Private Letter Ruling
Number: 202149018
Internal Revenue Service
February 22, 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. 202149018
Release Date: 12/10/2021
   
UIL: 501.03-00
   
Date: February 22, 2019
Tax Year Ending:
Taxpayer Identification Number:
Person to Contact:
Employee Identification Number:
Employee Telephone Number:
   
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 July 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 I.R.C. section 501(c)(3) and exempt under section 501(a) must be both organized and operated exclusively for exempt purposes. You have not demonstrated you are organized exclusively for exempt purposes as required by Treasury Regulation 1.501(c)(3)-1(b).
   
Contributions to your organization are no longer deductible under IRC §170 after July 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 Examination
   
Date:
07/09/2018
Taxpayer ID number:
Form.
Tax periods ended:
Person to contact:
Employee ID number:
Telephone number:
Fax:
Manager's contact information:
Employee ID number:
Telephone number:
Response due date:
   
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 (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.
   
Alter 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 or 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 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 or this letter.
   
Sincerely.
   
for Maria Hooke
Director, Exempt Organizations Examinations
   
Enclosures:
Form 6018
Form 4621-A Report of Examination
Form 886-A
Publication 892
Publication 3498-A
   
   
   
                          
   
Date of Notice: July 09, 20XX   
   
Issues:
   
Whether the exempt status of ****** (the Organization) under IRC § 501(c)(3) should be revoked, effective July 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)?
   
Facts:   
   
******* applied for tax exempt status by filing the Form 1023 EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on December 1, 20XX, and was granted tax-exempt status as a 501(c)(3) on December 12, 20XX, with an effective date of May 15, 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 amateur sports competition.
   
The organization attested on Form 1023-EZ, part II, box 2 that they have the organizing document necessary for their organizational structure.
   
Section 501(c)(3) requires that an organizing document must limit your purposes to one or more exempt purposes within section 501(c)(3). The organization attested that their organizing document contains this limitation.
   
They also attested that their organizing document does not expressly empower you to engage, otherwise than as an insubstantial part of your activities, in activities that in themselves are not in furtherance of one or more exempt purposes.
   
The organization attested that their organizing document contains the dissolution provision required under section 501(c)(3) or that they did not need an express dissolution provision in your organizing document because they rely on the operation of state law in the state in which you are formed for your dissolution provision.
   
The Organization does not appear to have any organizing documents.
   
The organizing documents that the agent obtained from ******* does not include a purpose clause to limit the purpose of the Organization to one or more exempt purposes or include a dissolution clause.
   
The agent made several attempts to contact the Organization to request that to provide and/or conform its organizing documents. Specifically, the agent attempted to contact Organization by letter and also called a representative of the *******. The agent did not receive any organizing documents containing the necessary information required for a 501(c)(3) organizing documents.
   
- Correspondence for the audit was as follows:
   
o Letter 3606 (Rev. 6-2012) with attachments, was mailed to the organization on February 1, 20XX with a response date of March 2, 20XX. This letter requested the organizing documents, description of activities and financials.
   
o Letter 3844-A (Rev. 12-2015) with attachments, was mailed to the organization on July 12, 20XX, with a response date of August 12, 20XX.
   
o Letter 3844-A (12-2015), with attachments, was mailed certified to the organization at ******, per Form 1023-EZ application, on March 14, 20XX, with a response date of April 14, 20XX. Article Number ******.
   
o Letter 3844-A (12-2015), with attachments, was mailed to ******, President at *******, on March 14, 20XX, with a response date of April 14, 20XX. Article Number ******.
   
o Letter 3844-A (12-2015), with attachments, was mailed to ****** at *******, Treasurer, on March 14, 20XX, with a response date of April 14, 20XX. Article Number ******.
   
o A response was received from organization on May 18, 20XX. They provided a charter. The charter did not include a purpose or dissolution clause but it did mention bylaws. The bylaws were not included in the response that was received.
   
o Letter 3844-B (11-2015), with attachments, was mailed to organization at ******, on July 12, 20XX with a response date of August 14, 20XX. Letter was requesting copy of bylaws, a complete copy of original organizing and/or any amendments to verify that they meet the organizational test. Article Number *******. Letter was delivered and signed for on July 18, 20XX.
   
o Letter 5077-B (01-2017), TE/GE /DR Delinquency Notice, was mailed to organization at *******, on September 06, 20XX with a response date of October 06, 20XX, Article Number ******.
   
o Letter 6017 (09-2017), Taxpayer Contact after Disaster - TE/GE, was mailed to organization at *******, on October 05, 20XX, Letter advised that due to recent disaster we are suspending the exam until the suspension period expires,
   
- Telephone contact for the audit was as follows.
   
o January 29, 20XX, called the phone number listed on the Form 1023-EZ application of ******* and spoke with *******, She advised that she will let the President know,
   
o March 14, 20XX, called the *******at ******* and ****** number is no longer working,
   
o April 04, 20XX, received call from ******* from ******* and ****** granted 30 day extension due to information being requested is needing to be translated into English.
   
o May 11, 20XX, received call from ******* from ******* and was advised response was in the mail. There were some issues gathering information due to a strike at the university.
   
o September 05, 20XX, called ******* at ******* and it went to voice mail so agent left a message
   
Law:   
   
Internal Revenue Code (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.
   
Treasury Regulations (Regulation) 1.501(c)(3)-1  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).
   
Regulation §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 he both organized and 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.
   
Regulation §1.501(c)(3)-1(b)(1)(i)  An organization is organized exclusively for one or more exempt purposes only if its articles of organization (a) limit the purposes of such organization to one or more exempt purposes; and (b) Do not expressly empower the organization to engage, otherwise than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes.
   
Regulation 1.501(c)(3)-1(b)(4)  An organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if, upon dissolution, such assets would, by reason of a provision in the organization's articles or by operation of law, be distributed for one or more exempt purposes, or to the Federal Government, or to a State or local government, for a public purpose, or would be distributed by a court to another organization to be used in such manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized. However, an organization does not meet the organization31 test if its articles or the law of the State in which it was created provide that its assets would, upon dissolution, be distributed to its members or shareholders.
   
 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.
   
Rev.Proc. 2018-5, Sec 11.02 (3) Inaccurate information on request. A determination letter issued to an organization that submitted a request in accordance with this revenue procedure may not be relied upon by the organization submitting the request if it was based on any inaccurate material information submitted by the organization. Inaccurate material information includes an incorrect representation or attestation as to the organization's organizational documents, the organization's exempt purpose, the organization's conduct of prohibited and restricted activities, or the organization's eligibility to file Form 1023-EZ.
   
Organization's Position   
   
Taxpayer's position is unknown at this time.
   
Government's Position   
   
Based on the above facts, the Organization has not established that it had organizing documents limiting the purpose of the or organization to one or more exempt purposes, or a proper dissolution clause that meet the organizational test under IRC section 501(c)(3), at the time of applying for tax exemption.
   
If an organization fails to meet either the organizational test or the operational test, it is not exempt.
   
The Organization fails the organizational test because it did not establish that it had an organizing document that complied with section 501(c)(3) at the time of applying for tax exemption. Because it never had an organizing document that meets the requirements of section 501(c)(3), and because it misrepresented that fact in its Form 1023-EZ, the revocation is effective as of July 1, 20XX.
   
Conclusion:   
   
Based on the foregoing reasons, it is the IRS's position that the organization failed to establish that it meets the organizational test as required IRC §§ 501(c)(3) for it to be exempt from federal income tax under IRC § 501(c)(3) Accordingly, the organization's exempt status is revoked effective July 1, 20XX.
   
Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods after June 30, 20XX.