Private Letter Ruling
Number: 202151013
Internal Revenue Service
February 4, 2019
   
   
   
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TEGE EO Examinations Mail Stop 4920 DAL
1100 Commerce St
Dallas, Texas 75242
   
TAX EXEMPT AND GOVERNMENT ENTITIES DIVISION
   
Number: 202151013
Release Date: 12/23/2021
   
Date: February 4, 2019
   
Tax Year Ending:
Taxpayer Identification Number:
Person to Contact:
Employee Identification Number:
Employee Telephone Number:
   
UIL: 501.03-00
   
CERTIFIED MAIL -- RETURN RECEIPT
   
Dear *******:
   
This is a final determination that you do not qualify for exemption from Federal income tax under Internal Revenue Code (the "Code") section 501(a) as an organization described in Code section 501(c)(3) effective January 1, 20XX. Your determination letter dated December 12, 20XX is revoked.
   
The revocation of your exempt status was made for the following reason(s):
   
Organizations described in section 501(c)(3) of the Internal Revenue Code and exempt from tax under section 501(a) must be both organized and operated exclusively for exempt purposes. You have failed to produce documents or otherwise establish that you are operated exclusively for exempt purposes and that no part of your net earnings inure to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by sections 6001 and 6033(a)(1) and the regulations thereunder.
   
Contributions to your organization are no longer deductible under IRC §170 after January 1, 20XX.
   
Organizations that are not exempt under 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 section 7428 of the Code 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 letter 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:
   
United States Tax Court
400 Second Street, N.W.
Washington, D.C. 20217
   
U.S. Court of Federal Claims
717 Madison Place, N.W.
Washington, D.C. 20439
   
U.S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, D.C. 20001
   
Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for declaratory judgment under section 7428 of the Internal Revenue Code.
   
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 1-877-777-4778.
   
If you have any questions about this letter, please contact the person whose name and telephone number are shown in the heading of this letter.
   
Sincerely,
   
Maria Hooke
Director, EO Examinations
   
Enclosure:
Publication 892
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations Examinations
   
Date:
May 15, 2018
Taxpayer Identification Number:
Form:
Tax yea r(s) ended:
Person to canted/ID number:
Contact numbers:
Toll Free:
Long Distance:
Fax:
Manager's name/ID number:
Manager's contact number:
Response due date:
   
Certified Mail -Return Receipt. Requested
   
Dear *******:
   
Why you are receiving this letter   
We propose to revoke your status as an organization described in section 501(c)(3) of the Internal Revenue Code (Code). Enclosed is our report of examination explaining the proposed action.
   
What you need to do if you agree   
If you agree with our proposal, please sign the enclosed Form 6018, Consent to Proposed Action - Section 7428, and return it to the contact person at the address listed above (unless you have already provided us a signed Form 6018): We'll issue a final revocation letter determining that you aren't an organization described in section 501(c)(3).
   
After we issue the final revocation letter, we'll announce that your organization is no longer eligible for contributions deductible under section 170 of the Code.
   
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 final revocation letter. Failing to respond to this proposal will adversely impact your legal standing to seek a declaratory judgment because you failed to exhaust your administrative remedies.
   
Effect of revocation status   
If you receive a final revocation letter, you'll be required to file federal income tax returns for the tax year(s) shown above as well as for subsequent tax years.
   
What you need to do if you disagree with the proposed revocation   
If you disagree with our proposed revocation, you may request a meeting or telephone conference with the supervisor of the IRS contact identified in the heading of this letter. You. may also file a protest with the IRS Appeals office by submitting a written request to the contact person at the address listed above within 30 calendar days from the date of this letter. The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally.
   
For your protest to be valid, it must contain certain specific information including a statement of the facts, the applicable law, and arguments in support of your position. For specific information needed for a valid protest, please refer to page one of the enclosed Publication 892, How to Appeal an IRS Decision on Tax-Exempt Status, and page six of the enclosed Publication 3498, The Examination Process. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498 generally doesn't apply after we issue this letter.
   
You also may request that we refer this matter for technical advice as explained in Publication 892. Please contact the individual identified on the first page of this letter if you are considering requesting technical advice. If we issue a determination letter to you based on a technical advice memorandum issued by the Exempt Organizations Rulings and Agreements office, no further IRS administrative appeal will be available to you.
   
Contacting the Taxpayer Advocate Office is a taxpayer right   
You have the right to contact the office of the Taxpayer Advocate. Their assistance isn't a substitute for established IRS procedures, such as the formal appeals process. The Taxpayer Advocate can't reverse a legally correct tax determination or extend the time you have (fixed by law) to file a petition in a United States court. They can, however, see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling. You may call toll free 1-877-777-4778 and ask for Taxpayer Advocate assistance. If you prefer, you may contact your local Taxpayer Advocate at:
   
Tel:
Fax:
EEFax:  
   
For additional information   
If you have any questions, please call the contact person at the telephone number shown in the heading of this letter. If you write, please provide a telephone number and the most convenient time to call if we need to contact you.
   
Thank you for your cooperation.
   
Sincerely,
   
Maria Hooke
Director, Exempt Organizations Examinations
   
Enclosures:
Report of Examination
Form 6018
Publication 892
Publication 3498-A
   
   
   
                          
   
Date of Notice: May 7, 20XX   
   
Issues:   
   
Whether the exempt status of ******* organization under IRC § 501(c)(3) should be revoked, effective January 1, 20XX because it is not organized exclusively for exempt purposes within the meaning of section 501(c)(3) and Treas. Reg. § 1.501(c)(3)-1(b) due to the organizing document not including a dissolution clause?
   
Facts:   
   
The organization filed Form 1023-EZ for exemption on November 19, 20XX and was granted exemption as a 501(c)(3) on December 12, 20XX with an effective date of exemption of November 21, 20XX.
   
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 amatuer sports competition.
   
The organization was selected for audit to ensure that the examined organization's activities and operations align with its approved exempt status.
   
The organization failed to respond to the Internal Revenue Service attempts to obtain additional information to complete the review of an audit of Form 990-N for the above-mentioned tax period.
   
- Correspondence for the audit was as follows:
   
o Letter 3606 (Rev. 6-2012) with attachments were mailed to the organization on October 27, 20XX, with a response date of November 27, 20XX,
   
o Letter 3844-A was mailed certified to the organization on December 2, 20XX; with a respond date of December 16, 20XX.
   
o Received faxed response from the organization on January 3, 20XX; with information on the purpose of the organization, bank statements and paper articles and completed Form 2848 for POA. Organizing Documents with State stamp and dated for approval were not included in the response.
   
o Letter 3844-5 was Mailed certified to the POA address on April 7, 20XX; with a response date of April 17, 20XX. Article Number *******. Per the United States Postal Service (USPS) the receipt was returned to the IRS with signature and date April 23, 20XX.
   
o Letter 3844-B with Form 4564 IDR sent to the POA on May 18, 20XX, with a response date of June 8, 20XX
   
o. Letter 5077-B with Form 4564 mailed to POA on February 14; 20XX, with a response date of February 28, 20XX.
   
o Received faxed response on March 9, 20XX from the POA with the Certificate of Incorporation. No dissolution information included as required with the state of *******.
   
- Telephone contact for the audit was as follows:
   
o December 27, 20XX, TCO called President, ******* and went over Letter 3606, Form 4564.(information Document Request), and Publication 1 (Your Rights as a Taxpayer). Extension granted per request for 30 days.
   
o January 4, 20XX, TCO called *******, CPA from 2848 Form and discussed with him the missing organizing documents. Granted extension to research and send the organizing documents.
   
o February 14, 20XX, Called *******, CPA and left a message following up on his actions of gathering the Organizing Documents. No return phone call.
   
o March 8, 20XX  MST, TCO called *******, POA and *******, President and left messages with both parties requesting a follow-up. The phone call was not returned.
   
o January 8, 20XX, at 12:30 MST, TCO called POA, ******* requesting a follow up on the Organizing Documents that were required for audit.
   
o March 02, 20XX, *******; POA called letting me know that the organizing documents have been ordered by the state they are still awaiting the response.
   
o March 14, 20XX, at 3:14 MST, TCO left a voice message with *******, POA, requesting to amend their organizing documents to include the dissolution clause.
   
o April 24, 20XX, at 10:45 MST, TCO called. POA, ******* following up on documents requested to completed the audit. Phone conversation was ended by ******* with no response.
   
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 tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual.
   
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 such person is liable for tax under this title.
   
IRC §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.
   
IRC §1.6001-1(e)  of the Code provides that the books or records required by this section shall be kept at all time 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.
   
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.
   
Federal Tax Regulations (FTR) §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.
   
Section 1.501(c)(3)-1(a)  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).
   
FTR §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 arid 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.
   
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.
   
 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.
   
Organizations Position   
   
The 'organization has failed to respond to respond to meet the Organizational test. The taxpayer's position on the issue(s) is currently unknown at this time.
   
Governments 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 on enabling the Internal Revenue Service to inquire further into its exempt status.
   
Using the rationale that was developed in Revenue Ruling 59-95, the Organization's failure to provide requested information should result in the revocation 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 IRS's position that the organization failed to meet the reporting requirements under sections 6001 and 6033 to be recognized as exempt from federal income tax under 501(c)(3) of the Internal Revenue Code. Accordingly, the organization's exempt status is revoked effective January 1, 20XX.
   
Form 1120 returns should be filed for the tax periods after January 1, 20XX.