501(c)(3) status revoked for private inurement after directors routed donations to personal accounts

Plain-English summary

The IRS audited a small charity and found that its directors were using the organization to enrich themselves. The organization solicited donations online under its own name and Employer Identification Number, but the money was routed through a payment processor into the directors' personal bank account instead of the charity's account. The directors admitted the funds were for their personal use and were never reimbursed to the charity, and they could not show that any money actually went to the charitable causes the organization claimed to support. When other officers objected, the two directors changed the passwords to lock everyone else out of the accounts. The IRS concluded the organization's net earnings inured to the benefit of private individuals, which is flatly prohibited for a 501(c)(3), and that these were "excess benefit transactions" under Section 4958. Because the inurement was substantial and uncorrected (and the organization had also ceased operations), the IRS revoked its exempt status. Contributions are no longer deductible and the organization must file corporate income tax returns (Form 1120). This document bundles the final revocation (Letter 6337) with the proposed revocation (Letter 3618) and the Form 886-A audit report.

Ruling snapshot

• Question: Should a charity's 501(c)(3) status be revoked when its directors diverted solicited donations to their personal accounts?
• Outcome: revocation
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1(c)(2), (f)(2); IRC § 4958 (excess benefit transactions); Treas. Reg. § 53.4958-4

Full text (IRS public release)

        Department of the Treasury                      Date:
        Internal Revenue Service                        April 26, 2024
Tax Exempt and Government Entities                      Taxpayer ID number (last 4 digits):

                                                        Form:

Release Number: 202429020                               Tax periods ended:

Release Date: 7/19/2024                                 Person to contact:
UIL Code: 501.03-00                                     Name:
                                                        ID number:
                                                        Telephone:
                                                        Fax:
                                                        Last day to file petition with United States
                                                        Tax Court:

                                                        July 25, 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: Your records establish
that you are not organized and/or operated exclusively for exempt purposes within the meaning of IRC Section
501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(a). This is because you operated for the private
inurement of your officers, which is strictly prohibited. Additionally, you ceased operations. In general, ceasing
operations also causes you to fail the operational test required under IRC Section 501(c)(3). Thus, because you
are not operating exclusively for exempt purpose and because you are not operating, in general, you do not meet the
requirements of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1.

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. 3-2024)
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.

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 if 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. Visit TaxpayerAdvocate.IRS.gov/contact-us or call 877-777-4778 (TTY/TDD 800-829-4059)
to find the location and phone number of your local advocate. Learn more about TAS and your rights under the
Taxpayer Bill of Rights at TaxpayerAdvocate.IRS.gov. Do not send your Tax Court petition to TAS. Use the
Tax Court address provided earlier in the letter. Contacting TAS does not extend the time to file a petition.

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.

Letter 6337 (Rev. 3-2024)
Catalog Number 74808E

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. 3-2024)
Catalog Number 74808E


        Department of the Treasury                      Date: 5/2023
        Internal Revenue Service                        Taxpayer ID number:
IRS     Tax Exempt and Government Entities

                                                        Form:
                                                        Tax periods ended:

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

                                                        Manager's contact information:
                                                        Name:
                                                        ID number:
                                                        Telephone:
                                                        Response due date:

                                                        December 15, 2023
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 34809F

   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).

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

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

Enclosures:
Form 886-A
Form 6018
Form 4621-A
Pub. 892
Pub. 3498

Sincerely,

Richard D. Culter, for
Lynn A. Brinkley
Director, Exempt Organizations
Examinations

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


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

Issues

1) Whether 501(c)(3) status should be revoked on the grounds that its net earnings
inured to the benefit of its directors.

Facts

                    (Organization) filed its Form 1023-N on              . The Organization stated
purpose is
                    . The
organization noted during the interview that they collect funds using solicitations and
then make distributions to                     . The Organization was incorporated in
the              on              . The Organization was granted 501(C)(3)
status with 509(a)(2) foundation status. The 1023-EZ lists              as the Director,
              as Director,              , Director-President,              , Director, and
              as Director-Secretary. The organization filed a letter of dissolution with the
              on

The initial Information Document Request (IDR) requested financial statements as well as bank
account information. In response, the Organization provided a general ledger and bank
statements for              . A review of the              Account bank account was conducted.
It was noted as the Organization's only bank account, which showed deposits of              . The
examination discovered a 1099-K for $              was received from              under the
Organization's Employer Identification Number (EIN) that was not deposited in the Organization's
bank account. I asked              and              why this was not deposited in the organization's bank
account.              and              stated that the donations was not for the organization.
              and              stated that that the account was their own use. The deposits on the
Organization bank statement were donations received from the              . The
              is an organization which provides tools to accept and process donations for small
nonprofit organizations. No other donations were reported on the Organizations
              Account. The Organization stated that no other bank accounts connected to the
Organization.

The IDR requested proof of payment to any              the Organization supported. In
response, the Organization stated that payments to              were confidential. Further the
organization stated that payments went to the              supported accounts. The
Organization, however, did not provide any supporting documentation to show prove that any
payments were made to any

The Service conducted its interview on              , with              ;
              , and              . It should be noted that              and              are              .
              was appointed as a Director in              . During the interview, the              stated
that all donations received for the Organization were deposited to a transaction company called

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

              .              would then transfer the funds to the Organization's bank
account. The Exempt Organization Revenue Agent ("agent") questioned              and
              about the 1099-K showing income of $              . The agent informed the              and
              that there was no evidence of the deposits going to the Organization's bank account.
              and              stated that $              of donations was money given by friends and followers for
personal expenses for              .              and              stated that the fundraising
requests listed the name of the Organization but were noted on the
request for              's personal use.

Agent spoke with              and              after the interview. I asked them if they blocked access to
the organization's financial accounts from the other officers.              and              stated that they
changed the passwords on the organization's bank account, the organization's              account,
and the organization's              account, blocking the other officers access to the accounts.
              and              stated they disagreed with the other officers in regards of the funds collected
through              .              stated that those funds were strictly for              's personal use.
              and              provided the list of donors and amounts that were received by the
              account which they noted was for              's personal use in the amount of

Agent sent a third IDR was issued to the Organization. The agent request asked for proof that
assets were distributed to other 501(c)(3) organizations upon dissolution. No support was
provided by the organization.

Agent sent a fourth IDR to the Organization. The IDR requested the Organization to provide the
              statement for              to show donations received. The request also asked for bank
statements to confirm the deposits from              . In response, the Organization sent an excel
illustrating its activity of donations. The Organization provided              months of
              and              's personal bank statements showing some of the deposits being made in their
personal account.              and              stated that these fund-raising activities was for
              's personal use.

A summons was issued to              .              provided documentation (              ) that shows
distributions were sent to              and              's personal bank account. The statement
showed the account number where the funds were transferred. The funds were transferred to the
same Bank of America Account number that              and              provided as their personal
checking account. The report shows $              was deposited to              and              's
personal account in              . The account that received the donations used the EIN of the
Organization.

Law
§501(c)(3) of the Internal Revenue Code provides for exemption from Income Tax for
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

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

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.

§4958(a)(1) of the Internal Revenue Code imposes on each excess benefit transaction a tax equal
to 25% of the excess benefit.

§4958(b) provides that, where an initial tax is imposed, but the excess benefit involved in such
transaction is not corrected within the taxable period, a tax equal to 200% of the excess benefit
involved is imposed and must be paid by any disqualified person with respect to such transaction.

§4958(c) defines the term "excess benefit transaction" as any transaction in which an economic
benefit is provided by an applicable tax-exempt organization directly or indirectly to or for the use
of any disqualified person if the value of the economic benefit provided exceeds the value of the
consideration (including the performance of services) received for providing such benefit. For
purposes of the preceding sentence, an economic benefit shall not be treated as consideration for
performance of services unless such organization clearly indicated its intent to so treat such
benefit.

§4958(e) defines "applicable tax-exempt organization" as an organization described in either
§501(c)(3) or §501(c)(4) of the Internal Revenue Code or an organization which was so described
at any time during the five-year period ending on the date of the excess benefit transaction.

§4958(f)(1) defines a "disqualified person" as (A) any person who was, at any time during the five-
year period ending on the date of such transaction, in a position to exercise substantial influence
over the affairs of the organization, (B) a member of the family of a disqualified person, and (C) a
35% controlled entity.

§4958(f)(6) defines "correction", with respect to any excess benefit transaction, as the undoing of
the excess benefit to the extent possible and taking any additional measures necessary to place
the organization in a financial position not worse than that in which it would be if the disqualified
person were dealing under the highest fiduciary standards.

§6501(l)(1) provides that, for purposes of any tax imposed by section 4912, by chapter 42 (other
than section 4940) or by section 4975, the return referred to in this section shall be the return filed
by the private foundation, plan, trust, or other organization for the year in which the act (or failure
to act) giving rise to liability for such tax occurred.

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

Treasury Regulations §53.4958-1(c)(2)(i) provides, in part, that if a disqualified person makes a
payment of less than the full correction amount under the rules of §53.4958-7, the 200% is
imposed on the unpaid portion of the correction amount (as described in §53.4958-7(c)).

§53.4958-1(c)(2)(ii) defines the "taxable period", with respect to any excess benefit transaction, as
the period beginning with the date on which the transaction occurs and ending on the earlier of —

(A) The date of mailing a notice of deficiency under §6212 with respect to the §4958(a)(1) tax; or
(B) The date on which the tax imposed by §4958(a)(1) is assessed.

§53.4958-1(c)(2)(iii) provides, in part, that the abatement rules of §4961 specifically provide for a
90-day correction period after the date of mailing a notice of deficiency under §6212 with respect
to the §4958(b) 200% tax. If the excess benefit is corrected during that correction period, the
200% tax imposed shall not be assessed, and if assessed the assessment shall be abated, and if
collected shall be credited or refunded as an overpayment.

§53.4958-1(e)(1) of the Treasury Regulations provides that, except as otherwise provided, an
excess benefit transaction occurs on the date on which the disqualified person receives the
economic benefit for federal income tax purposes.

§53.4958-4(c)(1) provides that an economic benefit is not treated as consideration for the
performance of services unless the organization providing the benefit clearly indicates the intent to
treat the benefit as compensation when the benefit is paid. An applicable tax-exempt organization
is treated as clearly indicating its intent to provide an economic benefit as compensation for
services only if the organization provided written substantiation that is contemporaneous with the
transfer of the economic benefit at issue. If an organization fails to provide this contemporaneous
substantiation, any services provided by the disqualified person will not be treated as provided in
consideration for the economic benefit for purposes of determining the reasonableness of the
transaction. In no event shall an economic benefit that a disqualified person obtains by theft or
fraud be treated as consideration for the performance of services.

§53.4958-4(c)(3)(i)(A) provides that an organization's reporting constitutes contemporaneous
substantiation to treat a benefit as compensation if the organization reports the benefit as
compensation on an original Federal tax information return with respect to the payment (e.g.,
Form W-2 or 1099); or the recipient disqualified person reports the benefit as income on the
person's original Federal tax return (e.g., Form 1040); or there is an approved written employment
contract executed on or before the date of the transfer indicating the benefit is compensation; or
there is documentation by the organization's authorized body approving the transfer as
compensation for services on or before the date of the transfer; or there was written evidence in
existence before the due date of the applicable Federal tax return indicating a reasonable belief by
the organization that the benefit was a nontaxable benefit as described in Regulations §53.4958-
4(c)(2).

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

§1.501(c)(3)-1(a)(1) provides that, in order 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. If an organization fails to meet either the organizational test or
the operational test, it is not exempt.

§1.501(c)(3)-1(c)(2) 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.

§1.501(c)(3)-1(f)(2)(i) states that, regardless of whether a particular transaction is subject to
excise taxes under section 4958, the substantive requirements for tax exemption under section
501(c)(3) still apply to an applicable tax-exempt organization described in section 501(c)(3) whose
disqualified persons or organization managers are subject to excise taxes under section 4958.
Accordingly, an organization will no longer meet the requirements for tax-exempt status under
section 501(c)(3) if the organization fails to satisfy the requirements of paragraph (b), (c) or (d) of
this section.

§1.501(c)(3)-1(f)(2)(ii) provides that, in determining whether to continue to recognize the tax-
exempt status of an applicable tax-exempt organization (as defined in section 4958(e) and
§53.4958-2) described in section 501(c)(3) that engages in one or more excess benefit
transactions that violate the prohibition on inurement under section 501(c)(3), the Commissioner
will consider all relevant facts and circumstances, including, but not limited to, the following —

(A) The size and scope of the organization's regular and ongoing activities that further exempt
purposes before and after the excess benefit transaction or transactions occurred.

(B) The size and scope of the excess benefit transaction or transactions (collectively, if more than
one) in relation to the size and scope of the organization's regular and ongoing activities that
further exempt purposes.

(C) Whether the organization has been involved in multiple excess benefit transactions with one or
more persons.

(D) Whether the organization has implemented safeguards that are reasonably calculated to
prevent excess benefit transactions; and

(E) Whether the excess benefit transaction has been corrected (within the meaning of section
4958(f)(6) and §53.4958-7), or the organization has made good faith efforts to seek correction
from the disqualified person(s) who benefited from the excess benefit transaction.

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
(May 2017)                        Explanations of Items                      or exhibit
Name of taxpayer      Tax Identification Number (last 4 digits) | Year/Period ended
Taxpayer's Position
              and              state that the request for              's expenses were for
              's personal use and not the Organizations.
Government's Position

1) The issue to resolve is, whether the Organization's 501(c)(3) status should be revoked on the
grounds that its net earnings inured to the benefit of its Directors.

The government holds the position that the Organization's earnings have inured, in substantial
part, to the benefit of              and              . This violates §1.501(c)(3)-1(c)(2) of the Treasury
Regulations and warrants revocation of EO's 501(c)(3) status. This position is since              and
              were in a position of complete financial control during the years under examination. An
excess benefit transaction is a transaction in which an economic benefit is provided by an
applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified
person — here, the Officers of the Organization. Additionally, the value of the economic benefit
provided by the Organization exceeds the value of the consideration (including the performance of
services) that the Organization received from the disqualified person in exchange for the benefit
as noted in Internal Revenue Code 4958(c)(1).              and              were Officers of the
Organization and was a disqualified persons under the Internal Revenue Code.

              and              were in a position of complete financial control during the year under
examination. Because of this control,              was able to use the Exempt Organization's EIN to
collect donations to be deposited into              and              's personal bank account.              and
              have stated, unequivocally, that these funds collected under the EO's EIN was for
              's personal use. These funds were not reimbursed to the EO. Therefore, all funds collected
under the EO's EIN, constitute inurement to              and              's              . Furthermore,              and
              could not produce supporting documentation that the Organization's ending assets were
distributed to another charitable organization.

Therefore, the Organization is operated for the benefit of private interests in violation of the
restriction on private benefit in paragraph under Internal Revenue Code, § 7805 1.501(c)(3)-1
(d)(1)(ii). Based on these facts and circumstances, the Organization is not operated exclusively
for exempt purposes and, therefore, is not described in section 501(c)(3).

Interaction with Section 4958 of the Code

The Organization, having been recognized in              as an organization described in §501(c)(3) of
the Internal Revenue Code, and remaining so recognized through the date of this report, is an
"applicable tax-exempt organization", as contemplated by §4958(e) of the Code.

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
(May 2017)                        Explanations of Items                      or exhibit
Name of taxpayer      Tax Identification Number (last 4 digits) | Year/Period ended
              is the Initial Director of the Corporation of the Organization.              writes and
signs checks drawn on the Organization's bank account.              is an officer of and
exercises substantial influence over the affairs of the Organization, and therefore satisfies the
definition of a "disqualified person" as contemplated by §4958(f)(1) of the Code.

              stated unequivocally that              and              are volunteers, and that they
were not to be compensated by the Organization in any way.              and              were not issued
either Forms W2 or 1099 by the Organization. Thus, there was no intent by the Organization to
treat any economic benefit to              and              as compensation. Therefore, per §53.4958-
4(c)(1) of the Treasury Regulations, any economic benefit that they received from the
Organization is an automatic excess benefit transaction. All the transactions shown in
represent economic benefits that were transferred from the Organization's account into
              and              's personal bank account are thus all excess benefit transactions.

The Following is a discussion of the five factors contemplated in §1.501(c)(3)-1(f)(2)(ii) of the
Treasury Regulations for revoking 501(c)(3) status on the grounds of inurement when the
inurement also constitutes excess benefit transactions ("EBTs"):

Factor #1: Size and scope of exempt activities before and after EBTs

Revocation is being proposed primarily on the grounds of inurement. The Organization used its
website to solicitate funds for a charitable purpose. These funds were never deposited in the
organization's bank account. These funds were deposited directly to              and              's
personal bank account.

Factor #2: Size and scope of EBTs in relation to size and scope of exempt activities

When applying for exempt organization status, the organization noted that its purpose is
                    . The Organization noted
during the interview that it collects funds using solicitations and make distributions to
                    . When asked to show support of the payments to any              , the
Organization said that payments were confidential. The organization stated that payments went to
              accounts. The organization could not provide any support that any payments were
made to a
The Organization provided one bank account as the Organization's bank account. The
account showed deposits of              transferred in using the              . Upon
dissolution, the checking account had a balance of $              that was not distributed to another
charitable organization. Checks total              could not tie any charitable cause. Of the
donations received from the              , only $              could be determined to
be used for a charitable purpose. The audit discovered a 1099-K for $              was received
from              under the organization's EIN that was not deposited in the Organization's bank

Catalog Number 20810W      Page 7      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

account. The funds in the Organization's bank account were used in large part for trips and hotel
stays for conventions. The summons showed transactions in the amount of $
deposited directly to              and              's personal account. The Organization stated that the
account that was attached to the Organization was never used as a fundraising tool for the
Organization. Using the Organization's              page, the Organization requested donations for
              's personal expenses. Treasury regulation 1.501(c)(3)-1(f)(2) states that
disqualified persons or Organization managers are subject to excise taxes under section 4958.
Accordingly, an Organization will no longer meet the requirements for tax-exempt status under
section 501(c)(3).              is a Director of the Organization and is a disqualified person. The
Organization provided the list of donors and amounts that were received by the              account.
Therefore, consideration of this factor weighs in favor of revocation.

The Excess Benefit Transactions (EBT's) are to be considered relative to the size and scope of
EO's fundraising activities. For the purposes of this report, this comparison will made using
revenues. The comparison is as follows:

                                                        EBTs as % of
Year      EBTs      Exempt Revenue                      Exempt Revenue
          $         $                                   %

Factor #3: Multiple EBTs

As shown in              , there were over              transactions in the amount of $              during
              that constitute both inurement and EBTs. Upon dissolution, the checking account had a balance
of $              that was not distributed to another charitable organization. EBTs were thus not
isolated or infrequent. Consideration of this third factor then also weighs in favor of revocation.

Factor #4: Whether safeguards have been implemented.

When              and              were asked about the transaction to their personal bank account by the
other officers of the organization,              and              changed the passwords to the
Organization's              Account,              account and bank account.

No safeguards have been implemented.              and              employed no procedures to enforce
any safeguards. Consideration of this fourth factor therefore also weighs in favor of revocation.

Factor #5: Whether the EBTs have been corrected.

              and              do not believe the money collected under the Organization's
account and              Account in the amount of $              belong to the Organization. Upon

Catalog Number 20810W      Page 8      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
dissolution, the checking account had a balance of $              that was not distributed to another
charitable organization.
For the purposes of considering this fifth factor,              and              's control of the
Organization's finances, using the organization's              account to collect donations through
              , and deposit these funds directly to              and              's personal checking has shown
inurement. For this reason, consideration of this fifth factor weighs in favor of revocation.
Conclusion

The Organization no longer qualifies for exemption under IRC § 501(c)(3). The Organization's net
earnings have inured, in substantial part, to the benefit of its founder and Director. This violates
§1.501(c)(3)-1(c)(2) of the Treasury Regulations and warrants revocation of the Organization's
501(c)(3) status effective    /    . Form 1120, U.S. Corporation Income Tax Return, should
be filed for              and each year thereafter the EO remains subject to federal income tax.
Therefore, it is proposed that The Organization's exempt status under IRC § 501(c)(3) of the Code
be revoked as of

Catalog Number 20810W      Page 9      www.irs.gov      Form 886-A (Rev. 5-2017)