Private Letter Ruling
Number: 202414010
Internal Revenue Service
January 10, 2024
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Release Number: 202414010
Release Date: 4/5/2024
UIL Code: 501.03-00
   
Date:
January 10, 2024
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:
Wednesday, April 9, 2024
   
CERTIFIED MAIL - 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: You are in violation of Sections 6001 and 6033(a) of the Code because no records were provided after the IRS's repeated attempts to contact the Trust. Failure to comply with Section 6033 of the Code and the applicable regulations 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 an exempt status. See Rev.Rul. 59-95. Here, the Trust's failure to respond to the IRS's repeated, reasonable requests for information in connection with the examination constitutes a failure on the part of the Trust to demonstrate continued compliance with the requirements in Section 501(c)(3) of the Code.
   
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 cores 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
   
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
Exempt Organizations Examinations
   
Date:
September 1, 2023
Taxpayer ID number:
Form:
Tax periods ended:
Person to contact:
Name:
ID number:
Telephone:
Fax:
Address:
Manager's contact information:
Name:
ID number:
Telephone:
Response due date:
October 2, 2023
   
CERTIFIED MAIL -- Return Receipt Requested
   
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 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   
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.
   
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,
   
   
for Lynn A. Brinkley
Director, Exempt Organizations
Examinations
   
Enclosures:
Form 886-A
Form 6018
Form 4621-A
Publication 3498
Publication 892
   
   
   
                          
   
ISSUE   
   
Whether ****** (the ******) continues to qualify for exemption under Section 501(c)(3) of the Internal Revenue Code?
   
FACTS   
   
Overview   
   
The ****** was created by a will from ****** which directs ******, ******, ****** and ******, ******, ****** (the ******), to establish a ****** for ****** payments to ****** (******) located at ******. On ******, the ****** filed Form 1023 with the Internal Revenue Service (IRS) requesting exemption as a non-functionally integrated supporting organization under Sections 501(c)(3) and 509(a)(3) of the Code. The ****** activity of the ****** is to make ****** distributions to ******. The assets of the ****** are invested and net income is distributed by the ****** to ******. On ******, the IRS issued a letter granting the ******'s application for exemption submitted on Form 1023. The ****** Form 990 for tax year ending ******, was selected for examination and was assigned to an ****** on ******. The ****** did not cooperate with the examination by providing the requested records as required under Sections 6001 and 6033(a) of the Code.
   
Form 1023   
   
The ****** submitted Form 1023 requesting exemption on ******. The ****** was created in ****** based on the ****** of ****** created on ******, with updates to the will on ******, and ******.
   
In ****** the will states, "******
   
   
****** consists ****** of property, or the proceeds therefrom, ****** part of the ******. The ****** does not allow for any other forms of income to be generated by the ******. The ****** has no by-laws or any similar code of regulations.
   
Form 1023 stated that as of ******, the ****** had the following assets & liabilities:
   
       
   
When Form 1023 was filed, the ****** had no plan to engage in any fund-raising activities or any business enterprise, other than the management of its ****** assets by its ******.
   
****** is the ****** of the ******. ****** was not and is not controlled, directly or indirectly, by ******, the ******, or by ****** of ****** family or entities owned by them, or by the ******. ****** is compensated in accordance with its standard fee schedule.
   
Determination Letter   
   
On ******, the IRS issued a letter granting the ******'s application for exemption submitted on Form 1023. In such letter, the IRS determined that the ****** was a tax-exempt organization described in Section 501(c)(3) of the Code, as well as a supporting organization described in Section 509(a)(3) of the Code.
   
Form 990EZ   
   
The Form 990EZ for tax year ending ******, shows the ****** checked the box Section 501(c)(3) of the Code as its exempt status.
   
Section 509(a)(3) Status
   
The initial focus of the examination of the ******'s Form 990 for the tax year ending ******, was the issue of foundation status under Section 509 of the Code; in particular, continued classification as an organization described in Section 509(a)(3) of the Code. However, this report does not address the foundation classification issue because of the ******'s failure to respond to any of the requests for documentation.
   
Examination Procedure   
   
- Precontact analysis of the Form 990-EZ return was started and completed on ******. The appointment letter and Information Document Request (IDR) number *** was mailed on the same date. ****** received no response from the ****** by the due date ******.
   
- On ******, ****** prepared and mailed Letter 5798 giving the ****** a ****** extension to provide the requested records. The ****** did not respond to the ****** extension letter.
   
- The ****** instructed the ****** to issue a ****** IDR extension on ******. The ****** prepared and mailed the extension letter on ******. The letter was sent via certified mail addressed to the ****** name listed on the Form 990-EZ. The ****** did not respond to the ****** extension letter.
   
- On ******, ****** received a returned ****** card showing letter was received by the ******. ****** called the ****** using telephone number listed on Form 990EZ and spoke to a ****** at ******. The receptionist did not have authority over or connection with the ******. The receptionist provided the ****** with a mail stop number where records requests can be sent.
   
- On ******, ****** prepared Letter 5077-D, delinquency notice, stating next step is to summons records if records not received by due date ******. ****** mailed Letter 5077-D to the ****** at the mail stop number provided during the ******, phone call. Examiner did not receive any of the records requested by the due date stated in Letter 5077-D.
   
- On ******, ****** prepared Letter 5077-A (pre summons) and email to ****** for signature and mailing. The Letter 5077-A was mailed to the ****** on ******, with a stated due date of ******.
   
- As of the date of this report, the ****** has not provided any of the documents requested by ****** or otherwise responded to ****** written requests for documents.
   
- Held all appropriate meetings per the Internal Revenue Manual 4.75.10.
   
LAW   
   
Code Section 501(c)(3) - Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), 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, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
   
Code Section 4947(1) - Charitable trusts.- For purposes of part II of subchapter F of chapter 1 (other than section 508(a), (b), and (c)) and for purposes of this chapter, a trust which is not exempt from taxation under section 501(a), all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B), and for which a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522 (or the corresponding provisions of prior law), shall be treated as an organization described in section 501(c)(3).
   
Code Section 6001 provides that every person liable for any tax imposed by Title 26, 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 or not such person is liable for tax under Title 26.
   
Code Section 6033(a)(1) provides, except as provided in section 6033(a)(3), every organization exempt from taxation 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 purpose of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and shall 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 Section 1.6001-1(c) Exempt organizations. In addition to 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.
   
Treasury Regulations Section 1.6033-2(i)(2) Every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of Subchapter F (section 501 and following), Chapter 1 of Subtitle A of the Code, section 6033, and Chapter 42 of Subtitle D of the Code. See section 6001 and § 1.6001-1 with respect to the authority of the district directors or directors of service centers to require such additional information and with respect to the books of account or records to be kept by such ******
   
In Revenue Ruling 59-95, 1959-1 C.B. 627, an exempt organization 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.
   
The court in Church of Spiritual Technology v. United States, 26 Cl.Ct. 713, 729-730 (1992), aff'd w/o opinion, 991 F.2d 812 (Fed.Cir.), cert. denied, 510 U.S. 870, (1993), stated that the applicant bears the burden of showing it is entitled to exemption.
   
In Harding Hospital, Inc. v. United States, 505 F.2d 1068, 1071 (6th Cir. 1974), the court stated that tax exemptions "must be strictly construed, with any doubts to be resolved in favor of the taxing entity.
   
TAXPAYER POSITION   
   
The taxpayer's position is unknown at this time.
   
GOVERNMENT POSITION   
   
The Government determines that the ****** is in violation of Sections 6001 and 6033(a) of the Code for not providing the requested records needed to complete the examination of Form 990EZ for tax year ending ******. After ****** written requests, the ****** did not provide records or try to contact the examination ****** to discuss the document requests.
   
Failure to comply with Section 6033 of the Code and the applicable regulations may result in the termination of the exempt status of an organization ****** held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of an exempt status. See Rev.Rul. 59-95. Specifically, the ****** has failed to produce documents, records, or other information to establish that it operated exclusively for one or more exempt purposes set forth in section 501(c)(3), was not operated for the benefit of private interests, or that a part of its net earnings did not inure to the benefit of private individuals. Therefore, the ****** has not established that it is observing the conditions required for the continuation of tax-exempt status under Section 501(c)(3) of the Code.
   
Accordingly, revocation is warranted.
   
Conclusion   
   
The ****** is in violation of Sections 6001 and 6033(a) of the Code because no records were provided after the IRS's repeated attempts to contact the ******. Failure to comply with Section 6033 of the Code and the applicable regulations 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 an exempt status. See Rev.Rul. 59-95. Here, the ******'s failure to respond to the IRS's repeated, reasonable requests for information in connection with the examination constitutes a failure on the part of the ****** to demonstrate continued compliance with the requirements in Section 501(c)(3) of the Code.
   
Accordingly, it is proposed that the ******'s exempt status be revoked effective ******. Should this revocation be upheld, Form 1041, U.S. ****** Income Tax, should be filed for the tax year ending ******, and the tax years thereafter.
   
If you agree, please sign the attached Forms.   
   
If you disagree, please submit a statement of your position and explanation.