IRS revokes a radio broadcaster's 501(c)(3) for inactivity and inurement to its officers

Plain-English summary

The IRS revoked the tax-exempt status of an organization that had been
recognized as a 501(c)(3) public charity to run noncommercial educational
radio broadcasting. Two problems drove the revocation. First, after the
organization sold its broadcasting assets (FCC licenses, studio equipment,
tower, and tower site), it no longer carried on any charitable activity: board
minutes showed only unsuccessful attempts to find new broadcasting
opportunities, and the board was considering dissolving, so it failed the
operational test. Second, its earnings inured to its officers: amounts the
officers called "loans" from themselves had no promissory notes, interest,
maturity dates, or repayment records, and the organization also made
unsubstantiated direct payments, personal payments, and cash withdrawals to or
for officers, none reported as wages on W-2s, 941s, or 1099s. Because the
organization was neither operated exclusively for exempt purposes nor free of
private inurement, the IRS revoked its exemption. Contributions are no longer
deductible under Section 170, and the organization must file Form 1120. The
organization waived its right to contest under Section 7428.

Ruling snapshot

• Question: Should the organization's 501(c)(3) exemption be revoked for inactivity (failing the operational test) and inurement of earnings to its officers?
• Outcome: Revocation
• Key authorities: IRC § 501(c)(3); Treas. Reg. §§ 1.501(c)(3)-1(a), (c)(1), (c)(2); Community Education Foundation v. Comm'r; Vinikoor v. Comm'r; Rameses School of San Antonio v. Comm'r; Founding Church of Scientology v. United States

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Independent Office of Appeals

Date: JUN [illegible] 2024
Release Number: 202436013
Release Date: 9/6/2024
UIL Code: 501.32-00, 501.32-01, 501.35-00
Uniform Issue List (UIL): 501.32-00, 501.32-01, 6014.35-00

Person to contact:
Name: [redacted]
Employee ID number: [redacted]
Telephone: [redacted]
Hours: [redacted]
Employer ID number: [redacted]

Certified Mail

Dear [redacted]:

This is a final adverse determination that you do not qualify for exemption from federal income tax under Internal Revenue Code (the "Code") Section 501(a) as an organization described in Section 501(c)(3) of the Code.

We have hereby revoked the favorable determination letter to you dated [redacted] and you are no longer exempt under Section 501(a) of the Code effective [redacted].

We made the adverse determination for the following reasons:

Your assets inured to the benefit of your officers and directors. Therefore, you are not operated exclusively for Section 501(c)(3) purposes.

Contributions to your organization are not deductible under Section 170 of the Code.

You're required to file federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return. Mail your form to the appropriate Internal Revenue Service Center per the form's instructions. You can get forms and instructions by visiting our website at www.irs.gov/forms or by calling 800-TAX-FORM (800-829-3676).

You've agreed to waive your right to contest this determination under the declaratory judgment provisions of Section 7428 of the Code.

We'll make this letter and the proposed adverse determination letter available for public inspection under Section 6110 of the Code after deleting certain identifying information. We provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437.

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

Sincerely,

Enclosures:
IRS Appeals Survey

Letter 1371-A (Rev. 10-2021)
Catalog Number 62960H

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

Date: [redacted]
Taxpayer ID number: [redacted]
Form: [redacted]
Tax periods ended: [redacted]
Person to contact:
Name: [redacted]
ID number: [redacted]
Telephone: [redacted]
Fax: [redacted]
Address: [redacted]
Manager's contact information:
Name: [redacted]
ID number: [redacted]
Telephone: [redacted]
Response due date: May 30, 2022

CERTIFIED MAIL — Return Receipt Requested

Dear [redacted]:

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.

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).

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

Sincerely,
Michelle Henson signing for
Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018
Form 4621-A
Exhibit A
Exhibit B - F
Publication 892
Publication 3498

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

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

Name of taxpayer: [redacted]
Tax Identification Number (last 4 digits): [redacted]
Year/Period ended: [redacted]

ISSUE

Does [redacted] continue to qualify as an organization exempt from Federal income tax under Section 501(c)(3) the Internal Revenue Code (IRC) with regard to the following compliance issues?

1. Is [redacted] operated exclusively for one or more exempt purposes specified in section 501(c)(3)?
2. Did [redacted] earnings inure to the benefit of its officers.

FACTS

[redacted] (hereinafter referred to as "the organization") was granted tax-exempt status under IRC section 501(c)(3) within the meaning of section 509(a)(1) and 170(b)(1)(A)(vi) on [redacted]. The organization received Letter 1050 dated [redacted], notifying them of the expiration of the advance ruling period and that their exemption status under IRC section 501(c)(3) as an organization described in section 509(a)(1) and 170(b)(1)(A)(vi) was still in effect.

As stated on [redacted] Articles of Incorporation its purposes are, "exclusively educational, scientific, literary, charitable and religious within the meaning of section 501(c)(3) of the Internal Revenue Code of 1986 or the corresponding provision of any future United States Internal Revenue law. The organization is formed so as to constitute an educational organization to engage in noncommercial educational broadcasting. The organization will operate in the public interest by broadcasting programs that advance the educational, scientific, literary, charitable and religious interest of the community(s) where it operates such noncommercial educational stations(s)."

The organization's activities include the production, managing and broadcasting of radio programing that are educational and religious in nature.

During the interview [redacted], the Vice President, said the organization's main sources of income are rental income from the use of the organization's radio tower, sponsors, contributions from the public and loans from officers.

In the year ending [redacted], the organization executed the sale of its radio broadcasting assets, that included Federal Communication Commission broadcasting licenses, studio broadcasting equipment, tower, and tower site for $[redacted]. The sale closed on [redacted]. See Exhibit A.

Operating exclusively for one or more exempt purposes specified in section 501(c)(3):

Based on the organization's Form 990 and the books and records examined for the year ending [redacted], income was primarily from the sale of assets. Other sources of income were interest, rents, and contributions. The income from the sale of assets made up [redacted]% of total income. Interest, rental, and contributions were less than [redacted]% of total income. See Exhibit B.

Based on the organization's Form 990-EZ and the books and records examined for the year ending [redacted], income was from interest and contributions totaling $[redacted]. See Exhibit C.

The income reported in [redacted] of $[redacted] and [redacted] of $[redacted] was substantially greater than amounts reported in [redacted], when excluding income from the sale of assets, and in [redacted].

In response to Information Document Response #2.a, the organization admits activities had changed post sale of the assets. The activities were focused on broadcasting "[redacted]" radio program. No related income or expenses were identified from this activity. This program is the product of the officers' other organization, [redacted]. See Exhibit D for copy of response and advertisement found on website.

The organization ceased broadcasting from its offices and made its final occupancy payment for office space and studio at the [redacted]. See Exhibit E.

Board minutes dated [redacted], documents that in both [redacted], President [redacted] and [redacted], Vice President were given approval for and engaged in seeking other broadcasting opportunities. See Exhibit F for Board meeting minutes.

Board minutes dated [redacted], documents they continued to search for a new office, studio, tower for the radio station. See Exhibit F for Board meeting minutes.

Board minutes dated [redacted], documents the organization had not succeeded in identifying new broadcasting opportunities for the organization to continue operations as a radio program broadcaster. In the same meeting minutes, an alternate form of broadcasting was discussed. However, by that point the organization had not progressed beyond the planning and research stage on going since [redacted]. Additionally, it was noted that due to the cost of time, travel, distance, and high market value, the board was considering dissolving the organization at the end of [redacted]. See Exhibit F for Board meeting minutes.

Earnings inure to the benefit of officers:

According to Form 990, for the year ending [redacted], and Form 990-EZ for the year ending [redacted], [redacted] was the President / Director, [redacted] was Vice President / Director and [redacted] was Secretary Treasurer / Director. All officers have check writing authority over the organization's bank accounts, voting board members and control over the organization's operations.

The organization did not file a Schedule L, Transactions with Interested Persons, with Form 990 for the year ending [redacted], or with the Form 990-EZ for the year ending [redacted], to report loans and transactions with interested persons as required.

During the interview conducted on [redacted], Vice President stated the "organization was initially funded with loans from officers." When asked if they had documentation in support of the loans made to the organization, [redacted] responded "Yes, we should have the documents to support the loans."

Information Document Request #1:

Revenue Agent sent Information Document Request #1 on [redacted], that included request for documents in support of the loans reported under liabilities on the organization's Form 990 return.

The organization provided copies of the minutes for the annual board meeting dated [redacted]. The meeting minutes did not contemporaneously substantiate whether the board approved the taking on of debt nor the approval to pay back loans owed to officers.

There were no documents, e.g., loan agreement, promissory note, invoice, or any other substantiation provided in response to Information Document Requests #1, issued on [redacted], to verify that the $[redacted] of reported liabilities were bona fide loans owed to officers.

The organization did provide the following response to Information Document Request #1 with respect to the loan amount of $[redacted] reported on the Form 990:

"The monies distributed that created these liability numbers were paid directly by the officers to meet salaries of help staff and expenses through the years. There were not loan documents we just kept track of out of pocket expenses. This was added to the monies owed to [redacted] to be reimbursed if possible in future years if it would have been available. As referred in original and current corporate minutes. Also, a portion of Salaries were included in this account."

The organization also responded that the purpose for the loans were to, "Buy property, tower, office expense, rents. Electrical cost and other operational cost for [redacted] and other operational cost."

Information Document Request #2.b:

Revenue Agent sent Information Document Request #2.b on [redacted], requesting copies of the records used to keep track of payments received from officers.

The organization provided a copy of board meeting minutes dated [redacted]. The meeting minutes did not provide contemporaneous substantiation to whether the board approved the taking on of debt nor the approval to pay back loans owed to officers.

The meeting minutes dated [redacted] are not consistent with other responses provided by the organization, because of the following facts identified:

1. During the initial interview on [redacted], Officers were asked how often board meetings were held. The Vice President answered, "meetings are held once a year". The meeting minutes provided in response to Information Document request #2.b, issued [redacted], documents a second meeting that took place during the tax year ending [redacted], that was not mentioned during the interview.
2. All board meeting minutes for the period [redacted], through [redacted], were requested for review on Information Document Request #1, issued [redacted]. In response to the request the organization provided meeting minutes that took place on [redacted]. The organization's response to the initial request for board meeting minutes did not include a copy of the board meeting minutes dated [redacted].
3. The meeting minutes dated [redacted], documents specific detail of loans and reimbursement to officers not discussed in such detail in prior or subsequent board meeting minutes. Adequate substantiation for the details disclosed in the board meeting minutes dated [redacted], with respect to loans and reimbursements were not provided.

The organization also provided the following items in their response to Information Document Requests #2.b, issued on [redacted]:

1. A copy of an attachment to the organization's Form 990. The attachment discloses details related to a loan of $[redacted] from [redacted] to the organization.
2. Bank Reconciliation report dated [redacted], showing a deposit dated [redacted], for $[redacted] with the description "[redacted]".
3. General Ledger report showing deposits dated [redacted], for $[redacted] and [redacted], for $[redacted] accounted for under "[redacted]".
4. General Ledger report showing a deposit dated [redacted], for $[redacted] accounted for under "Gifts Received — Other", that the organization claims should have been accounted for as a loan from [redacted].

The organization provided the following statement in their Information Document Request #2.b response: "We could not find other documentation. The old statements are lost and the bank does not keep records back that far."

The organization has not provided other documents in support of the loan and other disbursements. The documents provided do not adequately substantiate whether the officers disbursed funds to the organization in the form of bona fide loans.

There were no records, or any other substantiation provided in response to the Information Document Requests #2.b, issued on [redacted], to adequately verify that any amount of the $[redacted] reported on the Form 990 were ever paid by the officers to the organization in [redacted] or in any other prior years.

Information Document Request #3:

Revenue Agent issued Information Document Request #3 on [redacted], requesting information on credit card payments identified on the organization's bank statements and general ledger for the years ending [redacted].

The organization only provided credit card statement for the card ending in [redacted]. The credit card statement contained record of personal expense payments. As for the other credit cards identified, the organization did not provide the monthly statements for review. The organization's response to Information Document Request #3 provided the following: "These are personal charges, and why we explained the payments were used as personal draws to [redacted]. It was not used as a business card. [redacted] assumes all personal responsibility for these charges."

A review of the credit card statements confirms [redacted] statement that charges on the credit card ending [redacted] were personal charges, not legitimate business expenses and [redacted] is responsible for the personal charges. However, the credit card statements do not provide that [redacted] was an authorized user. Authorized user of the credit card ending in [redacted] identified is [redacted].

The documents provided with response to Information Document Request #3 do not provide substantiation for the expenses paid with credit card ending in [redacted]. However, a partial credit card statement for card ending in [redacted] provided, shows a $[redacted] balance transfer to [redacted]. No invoice or receipt was provided to substantiate the business purpose of the $[redacted] expense.

The bank statements provided by the organization showed multiple personal payments and cash withdrawals made by officers during the years ending [redacted].

Personal payments and cash withdrawals were authorized by officers. The payments were not reported as compensation in the books and record, and were not reported on Forms W-2, Forms 941, or Form 1099-MISC for the years ending [redacted]. No records have been provided to substantiate the payments were related to bona fide loans or were expenses related to an exempt purpose.

Transactions inuring the benefit of officers:

[The Form 886-A includes tables itemizing, for each officer (Vice President / Director, President / Director, and Secretary Treasurer / Director), Personal Payments, Cash Withdrawals, and Direct Payments, listing Date, Bank Account, Amount, and Description. The specific dates, account numbers, and dollar amounts in these tables are redacted in the public release. [illegible]]

LAW

Operating exclusively for one or more exempt purposes specified in section 501(c)(3):

Internal Revenue Code section 501(c)(3) provides for the exemption from Federal income tax of corporations organized and operated exclusively for religious, charitable, literary, scientific, and educational purposes; no part of the net earnings of which inures to any private shareholder or individual.

Treasury Regulation 1.501(c)(3)-1(a)(1) provides to be exempt as an organization described 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.

Treasury Regulations section 1.501(c)(3)-1(c)(1) states 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). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.

Treasury Regulations section 1.501(c)(3)-1(c)(2) states 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.

In Community Education Foundation v. Commissioner, T.C. Memo 2016-223, it was determined that petitioner, Community Education Foundation, no longer qualified for exemption from Federal income tax under section 501(a) because it did not meet the operational test requirements for a section 501(c)(3) organization. Specifically, the organization in that case over time did not meaningfully organize or allocate resources to any of its activities. Community Education Foundation admitted to a significant period of inactivity and failed to demonstrate that it engaged in activities furthering exempt purposes described in section 501(c)(3).

Earnings inure to the benefit of officers:

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and operated exclusively for religious, charitable, or other purposes as specified in the statute. No part of the net earnings may inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, 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.

Treasury Regulation Section 1.501(a)-1(c) provides the words private shareholder or individual in section 501 refer to persons having a personal and private interest in the activities of the organization.

In Greg R. Vinikoor v. Commissioner, T.C. Memo. 1998-152, the United States Tax Court held that whether a financial transaction constitutes a loan depends on all the facts and circumstances, including whether:

1. There was a promissory note or other evidence of indebtedness,
2. Interest was charged,
3. There was security or collateral,
4. There was a fixed maturity date,
5. A demand for repayment was made,
6. Any actual repayment was made,
7. The transferee had the ability to repay,
8. Any records maintained by the transferor and/or the transferee reflected the transaction as a loan, and
9. The manner in which the transaction was reported for Federal tax purposes is consistent with a loan.

The Court stated, "A mere declaration by the taxpayers that they intended the transfer to constitute a loan is insufficient if the transaction fails to exhibit more reliable indicia of debt."

In Rameses School of San Antonio, Texas v. Commissioner of Internal Revenue, T.C. Memo. 2007-85, 2007 WL 1061871 (U.S. Tax Ct. 2007) the court held that IRS properly revoked the exempt status under section 501(c)(3) of the Code of a school on the grounds that its earnings inured to the benefit of its founder, who also served as its executive director, president, and CEO. The record showed that the founder, Ms. Fennell, issued numerous organization checks to herself and withdrew cash from organization accounts for which the record showed no documented business purpose. The record also contained thousands of dollars of expenditures directed to retail stores, credit card companies, financial institutions, Ms. Fennell's dentist, and other businesses for which there was no evidence of a business purpose or board authorization. Neither did the organization's records show that there was any documented system for either loans to and repayments by Ms. Fennell or for loans by Ms. Fennell and reimbursements from the school.

In Founding Church of Scientology v. United States, 412 F.2d 1197 (Ct. Cl. 1969), cert. den., 397 U.S. 1009 (1970), an organization argued that it had paid its founder for expenses incurred in connection with his services, made reimbursements to him for expenditures on its behalf, and made some payments to him as repayments on a loan. The organization could produce no evidence of contractual agreements for services, documents evidencing indebtedness, or any explanation regarding the purposes for which expenses had been incurred. The Court concluded that— "nothing we have found in the record dispels the substantial doubts the court entertains concerning the receipt of benefit by the Hubbards from plaintiff's net earnings. Since plaintiff has failed to meet its burden of proof, we hold therefore that a part of the corporate net earnings was a source of benefit to private individuals." Supra, at 1202.

TAXPAYER'S POSITION

The Taxpayer's position is unknown at this time.

GOVERNMENT'S POSITION

Operating exclusively for one or more exempt purposes specified in section 501(c)(3):

The organization has failed to show that they meet the operational test for an IRC section 501(c)(3) organization for the years 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).

After the sale of its radio broadcasting assets, that included Federal Communication Commission broadcasting licenses, studio broadcasting equipment, tower, and tower site for $[redacted], the organization no longer had the assets to conduct charitable activities consistent with their exempt purpose and did not primarily engage in any other charitable purpose activities.

Meeting minutes from [redacted], document that the organization researched radio broadcasting opportunities post asset sale. However, the meeting minutes do not document any charitable purpose activities.

Income in [redacted] from activities was significantly lower when compared to income reported in [redacted], indicating that organization had not been active in performing activities related to an exempt purpose after the sale of the broadcasting assets. This conclusion is also supported by the fact that there was no mention of charitable purpose activities in board meeting minutes, no substantial income and expenses related to charitable purpose activities in [redacted] and [redacted], and by the officer's own admission, documented on their Information Document Request #2.a response, the organization's activities changed after the sale of assets to mainly focus on producing and hosting a radio program for one of the officer's other organizations, [redacted]. Furthermore, by [redacted] the organization was discussing and evaluating the organization's dissolution. Therefore, the organization did not operate exclusively for one or more exempt purposes within the meaning of IRC section 501(c)(3) and did not meet the operational test in Treasury Regulations 1.501(c)(3)-1(c).

Earnings inure to the benefit of officers:

[redacted] net earnings have substantially inured to the benefit of its officers. For inurement to exist, an "insider" must receive financial gain because of their position within the exempt organization. Insiders include board members, officers, and founders. This violates section 1.501(c)(3)-1(c)(2) of the Treasury Regulations and warrants revocation of organization's tax exempt status under IRC section 501(c)(3).

Loans From Officers:

The organization's officers claimed that the beginning year loan balance reported on Form 990 for the year ending [redacted], were disbursements from the organization's officers own funds. The organization did not file a Schedule L, Transactions with Interested Persons to report the loan or any transactions with interested persons, as required.

The officers admitted in their response to Information Document Request #1 that they did not prepare loan documents and had no expectation of repayment. There was no written promissory note for the loans during the existence of the loans. There was no repayment schedule, no maturity date for the loans and an interest rate was not set. Furthermore, no records were kept to account for disbursements made to the organization. Documents produced, after the organization was asked to submit support for the disbursements, was inadequate to determine whether the funds had been disbursed by the officers to the organization.

Based on the preceding facts noted, the loans were not bona fide loans and the amounts owed could not be substantiated to have been disbursed by the officers. Therefore, the loan amounts claimed to have been fund disbursements to the organization in the form of loans are not loans and any payments from the organization to officers characterized as loan payments have inured to the benefit of the officers.

Direct payments inuring the benefit of officers:

There were direct payments to officers identified on the bank statements. The payments were repayments for alleged disbursements made by officers to pay for operating expenses over the years. The organization has not provided substantiation to support the officers paid for expenses from their own personal funds. The payments were not treated as wages, because they were not reported on Forms W-2, Forms 941, or Form 1099-MISC for the years ending [redacted].

Personal Payments inuring to the benefit of officers:

There were personal payments identified on the organization's bank statements that provided a direct benefit to officers. The organization has not provided adequate substantiation to support these payments were reimbursements or were payments intended to reduce a debt owed and or compensation to officers. The personal payments identified were not treated as wages, because they were not reported on Forms W-2, Forms 941, or Form 1099-MISC for the years ending [redacted].

Cash withdraws inuring to the benefit of officers:

There were multiple cash withdrawals from the organization's bank accounts during the year ending [redacted], that were made by the officers. The organization did not provide any expense reports or receipts to substantiate the cash withdrawals to support the cash was used for expenses related to the organization's exempt purpose, to reduce a debt owed and/or compensation to officers. The cash withdrawals identified were not treated as wages, because they were not reported on Forms W-2, Forms 941, or Form 1099-MISC for the years ending [redacted].

CONCLUSION

Organizations described in IRC Section 501(c)(3) and exempt under Section 501(a) must be both organized and operated exclusively for exempt purposes. [redacted] has not demonstrated that it is operated exclusively for charitable, educational, or other exempt purposes within the meaning of 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.

[redacted] has not established that it is operating exclusively for an exempt purpose due to an extended period of inactivity as indicated by the lack of income and expenses attributed to exempt purpose activities, no record of exempt purpose activities in [redacted], the selloff of assets used to accomplish the organization's exempt purpose in [redacted], the fact that after a long period of research and analysis the organization has not followed through and engaged in creditable exempt purpose activities and are considering dissolving the organization.

[redacted] has not established that the direct payments, personal payments, and cash withdrawals identified on the organization's financial records are transactions that do not inure to the benefit of officers, because it has not provided adequate contemporaneous substantiation to support that the payments to officers were related to the organization's exempt purpose, bona fide loans, reimbursements and or compensation.

As such, [redacted] has failed to meet the requirements of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(a), in that it has not established that it is operating exclusively for exempt purposes and that no part of the earnings inured to the benefit of private shareholders or individuals. Therefore, the proposed revocation of the organization's exempt status is effective [redacted].

Form 1120, U.S. Corporation Income Tax Return, should be filed for [redacted], and each year thereafter as long as the organization remains subject to federal income tax. If the proposed revocation becomes final, appropriate state officials will be notified of such action in accordance with Section 6104(c) of the Internal Revenue Code.

Catalog Number 20810W Form 886-A (Rev. 5-2017)