Private Letter Ruling
Number: 202402014
Internal Revenue Service
Date: not given
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Release Number: 202402014
Release Date: 1/12/2024
UIL Code: 501.03-00
   
Date:
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:
   
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 ceased operations and conducting exempt activities under Internal Revenue Code (IRC) Section 501(c)(3). This causes you to fail the operational test required under IRC Section 501(c)(3). Thus, because you are no longer operating and/or conducting exempt activities, you do not meet the requirements of IRC Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1. In addition, you did not properly dissolve with the State, file a final return, submit a written statement of disposition of assets, nor submit a dissolution document, as specified within IRC Section 6043(b) and Treasury Regulations Section 1.6043-3.
   
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.
   
Contributions to your organization are no longer deductible under IRC Section 170.
   
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.
   
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).
   
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: ******
   
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 26, 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:
Fax:
Response due date:
August 28, 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 (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.
   
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,
   
   
Lynn A. Brinkley
Director, Exempt Organizations Examinations
   
Enclosures:
Form 886-A
Form 6018
   
   
   
                          
   
 ISSUE:
   
Whether ****** (******) continues to qualify for exemption under Section 501(c)(3) of the Internal Revenue Code (IRC)?
   
 FACTS:
   
****** filed the Form 1023 requesting exemption under IRC Section 501(c)(3) on ******. ****** was granted tax-exempt status on ****** to ******. ****** last filed Form 990-N for the tax year ending ****** on ******. Organization has not filed Form 990-N for the tax years ending ****** or ******.
   
****** conducted its operations out of its facility located in ******. According to its Articles of Incorporation dated ******, the purposes of the EO are as follows.
   
Article ******.
   
The corporation is organized exclusively for charitable, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("Code"), or the corresponding section of any future federal tax code. The charitable, educational, and scientific purposes for which said corporation shall consist of the following specific primary purposes:
   
A. The mission of ****** is to promote ******.
   
The following information was received by the Service from the organization in response to the initial information document request dated ******:
   
- Income statements and bank statements were provided for the tax year ending ******. The Treasurer of the organization ****** stated that the organization ceased operation in ******.
   
During the period ****** to the ******, the organization did not receive any contribution, grants, gifts, or any other funds related to their tax-exempt purposes. However, the organization did continue to use its employee identification number (EIN) to report non-employee compensation on Form 1099 into tax year ******. ****** (Treasurer) stated that the organizations EIN was used in error and that the compensation paid in tax year ****** was****** expense of the ******, EIN ******. ****** stated that he is also the treasurer of the ******.
   
The organization was aware that it needed to file articles of dissolution with the ******, which is also required by the Internal Revenue Service (IRS), to terminate the organization as an IRC Section 501(c)(3) organization. The organization did substantiate they did close the bank account on ****** with a closing withdrawal amount of $ ******. The organization was also able to substantiate that the $ ****** was transferred to the ****** bank account ( ******) at ******, account number ending ******. The closing of all bank accounts is required to terminate the organization.
   
The organization was required to file a final Form 990, submit a written statement of disposition of assets, and submit a dissolution document. All documents required to terminate the organization were requested in a second information document request dated ******, the organization then failed to submit the necessary information requested to terminate the organization. ****** stated that the official articles of dissolution necessary to complete the termination process could not be obtained from the Secretary of ******.
   
 LAW:
   
IRC Section 501(c)(3) exempts from Federal income tax: 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, 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(i)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office.
   
IRC Section 1.501(c)(3)-1(a) of the Income Tax Regulations (Treas.Reg.) provides that in order to be exempt as an organization described in IRC Section 501(c)(3), an organization must be 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.
   
Treas.Reg. 1.501(c)(3)-1(c)(1) provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in IRC Section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.
   
Treas.Reg. 1.501(c)(3)-1(c)(2) provides that the operational test is not satisfied where any part of the organization's earnings inure to the benefit of private shareholders or individuals, and where the organization serves a private rather than a public interest. Treas.Reg. 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated exclusively for one or more of the purposes specified in IRC 501(c)(3) unless it services a public rather than a private interest.
   
Rev.Proc. 98-1, 1998-1 I.R.B. 7 provides that except in rare or unusual circumstances, the revocation or modification of a letter ruling will not be applied retroactively to the taxpayer for whom the letter ruling was issued or to a taxpayer whose tax liability was directly involved in the letter ruling provided that: (1) there has been no misstatement or omission of material facts; (2) the facts at the time of the transaction are not materially different from the facts on which the letter ruling was based; (3) there has been no change in the applicable law; (4) the letter ruling was originally issued for a proposed transaction, and (5) the taxpayer directly involved in the letter ruling acted in good faith in relying on the letter ruling, and revoking or modifying the letter ruling retroactively would be to the taxpayer's detriment.
   
IRC 6104 Publicity of information from certain exempt organizations and certain trusts.
   
(c) Publication to State officials
   
(1) General rule for charitable organizations
   
In the case of any organization which is described in section 501(c)(3) and exempt from taxation under section 501(a), or has applied under section 508(a) for recognition as an organization described in section 501(c)(3), the Secretary at such times and in such manner as he may by regulations prescribe shall--
   
(A) notify the appropriate State officer of a refusal to recognize such organization as an organization described in section 501(c)(3), or of the operation of such organization in a manner which does not meet, or no longer meets, the requirements of its exemption,
   
(B) notify the appropriate State officer of the mailing of a notice of deficiency of tax imposed under section 507 or chapter 41 or 42, and
   
(C) at the request of such appropriate State officer, make available for inspection and copying such returns, filed statements, records, reports, and other information, relating to a determination under subparagraph (A) or (B) as are relevant to any determination under State law.
   
(2) Disclosure of proposed actions related to charitable organizations
   
(A) Specific notifications in the case of an organization to which paragraph (1) applies, the Secretary may disclose to the appropriate State officer--
   
(i) a notice of proposed refusal to recognize such organization as an organization described in section 501(c)(3) or a notice of proposed revocation of such organization's recognition as an organization exempt from taxation,
   
(ii) the issuance of a letter of proposed deficiency of tax imposed under section 507 or chapter 41 or 42, and
   
(iii) the names, addresses, and taxpayer identification numbers of organizations which have applied for recognition as organizations described in section 501(c)(3).
   
(B) Additional disclosures
   
Returns and return information of organizations with respect to which information is disclosed under subparagraph (A) may be made available for inspection by or disclosed to an appropriate State officer.
   
(C) Procedures for disclosure
   
Information may be inspected or disclosed under subparagraph (A) or (B) only--
   
(i) upon written request by an appropriate State officer, and
   
(ii) for the purpose of, and only to the extent necessary in, the administration of State laws regulating such organizations.
   
Such information may only be inspected by or disclosed to a person other than the appropriate State officer if such person is an officer or employee of the State and is designated by the appropriate State officer to receive the returns or return information under this paragraph on behalf of the appropriate State officer.
   
(D) Disclosures other than by request
   
The Secretary may make available for inspection or disclose returns and return information of an organization to which paragraph (1) applies to an appropriate State officer of any State if the Secretary determines that such returns or return information may constitute evidence of noncompliance under the laws within the jurisdiction of the appropriate State officer.
   
Rev.Rul. 58-617, 1958-2 CB 260, (Jan 01, 1958), Rulings and determinations letters granting exemption from federal income tax to an organization described in section 501(a) of the Internal Revenue Code of 1954, [*10]  to which contributions are deductible by donors in computing their taxable income in the manner and to the extent provided by section 170 of the Code, are effective only so long as there are no material changes in the character of the organization, the purposes for which it was organized, or its methods of operation. Failure to comply with this requirement may result in serious consequences to the organization for the reason that the ruling or determination letter holding the organization exempt may be revoked retroactively to the date of the changes affecting its exempt status, depending upon the circumstances involved, and subject to the limitations on retroactivity of revocation found in section 503 of the Code.
   
Rev.Rul. 59-95, 1959-1 C. B. 627 provides that an organization previously held exempt from Federal income tax was requested to produce a financial statement as of the end of the year and a statement of its operations during such year. However, its records were so incomplete that it was unable to furnish such statements. Section 6033 of the Internal Revenue Code of 1954 provides that every organization, except as provided therein, exempt from taxation under section 501(a) of the Code shall file an annual return, stating specifically the items of gross income, receipts, and disbursements, and shall keep such records, render under oath such statements, make such other returns and comply with such rules and regulations as the Secretary of the Treasury or his delegate may from time to time prescribe. Held, failure or inability to file the required information return or otherwise to comply with the provision 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 an exempt status.
   
 TAXPAYER'S POSITION:
   
The taxpayer's position is unknown at this time.
   
 GOVERNMENT'S POSITION:
   
****** is no longer operating as a tax-exempt IRC Section 501(c)(3) organization. It ceased conducting exempt operations indefinitely in ******. ****** substantiated that they closed its associated bank account and distributed funds to the ****** on ******. ****** stated that the organization had no more employees and that payments made to independent contractors were for services performed for ******, EIN ******.
   
The ****** no longer operates as an IRC Section 501(c)(3) organization. They did not properly dissolve the organization with the ******, per IRS procedures. ****** did not file final Form 990-N, submit a written statement of disposition of assets, or submit a dissolution document when they transferred assets to the ******, these actions would have properly terminated the organization.
   
The organization does not qualify to terminate the organization, because they did not file final Form 990-N, submit a written statement of disposition of assets, or submit a dissolution document, when they transferred assets to the ******, these items are required to terminate an organization exempt under IRC Section 501(c)(3) of the Internal Revenue Code.
   
During examination it was determined that the organization did not terminate properly. The organization ceased conducting exempt operations and did not engage in activities that which accomplished any exempt purposes as specified in IRC Section 501(c)(3) at any time during the year in ******. Since ****** is no longer conducting exempt activities, it fails the operational test and is proposed with revocation of exempt status.
   
 CONCLUSION:
   
As a result of the examination, the Service has determined that ****** is no longer operating as a tax-exempt IRC Section 501(c)(3) organization. ****** has not provided the necessary documentation to properly terminate its exempt status. ****** is no longer conducting exempt activities; therefore, the organization fails the operational test. Since the organization fails the operational test, its exemption is revoked effective ******. Should this revocation be upheld, Form 1120 must be filed starting with tax periods ending ******.