Charity lost exemption after ceasing operations without formally dissolving

Plain-English summary

A section 501(c)(3) organization stopped its exempt activities and closed its bank account, but it did not complete the required steps to terminate formally. It did not file a final return, provide a statement describing the disposition of its assets, or submit dissolution documents. The IRS concluded that an inactive organization that no longer conducts exempt activities fails the operational test under section 501(c)(3). It revoked the organization's exemption and stated that contributions were no longer deductible under section 170. The organization would generally need to file federal income tax returns, and it could challenge the final determination in one of the federal courts listed in the letter.

Ruling snapshot

• Question: Could the organization retain section 501(c)(3) status after it ceased exempt operations without completing the required termination filings?
• Outcome: revocation
• Key authorities: IRC §§ 170, 501(a), 501(c)(3), 6043(b), 7428; Treas. Reg. §§ 1.501(c)(3)-1, 1.6043-3; Rev. Proc. 98-1

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
IRS Tax Exempt and Government Entities

Date:
Taxpayer ID number (last 4 digits):
Form:
Tax periods ended:

Release Number: 202402014
Release Date: 1/12/2024
UIL Code: 501.03-00

Person to contact:
Name:
ID number:
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: You ceased operations
and conducting exempt activities under Internal Revenue Code (IRC) Section 501(c)(3). This causes you to fail
the operational test required under IRC Section 501(c)(3). Thus, because you are no longer operating and/or
conducting exempt activities, you do not meet the requirements of IRC Section 501(c)(3) and Treasury
Regulations Section 1.501(c)(3)-1. In addition, you did not properly dissolve with the State, file a final return,
submit a written statement of disposition of assets, nor submit a dissolution document, as specified within IRC
Section 6043(b) and Treasury Regulations Section 1.6043-3.

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.

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 Date:
Internal Revenue Service July 26, 2023
IRS Tax Exempt and Government Entities Taxpayer ID number:
Form:

Tax periods ended:

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

Manager's contact information:
Name:

CERTIFIED MAIL - Return Receipt Requested ID number:

Telephone:

Fax:
Response due date:
August 28, 2023

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.

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.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn’t
apply now that we’ve issued this letter.

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

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 Kenneth Bradley
Date: 2023.07.26 06:49:11 -04'00"

Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018

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

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

Name of taxpayer
Tax Identification Number (last 4 digits)
Year/Period ended
Schedule number or exhibit

ISSUE:
Whether ( ) continues to qualify for
exemption under Section 501(c)(3) of the Internal Revenue Code (IRC)?
FACTS:

filed the Form 1023 requesting exemption under IRC Section 501(c)(3) on

was granted tax-exempt status on to
last filed Form 990-N for the tax year ending on
Organization has not filed Form 990-N for the tax years ending or

conducted its operations out of its facility located in . According
to its Articles of Incorporation dated , the purposes of the EO are as follows.
Article

The corporation is organized exclusively for charitable, educational, and scientific purposes,
including, for such purposes, the making of distributions to organizations that qualify as exempt
organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(“Code”), or the corresponding section of any future federal tax code. The charitable, educational,
and scientific purposes for which said corporation shall consist of the following specific primary
purposes:

A. The mission of is to promote

The following information was received by the Service from the organization in response to the
initial information document request dated

• Income statements and bank statements were provided for the tax year ending

. The Treasurer of the organization stated that the organization ceased
operation in
During the period to the , the organization did not receive any

contribution, grants, gifts, or any other funds related to their tax-exempt purposes. However, the
organization did continue to use its employee identification number (EIN) to report non-employee
compensation on Form 1099 into tax year . (Treasurer) stated that the
organization's EIN was used in error and that the compensation paid in tax year was

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

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

Name of taxpayer
Tax Identification Number (last 4 digits)
Year/Period ended
Schedule number or exhibit
expense of the , EIN ; stated that he is

also the treasurer of the

The organization was aware that it needed to file articles of dissolution with the

,_ which is also required by the Internal Revenue Service (IRS), to terminate the
organization as an IRC Section 501(c)(3) organization. The organization did substantiate they did
close the bank account on with a closing withdrawal amount of $ . The

organization was also able to substantiate that the $ was transferred to the
bank account ( ) at . account number

ending . The closing of all bank accounts is required to terminate the organization.

The organization was required to file a final Form 990, submit a written statement of disposition of
assets, and submit a dissolution document. All documents required to terminate the organization
were requested in a second information document request dated , the organization
then failed to submit the necessary information requested to terminate the organization.

stated that the official articles of dissolution necessary to complete the termination process
could not be obtained from the Secretary of

LAW:

IRC Section 501(c)(3) exempts from Federal income tax: corporations, and any community chest,
fund, or foundation 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, 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(i)), and which does not participate in, or intervene in
(including the publishing or distributing of statements), any political campaign on behalf of any
candidate for public office.

IRC Section 1.501 (c)(3)-1(a) of the Income Tax Regulations (Treas. Reg.) provides that in
order to be exempt as an organization described in IRC 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.

Treas. Reg. 1.501(c)(3)-1(c)(1) 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 IRC
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.

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

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

Name of taxpayer
Tax Identification Number (last 4 digits)
Year/Period ended
Schedule number or exhibit

Treas. Reg. 1.501(c)(3)-1(c)(2) provides that the operational test is not satisfied where
any part of the organization's earnings inure to the benefit of private shareholders or
individuals, and where the organization serves a private rather than a public interest.
Treas. Reg. 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or
operated exclusively for one or more of the purposes specified in IRC 501(c)(3) unless it
services a public rather than a private interest.

Rev. Proc. 98-1, 1998-1 I.R.B. 7 provides that except in rare or unusual circumstances,
the revocation or modification of a letter ruling will not be applied retroactively to the
taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was
directly involved in the letter ruling provided that: (1) there has been no misstatement or
omission of material facts; (2) the facts at the time of the transaction are not materially
different from the facts on which the letter ruling was based; (3) there has been no change
in the applicable law; (4) the letter ruling was originally issued for a proposed transaction;
and (5) the taxpayer directly involved in the letter ruling acted in good faith in relying on
the letter ruling, and revoking or modifying the letter ruling retroactively would be to the
taxpayer's detriment.

IRC 6104 Publicity of information from certain exempt organizations and certain trusts.

(c) Publication to State officials

(1) General rule for charitable organizations

In the case of any organization which is described in section 501(c)(3) and exempt from taxation
under section 501(a), or has applied under section 508(a) for recognition as an organization

described in section 501(c)(3), the Secretary at such times and in such manner as he may by
regulations prescribe shall—

(A) notify the appropriate State officer of a refusal to recognize such organization as an
organization described in section 501(c)(3), or of the operation of such organization in a manner
which does not meet, or no longer meets, the requirements of its exemption,

(B) notify the appropriate State officer of the mailing of a notice of deficiency of tax imposed under
section 507 or chapter 41 or 42, and

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

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

(May 2017)

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

(C) at the request of such appropriate State officer, make available for inspection and copying
such returns, filed statements, records, reports, and other information, relating to a determination
under subparagraph (A) or (B) as are relevant to any determination under State law.

(2) Disclosure of proposed actions related to charitable organizations

(A) Specific notifications in the case of an organization to which paragraph (1) applies, the
Secretary may disclose to the appropriate State officer—

(i) a notice of proposed refusal to recognize such organization as an organization described in
section 501(c)(3) or a notice of proposed revocation of such organization’s recognition as an
organization exempt from taxation,

(ii) the issuance of a letter of proposed deficiency of tax imposed under section 507 or chapter 41
or 42, and

(iii) the names, addresses, and taxpayer identification numbers of organizations which have
applied for recognition as organizations described in section 501(c)(3).

(B) Additional disclosures

Returns and return information of organizations with respect to which information is disclosed
under subparagraph (A) may be made available for inspection by or disclosed to an appropriate
State officer.

(C) Procedures for disclosure

Information may be inspected or disclosed under subparagraph (A) or (B) only—

(i) upon written request by an appropriate State officer, and

(ii) for the purpose of, and only to the extent necessary in, the administration of State laws
regulating such organizations.

Such information may only be inspected by or disclosed to a person other than the appropriate
State officer if such person is an officer or employee of the State and is designated by the
appropriate State officer to receive the returns or return information under this paragraph on behalf
of the appropriate State officer.

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

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

(May 2017)

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

(D) Disclosures other than by request

The Secretary may make available for inspection or disclose returns and return information of an
organization to which paragraph (1) applies to an appropriate State officer of any State if the
Secretary determines that such returns or return information may constitute evidence of
noncompliance under the laws within the jurisdiction of the appropriate State officer.

Rev. Rul. 58-617, 1958-2 CB 260, (Jan 01, 1958), Rulings and determinations letters granting
exemption from federal income tax to an organization described in section 501(a) of the Internal
Revenue Code of 1954, [*10] to which contributions are deductible by donors in computing their
taxable income in the manner and to the extent provided by section 170 of the Code, are effective
only so long as there are no material changes in the character of the organization, the purposes
for which it was organized, or its methods of operation. Failure to comply with this requirement
may result in serious consequences to the organization for the reason that the ruling or
determination letter holding the organization exempt may be revoked retroactively to the date of
the changes affecting its exempt status, depending upon the circumstances involved, and subject
to the limitations on retroactivity of revocation found in section 503 of the Code.

Rev. Rul. 59-95, 1959-1 C.B. 627 provides that an organization previously held exempt from
Federal income tax was requested to produce a financial statement as of the end of the year and
a statement of its operations during such year. However, its records were so incomplete that it
was unable to furnish such statements. Section 6033 of the Internal Revenue Code of 1954
provides that every organization, except as provided therein, exempt from taxation under section
501(a) of the Code shall file an annual return, stating specifically the items of gross income,
receipts, and disbursements, and shall keep such records, render under oath such statements,
make such other returns and comply with such rules and regulations as the Secretary of the
Treasury or his delegate may from time to time prescribe. Held, failure or inability to file the
required information return or otherwise to comply with the provision 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 an exempt status.

TAXPAYER'S POSITION:

The taxpayer's position is unknown at this time.

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

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

Name of taxpayer
Tax Identification Number (last 4 digits)
Year/Period ended
Schedule number or exhibit

GOVERNMENT'S POSITION:

is no longer operating as a tax-exempt IRC Section 501(c)(3) organization. It ceased
conducting exempt operations indefinitely in
; substantiated that they closed its associated
bank account and distributed funds to the on .
stated that the organization had no more employees and that payments made to independent
contractors were for services performed for , EIN

The no longer operates as an IRC Section
501(c)(3) organization. They did not properly dissolve the organization with the
, per IRS procedures. did not file final Form 990-N, submit a written statement of
disposition of assets, or submit a dissolution document when they transferred assets to the
, these actions would have properly terminated the organization.

The organization does not qualify to terminate the organization, because they did not file final
Form 990-N, submit a written statement of disposition of assets, or submit a dissolution document,
when they transferred assets to the , these items are required to
terminate an organization exempt under IRC Section 501(c)(3) of the Internal Revenue Code.

During examination it was determined that the organization did not terminate properly. The
organization ceased conducting exempt operations and did not engage in activities that which
accomplished any exempt purposes as specified in IRC Section 501(c)(3) at any time during the
year in . Since is no longer conducting exempt activities, it fails the operational test
and is proposed with revocation of exempt status.

CONCLUSION:

As a result of the examination, the Service has determined that is no longer operating as
a tax-exempt IRC Section 501(c)(3) organization. has not provided the necessary
documentation to properly terminate its exempt status. is no longer conducting exempt
activities; therefore, the organization fails the operational test. Since the organization fails the
operational test, its exemption is revoked effective . Should this revocation be

upheld, Form 1120 must be filed starting with tax periods ending

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