IRS disqualifies a self-declared 501(c)(4) "University" that never operated

Plain-English summary

This is the IRS's final determination that an organization does not qualify for tax exemption under section 501(c)(4) (the category for social-welfare organizations). Unlike most documents in this series, this is not a section 501(c)(3) charity case. The organization was incorporated as a nonprofit "religious corporation" and styled itself a "University," but it never applied for exemption: it filed no Form 1023 for 501(c)(3) status and no Form 8976 notice for 501(c)(4) status. It simply checked the 501(c)(4) box on its annual filings. When the IRS examined it, the organization did not respond, so the agent used a summons to reach the one officer listed on its filings. In an interview, that officer said he was only a consultant who had incorporated this school (and several other organizations) at the request of people he would not name, that the organization's addresses were mailboxes and a residential rental, and that the organization "had never been active." He alone controlled its single bank account and debit card; he described the deposits as donations and the spending as meals and gifts to donors, but produced no records to back that up. Because the organization was not operated exclusively for social welfare and showed no exempt activity at all, the IRS determined it fails section 501(c)(4) and proposed to disqualify it. The organization had already dissolved with the state.

Ruling snapshot

• Question: Does an inactive, self-declared 501(c)(4) organization, controlled by a single consultant and never operated, qualify for exemption?
• Outcome: revocation (disqualification: not operated exclusively for social welfare, no exempt activity shown)
• Key authorities: IRC § 501(c)(4); Treas. Reg. § 1.501(c)(4)-1(a)(2)(i)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service June 13, 2023
Form:
Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):
Number: 202336026 Tax periods ended:

Release Date: 9/8/2023
Person to contact:
Name:
ID number:
Telephone:
Fax:

Last day to file petition with United States
Tax Court:

UIL: 501.03-00

CERTIFIED MAIL - Return Receipt Requested
Dear

Why we are sending you this letter
This is a final determination explaining why your organization doesn't qualify as an organization described in
Internal Revenue Code (IRC) Section 501(c)(4) for the tax periods above.

In the future, if you believe your organization qualifies for tax-exempt status and would like a determination
letter from the Internal Revenue Service, you can request a determination by filing Form 1024, Application for
Recognition of Exemption Under Section 501(a), or Form 1024-A, Application for Recognition of Exemption
Under Section 501(c)(4) of the Internal Revenue Code, (as applicable) and paying the required user fee.

Our adverse determination as to your exempt status was made for the following reasons: You did not respond to
our requests for information regarding your purpose and activities. You have not established that you are
operated exclusively for the promotion of social welfare and other non-profitable purposes and the net earnings
of which are devoted exclusively to charitable, educational or recreational purposes under IRC Section 501(a)
as described in IRC Section 501(c)(4).

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.

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

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,

[illegible signature]
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

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


Department of the Treasury Date:
Internal Revenue Service 09/14/2022
IRS 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:

ID number:
Telephone:
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 your organization
doesn't qualify as an organization described in Internal Revenue Code (IRC) Section 501(c)(4).

This letter is not a determination of your tax-exempt status under IRC Section 501 for any period other than the
tax periods above.

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)(4) for the periods above.

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.

In the future, if you believe your organization qualifies for tax-exempt status and would like a status determination
letter from the IRS, you can request a determination by filing Form 1024, Application for Recognition of
Exemption Under Section 501(a), and paying the required user fee.

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: 2022.09.13 16301460700

for Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations

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

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


Form 886-A Department of the Treasury - Internal Revenue Service Schedule number or exhibit
Explanation of Items

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

ISSUES:

Whether the qualifies to be exempt under section 501(c)(4) of the Internal Revenue
Code ("IRC").

FACTS:

Background

the ("the ) was incorporated in the state of by on
. The one-page article of incorporation states:

* name is , a Non Profit Religious Corporation,
* its specific purpose is "to provide religious education programs and to continue development
of religious educations", and
* it is organized and operated exclusively for charitable purpose within the meaning of IRC
section 501(c)(3).

Per the Internal Revenue Service's ("Service") records, no Form 1023, Application for Recognition of
Exemption under Section 501(c)(3) of the Internal Revenue Code, has been filed for the

Beginning with the fiscal year, ending , the began submitting
and selected that it was exempt under IRC section 501(c)(4).

Per the Service's records, no Form 8976, Notice of Intent to Operate Under Section 501(c)(4),
notifying the Service of its intent to operate as a section 501(c)(4) organization has been filed by the
University.

The filed listed the University's name as and stated the following
information:
Tax Year Tax Period Principal Officer's Name Principal Officer's Address

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 or exhibit
Explanation of Items

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

Examination

An information document request ("IDR") was sent to the by the initial examining revenue
agent on . No response was received from the and a delinquency notice was
sent on . Additionally, the was notified of the Service's intent to make third
party contacts in a letter sent on

The subsequent examining revenue agent ("agent") attempted to locate the Officers, for
the present and prior exam years, and was able to locate , the primary officer listed on
the . A third-party summons for testimony and available records was
hand delivered to his last known personal residence on

Interview
On , an individual answering to the name of presented himself to
the agent at the Service office located in . Upon examining his identification, the
agent determined that this was not but an acquaintance. The interview was
rescheduled to the following day. presented himself on , for an
interview and to provide available documents. Key points taken from the interview were:

* changes to the accreditation authority caused a rush in the creation of post-
secondary schools,
* stated he had incorporated the and multiple other organizations with the
state of at the behest of individuals that he declined to name,
* he was asked to help due to his familiarity with the school accreditation process,
he was involved in the filing of the ,
* the address was owned by an associate of , who allowed him to
use various suite numbers for mailing purposes based on vacancy,
* the address was a mailbox set up by to handle the
dissolution of the ;
the address is a residential rental property owned by , and
* the had never been active.

stated that he was a consultant and not involved in the day-to-day operations for the
. When asked to list any of the other board members or provide the name of the individual
who enlisted his services, stated he did not remember or declined to answer.

Bank Activity

On , a business checking account was opened at using the
name and tax identification number. When questioned, stated that:

* he had opened the account, and
* only he had access to the account and use of the account's debit card.

Monthly bank statements from the exam period showed the following transactions:

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 or exhibit
Explanation of Items

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

DATE DESCRIPTION AMOUNT
Account opened by
Cash deposit
Cash deposit
Check# - Pay to the order of
Card Purchase -
Foreign Exchange Fee
Card Purchase -
Card Purchase -
Card Purchase -

Ending Balance at FYE | $

During the interview, the agent requested additional information on the source of the cash deposits,
the nature of the expenditures, and how the ending balance at the fiscal year end of
was spent by the stated that the deposits were donations, some of which were
returned to the donor; the expenditures were meals and gifts to donor; and he speculated that the
remaining funds were used to dissolve the school. No additional documentation was received by the
agent to support statements.

LAW:

IRC section 501(c)(4)(A) exempts from Federal income tax civic leagues or organizations not
organized for profit but operated exclusively for the promotion of social welfare, or local associations
of employees, the membership of which is limited to the employees of a designated person or
persons in a particular municipality, and the net earnings of which are devoted exclusively to
charitable, education, or recreational purposes.

Section 1.501(c)(4)-1(a)(2)(i) of the Federal Tax Regulations states that an organization is operated
exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the
common good and general welfare of the people of the community. An organization embraced within
this section is one which is operated primarily for the purpose of bringing about civic betterments and
social improvements.

TAXPAYER'S POSITION:

The position is unknown at this time; however, the had dissolved with the
state of as of

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 or exhibit
Explanation of Items

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

GOVERNMENT'S POSITION:

It is the government's position that the has failed to meet the requirements to be exempt
under IRC section 501(c)(4). The articles of incorporation and the interview indicates that the
was not created for the exclusive promotion of social welfare. Additionally, there was no
evidence that the engaged in any activity that supported its exempt purpose.

CONCLUSION:
Based upon the facts and circumstances, has failed to meet the requirements for
an organization exempt under IRC Section 501(c)(4). The government proposes that the
be disqualified for the tax period ending .

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