Charity lost exemption after failing to provide records

Plain-English summary

A charitable organization under examination did not provide the organizational and financial records requested by the IRS, including records of its receipts, expenditures, and activities. Its representative said that the organization could not access most of its records because of a redacted state-related matter, but the organization still did not produce enough information for the IRS to verify its operations. The IRS concluded that the organization had not shown that it operated exclusively for exempt purposes or that its earnings did not benefit private persons. It revoked the organization's Section 501(c)(3) exemption and stated that contributions were no longer deductible under Section 170.

Ruling snapshot

• Question: Did the organization continue to qualify under Section 501(c)(3) despite failing to provide records for its examination?
• Outcome: revoked
• Key authorities: IRC §§ 170, 501(c)(3), 6001, and 6033(a)(1); Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1(e), and 1.6033-2(i)(2); Rev. Rul. 58-617; Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 12/29/2023
Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):
Form:
Release Number: 202412010 Tax periods ended:
Release Date: 3/22/2024
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: Organizations
described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) must be
both organized and operated exclusively for exempt purposes. You have failed to produce documents or
otherwise establish that you are organized and operated exclusively for exempt purposes and that no part of
your net earnings inures to the benefit of private shareholders or individuals. You failed to provide records
regarding your receipts, expenditures, or activities as required by I.R.C. sections 6001, 6033(a)(1). Treasury
Regulation section 1.6033-2(i)(2) 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.

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:

Internal Revenue Service

Taxpayer Advocate Office

Telephone:
Fax:

Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights,
go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above.
Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time
to file an action for declaratory judgment.

Where you can find more information
Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for

more comprehensive information.

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

Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you
have questions, you can call the person shown at the top of this letter.

If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best
time to call, and a copy of this letter.

You may fax your documents to the fax number shown above, using either a fax machine or online fax service.
Protect yourself when sending digital data by understanding the fax service's privacy and security policies.

Keep the original letter for your records.
Sincerely,
Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

cc: - Power of Attorney

Letter 6337 (Rev. 8-2022)

Catalog Number 74808E

Department of the Treasury Date:
Internal Revenue Service June 30, 2023
Tax Exempt and Government Entities Taxpayer ID number:
Form:
Tax periods ended:

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

Manager's contact information:
Name: AGM:
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.

Letter 3618 (Rev. 8-2019)
Catalog Number 34800

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.

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).

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

If you have questions, you can contact the person shown at the top of this letter.

Sincerely,
Vanessa Richards Rather
Digitally signed by Vanessa Richards Rather
Date: 2023.06.30 08:29:21 -0400

For Lynn Brinkley

Director, Exempt Organizations

Examinations
Enclosures:
Form 886-A
Form 6018
Publication 1

3 Letter 3618 (Rev. 8-2019)

Catalog Number 34809F

Form 886-A Department of the Treasury — Internal Revenue Service Schedule number
or exhibit
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
ISSUE:
Whether continues to qualify for exemption as an organization described in

the Internal Revenue Code (IRC) Section 501(c)(3) because of your failure to meet the
Operational Test?

FACTS:
was incorporated under the laws of the State of as a
corporation on ; , for the following purposes:
was organized and operated exclusively to further Charitable and Scientific
purposes.
On was recognized to be exempt from Federal income tax

as an organization described in IRC Section 501(c)(3).

On ; , Internal Revenue Service sent Letter and enclosed
Form 4564, Information Document Request (IDR) listing items needed to conduct the examination,
did not provide response to the IDR.

Revenue Agent alerted Group Manager that has not responded to initial letter
and Information Document Request issued on ;

On ; , Internal Revenue Service (IRS) sent Delinquency Notice,
Letter 5077-B informing the taxpayer if you don't fully respond to the IDR by the due date of
, we'll propose revocation of your exempt status.

On ; , Internal Revenue Service received correspondence, Form from
. Revenue Agent called and states that the organization is under a
by the State of
On ; , Internal Revenue Service sent Form 4564, Information

Document Request (IDR) and to copy to Power of Attorney, listing of items regarding
by the organization.

On , , Internal Revenue Service received correspondence, via fax, a document
from Power of Attorney, , in regards in the

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

(May 2017) Explanations of Items or exhibit

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

LAW:

IRC § 501 (c)(3) exempts from federal income tax organizations which are 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 (but only if
no part of its activities involve the provision of athletic facilities or equipment), 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 (h)), and which does not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or in opposition to) any candidate
for public office.

IRC § 501(c)(3) requires an organization to be both "organized" and "operated" exclusively for one
or more IRC § 501(c)(3) purposes. If the organization fails either the organizational test or the
operational test, it isn’t exempt. The operational test applies to the organization's activities and
how it furthers exempt purposes.

Tax Reg. § 1.501(c)(3)-1(d)(i) states that an organization may be exempt as an organization
described in Section 501(c)(3) if it is organized and operated exclusively for one or more of the
following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or
prevention of cruelty to children or animals.

Tax Reg. § 1.501(c)(3)-1(a)(1) of the regulations provides that in order to be exempt as an
organization described in Section 501(c)(3) of the Code, the organization must be one that is both
organized and operated exclusively for one or more of the purposes specified in that section.

Tax Reg. § 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).

Treas. Reg. § 1.6001-1(e) states that the books or records required by this Section shall be kept
at all times available for inspection by authorized Internal Revenue Service officers or employees
and shall be retained as long as the contents thereof may be material in the administration of any
Internal Revenue Law.

IRS, Private Letter Ruling, Section 501 - Exemption from Tax on Corporations, Certain Trusts,
etc., PLR 202248012

Revenue Ruling 58-617, 1958-2 C.B. 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, 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

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
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended

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.

TAXPAYER'S POSITION:

On : , , POA forward over a fax stating “that the organization records
are with the ( ). The all the organization's records and
they have no access to those records at this time.” Including in the fax was a copy of the

, from the State of

On forward over . via flash drive from the
documents they were about to get access to; but no other documents were able to be furnished as
the has all other documents and records related to the organization.

On ; , Internal Revenue Service received correspondence, via fax, a document
from Power of Attorney, , stating that “
, open for - while the
and proceed. As such, the organization has not
filed its and is not in a position to file a final "

GOVERNMENT'S POSITION:

Internal Revenue Service, Private Letter Ruling, Section 501 - Exemption from Tax on
Corporations, Certain Trusts, etc., PLR 202248012

Failure to Meet the Operational Test: has failed to show us that they meet the
operational test for a § 501(c)(3) organization for the year under examination. To meet the
operational test, they must show that they engage primarily in activities which accomplish one or
more of such exempt purposes specified in section § 501(c)(3). An organization won't meet the
operational test if more than an insubstantial part of its activities isn't in furtherance of an exempt
purpose.

Failure to Provide Records: failed to provide records as is required in Treas.
Reg. § 1.6001-1(e). They failed to provide most or any organizational or financial information that
we requested for the examination. They were only able to provide

Without the Exempt Organization records, we cannot verify that they are operating according to
their exempt purpose. by their own admission in their letter to the Internal

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

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

(May 2017) Explanations of Items or exhibit

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

Revenue Service declared that it has been “
” from the State of

Our position is that the organization will be revoked for failing the operational test, it is not
operating for exempt purpose.

CONCLUSION:

As demonstrated in Rev. Rul. 58-617, an organization's exempt status will remain in effect 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. In the case of , the organization
states it has due to “ ” from
the State of ; did not provide any of the requested items in the
Information Document Request (IDR) for the examination, other than . As such,

fails to meet the operational requirements to continue its exemption status
under IRC § 501(c)(3). Therefore, the effective revocation date will be ;

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