt and Government Entities Taxpayer ID number:
Form:
Tax periods ended:
Person to contact:

CERTIFIED MAIL — Return Receipt Requested Manager's contact information:

Response due date:

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,

for Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations

Enclosures:

Form 886-A

Form 6018

Form 4621-A

Publications 892 & 3498-A

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


Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
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 Form 1023-
EZ 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 Form 990 for the tax year . The
organization did provide the organization’s activities, revenues and some of the
expenses listed on the Form 990-EZ but fail to provide a copy of a state approved
amended Articles of Incorporation as well as trial balance, income statement, balance
sheet, general ledger, or bank statements so the TCO could record the organization’s
expenses correctly. The director refused to respond to any more requests.

The Form 1023-EZ application list the phone number of for the
CEO/Owner of .
Per the web-site, it lists the organization as in good standing and active.

A copy attached from state web-site is attached.
• Correspondence for the audit was as follows:

o Letter 6031 ( ) 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.

• , the organization faxed a reply to the TCO that contained a
copy of the organization’s Articles of Incorporation. This was of many
items request.

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -1-


Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
• , the organization faxed a copy of the organization's amended

Articles of Incorporation for the TCO to proofread prior to the organization
sending in a copy of amended Articles of Incorporation to the

• , The TCO received a fax from the organization reporting proof
of revenues receive which included copies of letters to
and Forms 1099
for the organization and the director of the organization. This information
reported all revenues received by the organization listed on the organization’s

Form 990-EZ.
o The Letter 5798 ( ) was mailed to the organization on
, with a response due date of . This letter was to report
a to the organization to report the balance of requested

information that was requested in the initial 6031 letter and Form 4564.

• , The TCO received a fax from the organization that responded
to some of the requested information from the Form 4564. It included
responding to the organization’s activities, revenues, no meeting minutes
because all meeting and minutes were conducted by the director and she
makes all the decisions concerning the organization. The reasons for
revenues exceeding $ for the of operating were provided
to the best of the directors’ ability but did not answer the questions. Copies of
Form W-9 were provided to the TCO indicating that the director tried to have
the provide the Form 1099 in the name and EIN of the
organization rather than the director's name and SSN.

• , The TCO received another fax from the organization which
contained of the same responses as before. She did give a more
detailed response to the expenses listed on Schedule O of the Form 990-EZ.
She also provided a copy of her Form 1096 and
. This was provided by the director when I asked for a
copy of her rental/lease agreement for her business listed on the Form 990-

EZ.
o Letter 3844-A ( ) with attachments, was mailed certified to the
Organization on , with a response date of ,
. Per the
( ) tracking, this was to be forwarded on to the next network to be
delivered to its dated on . It never reached it’s

destination nor was the article returned to the TCO and the service center.

o Letter 3844-A ( ) with attachments, was mailed certified to the

Form 886- ev.4-68) Department of the Treasury - Internal Revenue Service
Page: -2-

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

Explanation of Items Exhibit

Name of Taxpayer Year/Period Ended

e}

Organization on , , with a response date of ,
Per tracking this was
delivered to the organization on ' , at

Letter 5077-B ( ), with attachments, was mailed to the organization, on
, with a response date of ,
. This letter was delivered and received
by the organization on

• Telephone contact for the audit was as follows:

e)

, called the phone number listed on the Form 1023-EZ
application for the CEO/Owner of and received VMS. I lefta
message for an officer of the organization to return my phone call and to
verify if she received our initial letter 6031 with attachments

, the CEO/Owner of the organization called me back and
indicated she did receive our Letter 6031 with attachments and that she gave
the letter with attachments to her CPA. The director gave verbal authorization
to speak with her accountant. I then called the CPA at and
had to leave a message asking if he had any questions concerning our
examination of the organization.

, TCO called the CEO/Owner of the organization for the initial
interview. The CEO/Owner had difficulty understanding some of the
questions asked of her but after further explanation she was able to complete
the interview with me.

, TCO called the CEO/Owner of the organization asking where
her response was for our Letter 6031 with Form 4564, Informational
Document Request (IDR). She was unaware of the due date of the
information requested and said she gave all the information and the letter to
her CPA and assumed he would be responding to our examination.

, Director of the organization called requesting a conference call
with her financial advisor on . Conference call was scheduled
for , at . Director provided she would confirm the time
with her financial advisor.

, I called the director back to confirm the conference call for
. I had to leave a message on her voice mail.

, While out of the office I received a voice message from the

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

Page: -3-


Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
director asking if would work for the conference call. I called
the director back and had to leave another message that that time would
work.
• , I spoke with the director and her financial advisor on a

conference call. They were unsure from the Form 4564 what we needed. I
went through every item we requested in detail and they understood. The
director called back later that morning to ask how to amend her Articles of
Incorporation and I explained the process and how to complete that task.

• , The director of the organization called and needed help with
the amending of her Articles of Incorporation (AOI). We went through what
she needed to put in the amended portion of her AOI. She said she would
send me the balance of the information needed as soon as she could.

• , I called the director of the organization since it was past due
from the extension to respond. I had to leave another voice message to the
director to call me back as soon as possible with a response.

• , I called the director of the organization asking about the
organization’s response from our Form 4564 (IDR). She thought that her
financial advisor would have responded by now. I reminded her that during
our conference call her financial director indicated we were asking way too
much and indicated he would not respond to our request. During the call I
advised that if we did not receive a response of any kind she would be held
accountable, not the third party. She said she would contact her financial
advisor and get back to me.

• , I received a fax from the director of the organization and called
her to indicate that what she sent in was the very same information previously
submitted to us. I had her pull up her copy of the Form 4564 (IDR) and
explained what was not answered. She indicated all her revenues was from
agencies from the . [told her I would check with my lead about
revenues and would get back to her.

• , I called the director of the organization and had to leave a
message. I asked the questions the lead prepared for me to ask for and said
I would be calling back again or she could call me.

• , I called the director after receiving a fax from her indicating
that her fax was very hard to read and could not decipher. She emailed the
information to me this time and we went over the information. She had not
responded to all the information requested and so she said she would gather
it up and send it to me. An hour later she called saying she sent her

Form 886- ev.4-68) Department of the Treasury - Internal Revenue Service
Page: -4-


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

Name of Taxpayer Year/Period Ended

information to me and upon reading it while on the line with her it was
information previously sent to me, not the items we had discussed earlier.

• , I called the director of the organization after receiving another
fax from the organization. She responded with most of the information
requested but her response raised several more questions. I asked her about
those items raised and she got upset with me saying I was asking too much
from her about her organization. She indicated if I kept asking for more
information she would terminate her organization. I calmed her down and she
said she would send me what she could.

The director called me after faxing more information to me. She wanted to
know if I received it and asked me if I could call her financial advisor.

I called the financial advisor and had to leave a message and asked him to
return my call.

• , I called the director of the organization to tell her I called and
left a message with her financial advisor but have not been contacted back
yet. She asked if I could send her a copy of the additional information I was
requesting and I said I would.

• , I called the director of the organization to see if she had
received the Letter 3844-A with the second Form 4564 (IDR) requesting
additional information. I had to leave a voice message.

• , I called the director once again to see if she received the
second Form 4564 and once again had to leave a voice message requesting
a call back from her.

• , I called the director again to see if the second Letter 3844-A
was received since the first letter 3844-A never reached its destination. I had
to leave a message that her response to the second Letter 3844-A was due
and we needed to receive a response.

• , I called the director and she answered the phone. I
asked about her responding to our inquiry with Form 4564 and she told
me she would not be responding any more, that we were asking too much
information from her. I told her I understood her position and explained about
the letter 3618, 30-Day revocation letter and about her choice to accept our
proposal for revocation or not.

Law:

Form 886- ev.4-68) Department of the Treasury - Internal Revenue Service
Page: -5-


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

Name of Taxpayer Year/Period Ended

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

Form 886- ev.4-68) Department of the Treasury - Internal Revenue Service
Page: -6-


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

Name of Taxpayer Year/Period Ended

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

Form 886-A (Rev. 4-68) Department of the Treasury - Internal Revenue Service
Page: -7-


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

Name of Taxpayer Year/Period Ended

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
Page: -8-