IRS revokes a nonprofit's 501(c)(3) status after it acknowledged an audit but produced no records

Plain-English summary

This is the IRS's final determination revoking a nonprofit corporation's tax-exempt status under section 501(c)(3). The organization's articles of incorporation were adequate (they restricted its activities and included a dissolution clause), so the revocation rests on how it operated, not on how it was organized. The IRS had recognized it as a public charity based on its Form 1023, and it filed only Form 990-N e-Postcards using commercial mailbox-service store addresses. When the IRS examined it and requested basic financial records (a general ledger, bank statements, canceled checks, board minutes), an officer acknowledged receiving the audit notice but the organization never produced any records, even after a pandemic extension, and then stopped answering calls. The state also listed the corporation as "not in good standing" for failing to file required annual reports. Because it would not let the IRS verify how it operated, it failed the operational test and the recordkeeping duties of sections 6001 and 6033. Exemption was revoked and contributions are no longer deductible under section 170. The document combines the final adverse letter (Letter 6337), the proposed revocation (Letter 3618), and the Form 886-A revenue agent report. Its name suggested a link to a network of charities, but the IRS found no evidence of any affiliation.

Ruling snapshot

• Question: Does the organization still qualify under IRC § 501(a) as a § 501(c)(3) charity after acknowledging an IRS audit but producing no records?
• Outcome: revocation (fails the operational test and recordkeeping requirements)
• Key authorities: IRC § 501(c)(3); IRC §§ 6001, 6033; IRC § 170; Treas. Reg. §§ 1.501(c)(3)-1(a) and (c), 1.6001-1, 1.6033-2; Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 03/28/2023
IRS Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):

Form:
Number: 202336018

Release Date: 9/8/2023 Tax periods ended:

Person to contact:
Name:

ID number:

UIL: 501.03-00 Telephone:
Fax:

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
Your determination letter dated is revoked.

Our adverse determination as to your exempt status was made for the following reasons: Organizations
described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated
exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 501(c)(3).
You have not demonstrated that you are operated exclusively for charitable, educational, or other 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. You failed to respond to repeated reasonable requests to allow the
Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as
required by IRC sections 6001, 6033(a)(1) and Rev. Rul. 59-95, 1959-1 C.B. 627.

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.

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.

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

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.

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.

[illegible signature]

Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

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


Date:

Department of the Treasury May 17, 2022

Internal Revenue Service Taxpayer ID number:
IRS Tax Exempt and Government Entities

Exempt Organizations Examinations Form:

Tax periods ended:

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

Manager's contact information:
Name:
ID number:

Telephone:
Response due date:

CERTIFIED MAIL — Return Receipt Requested
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

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


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,
[illegible signature]

Lynn A. Brinkley

Acting Director

Exempt Organizations Examinations
Enclosures:
Form 886-A and Attachments
Form 6018

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


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number

Explanations of Items or exhibit

Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
Issue:
Whether ( continues to qualify for exemption
from Federal income tax under section 501(a) of the Internal Revenue Code (Code) as a
charitable organization described in Code section 501(c)(3).

Facts:
was incorporated in the on , under the state's
law. The Articles of Incorporation filed with provide that the corporate
purpose for which was formed is
in the city of The article of organizing document sets forth restrictions
on activities that can be performed and provides for a dissolution clause intended to allow
to satisfy the organizational requirements for Federal exemption.

According to the of Articles of Incorporation, the corporation was formed by
who gave his address located in The article provides
that the street address for principal office is ;
. The article of the organizing document identifies as the
registered agent for the corporation. is also listed as the director of at the
time it was formed.

In filed Form 1023, Application for Recognition of Exemption Under Section
501(c)(3) of the Internal Revenue Code, with the Internal Revenue Service (IRS). The Form
1023 application is signed by according to the declaration on page __ of the
Form 1023. is the only individual listed in Part V of Form 1023 which requires
applicant organizations to list the names, titles and mailing addresses of all officers, directors,
and trustees. The address of the organization as reported on the Form 1023 is

The Form 1023 application is accompanied by a conformed copy of Articles of
Incorporation and several attachments providing narrative responses to certain questions in
Form 1023. According to the attachment providing a narrative description of past, present, and
planned activities as requested in Part IV of Form 1023, states the following:

Based on the Form 1023 application and accompanying records filed by the IRS issued a
determination letter dated , granting recognition of exemption under
section 501(c)(3) of the Code. was classified as a public charity under sections 509(a)(1)
and 170(b)(1)(A)(vi) of the Code based on its planned fundraising programs and projected
financial support.

Catalog Number 20810W Page 1 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number
Explanations of Items or exhibit
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended

IRS records show that filed Form 990-N, Electronic Notice (e-Postcard), beginning with the
filed Form 990-N in lieu of a Form 990 or Form 990-EZ return. The
organization indicated on Form 990-N that its gross receipts are normally $ . The
address for as reported on Forms 990-N filed through is the same address reported
on the Form 1023 application -

The address furnished by corresponds to a ( which
offers mailbox services. A copy of the pertinent website content posted by or on behalf of the
store is appended as Exhibit A.

As described in Exhibit A, the following are at its

*

* Package and mail receipt notifications
* Mail holding and forwarding

* Call-in mail check

In the Tax Exempt and Governmental Entities (TE/GE) division of the IRS selected
for examination of its books and records covering the . The notice of
examination package, which is dated consists of IRS letter #6031, Form
4564, Information Document Request (IDR), Publication 1, Your Rights as a Taxpayer, Notice
609, Privacy Act Notice, and Publication 3498-A, The Examination Process (Audits by Mail).

The notice of examination package was mailed to at the last known address on file for the
organization which is as follows:

changed its address to the current one in when it filed its
Form 990-N with the IRS. The address furnished by also corresponds
to a retail store which offers mailbox services. A copy of the pertinent website content
posted by or on behalf of the store is appended as Exhibit B.

As noted on page of the IDR issued with the examination notice, the examination of
books and records is intended to verify that the organization:

1. Operates in accordance with section 501(c)(3) of the Code
2. Is eligible to file Form 990-N based on gross receipts, and
3. Filed all required returns including information returns.

Catalog Number 20810W Page 2 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number

Explanations of Items or exhibit

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

As part of standard audit procedures, the requested that furnish certain
records and information needed to determine whether the organization is operating in furtherance
of charitable and other exempt purposes described in section 501(c)(3) of the Code. IDR
issued to on requests copies of the following records and information
covering the calendar year under examination:

* Chart of accounts

* General ledger

* Adjusted trial balance

* Cash disbursements journal.

* Monthly bank statements for primary operating (checking) account together with
canceled checks or check images furnished by the bank.

* Monthly statements for all credit cards that may have been issued to under a corporate
account.

* Minutes of meetings held by Board of Directors and committees of the Board.
* Internal policies and procedures regarding the handling and recording of cash donations.

* Lease agreements and other information relating to any office or other facility used by to
conduct activities.

* Contracts and other arrangements with individuals and/or organizations which solicit and raise
funds for including, but not limited to, professional fundraising organizations.

* The organization's website address, if any, and the identity of the party that hosts the website.

* Information regarding the accounting software used by for preparation of its books and
records.

Due to the Covid-19 pandemic, was given additional time to compile and furnish the
records and information requested by the The response due date on the IDR was

On the received a telephone call from an
officer of . With consent, the
conferenced in the assigned to the case. acknowledged receipt of the
IRS notice of examination package for However, he did not discuss the finances or
activities of the organization. Instead, he described circumstances that he believed warranted an
extension of time to compile records and respond to the initial IDR. The granted
an extension to

did not respond to the IDR or otherwise contact the or the by
the extended due date. In early , the attempted to contact
by telephone using the contact telephone numbers that he provided. did not

Catalog Number 20810W Page 3 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number

Explanations of Items or exhibit

Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
answer the phone and the did not subsequently receive a return call. Neither the
nor the subsequently received any of the requested records and
information from or any other officer or director of

In accordance with established IRS procedures, a follow-up "Delinquency Notice" letter was
issued to with a copy of IDR on . The delinquency notice states, in part,
that if the organization does not fully respond to the IDR by the response due date, the IRS will
propose revocation of exempt status. did not respond to the delinquency notice or
otherwise contact the The delinquency notice was not returned by the post office
as undeliverable.

A search of the corporate database on , which provides
information on the status of entities incorporated under state law, shows that is
not in good standing. According to information posted by the Department of
Assessments and Taxation, the term "Not in Good Standing" means the business entity is not in
compliance with laws that apply to businesses and their responsibilities in
the State. Only business entities that are active can have a good standing status, so a business
that has been voluntarily terminated will also show "not in good standing" because it is no longer
active. According to the status search for which was downloaded from the state website
and is appended as Exhibit C, has not complied with one or more annual report filing
requirements.

Despite its name, there is no evidence that is an of the
s that operate within the . The
maintains a website which allows users to search for . is
not among the local or state chapters listed. The Form 990-N filed by with the IRS in
identifies a website address ( ) in section E. The was not able
to locate the website domain address referenced on the Form 990-N. The Form 990-N
filed by does not identify any website address.

Applicable Law:

Section 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.

Section 1.501(c)(3)-1(a)(1) of the Treasury Regulations states that 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 - charitable, religious,
educational, scientific, literary, testing for public safety, or for the prevention of cruelty to children
or animals. If an organization fails to meet either the organizational test or the operational test, it
is not exempt.

Catalog Number 20810W Page 4 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number

Explanations of Items or exhibit

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

Section 1.501(c)(3)-1(c) of the regulations describes the operational test requirements for
501(c)(3) exemption. The operational test focuses on how the organization is actually operated,
regardless of whether it is properly organized for tax-exempt purposes.

Section 1.501(c)(3)-1(c)(1) of the regulations provides 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. This is referred to as the "primary activities" test.

Section 1.501(c)(3)-1(c)(2) of the regulations provides 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.

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

Section 6001 of the Code provides, in part, 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.

Section 1.6001-1(c) of the regulations provides that in addition to 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 regulations sections
1.6033-1 through 1.6033-3.

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

Section 6033 of the Code provides, in general, that every organization exempt under IRC 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 of regulations prescribe, and shall keep such records, render

Catalog Number 20810W Page 5 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number

Explanations of Items or exhibit

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

under oath such statements, make such other returns, and comply with such rules and regulations
as the Secretary may from time to time prescribe.

Section 6033 of the Code provides an exception to the annual filing requirement in the case of an
organization described in section 501(c) (other than a private foundation or a supporting
organization described in section 509(a)(3)) the gross receipts of which in each taxable year are
normally not more than $50,000. See section 1.6033-2(g)(1)(iii) of the regulations.

Section 1.6033-2(g)(5) of the regulations provide that an organization that is not required to file an
annual return by virtue of the gross receipts exception must submit an annual electronic notice
notification as described in section 6033(i) of the Code.

Section 1.6033-2(i)(2) of the regulations provides that every organization which is exempt from
tax, whether or not it is required to file an annual information return, shall submit such additional
information as may be required by the Internal Revenue Service for the purpose of inquiring into
its exempt status and administering the provisions of subchapter F (section 501 and following),
chapter 1 of subtitle A of the Code and section 6033.

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:

Analysis
The facts indicate that received recognition of exemption under section 501(c)(3) of the
Code in based on information presented in its Form 1023 application and
accompanying attachments.

The TE/GE division of the IRS maintains an examination program for exempt organizations to
determine whether they are complying with statutory requirements regarding their tax-exempt
status, the proper filing of returns, and other tax reporting matters. filed Form 990-N, an
electronic notice, with the IRS for the . was selected for audit to ensure
that the organization's activities and operations align with their approved exempt status and to

Catalog Number 20810W Page 6 www.irs.gov Form 886-A (Rev. 5-2017)


Form 886-A Department of the Treasury — Internal Revenue Service Schedule number
or exhibit
Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended

verify that the filing of Form 990-N was proper based on the organization's gross receipts.

Section 6001 of the Code and the regulations thereunder impose requirements on exempt
organizations to keep books and records to substantiate information required under section 6033
of the Code. Although filed an electronic notice in lieu of a return, the organization is
nevertheless required to produce records and other information requested by the IRS to verify that
it operates in furtherance of its exempt purpose. See regulations section 1.6033-2(i)(2).

failed to respond to repeated reasonable requests to allow the IRS to examine its books
and records including its receipts, disbursements, and other items required to be kept and
maintained pursuant to sections 6001 and 6033(a)(1) of the Code.

Accordingly, has failed to meet the requirements of section 501(c)(3) of the Code and
sections 1.501(c)(3)-1(a) and 1.501(c)(3)-1(c) of the regulations, in that the organization has not
established that it is operated exclusively for exempt purposes and that no part of its net earnings
inures to the benefit of private shareholders or individuals. See also Rev. Rul. 59-95, 1959-1 C.B.
627.

Conclusion:

For the reasons stated above, the IRS has determined that is no longer exempt from
Federal income tax under section 501(a) of the Code as an organization described in Code
section 501(c)(3). The IRS is proposing to revoke 501(c)(3) tax-exempt status effective
the of the calendar year under examination.

Please note that this Form 886-A, Explanation of Items, which is also known as the revenue agent
report (RAR), constitutes an integral part of the attached 30-day letter #3618. Please refer to the
attached letter #3618 for additional information including appeal rights and other options available
to the organization and the instructions for how to respond.

Catalog Number 20810W Page 7 www.irs.gov Form 886-A (Rev. 5-2017)