Organization Is Denied Tax-Exempt Status

Contact person/ID number: * * *
Contact telephone number: * * *

UIL: 501.04-03
Release Date: 12/20/2019

Date: September 25, 2019

Employer ID number: * * *

Form you must file: * * *

Tax years: * * *

Dear * * *:

This letter is our final determination that you don't qualify for tax-exempt status under Section 501(c)(4) of the Internal Revenue Code (the Code). Recently, we sent you a proposed adverse determination in response to your application. The proposed adverse determination explained the facts, law, and basis for our conclusion, and it gave you 30 days to file a protest. Because we didn't receive a protest within the required 30 days, the proposed determination is now final.

You must file federal income tax returns for the tax years listed at the top of this letter using the required form (also listed at the top of this letter) within 30 days of this letter unless you request an extension of time to file.

We'll make this final adverse determination letter and the proposed adverse determination letter available for public inspection (as required under Section 6110 of the Code) after deleting certain identifying information. Please read the enclosed Notice 437, Notice of Intention to Disclose, and review the two attached letters that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in the Notice 437 on how to notify us. If you agree with our deletions, you don't need to take any further action.

If you have questions about this letter, you can contact the person listed at the top of this letter. If you have questions about your federal income tax status and responsibilities, call our customer service number at 1-800-829-1040 (TTY 1-800-829-4933 for deaf or hard of hearing) or customer service for businesses at 1-800-829-4933.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Notice 437
Redacted Letter 4034, Proposed Adverse Determination under IRC Section 501(a) Other Than 501 (c)(3)
Redacted Letter 4040, Final Adverse Determination under IRC Section 501(a) Other Than 501(c)(3) — No Protest

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Contact person/ID number: * * * 
Contact telephone number: * * * 
Contact fax number: * * *

UIL: 501.04-03

Date: July 25, 2019

Employer ID number: * * *

LEGEND:

V = Formation date
W = State
X = Letter 1 date
Y = Letter 2 date
Z = Letter 3 date

Dear * * *:

We considered your application for recognition of exemption from federal income tax under Section 501(a) of the Internal Revenue Code (the Code). Based on the information provided, we determined that you don't qualify for exemption under Section 501(c)(4) of the Code. This letter explains the basis for our conclusion. Please keep it for your records.

Issues

Do you qualify for exemption under Section 501(c)(4) of the Code? No, for the reasons stated below.

Facts

You were incorporated on V in the State of W. In your application you stated that you educate the electorate, facilitate and encourage dialogue, find common ground, and then use that common ground to influence elected officials; and that you will not support elective officials who ignore and do not legislate the “common ground,” but will endorse and support elective officials who work to enact the “common ground.”

In letters dated X, Y, and Z we requested that you provide a detailed description of your programs, and specifically that you project the percentage of your time and resources that you would spend on supporting and opposing candidates for public office. You responded only to the Y letter, but did not provide the detailed information we requested, either as regards your activities in general, or with specific reference to the extent of your interventions in political campaigns. In the response you represented the “main purpose” of your mission is not solely to engage in endorsing elected officials who may align with our mission and values or those of our members and participants, though this might be a byproduct or outcome. You described your “main purpose” in very general terms: you engage in citizen advocacy and facilitated dialogue regardless of participants' party affiliation or political views, with the intent of finding common ground and compromise and taking action, based on the concepts uncovered through your facilitated process. If possible solutions to these common ground problems are identified, participants may deliver these solutions to their respective elected officials. It is entirely up to the citizens who developed the solutions to choose to support or endorse their elected officials based on how they handle or respond to the solutions. You did not project the percentage of your time and resources that you would spend on supporting and opposing candidates for public office, or any other activities, as requested. Your reason for not so doing was that, as you have yet to commence business operations, you have no basis for estimates of future time or resource allocations to specific activities. Because your remarks about the main purpose of your mission suggested that your activities may primarily promote social welfare, we sent you the Z letter, seeking specific information about your activities that would establish that they were. You did not respond.

Consequently, we are unable to ascertain whether you are operated exclusively for the promotion of social welfare.

Law

Section 501(c)(4) of the Code provides for the exemption from federal income tax of organizations not organized for profit but operated exclusively for the promotion of social welfare.

Treasury Regulation Section 1.501(c)(4)-1(a)(1) states a civic league or organization may be exempt as an organization described in Section 501(c)(4) of the Code if it is not organized or operated for profit and it is operated exclusively for the promotion of social welfare.

Treas. Reg. Section 1.501(c)(4)-l(a)(2)(i) provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the people of the community. An organization embraced within Section 501(c)(4) of the Code is one that is operated primarily for the purpose of bringing about civic betterments and social improvements.

Treas. Reg. Section 1.501(c)(4)-1(a)(2)(ii) provides that the promotion of social welfare does not include participation in political campaigns on behalf of or in opposition to any political candidate. An exempt IRC 501(c)(4) organization may intervene in political campaigns as long as its primary activity is the promotion of social welfare.

Revenue Procedure 2019-5, 2019-1 I.R.B. 249, Section 6 (and its predecessors) provides that a favorable determination letter or ruling will be issued to an organization only if its application and supporting documents establish that it meets the particular requirements of the section under which exemption from federal income tax is claimed. Section 3 states that a determination letter or ruling on exempt status is issued based solely upon the facts and representations contained in the administrative record. The applicant is responsible for the accuracy of any factual representations contained in the application.

In Universal Life Church v. United States, 372 F. Supp. 770 (E.D. Cal. 1974), the court concluded that “one seeking a tax exemption has the burden of establishing his right to a tax-exempt status.”

Pius XII Academy v. Commissioner, T.C. Memo. 1982-97 provides that an organization must establish through the administrative record that it operates as an exempt organization. Denial of exemption may be based solely upon failure to provide information describing in adequate detail how the operational test will be met.

In La Verdad v. Commissioner, 82 T.C. 215 (1984), the administrative record did not demonstrate that the organization would operate exclusively in furtherance of an exempt purpose. Therefore, denial of organization's request for tax-exempt status was reasonable.

New Dynamics Foundation v. United States, 70 Fed. Cl. 782 (2006), was an action for declaratory judgment that the petitioner brought to challenge the denial of his application for exempt status. The court, in finding that the actual purposes displayed in the administrative record supported the Service's denial, stated “It is well-accepted that, in initial qualification cases such as this, gaps in the administrative record are resolved against the applicant.” The court noted that if the petitioner had evidence that contradicted these findings, it should have submitted it as part of the administrative process. The court also highlighted the principle that exemptions from income tax are matters of legislative grace.

Ohio Disability Association v. Commissioner, T.C. Memo 2009-261 states denial is justified because responses to requests for additional information failed to supplement the initial application or clarify purposes and activities, and generalizations did not provide sufficient detail to determine that the organization would be operated exclusively for exempt purposes.

Application of law

Given repeated opportunities, you failed to respond to requests about your activities in sufficient detail to warrant the conclusion that you are primarily engaged in activities that promote in some way the common good and general welfare of the people of the community, as required by Treas. Reg. Section 1.501(c)(4)-l(a)(2)(i), rather than activities that do not do so, such as participation in political campaigns on behalf of or in opposition to political candidates described in Treas. Reg. Section 1.501(c)(4)-1(a)(2)(ii). You have failed to establish that you are organized and operated exclusively for exempt purposes within the meaning of Section 501(c)(4) of the Code and Treas. Reg. Section 1.501(c)(4)-1(a)(1).

A ruling on exempt status is based solely on facts and representations in the administrative file. You did not provide sufficient facts in your application and the additional information you provided did not establish that you are entitled to exempt status. You stated that you were unable to identify your specific business operations or estimate time spent on operations until you receive final approval from the IRS. The facts and representations you have furnished are insufficient to establish that you meet the requirements of Section 501(c)(4) as required by Revenue Procedure 2019-5. As in Universal, you have the burden of establishing that you qualify for tax exemption.

In Pius, La Verdad, and New Dynamics, it was established that an organization must establish, through its administrative record, that it meets the requirements for exemption. Because you failed to provide sufficient details in your initial application and the additional information you provided did not meet the statutory and regulatory requirements for exemption, you have not established that you meet the requirements for exemption under Section 501(c)(4) of the Code. As provided in New Dynamics, any gaps in the administrative record will be resolved against the applicant. Similarly, in Ohio Disability Association, the court found that even when additional information was provided, but it contained generalizations and failed to clarify purposes, denial is justified. You did not provide supplemental information; therefore, we are unable to determine that you qualify for exemption.

Conclusion

Based on the information submitted, you have failed to establish that you are organized and operated exclusively for exempt purposes within the meaning of Section 501(c)(4) of the Code and the related income tax regulations. Therefore, based on the administrative record, you fail to qualify for exemption under Section 501(c)(4) of the Code.

If you don't agree

You have a right to file a protest if you don't agree with our proposed adverse determination. To do so, you must send a statement to us within 30 days of the date of this letter. The statement must include:

• Your name, address, employer identification number (EIN), and a daytime phone number

• A copy of this letter highlighting the findings you disagree with

• An explanation of why you disagree, including any supporting documents

• The law or authority, if any, you are relying on

• The signature of an officer, director, trustee, or other official who is authorized to sign for the organization, or your authorized representative

• One of the following declarations:

  For an officer, director, trustee, or other official who is authorized to sign for the organization:

  Under penalties of perjury, I declare that I examined this protest statement, including accompanying documents, and to the best of my knowledge and belief, the statement contains all relevant facts and such facts are true, correct, and complete.

  For authorized representatives:

  Under penalties of perjury, I declare that I prepared this protest statement, including accompanying documents, and to the best of my knowledge and belief, the statement contains all relevant facts and such facts are true, correct, and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if he or she hasn't already done so. You can find more information about representation in Publication 947, Practice Before the IRS and Power of Attorney.

We'll review your protest statement and decide if you provided a basis for us to reconsider our determination. If so, we'll continue to process your case considering the information you provided. If you haven't provided a basis for reconsideration, we'll forward your case to the Office of Appeals and notify you. You can find more information about the role of the Appeals Office in Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status.

If you don't file a protest within 30 days, you can't seek a declaratory judgment in court at a later date because the law requires that you use the IRS administrative process first (Section 7428(b)(2) of the Code).

Where to send your protest

Please send your protest statement, Form 2848, if needed, and any supporting documents to the applicable address:

You can also fax your statement and supporting documents to the fax number listed at the top of this letter. If you fax your statement, please contact the person listed at the top of this letter to confirm that he or she received it.

If you agree

If you agree with our proposed adverse determination, you don't need to do anything. If we don't hear from you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on your income tax filing requirements.

You can find all forms and publications mentioned in this letter on our website at www.irs.gov/formspubs. If you have questions, you can contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosure:
Publication 892