Organization loses exemption after refusing examination requests

Plain-English summary

The IRS revoked an organization’s section 501(c)(3) status after it failed to cooperate with an examination. The examination file describes repeated letters, delinquency notices, telephone calls, and searches for alternative contact numbers, but the organization did not provide the requested records or information. Sections 6001 and 6033 require exempt organizations to keep records and provide information needed to determine whether they continue to qualify. Without those records, the organization did not establish that it operated exclusively for exempt purposes or that its earnings did not benefit private interests. The IRS therefore revoked the exemption effective on a redacted date.

Ruling snapshot

• Question: Could the organization retain section 501(c)(3) status without producing records requested during an IRS examination?
• Outcome: revocation
• Key authorities: IRC §§ 501(c)(3), 511, 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 November 6, 2023
Tax Exempt and Government Entities

IRS Taxpayer ID number {last 4 digits}:

Form:

Release Number: 202405014 Tax periods ended:
Release Date: 2/2/2024

UIL Code: 501.03-00

Person to contact:

ID number:
Telephone:
Fax,

Last day to file petition with United States
Tax Court: February 4, 2024

CERTIFIED MAIL - Return Receipt Requested
Dear :

Why we are sending you this letter
This is a final determination that you don’t qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective

. Your determination letter dated , is revoked.

Our adverse determination as to your exempt status was made for the following reasons. You have 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 sections 6001 and 6033(a)(1) of the IRC and
Rev. Rul. 59-95, 1959-1 C.B. 627. Section 1.6033-2(1)(2) of the Income Tax Regulations provides, in part,
that every organization which is exempt from tax, shall submit such additional information as may be required
by the Internal Revenue Service for the purpose of inquiring into its exempt status. Since you have not
provided the requested information, you have failed to establish that you are operated exclusively for 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.

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 6/12/2023
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:

CERTIFIED MAIL — Return Receipt Requested ae
Telephone:
Response due date:
July 12, 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,

for Lynn A. Brinkley

Director, Exempt Organizations Examinations

Enclosures:

Form 886-A

Form 6018

Publication 892
Publication 3498-A

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

D - i Schedule number or
Form 886-A epartment of the Treasury — Internal Revenue Service

. hibit
(May 2017) Explanations of Items ox

Name of taxpayer Tax Identification Number (last 4 digits) | 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 to substantiate that the organization
is meeting the organizational and operational tests?

Facts:
applied for tax-exempt status by filing the

,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/or
fostering 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 for the tax year

The list the phone number of for the president of

Per the State of website, the organization is listed as active and in good standing.
. Articles of incorporation were filed on and were available on the State of
website.

• Correspondence for the audit was as follows:

• Letter 6031 (Rev. 03-2022), Initial Exam Appointment, with attachments, was mailed
to the organization on , with a response date of
This letter was not returned by the post office as being undeliverable.

• Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area,
with attachments, was mailed to the
,on , with a response date of .
Article Number . This letter was not returned by the post

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

x hibi
(May 2017) Explanations of Items exhibit

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

office as being undeliverable. USPS tracking shows letter picked up

• Letter 5077-B (1-2017), TE/GE IDR Delinquency Notice, was mailed to the
organization, on , with a response date of . This
letter was not returned by the post office as being undeliverable. USPS tracking shows
letter picked up .

• Letter 5077-B (1-2017), TE/GE IDR Delinquency Notice, was mailed to the
organization, on , with a response date of . The
letter was reissued due to area being under and inserts not included.
The Administrative File was included. This letter was not returned by the post office as
being undeliverable. USPS tracking shows letter picked up

• Telephone contact for the audit was as follows:

oO , Tax Compliance Officer (TCO) called the phone number listed
on the for the President of . Phone rang 2
times and disconnected. Tried 2 more times immediately with same result.

s) , Tax Compliance Officer (TCO) called the phone number listed
on the application for the President of . Phone rang 2
times and disconnected. Tried 2 more times immediately with same result.

e) , Tax Compliance Officer (TCO) called the phone number listed on
the for the President of . Phone rang more
than 10 times, no voicemail. Previous research shows all officers reside at same
address.

• , called the phone number listed on the
for the President of and received VMS. Left a message for an officer
of the organization to return my phone call.

fe) , called the phone number listed on the
for the President of and received VMS. Left a message for an officer
of the organization to return my phone call.

re) , called the phone number listed on the
for the President of and received VMS. Left a message for an officer
of the organization to return my phone call.

Oo , called phone number found on Accurint for
. Phone number is Not in Service.

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
: exhibi
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
° , called phone numbers found on Accurint for

, No longer belongs to No longer belongs to

Not in Service.

fe) , called number found on Accurint for
. No longer belongs to

O° , called for who was
listed as preparer on . No answer, unable to leave message.
Law:

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

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

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

. hibit
(May 2017) Explanations of Items exhibit

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

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 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.

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

Form 886-A Department of the Treasury —~ Internal Revenue Service Sereaule number or
. exhibit
(May 2017) Explanations of Items

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

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 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 states that exempt organizations shall
submit additional information for the purpose of 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

, should be filed for the tax periods after

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