Organization Loses Exemption

Person to Contact: * * *
Identification Number: * * *
Telephone Number: * * *
Fax Number: * * *

UIL: 501.03-00
Release Date: 12/24/2020

Date: August 11, 2020

Taxpayer ID Number: * * *

Form: * * *

Tax Period(s) Ending: * * *

LAST DAY FOR FILING A PETITION WITH THE TAX COURT: * * *

Dear * * *:

This is a final determination that you do not 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 January 1, 20XX. Your determination letter dated February 20XX is revoked.

Our adverse determination as to your exempt status was made for the following reason(s):

Organizations described in IRC Section 501(c)(3) and exempt under section 501(a) must be both organized and operated exclusively for exempt purposes, and no part of their net earnings may inure to the benefit of private shareholders or individuals. You have not consistently operated since 20XX and have shown no concrete plans to operate. You have shown no reasonable acts or steps to begin operation. Consequently, you failed the operational test that is required under section 501(c)(3) of the Code.

As such, you failed to meet the requirements of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(a), in that you have not established that you were organized and operated exclusively for exempt purposes, and that no part of your net earnings inured to the benefit of private shareholders or individuals.

Contributions to your organization are no longer deductible under IRC Section 170.

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 www.irs.gov.

If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination was mailed to you. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment by referring to the enclosed Publication 892. You may write to the courts at the following addresses:

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.

We'll notify the appropriate state officials (as permitted by law) of our determination that you aren't an organization described in IRC Section 501(c)(3).

You may be eligible for help from the Taxpayer Advocate Service (TAS). 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 1-877-777-4778.

Taxpayer Advocate assistance can't be used as substitute for established IRS procedures, formal appeals processes, etc. The Taxpayer Advocate is not able to reverse legal or technically correct tax determination, nor extend the time fixed by law that you have to file a petition in Court. The Taxpayer Advocate can, however, see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling.

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

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

Sincerely,

Sean E. O'Reilly
Director, EO Examinations

Enclosures:
Publication 892

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

Manager's contact information:
Name: * * *
ID number: * * *
Telephone: * * *

Date: January 22, 2020

Taxpayer ID number: * * *

Form: * * *

Tax periods ended: * * *

Response due date: * * *

Dear * * *:

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

If we don't hear from you

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

Contacting the Taxpayer Advocate Office is a taxpayer right

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

For additional information

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

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

Sincerely,

Maria Hooke
Director, Exempt Organizations
Examinations

Enclosures:
Form 886-A
Form 6018

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Issue

Whether the * * * (* * *) qualifies for exemption under section 501(c)(3) of the Internal Revenue Code.

Facts

Exhibit A provides copies of the Internal Revenue Service (“IRS”) correspondence requesting * * * provided documents to support the exemption under Section 501(c)(3) of the Code. * * * failed to respond to correspondence from the IRS.

Furthermore, * * * has not consistently operated since * * * and shown no concrete plans to operate. * * * has provided no minutes. It has shown no reasonable acts or steps to begin operation. Consequently, the entity failed the operational test that is required under section 501(c)(3) of the Code.

Law

Regulation 1.501(c)(3) provides that an organization will be regarded as operated exclusively for one or more exempt purposed only if it engages primarily in activities which accomplish one or more such exempt purposes specified section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activies in not in furtherance of exempt purpose

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 that, 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. section 1.6001-1(a) in conjunction with Treas. Reg. section 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. section 1.6001-1(e) states that the books or records required by this section shall always be kept available for inspection by authorized internal revenue officers or employees and shall be retained if the contents thereof may be material in the administration of any internal revenue law.

Treas. Reg section 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.

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 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.

Government's Position

In accordance with the above cited provisions of the Code and regulations under IRC 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 enough 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.

The Organization has failed repeatedly to respond to the Service's request for information in contrast to section 1.6033-1(h)(2) of the regulations which require an organization to provide such information as requested to allow the Service to decide of that organization's exempt status.

It is the Service's position that the organization failed to meet the reporting requirements under IRC sections 6001 and 6033 to be recognized as exempt from federal income tax under IRC section 501(c)(3). Accordingly, it is proposed that the organization's exempt status be revoked effective 12/31/20XX, the last day of the tax year in which * * * is under examination.

Taxpayer's Position

Taxpayer agreed verbally to the exemption revocation.

Conclusion

It is the Service's position that the Organization does not qualify for exemption from federal income tax under IRC section 501(c)(3). The proposed date of the revocation is 12/31/20XX.