Letter 6337 (202501012): Revocation of 501(c)(3) status for an inactive organization that failed to substantiate the operational and organizational tests

Plain-English summary

This is a final IRS letter revoking a charity's tax exemption. To keep 501(c)(3) status, an organization must be both organized and operated exclusively for exempt purposes (the organizational and operational tests) and must keep records and file the required annual returns. Here the IRS audited the organization and found it had been inactive since 2019: due to the director's health and family situation, and the COVID-19 pandemic, it stopped operating, and the director decided to terminate it. The organization did not produce its organizing documents, financial records, a dissolution document, or a final return when the IRS asked, so the IRS could not verify that it met either test. The organization agreed to the revocation and said it would not appeal. The IRS revoked the exemption, meaning contributions to it are no longer deductible under Section 170 and it may have to file regular income tax returns. The letter explains the organization's right to challenge the decision in the U.S. Tax Court, the Court of Federal Claims, or the U.S. District Court for the District of Columbia within 90 days. The release bundles the final Letter 6337, the earlier proposed-revocation Letter 3618, and the audit report (Form 886-A).

Ruling snapshot

• Question: Should the organization's 501(c)(3) exemption be revoked for failing to substantiate the organizational and operational tests?
• Outcome: revocation
• Key authorities: IRC § 501(c)(3); IRC §§ 6001, 6033; Treas. Reg. §§ 1.501(c)(3)-1, 1.6033-2; Rev. Rul. 59-95

Full text (IRS public release)

Scanned document; transcribed under the runbook proofreading rule. Obvious OCR misreads are corrected; the many identifying details redacted by the IRS appear as blanks or unreadable fragments and are marked [illegible].

Department of the Treasury                              Date:
Internal Revenue Service                                October 9, 2024

Tax Exempt and Government Entities                      Taxpayer ID number (last 4 digits):
                                                        [illegible]
                                                        Form:

Release Number: 202501012

Release Date: 1/3/2025                                  Tax periods ended:

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

                                                        Last day to file petition with United States
UIL Code: 501.03-00                                     [Tax Court]:
                                                        January 7, 2025

CERTIFIED MAIL - Return Receipt Requested

Dear [illegible]:

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
organizational and operational tests, under IRC § 501(c)(3), which are required for the continuation of your
exempt status. The organization is inactive and has been since 2019. The information provided did not
substantiate that they are organized and operating exclusively for one or more of the purposes specified in IRC
Section 501(c)(3).

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 signature]
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:
Internal Revenue Service                                04/17/2024
Tax Exempt and Government Entities                      Taxpayer ID number:

IRS [Examinations]                                      Tax periods ended:

                                                        Person to contact:
                                                        ID number:
                                                        Telephone:
                                                        Address:

CERTIFIED MAIL - Return Receipt Requested              Name:
                                                        ID number:
                                                        Telephone:

                                                        Response due date:
                                                        May 20, 2024

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.

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

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities)
if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the
IRS.

If you're considering requesting technical advice, contact the person shown at the top of this letter. If you
disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as
explained above. A decision made in a technical advice memorandum, however, generally is final and
binding on Appeals.

If we don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final
adverse determination letter.

Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your
taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't
been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS
will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

Additional information
You can get any of the forms and publications mentioned in this letter by visiting our website at
www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).

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

Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018
Form 4621-A
Publications 892 & 3498-A

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


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

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

Date of Notice: [illegible]

Issues
Whether the organization [illegible], which qualified for exemption from
Federal income tax under Section 501(c)(3) of the Internal Revenue Code, should be revoked due
to failing to fully respond and produce records to substantiate that the organization is meeting the
organizational and operational tests?

Facts
[The organization] applied for tax-exempt status by filing the Form 1023,
Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code,
[illegible]. In a determination letter dated [illegible], the Internal Revenue Service
recognized the organization tax-exempt status as a 501(c)(3) organization, with an effective date of
[illegible].

An organization exempt under 501(c)(3) needs to be organized and operated exclusively for
religious, charitable, scientific, testing for public safety, literary or educational purposes and to
foster national and amateur sports competition.

Articles of Incorporation shows the organization was
incorporated under State of [illegible] on [illegible].
Section 501(c)(3) requires that an organizing document must limit your purposes to one or more
exempt purposes within section 501(c)(3). The organization attested that their organizing
document contains this limitation.

The organization attested that their organizing document contains the dissolution provision
required under section 501(c)(3) or that they did not need an express dissolution provision in your
organizing document because they rely on the operation of state law in the state in which you are
formed for your dissolution provision.

The State of [illegible] does require a dissolution provision.

The organization was selected for audit to ensure that the activities and operations align with
their approved exempt status.

The initial Information Document Request (IDR) was issued on [illegible].

During an interview with the Director of the organization, [illegible], the organization would like to
terminate. Due to Covid-19, the organization was unable to
operate regular activities and has been inactive since [illegible].

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


Form 886-A          Department of the Treasury - Internal Revenue Service          Schedule number or exhibit
(May 2017)                          Explanations of Items
Name of taxpayer              Tax Identification Number (last 4 digits)          Year/Period ended

The organization responded to the initial IDR on [illegible]. The organization attested
the following information in the response:

* The organization has been inactive.
* Due to the director's health situation and family situation, the 501(c)(3) organization was
  unable to operate regularly.
* The director has determined to terminate the 501(c)(3) non-profit organization.

No organizational documents were included in the response.

The response did not include any financials to verify sources of income and expenses for the
year under examination. It was determined the organization is inactive, therefore not meeting
the operational test.

A [second] IDR was issued on [illegible] a response due date of [illegible].
The second IDR requested three items that for IRS to properly conclude this examination as a
termination. Items requested in the [second] IDR include:

* The Dissolution Document
* The Final Return, and
* A Written Statement of Disposition of Assets

The organization failed to fully respond to the Internal Revenue Service attempts to obtain
information to perform an audit of Form 990-N for the tax year ending [illegible].

Letter 5077-B (Rev. 1-2017) with Form 4564 (Request) was mailed certified to
the organization, on [illegible] with a response [illegible].
The Administrative File included:

* Form 1023, Application of Recognition of Exemption Under Section IRC 501(c)(3) of the
  Internal Revenue Code
* Letter 1050, (DO/CG)
* [illegible] Form 990-N, Electronic Notice (e-Postcard)

The organization has been inactive since [illegible].
As of [illegible], per the State of [illegible] website, it lists the organizations status as in
existence.

Law

Internal Revenue Code (IRC) §501(c)(3) of the Code provides that an organization organized
and operated exclusively for charitable or educational purposes is exempt from Federal income

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


Form 886-A          Department of the Treasury - Internal Revenue Service          Schedule number or exhibit
(May 2017)                          Explanations of Items
Name of taxpayer              Tax Identification Number (last 4 digits)          Year/Period ended

tax, provided no part of its net earnings inures to the benefit of any private shareholder or
individual.

IRC §511 of the Internal Revenue Code imposes a tax at corporate rates under section 11 on the
unrelated business taxable income of certain tax-exempt organizations.

IRC §6001 of the Code provides that every person liable for any tax imposed by this title, or for the
collection thereof, shall keep such records, render such statements, make such returns, and
comply with such rules and regulations as the Secretary may from time to time prescribe.
Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice
served upon such person or by regulations, to make such returns, render such statements, or
keep such records, as the Secretary deems sufficient to show whether or not such person is liable
for tax under this title.

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

Treasury Regulations (Regulation) 1.501(c)(3)-1 In order to be exempt under §501(c)(3) the
organization must be both organized and operated exclusively for one or more of the purposes
specified in the section. (religious, charitable, scientific, testing for public safety, literary or
educational).

Regulation §1.501(c)(3)-1(a)(1) of the regulations states that in order to be exempt as an
organization described in section 501(c)(3), an organization must be both organized and operated
exclusively for one or more of the purposes specified in such section. If an organization fails to
meet either the organizational test or the operational test, it is not exempt.

Regulation §1.501(c)(3)-1(c)(1) of the regulations provides that an organization will not be
regarded as "operated exclusively" for one or more exempt purposes described in section
501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance of a
501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under section
501(c)(3) of the Code.

Regulation §1.6001-1(c) of the Code provides that such permanent books and records as are
required by paragraph (a) of this section with respect to the tax imposed by section 511 on
unrelated business income of certain exempt organizations, every organization exempt from tax
under section 501(a) shall keep such permanent books of account or records, including
inventories, as are sufficient to show specifically the items of gross income, receipts and
disbursements. Such organizations shall also keep such books and records as are required to

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

substantiate the information required by section 6033. See section 6033 and §§ 1.6033-1 through
1.6033-3.

Regulation §1.6001-1(e) of the Code provides that the books or records required by this section
shall be kept at all times available for inspection by authorized internal revenue officers or
employees, and shall be retained as long as the contents thereof may be material in the
administration of any internal revenue law.

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

Regulation §1.6033-2(a)(1) of the Regulations provides, in part, that, except for certain
exceptions not here applicable, every organization exempt from taxation under section 501(a)
shall file an annual information return specifically setting forth its items of gross income, gross
receipts and disbursements, and such other information as may be prescribed in the instructions
issued with respect to the return.

Regulation §1.6033-2(i)(2) of the Regulations provides, in part, that every organization which is
exempt from tax, whether or not it is required to file an annual information return, shall submit such
additional information as may be required by the Internal Revenue Service for the purpose of
inquiring into its exempt status and administering the provisions of subchapter F, chapter 1 of
subtitle A of the Code, section 6033, and chapter 42 of subtitle D of the Code.

Regulation §1.61-1 of the regulations provides that Gross income means all income from
whatever source derived, unless excluded by law. Gross income includes income realized in any
form, whether in money, property, or services. Income may be realized, therefore, in the form of
services, meals, accommodations, stock, or other property, as well as in cash.

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

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


Form 886-A          Department of the Treasury - Internal Revenue Service          Schedule number or exhibit
(May 2017)                          Explanations of Items
Name of taxpayer              Tax Identification Number (last 4 digits)          Year/Period ended

Organization's Position

The organization agrees with revocation due to inactivity. Per phone conversation between Tax
Compliance Office (TCO) and the Director of the organization, [illegible] on [illegible], the
organization will not object, disagree, or appeal the revocation.

Government's Position

In accordance with the above-cited provisions of the Code, 501(c)(3) organization recognized
as exempt from federal income tax must be both organized and operated exclusively for one or
more of the purposes specified in such section, and will not be regarded as "operated
exclusively" for one or more exempt purposes described in section 501(c)(3) of the Code if
more than an insubstantial part of its activities is not in furtherance of a 501(c)(3) purpose.

Based on the above facts, [the organization] is inactive and has been since [illegible].
The information provided did not substantiate that they are organized and operated
exclusively for one or more of the purposes specified in IRC Section 501(c)(3). Therefore, the
organization does not meet the operational test.

No Articles of Incorporation or Bylaws were received from the organization. Therefore, we are
unable to determine the organization meets the organizational test.

If an organization fails to meet either the organizational test or the operational test, it is not
exempt.

Using the above rationale, the organization's failure to meet the organizational and operational
tests should result in revocation of their 501(c)(3) exempt status.

Conclusion

Based on the foregoing reasons, the organization does not qualify for exemption under section
501(c)(3) and its tax-exempt status should be revoked.

It is the IRS's position [that the organization] failed to establish that it meets the
organizational and operational tests, under [section 501(c)(3)], required for the continuation of its
exempt status. Accordingly, the organization's exempt status is revoked effective [illegible].

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