Private Letter Ruling
Number: 202405011
Internal Revenue Service
November 6, 2023
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Release Number: 202405011
Release Date: 2/2/2024
UIL Code: 501.03-00
   
Date:
November 6, 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:
Tuesday, February 6, 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 ceased operations and conducting exempt activities tinder 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 submit your articles of dissolution nor did you formally dissolve with the State, 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.
   
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
   
Date:
9/19/2023
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 4, 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.
   
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 15 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
Director, Exempt Organizations Examinations
   
Enclosures
Form 886-A
Form 4621-A
Form 6018
Publication 892
Publication 3498
   
   
   
                          
   
 ISSUES:
   
Whether ****** continues to qualify as an exempt organization under IRC Section 501(c)(3).
   
 FACTS:
   
****** ("******") is incorporated under the laws of the State of ****** as a non-profit corporation on ******. The foundation was granted exemption under Internal Revenue Code 501(c)(3) by Form M-0714 dated ******. ****** is classified as a supporting organization with the meaning of Section 509(a)(3).
   
The Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year ending ******, filed by ****** was selected for examination to ensure that the organization's activities and operations were in compliance with IRC Section 501(c)(3). According to Form 990-EZ, ****** primary exempt purpose is to ****** in ******, ******.
   
An examination for tax year ending ****** was opened. Initial contact letter 6031 was sent with Form 4564 Information Document Request, Publication 1, Publication 5295, and Notice 609 on ****** with a response due date of ******. The correspondence requested a copy of any amendments to governing instruments including Articles, Constitution and By laws, made to date, meeting minutes, financial data to reconcile the Form 990-EZ to the organization's books and records.
   
****** responded to the initial Form 4564 Information Document Request on ******. The ****** spoke to ******, ****** and ******, ******. ****** indicated that organization has terminated and Form 990-EZ tax year ending ****** was their final return. ****** gave the phone number for ****** and requested that ****** communicate with ******. ****** on the termination process of this examination. ****** spoke to ******. ****** and discussed the required documentaries to be submitted for the organization to properly terminate its exempt status.
   
****** sent Form 4564 Information Document Request # ****** on ****** with a response due date of ****** to ******, ******, via secured email. Form 4564 Information Document Request # ****** requested the following documentation:
   
1. According to Form 990EZ tax return ending ****** and our telephone conversation, dated ******, ****** has terminated with final tax return filed ending ******. ****** transferred its assets to ******. Please provide documentation for the transfer of assets to ******, for example, bank statements, canceled checks and written statement of disposition of assets. ****** '******
   
2. Copy of Articles of Dissolution and proof of filing with the state of ******.
   
****** called and spoke to ******, ******, on ******, and inquired about the response to Form 4564 IDR # ******. ****** requested more time to gather and submit the required documents. ****** and ****** agreed to an extension of ******.
   
On ******, ****** called and spoke to ******, ******. ****** stated that ****** needed more time to obtain the required documentation pertaining to Form 4564 IDR# ******. An agreed extension was set for ******.
   
On ******, ****** received an email from ******, ******, that stated the ****** needed to contact ******, ******/******, ****** stated that ******. ****** indicated that ****** would handle providing the required documents in response to Form 4564 IDR # ******.
   
On ******, ****** called and spoke to ******, ******. Discussed F4564-IDR # ****** and the ****** documents that were requested. ****** stated that ****** would submit the documents by ******, ******. ****** requested F4564-IDR# ****** be sent to email:
   
On ******, ****** emailed a response to F4564-IDR # ****** which included the following documents:
   
1. Letter from the Secretary of the State of ****** - Administrative Dissolution or Revocation for a Non-Profit Corporation, dated ******. (See ******).
   
2. Copy of partial Bylaws of ******, dated ******, which highlighted Article ******. Dissolution Sections:
   
   
Article ******. Dissolution   
   
3. Documents on Disposition of Assets, Letter - Summary of Contributions, dated between ****** to ******. Letter - Summary of Contributions and copies of checks and transfer wires that documented distributions totaling $ ****** to ******, an organization exempt under IRC 501(c)(3). (See ******).
   
On ******, ****** called and spoke to ******, ******/******. ****** discussed and explained that ****** must file Articles of Dissolution with the State of ****** to properly terminate its existence. ****** further explained that once the Articles of Dissolution are filed, a complete copy of the Articles of Dissolution with proof of filing with the state, such as a "******" stamp should be sent to the ******. ****** stated that ****** needed to inquire about the filing of Articles of Dissolution and would follow up with ****** by ******
   
On ******, ****** emailed the following documents:
   
1. A copy of Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year ending ******. (See ******).
   
2. Copy of sanitized ****** meeting minutes dated ****** and ******. (See ****** and ******).
   
****** called and spoke to ****** on ******, ******. ****** explained the requirement to file Articles of Dissolution with State of ****** to properly terminate the organization's existence. ****** further explained the difference between termination and revocation ****** stated that ****** would respond by ****** about Articles of Dissolution. The organization's former representative declared that the organization had no operational or financial activities since ******. ****** discussed revocation with the organization's former representative on ****** and ****** understood the difference between an organization's voluntary termination of its existence and Internal Revenues Service's (IRS') proposed revocation as organization is no longer operating for an exempt purpose.
   
On ******, ****** sent an email stating that ****** spoke to an employee with the Secretary of the State office who told ****** that Articles of Dissolution were not filed by ******, and the State administratively dissolved or revoked the non-profit corporation of ******. ****** submitted a copy of the ****** Secretary of the State document - Administrative Dissolution or Revocation for a Non-Corporation, dated ******. ****** expressed that the employee of the Secretary of the State office indicated that ****** does not need to file Articles of Dissolution because the State had administratively dissolved it non-profit corporation. (See ******).
   
The ****** review the ****** Secretary of State ****** website ******, there was a section on that provided the following description of Administrative Dissolution:
   
   
****** is declining to file an Articles of Dissolution with the Secretary of the State of ****** to properly terminate its existence and, is accepting State of ****** Administrative Dissolution or Revocation for a Non-Profit Corporation, dated ******, as its official Article of Dissolution.
   
Based on ****** Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year ending ******, notated it to be their final return and terminating its exempt status, meeting minutes dated ******; indicating to file final return for the ****** tax year ending ******, and discussion with ******, the organization had not been in operation since ******.
   
 LAW:
   
Internal Revenue Code §501(c)(3) 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 Regulation 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).
   
Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order to be exempt as an organization described in Section 501(c)(3) of the Code, 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.
   
Treasury Regulation Section 1.501(c)(3)-1(b)(4) holds that 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 operation of law, be distributed for one or more exempt purposes.
   
Treasury Regulation Section 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 Section 501(c)(3) of the Code. An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.
   
Treasury Regulation Section 1.501(c)(3)-1(d)(i) states that an organization may be exempt as an organization described in 501(c)(3) if it is organized and operated exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals.
   
Treasury Regulation Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest.
   
Rev.Rul. 58-617, 1958-2 C.B. 260, holds that 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, 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. The District Director of Internal Revenue for the district in which the organization is located must be advised immediately of any such changes in order that a determination may be made as to the effect the changes may have upon the exempt status of the organization See generally sections 1.501(a)-1 and 1.6033-1 of the Income Tax Regulations. 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 he 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.
   
 TAXPAYER'S POSITION:
   
Whether ****** continues to qualify as an exempt organization under IRC Section 501(c)(3).   
   
It is the position of ****** that the organization has terminated its existence through the following actions:
   
1. ****** filed a final return, Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year ending ******.
   
2. All the assets of the organization have boon distributed to ****** and copies of checks.
   
3. ****** has been administratively dissolved by the State of ******. They are relying on statements from an employee of the Secretary of State of ****** that it is not necessary to file Articles of Dissolution.
   
 GOVERNMENT'S POSITION:
   
Whether ****** continues to qualify as an exempt organization under IRC Section 501(c)(3).   
   
As demonstrated in Rev.Rul. 58-617, an organization's exempt status will remain in effect 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. During the year under examination, the organization did not conduct any activities exempt under IRC 501(c)(3). In fact, ****** has been inactive and has no plans for future activities. The only activities during the year were wrapping up the organization and distributing the assets. As such, ****** had failed to meet the operational requirements to continue its exemption status under IRC 501(c)(3).
   
During the course of this examination, you have informed the IRS that you have terminated the organization. In IDR # ****** you were informed of the termination procedures which included: (1) filing a final return; (2) providing documentation of the distribution of the assets; and (3) submitting Articles of Dissolution with the State of ******. In response you indicated that your Form 990-EZ for the year ended ****** was your final return, and you provided documentation that your final assets were distributed to another organization exempt under IRC 501(c)(3). You did not submit the Articles of Dissolution because your position is that it is not required. Since you have not filed Articles of Dissolution with the State of ******, your corporate existence has not been terminated. According to the State of ******, ****** Administrative dissolution does not mean that your corporation has ceased its existence. Thus, ****** has failed to properly terminate its existence
   
 CONCLUSION:
   
Based on the information provided, the organization had not conducted any activities since it ceased operations during the ****** year ended ******. In addition, you did not properly terminate your organization's existence described in Section 501(c)(3) of the Code.
   
Based on the foregoing reasons, ****** does not qualify for exemption from Federal income tax under Section 501(c)(3) of the Internal Revenue Code and its tax-exempt status should be revoked.
   
Accordingly, the organization's exempt status is revoked effective ******.