Private Letter Ruling
Number: 202346031
Internal Revenue Service
June 29, 2023
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Release Number: 202346031
Release Date: 11/17/2023
UIL Code: 501.03-00
   
Date:
06/29/2023
Taxpayer ID number (last 4 digits):
Form:
Tax periods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
   
Last day to file petition with United States
Tax Court: 09/27/2023
   
CERTIFIED MALL - Return Receipt Requested
   
Dear ******:
   
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 ******, ******. Your determination letter dated ******, ******, is revoked.
   
Our adverse determination as to your exempt status was made for the following reasons: 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 organized and operated exclusively for exempt purposes and that no part of your net earnings inures 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 I.R.C. sections 6001, 6033(a)(1), Treasury Regulation section 1.6033-2(i)(2) and Rev.Rul. 59-95, 1959-1 C.B. 627.
   
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.
   
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.
   
Information about the IRS Taxpayer Advocate Service   
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 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. Contact your local Taxpayer Advocate Office at:
   
Internal Revenue Service
Taxpayer Advocate Office
   
Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights, go to taxpayeradvocate.IRS.gov. Do not send your federal court pleading to the TAS address listed above. Use the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to file an action for declaratory judgment.
   
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.
   
Keep the original letter for your records.
   
Sincerely,
   
Lynn A. Brinkley
Director, Exempt Organizations Examinations
   
Enclosures:
Publication 1
Publication 594
Publication 892
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Date:
July 29, 2022
Taxpayer ID number:
Form:
Tax periods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
Manager's contact information:
Name:
ID number:
Telephone:
Response due date:
August 30, 2022
   
CERTIFIED MAIL Return Receipt Requested
   
Dear ******:
   
Why you're receiving this letter   
   
If you agree   
If you haven't already, please sigh 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.
   
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,
   
for Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations
   
Enclosures:
Form 886-A
Form 6018
Publication 892
Publication 3498
   
   
   
                          
   
ISSUE   
   
Whether the tax-exempt status of ****** (Organization), which qualified for exemption as an organization described in Section 501(c)(3) of the Internal Revenue Code (IRC), should be revoked due to Organization's failure to respond and produce records.
   
FACTS   
   
Organization was incorporated on ******, ******, as a nonprofit corporation under the laws of the State of ******.
   
As stated in its Articles of Incorporation, Organization's purpose is "[to] ****** and ****** the ******.. ******." Organization's Charitable Organization Registration Statement filed with the Attorney General of ****** similarly describes Organization's purpose as "[t]o ****** [of] ****** and ******"
   
Organization filed a Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, which was received by the Internal Revenue Service on ******, ******. On ******, ******, the IRS issued a determination letter recognizing Organization as tax-exempt under IRC Section 501(c)(3) effective ******, ******. The letter stated that Organization is classified as a public charity under IRC sections 509(a)(2). To date, this determination has not been changed.
   
Organization's Form 990-N for the tax period ended ******, ******, was selected for examination to ensure that Organization operates in accordance with its exempt purpose(s), thus continuing to qualify for recognition as exempt from federal income taxes. Organization has not filed a Form 990 for the tax period ended ******, ******. Organization did, however, file Forms 990-N for the prior and subsequent tax years ended ******, ******, and ******, ******, respectively.
   
Organization failed to respond to multiple attempts by the Internal Revenue Agent to obtain information needed to complete the examination. More specifically, the Revenue Agent sent ****** letters containing a Letter 6031, Form 4564 Information Document Request (IDR), and attachments. The IDR requested financial, organizational, and operational information for the year under examination.
   
****** of the ****** letters were confirmed as delivered to the recipients, with the remaining returned as undeliverable to the IRS, as follows:
   
       
   
       
   
In addition, the Revenue Agent attempted to contact Organization by telephone using ****** different phone numbers identified by reviewing Organization's Form 1023 Application, ****** Attorney General Charitable Organization Registration filings, and other publicly available records. On ******, ******, the Revenue Agent called and left a voice message for Officer ****** requesting a return call. All of the other ****** phone numbers were disconnected with no forwarding number available.
   
To date, Organization has not responded or otherwise acknowledged the attempts to contact. Moreover, Organization has not provided any organizational, financial, and other pertinent information about its operations and activities as requested in the IDR.
   
LAW   
   
IRC Sections 501(a) and 501(c)(3) provide, in relevant part, the exemption from federal income tax organizations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual.
   
Treas.Reg. Section 1.501(c)(3)-1(a)(1) provides that in order to be exempt as an organization described in section 501(c)(3) of the Code, the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.
   
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.
   
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 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.
   
IRC Section 6033(a)(1) provides, except as provided in IRC Section 6033(a)(3), every organization exempt from tax under IRC 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 1.6033-2(i)(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 § 6033.
   
Rev.Rul. 59-95, 1959-1 CB, 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 (lithe 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.
   
TAXPAYER'S POSITION   
   
Taxpayer's position is unknown at this time.
   
GOVERNMENT'S POSITION/ANALYSIS   
   
Organization's exempt status should he revoked because Organization has not provided any information to substantiate that it meets the requirements for continued exempt status.
   
Organization was previously held exempt as an organization described in IRC Section 501(c)(3). To qualify as an exempt organization described in section 501(c)(3), Organization must be both organized and operated exclusively for one or more of the specified purposes. See Treas.Reg. Section 1.501(c)(3)-1(a)(1). As an exempt organization, Organization is required to maintain records pertinent to its exempt status and make such records available to the Revenue Agent for inspection See Treas.Reg. Sections 1.6001-1(a), 1.6001-1(e), and 1.6033-2(i)(2).
   
In this case, the Revenue Agent made multiple attempts to contact Organization via ****** and ****** to obtain information regarding Organization's finances and activities. As described above, Organization did not respond. Organization thus failed to provide any records that would enable the Revenue Agent to determine whether Organization is operated exclusively for one or more exempt purposes specified in IRC Section 501(c)(1), as required under Treas.Reg. Section 1.501(c)(3)-1(a)(1).
   
Organization's continued exempt status depends on Organization's ability to establish that it is observing the required conditions for such exempt status. See Rev.Rul. 59-95. Because Organization failed to fulfill its records and inspection obligations under IRC Sections 6001 and 6033, Organization cannot establish that it meets the operational test. Per Treas.Reg. Section 1.501(c)(3)-1(a)(1), Organization is not exempt if it fails to meet both the organizational and operational tests.
   
It is the Service's position that Organization failed to meet the requirements to be recognized as exempt from federal income tax under IRC § 501(c)(3). Accordingly, Organization's exempt status should be revoked effective ******, ******.
   
CONCLUSION   
   
Organization does not qualify for exemption from federal income tax under IRC Section 501(c)(3). The proposed date of the revocation is ******, ******. Organization must therefore file the Form 1120 for tax periods ending on or after ******, ******.