IRS revokes tax exemption after records were not produced

Plain-English summary

The IRS issued a final adverse determination revoking an organization's federal tax exemption under IRC § 501(c)(3). During an examination, the organization did not produce records needed to establish that it operated exclusively for exempt purposes or that its earnings did not benefit private individuals. The packet also explains the organization's rights to challenge the determination in federal court and includes the examination report supporting the revocation. The determination states that the organization must generally file federal income tax returns for periods after the effective revocation date.

Ruling snapshot

• Question: Did the organization establish that it met the organizational, operational, and recordkeeping requirements for IRC § 501(c)(3) exemption?
• Outcome: Revocation of tax-exempt status
• Key authorities: IRC §§ 501(a), 501(c)(3), 511, 6001, 6033, and 7428; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, and 1.6033-1

Full text (IRS public release)

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

Date: [redacted]
Taxpayer ID number (last 4 digits): [redacted]
Form: [redacted]
Tax periods ended: [redacted]
Person to contact: [redacted]
ID number: [redacted]
Telephone: [redacted]
Fax: [redacted]
Last day to file petition with United States Tax Court: [redacted]

Release Number: 202641009
Release Date: 10/9/26
UIL Code: 501.03-00

CERTIFIED MAIL - Return Receipt Requested

Dear [redacted]:

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
[redacted]. Your determination letter dated [redacted] is revoked.

Our adverse determination as to your exempt status was made for the following reasons: Organizations described in Internal Revenue Code (IRC) Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated exclusively for exempt purposes. During the course of the examination, despite repeated requests, you failed to produce any documents or records to establish that you operated exclusively for charitable, educational, or other exempt purpose within the meaning of IRC Section 501(c)(3), or that your net earnings did not inure in whole or in part to the benefit of private shareholders or individuals.

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.

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,

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
Internal Revenue Service
Tax Exempt and Government Entities

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

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.

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.

Letter 3618 (Rev. 3-2024)
Catalog Number 34809F

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.

Sincerely,

Stephen Hepworth
Group Manager, EO Examinations

Enclosures:
Form 886-A

Form 6018
Form 4621-A

Publication 892
Publication 3498-A

Letter 3618 (Rev. 3-2024)
Catalog Number 34809F

Form 886-A
Department of the Treasury – Internal Revenue Service
(May 2017)
Explanations of Items
Name of taxpayer: [redacted]
Tax Identification Number (last 4 digits): [redacted]
Year/Period ended: [redacted]
Date of Notice: [redacted]

Issues:

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

Facts:

[redacted] 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, on [redacted] and was granted tax-exempt status as a 501(c)(3) on [redacted] with an effective date of [redacted].

An organization exempt under Section 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.

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

The organization failed to respond to the Internal Revenue Service attempts to obtain information to perform an examination of Form [redacted] for the tax year [redacted].

The Form [redacted] does not list a phone number for the president of [redacted].

• Correspondence for the examination was as follows:

◦ Letter 6031 (Rev. 09-2022), Initial Exam Appointment, with attachments, was mailed to the organization on [redacted], with a response date of [redacted]. This letter was not return by the post office as being undeliverable.

◦ Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area, with attachments, was mailed certified to [redacted] on [redacted], with a response date of
[redacted]. Through external research Tax Compliance Officer (TCO) located two different addresses, two separate letters were sent out certified, one address from [redacted] and other from Accurint research with attachments. Per the United States Postal Service (USPS) tracking, this was returned

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

Form 886-A
Department of the Treasury – Internal Revenue Service
(May 2017)
Explanations of Items
Name of taxpayer: [redacted]
Tax Identification Number (last 4 digits): [redacted]
Year/Period ended: [redacted]

as unclaimed/max hold time expired. This letter was received back at the Internal Revenue Service on [redacted].

◦ Letter 5077-B, TE/GE IDR Delinquency Notice, was mailed to the [redacted] on [redacted] with a response date of [redacted]. This letter was not return by the post office as being undeliverable.

◦ [redacted], TCO mailed Certified Revocation packets that included 30-day letter, 886-A, 6018 and 4621-A, Publication 892 and Publication 3498-A.

◦ [redacted], TCO checked status of revocation package on USPS.com and package was attempted to be delivered but authorized person was not there. Notice left with organization to schedule a delivery before [redacted] or package will be returned.

◦ [redacted], TCO checked status of previous letters that were mailed on USPS.com and Three of the previous certified mailings to the old address and the new updated address were delivered to a person but no response from organization. One was return to sender as the organization did not pick up the certified mailing which was the revocation letter from the previous TCO.

◦ [redacted], TCO after researching State of [redacted] website mailed 4 certified letter packages that in Letter 1477 and Letter 1014A, a copy of previous Information Document Request (IDR). The packets were sent to the officers found on the state site and to the organization’s mailing address.

◦ [redacted], TCO received email from [redacted] with an eFax that was sent to previous TCO's eFax number. The eFax was from the President of the organization with a phone number and time that he would be available.

◦ [redacted], TCO mailed Letter 5077B to both the Organization and the President of the organization.

• Telephone contact for the examination was as follows:

◦ [redacted], Tax Compliance Officer (TCO) called the phone number listed on the 1023 application for the President of [redacted] and received no answer and there was no voicemail setup to leave a message. Through external research Tax Compliance Officer (TCO) located two phone numbers through Accurint research [redacted] and [redacted] and both were non-working phone numbers. Went to organizations website [redacted] and found phone number
[redacted] however phone number was a non-

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

Form 886-A
Department of the Treasury – Internal Revenue Service
(May 2017)
Explanations of Items
Name of taxpayer: [redacted]
Tax Identification Number (last 4 digits): [redacted]
Year/Period ended: [redacted]

working phone number.

◦ [redacted], TCO attempted to contact organization [redacted]. [redacted] first call was a non-working phone number. Completed additional research through Accurint and found additional phone numbers [redacted] phone number was non-working, [redacted] had no answer and unable to leave a voice mail, and [redacted] was a non-working phone number.

◦ [redacted], TCO attempted to contact organization [redacted]. [redacted] first call was a non-working phone number. Called phone number on website [redacted]. Research Accurint further for contact information. Caller to [redacted] said we had the wrong number. Call to [redacted] and number is not in service. Call to [redacted] and number is not in service. Call to [redacted] and number is not in service. Spoke to [redacted] who would give a message to [redacted] who is an officer/director message to return my call at phone number [redacted]. [redacted] called back and said he was not affiliated with the organization, and we had the wrong [redacted].

◦ [redacted], TCO did additional research and found two more possible phones number that located on [redacted] with [redacted] on File) Left message [redacted], [redacted] on file) No longer works for the company and the Organization is no longer in company's working files.

◦ [redacted], TCO called the phone number from E-Fax that was sent to previous TCO that was email from [redacted]. TCO called [redacted] and left message.

◦ [redacted], TCO called [redacted] and left message.

◦ [redacted], TCO called [redacted] for [redacted] and left message during the allotted time of
[redacted] Standard time.

◦ [redacted], TCO called [redacted] for [redacted] and left message during the allotted time of
[redacted] Standard time.

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

Form 886-A
Department of the Treasury – Internal Revenue Service
(May 2017)
Explanations of Items
Name of taxpayer: [redacted]
Tax Identification Number (last 4 digits): [redacted]
Year/Period ended: [redacted]

◦ [redacted], TCO called [redacted] for [redacted] and left message during the allotted time of
[redacted] Standard time.

◦ [redacted], TCO received a voicemail from [redacted] after he received the L5077B packet. TCO returned the phone call and left a message for [redacted].

◦ [redacted], TCO left two more messages for [redacted]. [redacted] called and spoke with TCO’s manager, [redacted] and TCO’s manager gave [redacted] until [redacted], for information document request information to be provided.

Law:

Internal Revenue Code (IRC) Section 501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual.

IRC Section 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 Section 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

Catalog Number 20810W Page 4° Www ITS gov Form 886-A (Rev 5-2017)

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

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 Section 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 section 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 Section1.501(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 Section 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 Section 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 substantiate the information required by section 6033. See section 6033 and §§ 1.6033-1 through 1.6033-3.

Regulation Section 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.

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

Schedule number or

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

Regulation Section 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 Section 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.

Organization’s Position
Taxpayer's position is unknown currently.
Government’s Position

Based on the above facts, the organization did not respond to verify that they are organized and operated exclusively for one or more of the purposes specified in IRC Section 501(c)(3). If an organization fails to meet either the organizational test or the operational test, it is not exempt.

In accordance with the above-cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax- exempt status and to determine its liability for any unrelated business income tax.

Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations shall submit additional information for the purpose of enabling the Internal Revenue Service to inquire further into its exempt status.

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

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

Using the rationale that was developed in Revenue Ruling 59-95, the Organization’s failure to provide requested information should result in the termination of 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 Internal Revenue Service (IRS)'s position that the organization failed to establish that it meets the reporting requirements under IRC section 6001 and 6033 to be recognized as exempt from federal income tax under IRC section 501(c)(3). Furthermore, the organization has not established that it is observing the conditions required for the continuation of its exempt status or that it is organized and operated exclusively for an exempt purpose. Accordingly, since the organization failed to establish that it meets the reporting requirements under IRC section 6001 and 6033 to be recognized as exempt from federal income tax under IRC section 501(c)(3), we are proposing revocation of their tax-exempt status, effective [redacted].

Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods after
[redacted].

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