Private Letter Ruling
Number: 202319025
Internal Revenue Service
January 13, 2023
   
   
   
Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
   
Release Number: 202319025
Release Date: 5/12/2023
UIL Code: 501.03-00
   
Date:
January 13, 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:
April 13, 2023
   
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:
   
In our letters dated ******, ******, ****** and ******, we requested information necessary to conduct an examination of your Form 990-EZ for the year ended ******, ******. We have not received the requested information. Treasury Regulation Section 1.6033-2(i)(2) provides, in part, that every organization which is exempt from tax, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status.
   
Because you have not provided the requested information, you have failed to establish that you are operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(3) and that no part of yam net earnings inure to the benefit of private shareholders or individuals. Form ******, should be filed for the tax periods after ******, ******.
   
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 hider 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 fellable 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. Brinkly
Acting 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 6, 2022
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:
August 5, 2022
   
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 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.taxpaveradvocate.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
Acting Director, Exempt Organizations Examinations
   
Enclosures:
Form 886-A
Form 6018
Form 4621-A
Publications 892
Publication 3498-A
   
   
   
                          
   
Date of Notice:   
   
Issues:
   
Whether ****** (the organization), which qualified for exemption from Federal income tax under Section 501(c)(3) of the Internal Revenue Code, should be revoked due to its failure to respond and produce records to substantiate that the organization is meeting the organizational and operational tests?
   
Facts:
   
****** applied for tax-exempt status by filing the Form ******, on ******, ******, and was granted tax-exempt status as a 501(c)(3) on ******, ******, with an effective date of ******, ******.
   
The organization attested on Form ******, ******, ****** 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.
   
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 amatuer sports competition.
   
The organization was selected for audit to ensure that the activities and operations align with their approved exempt status.
   
The organization failed to respond to the Internal Revenue Service attempts to obtain information to perform an audit of Form ****** for the tax year ******, ******.
   
The organization has not filed a Form ****** series return for the tax years ******, ****** through ******, ****** tax year.
   
The Form ****** application list the phone number of (***) ***-**** for the director of ******.
   
Per the ****** website, it lists the organization as in good standing.
   
Articles of Incorporation were found on the ****** website. The Articles of Incorporation do not contain the required provisions limiting activities and dedicating assets to those purposes within the meaning of Section 501(c)(3).
   
The organization was informed that the Articles of Incorporation did not meet the requirements and must be amended with the initial Information Document Request.
   
- Correspondence for the audit was as follows:
   
o Letter 6031 (Rev. 11-2020), Initial Exam Appointment, with attachments, was mailed to the organization on ******, with a response date of ******, ******. This letter was returned by the post office as being undeliverable on ******, ******.
   
o Letter 6031 (Rev. 11-2020), Initial Exam Appointment, with attachments, was re-mailed to the organization on ******, ******, with a response date of ******, ******. Through external research, ****** found a current address on the ****** website, ******, ******, ******. In addition, ****** located addresses for ****** officers, President and Treasurer. ****** copies of Letter 6031 were mailed, certified, to the business address and both officers. Certified Article Numbers ******; ******; ******. The letters mailed to the business and President addresses were returned unclaimed. The letter mailed to the Treasurer was delivered ******, ****** at ******: ******.
   
o Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area, with attachments, was mailed certified to the organization on ******, ******, with a response date of ******, ************, Article Number ******. Per the ****** (******) tracking, this was returned on ******, ******, at ******: ****** as unclaimed/max hold time expired.
   
o Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area, with attachments, was mailed certified to ****** (President), per Form ****** and external research, on ******, ******, with a response date of ******, ******. Article Number ******. Per the ****** (******) tracking, this was returned on ******, ******, at ******: ****** as unclaimed/max hold time expired.
   
o Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area, with attachments, was mailed certified to ****** (President), per Form ****** and external research, on ******, with a response date of ******, ******. Article Number ******. Per the ****** (******) tracking, this was delivered on ******, ****** at ******: ****** P.M.
   
o Consent to receive electronic communication was received on ******, ******, at ******: ****** e-mail addresses were authorized to receive electronic communication, ****** for the Treasurer ****** and ****** for the President ******.
   
o Letter 5798 (10-2016), TE/GE Information Document Request Extension Notice, granting 1st extension, with enclosures, was securely emailed to both provided email addresses, on ******, ******, with a response date of ******, ******. Neither email was returned as being undeliverable.
   
o Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance Area, with attachments, was securely emailed to both email addresses, on ******, ******. Included with the letter was Form 4564, Information Document Request, requesting further information regarding either new exempt purpose or termination of exemption documents. Neither email was returned as being undeliverable.
   
o Letter 5077-B (Rev. 1-2017), TE/GE IDR Delinquency Notice, was emailed to both the President and Treasurer on ****** at ******: ******. Neither email was returned as being undeliverable.
   
- Telephone contact for the audit was as follows:
   
o ******, ******, ****** called the phone number listed on the Form ****** filing for the President of ******. Due to a bad connection, the man who answered could not hear/understand ******. ****** attempted to call right back and received VMS. Left a message for the president to return my call.
   
o ******, ******, ****** attempted second outcall to same phone number for President and received VMS. Left a message for the president to return my call.
   
o ******, ******, ****** attempted third outcall to President with no answer.
   
o ******, ******, through external research, ****** located phone number for Treasurer, ******. Treasurer answered, verified disclosure, and confirmed receipt of letter. Treasurer wanted to speak with President and would call ****** back before due date on letter.
   
o ******, ******, ****** attempted outcall to Treasurer and received VMS. ****** left message to return call.
   
o ******, ******, ****** attempted outcall to Treasurer. Treasurer advised he had a meeting scheduled with the President on ****** ****** to discuss the letter received. During the call, ****** advised of e-mail options, per Interim Guidance Memo. Treasurer stated that he would e-mail consent and applicable documentation after meeting with President.
   
o ******, ******, ****** attempted outcall to Treasurer. He advised he was too busy to talk and scheduled phone call for later in the day.
   
o ******, ******, ****** Treasurer and President called ******. President advised had not received letter that Treasurer had. During the call, they stated there had been ****** revenues and little to no activities for the organization. An extension was requested to provide documentation.
   
o ******, ******, ****** received message from President requesting a conference call. ****** returned phone call and schedule the call for ******, ****** at ******.
   
o ******, ******, at ******: ****** conducted conference call with President and Treasurer. During the call, they stated again the ****** revenues and little to no activity for the organization. They were undecided during that time if they needed to terminate the organization or pivot to a new exempt purpose.
   
o ******, ****** contacted President to inform that no response had been received. During the call, the President confirmed receipt of letters and provided he hoped to have documents within a few days. The decision was to terminate the organization.
   
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.
   
IRC §511  of the Internal Revenue Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations.
   
IRC §6001  of the Code provides that every person liable for any tax imposed by this title, 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 this title.
   
IRC §6033(a)(1)  of the Code provides, except as provided in section 6033(a)(2), every organization exempt from tax 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 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.
   
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 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.
   
Regulation §1.501(c)(3)-1(c)(1)  of the regulations provides that an organization will not be regarded as "operated exclusively" for one or more exempt purposes described in section 501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance of a 501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under section 501(c)(3) of the Code.
   
Regulation §1.6001-1(c)  of the Code provides that 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. See section 6033 and §§ 1.6033-1 through 1.6033-3.
   
Regulation §1.6001-1(e)  of the Code provides that the books or records required by this section shall be kept at all time 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.
   
Regulation §1.6033-1(h)(2)  of the regulations 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 section 6033.
   
Regulation §1.61-1  of the regulations provides that Gross income means all income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash.
   
 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. 2022-5, 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 did not maintain proper organizational documents, failing to amend the Articles of Incorporation for the limitations outlined within Section 501(c)(3). Further, the organization did not respond and produce records to verify that they are organized and operated exclusively for one or more of the purposes specified in IRC Section 501(c)(3). If an organization fails to meet either the organizational test or the operational test, it is not exempt.
   
In accordance with the above-cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and to determine its liability for any unrelated business income tax.
   
Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations shall submit additional information for the purpose on enabling the Internal Revenue Service to inquire further into its exempt status.
   
Using the rationale that was developed in Revenue Ruling 59-95, the Organization's failure to provide requested information should result in the termination of exempt status.
   
Conclusion:
   
Based on the foregoing reasons, the organization does not qualify for exemption under section 501(c)(3) and its tax-exempt status should be revoked.
   
It is the IRS's position that the organization failed to establish that it meets the reporting requirements under IRC §§ 6001 and 6033 to be recognized as exempt from federal income tax under IRC § 501(c)(3). Furthermore, the organization has not established that it is observing the conditions required for the continuation of its exempt status or that it is organized and operated exclusively for an exempt purpose. Accordingly, the organization's exempt status is revoked effective ******, ******.
   
Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods after ******, ******.