A charity whose funds paid for casinos, mortgages, and personal expenses loses its 501(c)(3) exemption

Plain-English summary

The IRS revoked an organization's tax-exempt status under Code section 501(c)(3) on two grounds. First, it failed the operational test: the group could produce no records showing it conducted any exempt activity, and its Form 990 filings listed only officer and staff compensation, with nothing spent on charitable programs. Second, its net earnings inured to insiders: a review of bank statements showed the organization's money went to cash withdrawals, mortgage payments, credit card bills, casino expenses, and other personal costs of the president and directors, with no substantiation that any of it served an exempt purpose. Section 501(c)(3) requires that a charity operate primarily for exempt purposes and that none of its earnings benefit private individuals; this organization did neither. The president and directors admitted they kept no books and records. The IRS cited cases like Rameses School and Founding Church of Scientology, where exemption was revoked because earnings benefited a founder. The revocation is effective the date stated in the letter, contributions are no longer deductible under section 170, and the organization generally must file income tax returns. This is a revocation for both inactivity and diversion of charitable funds to insiders.

Ruling snapshot

• Question: Should the organization's § 501(c)(3) exemption be revoked because it kept no records of exempt activity and its earnings benefited its officers?
• Outcome: Revocation (final adverse determination; proposed on operational-test and inurement grounds)
• Key authorities: IRC §§ 501(c)(3), 4958, 6001, 6033; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, 1.6033-1(h)(2), 53.4958-3; Rev. Rul. 59-95; Rev. Rul. 58-617; Rameses School of San Antonio v. Commissioner; Founding Church of Scientology v. United States; Greg R. Vinikoor v. Commissioner; Community Education Foundation v. Commissioner

Full text (IRS public release)

The scanned document below is reproduced as released. Per the transcription
duty for scanned documents, obvious OCR misreads are corrected while wording is
kept verbatim; redacted content that the scan rendered as unreadable characters,
and any other illegible spots, are marked [illegible].

Department of the Treasury                          Date:
Internal Revenue Service                            September 18, 2024
IRS Tax Exempt and Government Entities

                                                    Taxpayer ID number (last 4 digits):

                                                    Form:

                                                    Tax periods ended:

                                                    Person to contact:
                                                    Name: [illegible]
                                                    ID number: [illegible]
Release Number: 202450014                           Telephone: [illegible]

Release Date: 12/13/24                              Fax: [illegible]
UIL Code: 501.03-00                                 Last day to file petition with United States
                                                    Tax Court:

                                                    December 17, 2024

CERTIFIED MAIL - Return Receipt Requested

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
[illegible]. Your determination letter dated [illegible], is revoked.

Our adverse determination as to your exempt status was made for the following reasons: You did not meet the
operational test. Thus, you did not meet exemption under Internal Revenue Code Section 501(c)(3).
Additionally, you failed to meet Treasury Regulation Section 1.501(c)(3)-1 because you did not operate in
furtherance of your exempt purpose.

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

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.

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

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,

[illegible]
Lynn Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

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

Department of the Treasury
Internal Revenue Service

Date:
1/31/2024

Tax Exempt and Government Entities
Examinations

                                                    ID number: [illegible]
                                                    Form:

                                                    Person to contact: [illegible]
                                                    ID number: [illegible]
                                                    Telephone: [illegible]
                                                    Fax: [illegible]
                                                    Address: [illegible]

                                                    Manager's contact: [illegible]
                                                    Name: [illegible]
                                                    ID number: [illegible]
                                                    Telephone: [illegible]
                                                    Response due date:

                                                    3/1/2024

CERTIFIED MAIL — Return Receipt Requested

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.

Sincerely,

Michelle Henson
Supervisor, Internal Revenue Agent,
Exempt Organizations Examinations

Enclosures:
Form 886-A
Exhibit 1-7
Form 6018
Form 4621-A
Publication 892
Publication 3498

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

                                                                        Schedule number or exhibit
Form 886-A
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended
Issue:
Whether [illegible]'s tax-exempt status under IRC Section 501(c)(3) should be
revoked on the grounds that:

1. It is not operated for a substantial exempt purpose, and there were no records to
substantiate the organization's exempt activities.

2. The net earnings inured to the benefit of Disqualified Persons (President and Directors).

Facts:

The exempt organization (hereinafter referred to as EO), [illegible] was founded
on [illegible], in the state of [illegible]. [illegible] is a corporation under the
laws of the State of [illegible]. The organization was recognized as an exempt organization under
Internal Revenue Code Section 501(c)(3) on [illegible], with effective date of
[illegible], as per Internal Revenue Service's records. The letter stated that the organization was not a
Private Foundation because it was an organization described in section 509(a)(1) of the Code. To
date, this determination has not been changed. The current address of the organization is
[illegible], which also serves as the resident of the president and the
director or the organization.

According to the organization's [illegible], the organization is
organized exclusively to [illegible]

Exempt Organization's Activities:
The Summary of Narrative Description of Activities on Form 1023 Application for Recognition of
Exemption Under Section 501(c)(3) of Internal Revenue Code (See [illegible]) state
that the EO's activities include: [illegible]

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

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

During the initial interview on [illegible], at [illegible], the
founder/president, and directors stated that the EO's activities included: [illegible]

The directors stated that the organization holds various events at various locations during the
years under examination, but there were no records provided to substantiate the where, who, and
what exempt activities were conducted and those who received the benefits. It was clearly stated
during the initial interview that the organization did not keep any records for those activities
conducted by the EO.

Analysis of the exempt organization's bank statements reveals that the majority of the
organization's income are from cash deposits from sources that cannot be substantiated by the
organization's President and Directors. The majority of the expenses are cash withdrawals at
different locations, cash transfers to [illegible] and [illegible], Mortgage payments, credit cards
payments, casinos expenses and other personal expenses that cannot be substantiated by the
organization's President and Directors (See [illegible]). The only expenses on the
organization's Form 990, Return of Organization Exempt From Income Tax for the years ending
[illegible], and [illegible], are Compensation of current officers, Directors,
trustees, key employees, other salaries, and wages. There were no expenses related to the EO's
exempt activities on the Form 990, Return of Organization Exempt From Income Tax.

The organization was granted an exemption on the fact that the organization will conduct the
activities at stated on the Form 1023, Application for Recognition of Exemption Under Section
501(c)(3) of Internal Revenue Code stated above (See [illegible]), but there were no
records to substantiate that these activities benefited the general public.

Per the Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of Internal
Revenue Code, the organization was founded by [illegible] who is the President of the
organization. As stated in the initial interview, [illegible], his [illegible],
[illegible], and [illegible], are the Directors of the EO. [illegible] is
the only one listed on the Form 990 as an officer or director of the EO. At the initial contact and
interview with the EO's officers, it was determined that [illegible] is the in charge of

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

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended
the EO's day to day activities, [illegible], and [illegible] are also
involved in the running of the EO and were compensated during the year
[illegible], and [illegible]

The President and Directors acknowledged that they did not keep any books and records for their
activities during the initial interview and subsequent conversations with [illegible]

During the interview, it was gathered that [illegible], and the President,
[illegible], are the only signatory authority over the EO's checking accounts and approves all
the financial transactions of the EO.

The responses and telephone conversation to the additional Form 4564-Information Document
Request (IDR) ([illegible]) issued on [illegible], further revealed that the EO did not have
any documentation to substantiate the personal transactions on the bank statements, and
[illegible] out of [illegible] credit cards payments identified during the examination belong to the [illegible] of the
EO's President, [illegible], while [illegible] belonged to the EO's President,
[illegible]. The Casinos, hotel stays, and other expenses were said to be for needy families, however
no substantiation was provided to support what the expenses were for and that they were for an
exempt purpose.

Law:

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

Internal Revenue Code (IRC) Section 501(c)(3) exempts from Federal income tax corporations,
and any community chest, fund, or foundation, organized and operated exclusively for religious,
charitable, scientific, testing for public safety, literary, or educational purposes, or 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 and which does not
participate in, or intervene in (including the publishing or distributing of statements), any political
campaign on behalf of any candidate for public office.

Treasury. Regulation (Treas. Reg.) 1.501(c)(3)-1(d)(i) states that an organization may be
exempt as an organization described in 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.

Treas. 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

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

                                                                        Schedule number or exhibit
Form 886-A   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

section.

Treas. 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).

IRC Section 501(c)(3), an organization which is organized and operated exclusively for an exempt
purpose (and meets the other requirements of the provision) qualifies as a tax-exempt
organization. In order for an organization to be exempt from Federal income taxes under Section
501(a) and (c)(3), it must satisfy both the organizational and operational tests of Section
1.501(c)(3)-1(b) and 1.501(c)(3)-1(c), Income Tax Regs.

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).

IRC Section 6001 provides that every person liable for any tax imposed by the IRC, or for the
collection thereof, shall keep adequate records as the Secretary of the Treasury or his delegate
may from time to time prescribe.

IRC Section 6033(a)(1) provides, except as provided in IRC section 6033(a)(2), every organization
exempt from tax under section 501(a) shall file an annual return, stating specifically the items of
gross income, receipts and disbursements, and such other information for the purposes of
carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and
keep such records, render under oath such statements, make such other returns, and comply with
such rules and regulations as the Secretary may from time to time prescribe.

Treas. Reg. 1.6001-1(a) in conjunction with Treas. Reg. 1.6001-1(c) provides that every
organization exempt from tax under IRC Section 501(a) and subject to the tax imposed by IRC
Section 511 on its unrelated business income must keep such permanent books or accounts or
records, including inventories, as are sufficient to establish the amount of gross income,
deduction, credits, or other matters required to be shown by such person in any return of such tax.
Such organization shall also keep such books and records as are required to substantiate the
information required by IRC section 6033.

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 officers or employees and shall be

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

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

retained as long as the contents thereof may be material in the administration of any internal
revenue law.

Treas. Reg 1.6033-1(h)(2) provides that every organization which has established its right to
exemption from tax, whether or not it is required to file an annual return of information, shall
submit such additional information as may be required by the district director for the purpose of
enabling him to inquire further into its exempt status and to administer the provisions of
subchapter F (section 501 and the following), chapter 1 of the Code and IRC section 6033.

Revenue. Ruling. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to
produce a financial statement and statement of its operations for a certain year. However, its
records were so incomplete that the organization was unable to furnish such statements. The
Service held that the failure or inability to file the required information return or otherwise to
comply with the provisions of IRC section 6033 and the regulations which implement it, may result
in the termination of the exempt status of an organization previously held exempt, on the grounds
that the organization has not established that it is observing the conditions required for the
continuation of exempt status.

Earnings inure to the benefit of officers:

Internal Revenue Code (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 (Treas. Reg.) 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.

Treas. Reg. 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.

Excess Benefit Transactions (EBT): are any transactions where an economic benefit is provided
by an ATEO 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. See Internal Revenue Code (IRC) Section 4958(c)

Applicable Tax-Exempt Organizations (ATEO): are those generally described in Sections
501(c)(3) (except private foundations), 501(c)(4), 501(c)(29), and any organization that was
described under the above-listed subsections at any time during the 5-year period ending on the

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

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

date of the transaction. See IRC Section 4958(e).

Treas. Reg. 53.4958-3 states that Disqualified Persons (DP): includes persons who are in a
position to exercise substantial influence over the affairs of the organization, members of the
family of a disqualified person, 35% controlled entities, persons involved with a related Section
509(a)(3) supporting organization, donor/donor advisors involved in a transaction with a DAF, or
investment advisors with respect to a sponsoring 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,

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

[illegible]

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, 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 organizations
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

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

                                                                        Schedule number or exhibit
Form 886-A   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

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 plaintiffs 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 on the issue is unknown at this time.

Governments Position:

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

The EO has failed to show us that they meet the operational test for tax exempt status under IRC
Section 501(c)(3) for the years under examination. In order 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). We will not regard an organization as having met this test
if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.

As evidence of their failure to operate for exempt purposes, we reviewed the Form 990 filings and
found no support for exempt operations. The organization did not show that they spent any money
on their exempt functions. In fact, the only expenses on the organization's Form 990 for the years
ending [illegible], and [illegible], are compensation of current officers,
directors, trustees, key employees, other salaries, and wages. The returns that they filed in those
years show even less information about the organization's exempt activities. There are no records
to support that they have been performing exempt purpose activities since the year [illegible], which is
required for a section 501(c)(3) organization to keep their tax-exempt status. Accordingly, we are
proposing revocation because they do not operate for exempt purposes.

The EO has failed to provide records as is required in Code section 6033(a)(1) and Regulation
1.6033-1(h)(2). They failed to provide any organizational or financial information that support that
the organization engaged in exempt activities, which were requested during the examination.
These records were requested numerous times by mail and phone (See [illegible]). The Directors
agreed that the EO did not keep any books and records during the years under examination
except for the bank statements, credit card statements for [illegible] of the cards identified during the
review of the EO's bank statements, and Statements ([illegible] to [illegible]) for the year
ending [illegible]

Catalog Number 20810W   Page 7   www.irs.gov   Form 886-A (Rev. 5-2017)

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

Without substantiation of the organization's exempt activities, we cannot verify that they are
operating according to their exempt purpose.

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 (See Treas. Reg. 1.501(c)(3)-1(a)(1)). The operational test applies
to the organization's activities and how it furthers exempt purposes.

An organization will be regarded as operated exclusively for exempt purposes only if it engages
primarily in activities which accomplish one or more of the following exempt purposes: religious,
charitable, scientific, testing for public safety, literary, educational, fostering national or
international sports competition (but only if no part of its activities involve the provision of athletic
facilities or equipment), prevention of cruelty to children or animals (See Treas. Reg. 1.501(c)(3)-
1(d)).
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.
See Treas. Reg. 1.501(c)(3)-1(c)(1).

* Its net earnings inure in whole or in part to the benefit of private shareholders or individuals,
furthering private (rather than public) interests. See Treas. Reg. 1.501(c)(3)-1(c)(2).

* A substantial part of an organization's activities is attempting to influence legislation by its
direct contact, or in urging the public to contact members or employees of a legislative body
to propose, advocate and support for the adoption or the rejection of legislation and it is
regarded as an "action" organization. See Treas. Reg. 1.501(c)(3)-1(c)(3).

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

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.

Catalog Number 20810W   Page 8   www.irs.gov   Form 886-A (Rev. 5-2017)

                                                                        Schedule number or exhibit
Form 886-A
(Rev. May 2017)   EXPLANATIONS OF ITEMS
Name of taxpayer          Tax Identification Number (Last 4 digits)   Year/Period ended

As stated in the fact section above, the analysis of the bank statements provided revealed that the
withdrawals were personal expenses such as cash withdrawals at different locations, cash
transfers to [illegible] and [illegible], mortgage payments, credit cards payments, casinos expenses
and other personal expenses that have not been substantiated by the organization's President
and Directors (See [illegible]). The only expenses listed on the organization's Form 990,
Return of Organization Exempt From Income Tax for the year ending [illegible], and
[illegible], are Compensation of current officers, Directors, trustees, key employees,
and other salaries and wages.
The information gathered during the examination of the EO shows [illegible] had a
substantial influence on all the transactions of the EO.

Conclusion:

The fact that the EO did not comply with the Codes and Regulations pertaining to its exempt
activities and assets being inured to private shareholders or individual; the EO has jeopardized its
exempt status. The EO also failed to provide required documentation, thereby failing to show any
evidence of their exempt activities. We have no reason to believe that the EO is operating for
exempt purposes.

As a result of the examination, we have determined that the EO is not operating exclusively for
charitable, religious, or educational purposes consistent with Section 501(c)(3) of the Code and
Treas. Reg. 1.501(c)(3)-1(d)(1)(i) and therefore fail to meet the operational test under Treas. Reg.
1.501(c)(3)-1(b)(4). They have not provided any information to the contrary. Accordingly, since
the organization failed to operate primarily for exempt purposes, we are proposing revocation of
their tax-exempt status, effective [illegible].

If you agree to this conclusion, please sign the attached Form 6018.

If you disagree, please submit a statement of your position.

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