i es see ns tax_exempt_and_government_entities_division release number release date legend org organization name org address department of the treasury internal_revenue_service te_ge eo examinations commerce street dallas tx date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear this is a final_determination regarding your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 is revoked effective january 20xx because it is determined that you have not established that you are observing the conditions required for the continuation of an exempt status we previously mailed you a report explaining our proposed revocation of your tax- exempt status within days from the date of the letter accompanying the report in that correspondence we requested that you respond to the report because we did not hear from you within that day period we will process your case on the basis of the recommendations shown in the report we have determined that you fail to qualify for exempt status under any other subsection of sec_501 you are required to file federal_income_tax returns on form_1120 these returns should be filed with the appropriate service_center for all years beginning january 20xx if you have any questions please call the contact person at the telephone number shown in the heading of this letter sincerely nanette m downing acting director eo examinations f- ee tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service te_ge exempt_organizations examinations division commerce street mc dal dallas texas date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe an adjustment of your organization's exempt status is necessary if you do not agree with our position you may appeal your case the enclosed publication the examination process explains how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process if you request a conference we will forward your written_statement of protest to the appeals_office and they will contact you enclosed for your convenience an envelope is if you and appeals do not agree on some or all of the issues after your appeals_conference or if you do not request an appeals_conference you may file suit in united_states tax_court the united_states court of federal claims or united_states district_court after satisfying procedural and jurisdictional requirements as described in publication letter catalog number 34801v m h you may also request that we refer this matter for technical_advice as explained in publication exempt_organization appeal procedures for unagreed issues ifa determination_letter is issued to you based on technical_advice no further administrative appeal is available to you within the irs on the issue that was the subject of the technical_advice if we do not hear from you within days from the date of this letter we if you accept our findings please sign and return the enclosed form_6018 consent to proposed adverse action we will then send you a final letter modifying or revoking exempt status will process your case on the basis of the recommendations shown in the report of examination and this letter will become final in that event you will be required to file federal_income_tax returns for the tax period s shown above file these returns with the ogden service_center within days from the date of this letter unless a request for an extension of time is granted file returns for later tax years with the appropriate service_center indicated in the instructions for those returns you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through norma channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and letter catalog number 34801v d e t sincerely sunita lough director eo examinations thank you for your cooperation enclosures publication publication form_6018 report of examination envelope letter catalog number 34801v schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org ein 20xx year period ended _ organization name phone phone org state treasurer treasure sec_1 companie sec_2 date xx website website address address city city president president ra-1 ra-2 ra-3 g ra co-1 issues state v p co-2 co-3 v p whether org org qualifies for exemption under c of the internal_revenue_code code org's primary activity is not operated in a manner designed to further c purposes org has not established that it is observing the conditions for continuation of its exempt status as required under c and rev_proc 20xx-52 history overview facts org was recognized as a tax-exempt_organization on august 20xx under c of the code org originally applied for tax-exemption under code c during the application process org was notified by the determination specialist that the organization’s operations would better qualify under c org agreed to be recognized under c org filed its articles of incorporation on march 20xx the purpose of the organization as enumerated in its articles of incorporation was to provide assistance to individuals or families in the resolution of credit debt problems the articles of incorporation reported the principal office of org as address city state the articles of incorporation also show that the original officers included president--president v p --vice-president treasurer--secretary treasurer the state secretary of state web site reported org’s stated purpose as inactive to counsel individuals with credit problems and contact their creditors to resolve the problems org was incorporated on march 20xx its mailing address shown as address city state with the registered agent's name of president address of address city state the officers listed included president--president v p --vice-president treasurer--secretary treasurer as confirmed by president org started to operate its debt management plan dmp program as its primary activity under code sec_501 however business was not picking up especially with the credit card companies who traditionally paid fair share who primarily deal with c organizations the organization became inactive 20xx president added the following statement with respect to the org being inactive in correspondence of october form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org ein year period ended 20xx because of a lack of funding by the credit grantors and no grants or dmps we decided not to expand our operations’ application_for recognition of exemption form form org originally applied for tax-exemption under code c during the application process org was notified by the determination specialist that the organization’s operations would better qualify under code c org agreed to be recognized under code c on august 20xx on august 20xx based on the information that org provided in its application_for exemption and on the assumption that org would operate in the manner represented in its application org was recognized as a tax-exempt_organization described in c in the application org described its activities and operational information as follows org described its past present and planned activities as follows org is a community service_organization providing budget credit debt counseling stewardship and repayment programs to provide counseling to families and individual who have credit debt problems to include assistance in developing and utilization of a plan for liquidation of debts to promote educational programs and tools dealing with the wise and unwise use of credit budgeting and money management these activities were initiated in march 20xx at address city state provided by counselors at org org described its source of financial support as follows contributions and donations org listed the following individuals as officers or directors e e e president-president director v p ---vice president director treasurer-secretary treasurer director the address of president was shown as adaress city state and the address of org as address city state telephone numbers phone and phone org responded to the determination specialist’s letter of june 20xx as follows with regard to their stated purpose form 886-a 1-19xx ce ou catalog number 20810w publish no irs gov -page_2 s year period ended 20xx schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org ein please note org was incorporated as a ‘not for profit’ community service_organization for the sole purpose of budget credit debt and financial education and repayment programs and to teach consumers about the wise use of money and stewardship form credit counseling and form_990 filing requirement questionnaire irs correspondence dated february 20xx and april 20xx was issued to org to conduct a compliance check with regard to the organization’s credit counseling operation for the tax_year ended december 20xx in the correspondence the irs requested org to complete form credit counseling and form_990 filing requirement questionnaire org responded to the correspondence in a letter dated march 20xx as part of the response org enclosed a copy of the form_990 return for org the return was signed by president on march 20xx it was noted that the cover letter had the org logo address telephone number and operating hours the address shown was address city state telephone phone with operating hours of - the org logo on the letterhead showed as follows org a comprehensive credit counseling service non-profit organization the completed form was signed by president president on march 20xx org responded to the form questionnaire as shown below part organization president wrote in the name of the organization as org and the employer_identification_number of ein part il not required to file form_990 president wrote in n a part ill operation q responded yes to having a web site provided the web site address of website q responded to having provided the following services consumer credit_counseling_services debt management services and debt negotiation services q responded to having the following activities with respect to q education and or counseling consumers in person in writing or using electronic means helping consumers consolidate debts negotiating with creditors on behalf of consumers to lower interest rates waive fees adjust balances or restore acceptable credit ratings form 886-a 1-19xx catalog number 20810w - page_-3 publish no irs gov department of the treasury-internal revenue service schedule number of exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number year period ended 20xx org ein part iv consumer credit counseling debt management credit repair debt negotiation services q stated that the organization’s services are available to everyone regardless of income or assets q fee structure are reduced or waived in hardship situations or because of client’s inability to pay q in counseling sessions counselors are asked each person to provide detailed information about the following the type amount and source of all income current and future asset sec_3 monthly and annual expense sec_4 secured debt such as mortgages and car loan sec_5 unsecured debt including student loans and credit cards employment past or anticipated changes in earnings assets expenses and liabilities including the other liabilities such as child_support alimony and tax_liabilities significant expenditures buying habits reason or cause for those change sec_11 health and other life issues that may affect the individual’s financial situations q in counseling sessions counselors present clients with the following options to address debt problems negotiating directly with creditors on payment or interest rate relief mechanics and advantages of creating and maintaining a budget changing buying habits or strategies for saving money custom-designed self-administered payment plan sec_5 other-referral for homeless shelter mental health food bank social service counselors discuss the advantages and disadvantages of each of the options checked enrolling in debt management plans dmps filing for bankruptcy above counselors offer written materials on budgeting and managing personal finances q in counseling sessions the following was marked as criteria for recommendations counselors analyze all information before making recommendation sec_2 counselors use objective criteria when recommending any options in q above that best meet the client’s individual needs goals and circumstances form 886-a 1-19xxx duc ruc mi so ale ence le ioe og catalog number 20810w publish no irs gov -page__4 pe do schedule number or exhibit form 886-a rev january 19xx explanations of items tax identification_number year period ended ein 20xx name of taxpayer org qh6 in counseling sessions the following was marked with respect to referrals counselors provide specific and appropriate referrals to social service organizations for appropriate support services when they identify problems such as unemployment lack of training substance abuse literacy or psychological issues q in counselor education and training the following was marked counselors receive comprehensive training in counseling skills personal finance budgeting and credit and debt management in live or interactive training sessions and through detailed written manuals counselors are trained on how to develop options and recommendations that address the particular circumstances of each client counselors are trained to identify underlying personal problems such as illness job loss or suicide risk that may contribute to financial problems and on making appropriate referrals counselors are evaluated on how thoroughly and effectively they develop and present options to match the particular circumstances of each client q in outreach and advertising use of website educational pages can be accessed without providi ng contact information was marked n outreach and advertising content of advertising the organization marked the box that q o state the advertising mentions dmps as one option for addressing debt problems not as a universal solution q in outreach and advertising referrals the organization marked the box that state the organization receives potential clients from referral by employers union leaders clergy and or community organizations q in governance the organization marked the following the organization is governed by a community-based board that includes significant representation by religious organizations civic groups labor unions educational institutions and business groups the organization is governed by a board that has no familial or business relationships and is independent of creditors contractors employees or others with a financial interest in the organization q in governance governing board information the organization state that there are governing board members no governing board members are compensated form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service rev january 19xx name of taxpayer tax identification_number org ein year period ended 20xx board members with backgrounds in personal finance board member with background in education and in nonprofit_organizations q with respect to educational materials seminars the organization offers seminars taught by qualified instructors that are designed to meet the current needs of financially stressed individuals the organization distributes publications concerning financial management budgeting s e and credit seminars are open and advertised to the public the website contains educational materials that are readily accessible to the public all clients are provided with educational materials that will assist them with budgeting and their financial management goals whether they choose to receive additional counseling or purchase additional services such as a dmp all dmp and payment-plan clients are assigned a counselor who provides counseling and support during the plan clients who do not choose dmp services are offered continuing educational opportunities and help with budgeting q with respect to services provided n n educational_services counseling services advertising mass mailing and or telephone solicitations administrative services to manage dmps such as processing client payments and disbursing the funds resolving credit card payment problems and negotiating fair share with creditors q with respect to creditor fair share payments direct payments to organization q with respect to the office of the united_states trustee bankruptcy trustee the organization applied to the office of the u s trustee to be certified provider of credit counseling under the new bankruptcy act in mid-october 20xx operation of org activities per a telephone conversation with president on april 20xx president said that he would agree to terminate org because of its inactivity president mentioned that org was inactive since its inception and expected org to be inactive in the future org does not have any books_or_records no income or expenses to report there are no employees the officers are all form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form x00 explanations of items name of taxpayer tax identification_number year period ended org ein 20xx volunteers president is looking into changing the name of org to a name that would not have the word credit counseling or perhaps forming another organization currently org is using co-1 to answer telephone calls for org subsequent to the telephone conversation with president the agent issued information_document_request idr in that idr the agent asked for documentation to affirm that org was no longer in business president responded to idr in a letter of may 20xx in the letter president stated that org was not dissolved and thus the documentation requested was not submitted idr was issued to org on may 20xx the idr was to advise org of an examination of org books_and_records at address city state on june 20xx the idr also asked org to provide various documents to verify the organization’s operations and record keeping compliance the on-site examination took place on june 20xx with president the documentation provided by president was the following determination_letter and a state of state annual report for january 20xx no other information was provided copies of a part of the form_1023 application the during the initial interview president stated that he did not want to terminate or revoke org president stated that he is the only active officer counselor in the organization he stated that he conducts credit counseling sessions to about or individuals a month his focus is on individuals that are undergoing some sort of mortgage troubles ie homeowners in distress and first-time homebuyers president also stated to have conducted credit counseling sessions primarily at his home and close by towns in his neighborhood neighborhood and around town such as state city and downtown budgets and either suggests doing short_sales or moving to apartment complexes president stated that he also conducted counseling sessions verbally with no handouts given to clients org's response to the irs letter of october 20xx president offered the following statement with respect to the termination of org during his counseling sessions he would go over their in true-i was trying to emphasize the importance of what believe is a viable org in terms of home owner counseling believe you noted in this paragraph that said ‘ did not want to terminate org’ also pointed out that it is inactive only in the concept that it receives no income has no paid employees all persons are volunteers and all expenses are paid_by myself ie office supplies travel etc in this way can provide some sort of service to needy homeowners president also made the following statement with respect to the termination of org would rather not terminate org because it becomes more and more evident that the ‘home owners’ and consumers whom usually counsel are becoming more and more anxious about their ability to pay their mortgages form 886-a 1-19xx catalog number 20810w page_-7 publish no irs gov department of the treasury_internal revenue service form 886-a rev january 19xx name of taxpayer _ - org tax identification_number explanations of items ein year period ended 20xx president went on to say that org has no income no dmp no expenditures he claimed that if there were expenditures it would be paid out of his own pocket org used to operate its business at the address address for several years now he conducts his business either at his home or at his client's home org ran ads in the yellow pages to solicit clients president also operates another business a for-profit business called co-2 president has a real_estate broker license and about real_estate agents working under him in org’s response to the irs letter of october 20xx president stated that he no longer runs ads in the yellow pages president stated the officers and board members of org are president president and counselor v p vice-president treasurer secretary treasurer president stated that his duties included credit counseling meeting with the board once a year as well as operating and managing org president confirmed that v p and treasurer have no actual interactions with the organization solely being additional names present on a list of directors v p and treasurer are not related to president v p is an insurance agent and treasurer teaches at a university president is the only counselor for org during the initial interview president stated that he obtains clients through referrals from previous clients friends and clients in real_estate dealings on occasion president would give out the co- telephone number another credit counseling service to his clients as a referral in org’s response to the irs letter of october 20xx president offered the following statement with respect to relationship with co-1 co-1 is a c non-profit corporation however it is not a part of org or org do not know nor should comment on ‘co-1’ officers educational is a separate corporation incorporated under the laws of the state of state and recognized by the irs as a 501_c_3_organization with it’s own board_of directors and officers of which ra-1 is neither on their board_of directors or an officer do not believe intended to nor would say that ‘co-1’ took over ‘org’ co-1 am not familiar with co-1 their board_of directors or research of co-2 disclosed that the corporation was no longer in business and the officer listed was not president additionally research revealed president’s association with co-3 the state secretary of state web site for co-3 shows that the corporation is a domestic for-profit corporation incorporated december 19xx the corporation was rated as active and in good standing the description of its purpose was real_estate sales and development the mailing address shown was address city state telephone number phone the registered agent's name was president the officers listed were president president ra-1 vice-president ra-2 secretary treasury form 886-a 1-19xx catalog number 20810w - page__-8 publish no irs gov department of the treasury-internal revenue service schedule number or extitht ro a0 explanations of items name of taxpayer tax identification_number - org ein year period ended 20xx president also provided a copy of the state of state annual report for january 20xx the annual report shows the following e e e e name and address of organization org address city state description of actual activity inactive to counsel individuals with credit problems and contact their creditors to resolve the problems’ registered agent’s name and address president address city state the officers directors name president-president director v p -vice- president director treasurer-secretary treasurer director form_990 return of organization exempt from income_tax irs records indicate that org did not file form_990 for the period under examination or for prior and subsequent years related_organization at or about the same time president also submitted an application_for org state credit under code sec_501 state credit’s exemption under sec_501 was revoked by the irs in september 20xx in correspondence of october 20xx president offered the following statement with respect to the relationship with state credit where org refers to org and org’ refers to org org applied for it' sec_501 in 19xx and it was approved it was not until many years later that it received an adverse_ruling from the irs org was not restarted it went ahead with the c recommendation only to find out as you stated the credit granters did in effect not recognize a c because they were only familiar with c organizations thus we receive no dmp funds and lacked operating funds org web site state credit web site was reviewed at website a copy of the home page was printed and shown as exhibit a according to exhibit a the opening page of the web site contains the introduction heading org below the heading the statement welcome to org was displayed after the introduction heading the following statement was displayed org org is a non-profit community service offering e free confindential personal stewardship counseling education debt management programs and negotiating with creditors in eliminating debt in the fastest time period possible form 886-a 1-19xx catalog number 20810w - page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rov january 19xx name of taxpayer explanations of items ‘tax identification_number year period ended org ein 20xx e free budget credit debt financial and housing counseling with a bonded certified licensed professional our consumer advocates are here to help lower interest rates fees and monthly payments credit reports and evaluation establish budget and financial goals stop collection calls harassment pay off debts in the fastest time period possible automatic bill payment settle accounts for as low a sec_50 money management education debt consolidation on the same page the web site showed the address and telephone number for contact information as follows address city state tel fax toll free research of state credit was also conducted at the state secretary of state web site according to the state secretary of state web site org is a domestic nonprofit corporation incorporated november 19xx the corporate status is shown as active the stated purpose of the organization was reported as comprehensive credit counseling education establishing voluntary debt repayment programs the mailing address was reported at address city state registered agent's name and address was president address city state the officers listed are president-- president stratford whiting-- vice-president treasurer--secretary and v p -- treasurer the law sec_501 of the internal_revenue_code establishes standards that a credit_counseling_organization must satisfy for exemption under sec_501 or sec_501 as follows the organization provides credit_counseling_services tailored to the specific needs and circumstances of consumers the organization makes no loans to debtors and does not negotiate the making of loans on behalf of debtors the organization provides services for the purpose of improving a consumer's credit record credit history or credit rating only to the extent that such services are incidental to providing credit_counseling_services and form 886-a 1-19xx catalog number 20810w page _ publish no irs gov department of the treasury-internal revenue service schedule number or exhibit oon ee6-4 soxx explanations of items name of taxpayer org tax identification_number - year period ended ein 20xx the organization does not charge any separately_stated fee for services for the purpose of improving any consumer's credit record credit history or credit rating the organization does not refuse to provide credit_counseling_services to a consumer due to the inability of the consumer to pay the ineligibility of the consumer for debt management plan enrollment or the unwillingness of the consumer to enroll in a debt management plan the organization establishes and implements a fee policy which requires that any fees charged to a consumer for services are reasonable allows for the waiver of fees if the consumer is unable to pay and except to the extent allowed by state law prohibits charging any fee based in whole or in part on a percentage of the consumer's debt the consumer’s payments to be made pursuant to a debt management plan or the projected or actual savings to the consumer resulting from enrolling in a debt management plan atall times the organization has a board_of directors or other governing body which ts controlled by persons who represent the broad interests of the public such as public officials acting in their capacities as such persons having special knowledge or expertise in credit or financial education and community leaders not more than percent of the voting power of which is vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization's activities and not more than percent of the voting power of which is vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization's activities the organization does not own more than percent of the total combined voting power of any corporation the profits interest of any partnership which is in the trade_or_business of lending money repairing credit or providing debt_management_plan_services payments processing or similar services and the organization receives no amount for providing referrals to others for debt_management_plan_services and pays no amount to others for obtaining referrals of consumers the credit counseling provision of the pension_protection_act of defines credit_counseling_services as credit_counseling_services are the provision of educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit the assisting of individuals and families with financial problems by providing them with counseling or any combination of such activities the provision defines debt_management_plan_services as debt_management_plan_services are services related to the repayment consolidation or restructuring of a consumer's debt and includes the negotiation with creditors of lower interest rates the waiver or reduction of fees and the marketing and processing of debt management plans form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service 20xx schedule number or exhibit form 886-a rev january 19xx explanations of items name of laxpayer tax identification_number year period ended org ein c of the code provides in part for the exemption of civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare an organization is operated exclusively for the promotion of social welfare if some way the common good and general welfare of the people of the community an organization embraced within this section is one which is operated to bring about civic betterment and social improvements it is primarily engaged in promoting in sec_1_501_c_4_-1 provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the community an organization embraced within this section is one that is operated primarily for the purpose of bringing about civic betterments and social improvements the regulations require that an organization claiming exemption under c of the code must operate for the benefit of the community as a whole rather than for the benefit of a limited group compare revrul_78_69 1978_1_cb_156 which holds that an organization providing rush hour commuter bus service to all residents of a community qualifies for exemption under c with revrul_55_311 1955_1_cb_72 which holds that a local association of employees operating a bus primarily for the convenience of its members does not so qualify also compare revrul_62_167 1962_2_cb_142 which holds that an organization retransmitting television signals for the benefit of an entire community qualifies for exemption under c with revrul_54_394 1954_2_cb_131 which holds that an organization providing television on a cooperative basis does not qualify additionally erie endowment v united_states 2d holds that a nonprofit corporation formed to obtain and operate a low-cost housing cooperative was held not to be a civic league or social_welfare_organization because it did not offer a program of service to benefit the community-at-large revrul_78_50 1978_1_cb_155 jan states in part that a nonprofit organization that processes consumer complaints concerning products and services provided by business establishments meets with the parties involved to encourage resolution of the problem recommends a fair solution and if the proposed solution is not accepted informs the parties about appropriate judicial or administrative bodies that may be used to resolve the disputes qualifies for exemption under c of the code revrul_65_299 1965_2_cb_165 states in part that a nonprofit organization that was formed to assist families and individuals with financial problems and to help reduce the incidence of personal bankruptcy in the community qualifies as a social_welfare_organization under sec_501 of the code revproc_2007_52 with respect to revocation or modification of a determination states in part the revocation or modification of a determination_letter or ruling recognizing exemption may be form 886-a 1-19xx ee ec ubi lec lc catalog number 20810w page_ -_publish no irs gov form 886-a rev january 19xx explanations of items name of taxpayer org tax identification_number ein year period ended 20xx retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 of the code applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization in credit counseling centers v s portland a 2d s c me the supreme court of maine denied state tax exemption to a credit counseling agency that provided significant benefits to creditors credit card companies commonly make payments to credit counseling agencies of a portion of the funds they receive from clients of the agencies these payments are known as fair share payments and are a source of substantial funding for credit counseling agencies in this case the credit counseling agency received percent of its income from fair share payments from credit card companies at the rate of to of debt payments org will be allowed days to review the examination_report and respond taxpayer’s position government’s position based on the information provided by org we conclude that org is not operated for an exempt_purpose as described in c for an organization to be exempt under c it must be organized and operated exclusively for the promotion of social welfare an organization is operated exclusively for the promotion of social welfare if some way the common good and general welfare of the people of the community it is primarily engaged in promoting in sec_501 of the internal_revenue_code sets restrictions on who may serve on the governing board_of a credit_counseling_organization this includes public officials community leaders and persons having special knowledge or expertise in credit or financial education no more than percent of the board may be employees of the organization creditors or those who will benefit financially in any other way org does not have a board_of directors or a governing body that is controlled by persons who represent a broad interest of the public such as public officials acting in their capacities such as persons having special knowledge or expertise in credit or financial education and community leaders org has not established that its operated for the common good and general welfare of the people of the community during the course of the examination it was noted that org submitted conflicting information concerning the actual activities of the organization in the initial interview president claimed that the services offered by org were counseling to distressed homeowners and first-time homebuyers form 886-a 1-19xx catalog number 20810w - page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number year period ended org ein 20xx org's articles of incorporation application_for exemption and information provided on form stated org’s activities as providing counseling in personal stewardship education in debt management programs and negotiating with creditors in eliminating debt the evidence suggests that org has been inactive since its inception the state secretary of state web site reported the status of the organization as inactive to counsel individuals with credit problems and contact their creditors to resolve the problems’ however president claimed that the organization is only inactive to the extent that the organization receives no income has no paid employees all persons are volunteers and all expenses are paid_by myself ie office supplies travel etc service to needy homeowners in this way can provide some sort of the organization has no employees and no operating funds the volunteer officers as indicated in its application and to the secretary of state are also inactive except for president president claimed to be the only active officer and the only counselor it appears that president is operating org in a manner similar to a sole_proprietorship business than a corporation moreover the organization does not have or distribute newsletters newspaper articles advertisements brochures pamphlets or maintain financial statements to show its operations accordingly org has not established that it has maintained a traditional business model such as maintaining records hiring employees or maintaining a formal office the regulations require that an organization claiming exemption under c of the code must operate for the benefit of the community as a whole rather than for the benefit of a limited group compare revrul_78_69 1978_1_cb_156 which holds that an organization providing rush hour commuter bus service to all residents of a community qualifies for exemption under sec_501 with revrul_55_311 1955_1_cb_72 which holds that a local association of employees operating a bus primarily for the convenience of its members does not so qualify also compare revrul_62_167 1962_2_cb_142 which holds that an organization retransmitting television signals for the benefit of an entire community qualifies for exemption under sec_501 with revrul_54_394 1954_2_cb_131 which holds that an organization providing television on a cooperative basis does not qualify additionally erie endowment v united_states 2d holds that a nonprofit corporation formed to obtain and operate a low-cost housing cooperative was held not to be a civic league or social_welfare_organization because it did not offer a program of service to benefit the community-at-large the concept of social welfare includes the provision of benefits to the community at large the providing of benefits to a narrow group of recipients in most cases is not considered as promoting social welfare is the government’s position that the org operation is in a manner that is materially different it from that represented in its application_for exemption in org’s application_for exemption signed under penalties of perjury of august 20xx org represented that it was a community service_organization providing budget credit debt counseling stewardship and repayment programs to form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx name ol taxpayer - org explanations of items tax identification_number ein year period ended 20xx provide counseling to families and individual who have credit debt problems to include assistance in developing and utilization of a plan for liquidation of debts to promote educational programs and tools dealing with the wise and unwise use of credit budgeting and money management these activities were initiated in march 20xx at address city state provided by counselors at org revocation of a determination_letter may be retroactive if the organization operated in a manner materially different from that originally represented rev_proc 20xx-52 sec_601_201 rev_proc 20xx-4 on the form questionnaire org listed their internet site address as website however after inspecting that site it was determined that the site refers to org as the provider of credit counseling and debt solutions the web site provided complete details on the services offered by org irs records indicate that the org had its exempt status revoked in february 20xx according to the org website for 20xx and 20xx the services offered were the following e e free confindential personal stewardship counseling education debt management programs and negotiating with creditors in eliminating debt in the fastest time period possible free budget credit debt financial and housing counseling with a bonded certified licensed professional the website further advertised that the organization can help in the following ways e e e e e e e e lower interest rates fees and monthly payments credit reports and evaluation establish budget and financial goals stop collection calls harassment pay off debts in the fastest time period possible automatic bill payment settle accounts for as low a sec_50 money management education debt consolidation the web site also showed the address of address city state telephone fax toll free based on the information submitted it appears that org is operating as state credit which was revoked by the irs in february 20xx the web site address given by org was that of state credit’s web site address the officers and board listed on the application_for exemption and state secretary of state are the same as state credit moreover the services and purposes form 886-a 1-19xx nee ee catalog number 20810w page_15 -_publish no irs gov se schedule number or exhibit feo bees 19xx explanations of items name of laxpayer a tax identification_number ein year period ended 20xx stated for org are those of state credit org is continuing on the operations of state credit even though state credit was revoked by the irs in february 20xx in the organization’s correspondence of march 20xx to the irs org enclosed a copy of state credit’s form_990 return along with completed form a review of the completed form disclosed the following information president wrote in the name of the organization as org and employer_identification_number ein president responded to yes to have a web site and wrote in the org website as website provided the organization service as consumer credit_counseling_services debt management services and debt negotiation services the organization offered education and or counseling consumers in person writing or using electronic means helping consumers consolidate debts negotiating with creditors on behalf of consumers to lower interest rates waive fees adjust balances or restore acceptable credit ratings the educational material outreach and credit counseling activities were the same activities as org with respect to governance the organization stated that it is governed by a community- based board that includes significant representation by religious organizations civic groups labor unions educational institutions and business groups the organization also marked that it is governed by a board that has no familial or business relationships and is independent of creditors contractors employees or others with a financial interest in the organization with respect to governance--governing board information the organization stated that there are governing board members no governing board members are compensated board members with backgrounds in personal finance board member with background in education and in nonprofit_organizations a review of the return revealed that the return was signed by president on march 20xx and the officers listed were the same as org a review of the cover letter attached to the correspondence disclosed the state credit logo address telephone number and operating hours were the same as org the state credit logo on the letterhead showed as follows org a comprehensive credit counseling service non-profit organization conclusion form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service form 886-a rev january 19xx name of taxpayer tax identification_number explanations of items org ein year period ended 20xx in order to qualify for exemption under c an organization must be both organized and operated to achieve a purpose that is described under that code section orgs has failed to demonstrate that it is operated in accordance with internal_revenue_code c and q governing qualification for tax exemption under the code accordingly the tax-exempt status of org as an organization described in c of the code should be revoked org is required to file income_tax returns on form_1120 for all years beginning after december 20xx department of the treasury-internal revenue service form 886-a 1-19xx catalog number 20810w publish no irs gov page schedule number or exhibit form 886-a rev january 19xx name of taxpayer - explanations of items tax identification_number year period ended org ein 20xx legend org organization name state phone phone treasurer treasures po companies xx date website website address address city city president president v p ra-1 ra-2 ra-3 g ra co-1 co-2 issues state v p co-3 whether org org qualifies for exemption under c of the internal_revenue_code code org's primary activity is not operated in a manner designed to further c purposes org has not established that it is observing the conditions for continuation of its exempt status as required under c and rev_proc 20xx-52 history overview facts org was recognized as a tax-exempt_organization on august 20xx under c of the code org originally applied for tax-exemption under code c during the application process org was notified by the determination specialist that the organization’s operations would better qualify under c org agreed to be recognized under c org filed its articles of incorporation on march 20xx the purpose of the organization as enumerated in its articles of incorporation was to provide assistance to individuals or families in the resolution of credit debt problems the articles of incorporation reported the principal office of org as address city state the articles of incorporation also show that the original officers included president--president v p --vice-president treasurer--secretary treasurer the state secretary of state web site reported org’s stated purpose as inactive to counsel individuals with credit problems and contact their creditors to resolve the problems org was incorporated on march 20xx its mailing address shown as address city state with the registered agent’s name of president address of address city state the officers listed included president--president v p --vice-president treasurer--secretary treasurer as confirmed by president org started to operate its debt management plan dmp program as its primary activity under code sec_501 however business was not picking up especially with the credit card companies who traditionally paid fair share who primarily deal with c organizations the organization became inactive 20xx president added the following statement with respect to the org being inactive in correspondence of october form 886-a 1-19xx department of the treasury-internal revenue service catalog number 20810w - page_1 publish no irs gov schedule number or exhibit form 886-a rev january 19xx name of taxpayer org explanations of items tax identification_number ein year period ended 20xx because of a lack of funding by the credit grantors and no grants or dmps we decided not to expand our operations’ application_for recognition of exemption form form org originally applied for tax-exemption under code c during the application process org was notified by the determination specialist that the organization’s operations would better qualify under code c org agreed to be recognized under code c on august z20xx on august 20xx based on the information that org provided in its application_for exemption and on the assumption that org would operate in the manner represented in its application org was recognized as a tax-exempt_organization described in c in the application org described its activities and operational information as follows org described its past present and planned activities as follows org is a community service_organization providing budget credit debt counseling stewardship and repayment programs to provide counseling to families and individual who have credit debt problems to include assistance in developing and utilization of a plan for liquidation of debts to promote educational programs and tools dealing with the wise and unwise use of credit budgeting and money management these activities were initiated in march 20xx at address city state provided by counselors at org org described its source of financial support as follows contributions and donations org listed the following individuals as officers or directors e e e president-president director v p ---vice president director treasurer-secretary treasurer director the address of president was shown as address city state and the address of org as address city state telephone numbers phone and phone org responded to the determination specialist’s letter of june 20xx as follows with regard to their stated purpose form 886-a 1-19xx rr aie ee catalog number 20810w publish no irs gov -page_2 schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer org tax identification_number ein year period ended 20xx please note org was incorporated as a ‘not for profit’ community service_organization for the sole purpose of budget credit debt and financial education and repayment programs and to teach consumers about the wise use of money and stewardship form credit counseling and form_990 filing requirement questionnaire irs correspondence dated february 20xx and april 20xx was issued to org to conduct a compliance check with regard to the organization's credit counseling operation for the tax_year ended december 20xx in the correspondence the irs requested org to complete form credit counseling and form_990 filing requirement questionnaire org responded to the correspondence in a letter dated march 20xx as part of the response org enclosed a copy of the form_990 return for org the return was signed by president on march 20xx it was noted that the cover letter had the org logo address telephone number and operating hours the address shown was address city state telephone phone with operating hours of - the org logo on the letterhead showed as follows org a comprehensive credit counseling service non-profit organization the completed form was signed by president president on march 20xx org responded to the form questionnaire as shown below part organization president wrote in the name of the organization as org and the employer_identification_number of ein part il not required to file form_990 president wrote in n a part ill operation q responded yes to having a web site provided the web site address of website q responded to having provided the following services consumer credit_counseling_services debt management services and debt negotiation services q responded to having the following activities with respect to q education and or counseling consumers in person in writing or using electronic means helping consumers consolidate debts negotiating with creditors on behalf of consumers to lower interest rates waive fees adjust balances or restore acceptable credit ratings form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service fo bbo oxy name of laxpayer org explanations of items l tax identification_number part iv consumer credit counseling debt management credit repair debt negotiation services ein year period ended 20xx q stated that the organization’s services are available to everyone regardless of income or assets q fee structure are reduced or waived in hardship situations or because of client’s inability to pay q in counseling sessions counselors are asked each person to provide detailed information about the following the type amount and source of all income current and future asset sec_3 monthly and annual expense sec_4 secured debt such as mortgages and car loan sec_5 unsecured debt including student loans and credit cards past or anticipated changes in earnings assets expenses and liabilities including the other liabilities such as child_support alimony and tax_liabilities employment significant expenditures buying habits reason or cause for those change sec_11 health and other life issues that may affect the individual's financial situations q in counseling sessions counselors present clients with the following options to address debt problems n w r a o n o negotiating directly with creditors on payment or interest rate relief mechanics and advantages of creating and maintaining a budget changing buying habits or strategies for saving money custom-designed self-administered payment plans enrolling in debt management plans dmps filing for bankruptcy other-referral for homeless shelter mental health food bank social service counselors discuss the advantages and disadvantages of each of the options checked above counselors offer written materials on budgeting and managing personal finances q in counseling sessions the following was marked as criteria for recommendations - counselors analyze all information before making recommendation sec_2 counselors use objective criteria when recommending any options in q above that best meet the client's individual needs goals and circumstances form 886-a 1-19xxx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit - tax identification_number explanations of items ein year period ended 20xx form 886-a rev january 19xx name of taxpayer org q in counseling sessions the following was marked with respect to referrals counselors provide specific and appropriate referrals to social service organizations for appropriate support services when they identify problems such as unemployment lack of training substance abuse literacy or psychological issues q in counselor education and training the following was marked counselors receive comprehensive training in counseling skills personal finance budgeting and credit and debt management in live or interactive training sessions and through detailed written manuals counselors are trained on how to develop options and recommendations that address the particular circumstances of each client counselors are trained to identify underlying personal problems such as illness job loss or suicide risk that may contribute to financial problems and on making appropriate referrals counselors are evaluated on how thoroughly and effectively they develop and present options to match the particular circumstances of each client q in outreach and advertising use of website educational pages can be accessed without providing contact information was marked q in outreach and advertising content of advertising the organization marked the box that state the advertising mentions dmps as one option for addressing debt problems not as a universal solution q in outreach and advertising referrals the organization marked the box that state the organization receives potential clients from referral by employers union leaders clergy and or community organizations q in governance the organization marked the following the organization is governed by a community-based board that includes significant representation by religious organizations civic groups labor unions educational institutions and business groups the organization is governed by a board that has no familial or business relationships and is independent of creditors contractors employees or others with a financial interest in the organization q in governance governing board information the organization state that there are governing board members no governing board members are compensated form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19x name of taxpayer org explanations of items tax identification_number ein year period ended 20xx board members with backgrounds in personal finance board member with background in education and in nonprofit_organizations q with respect to educational materials seminars the organization offers seminars taught by qualified instructors that are designed to meet the current needs of financially stressed individuals the organization distributes publications concerning financial management budgeting e a and credit seminars are open and advertised to the public the website contains educational materials that are readily accessible to the public all clients are provided with educational materials that will assist them with budgeting and their financial management goals whether they choose to receive additional counseling or purchase additional services such as a dmp all dmp and payment-plan clients are assigned a counselor who provides counseling and support during the plan clients who do not choose dmp services are offered continuing educational opportunities and help with budgeting q with respect to services provided a n a educational_services counseling services advertising mass mailing and or telephone solicitations administrative services to manage dmps such as processing client payments and disbursing the funds resolving credit card payment problems and negotiating fair share with creditors q with respect to creditor fair share payments direct payments to organization q with respect to the office of the united_states trustee bankruptcy trustee the organization applied to the office of the u s trustee to be certified provider of credit counseling under the new bankruptcy act in mid-october 20xx operation of org activities per a telephone conversation with president on april 20xx president said that he would agree to terminate org because of its inactivity president mentioned that org was inactive since its inception and expected org to be inactive in the future org does not have any books_or_records no income or expenses to report there are no employees the officers are all form 886-a 1-19xx catalog number 20810w -page_- g publish no irs gov department of the treasury-internal revenue service rev eee roe name of taxpayer org explanations of items tax identification_number year period ended ein 20xx volunteers president is looking into changing the name of org to a name that would not have the word credit counseling or perhaps forming another organization currently org is using coq-1 to answer telephone calls for org subsequent to the telephone conversation with president the agent issued information_document_request idr in that idr the agent asked for documentation to affirm that org was no longer in business president responded to idr in a and thus the documentation requested was not submitted letter of may 20xx in the letter president stated that org was not dissolved idr was issued to org on may 20xx the idr was to advise org of an examination of org books_and_records at address city state on june 20xx the idr also asked org to provide various documents to verify the organization’s operations and record keeping compliance the on-site examination took place on june 20xx with president the documentation provided by president was the following determination_letter and a state of state annual report for january 20xx no other information was provided copies of a part of the form_1023 application the during the initial interview president stated that he did not want to terminate or revoke org president stated that he is the only active officer counselor in the organization he stated that he conducts credit counseling sessions to about or individuals a month his focus is on individuals that are undergoing some sort of mortgage troubles ie homeowners in distress and first-time homebuyers president also stated to have conducted credit counseling sessions primarily at his home and close by towns in his neighborhood neighborhood and around town such as state city and downtown budgets and either suggests doing short_sales or moving to apartment complexes president stated that he also conducted counseling sessions verbally with no handouts given to clients org's response to the irs letter of october 20xx president offered the following statement with respect to the termination of org during his counseling sessions he would go over their in true-i was trying to emphasize the importance of what believe is a viable org in terms of home owner counseling believe you noted in this paragraph that said ‘ did not want to terminate org’ also pointed out that it is inactive only in the concept that it receives no income has no paid employees all persons are volunteers and all expenses are paid_by myself ie office supplies travel etc in this way can provide some sort of service to needy homeowners president also made the following statement with respect to the termination of org f would rather not terminate org because it becomes more and more evident that the ‘home owners’ and consumers whom usually counsel are becoming more and more anxious about their ability to pay their mortgages form 886-a 1-19xxx publish no irs gov oc ae ee icd catalog number 20810w -page_7 form 886-a rev january 19xx name of taxpayer org explanations of items tax identification_number ein year period ended 20xx president went on to say that org has no income no dmp no expenditures he claimed that if there were expenditures it would be paid out of his own pocket org used to operate its business at the address address for several years now he conducts his business either at his home or at his client's home org ran ads in the yellow pages to solicit clients president also operates another business a for-profit business called co-2 president has a real_estate broker license and about real_estate agents working under him in org’s response to the irs letter of october 20xx president stated that he no longer runs ads in the yellow pages president stated the officers and board members of org are president president and counselor v p vice-president treasurer secretary treasurer president stated that his duties included credit counseling meeting with the board once a year as well as operating and managing org president confirmed that v p and treasurer have no actual interactions with the organization solely being additional names present on a list of directors v p and treasurer are not related to president v p is an insurance agent and treasurer teaches at a university president is the only counselor for org during the initial interview president stated that he obtains clients through referrals from previous clients friends and clients in real_estate dealings on occasion president would give out the co- telephone number another credit counseling service to his clients as a referral in org’s response to the irs letter of october 20xx president offered the following statement with respect to relationship with co-1 co-1 is a c non-profit corporation however it is not a part of org or org do not know nor should comment on ‘co-1’ officers educational is a separate corporation incorporated under the laws of the state of state and recognized by the irs as a 501_c_3_organization with it’s own board_of directors and officers of which ra-1 is neither on their board_of directors or an officer do not believe intended to nor would say that ‘co-1’ took over ‘org’ co-1 am not familiar with co-1 their board_of directors or research of co-2 disclosed that the corporation was no longer in business and the officer listed was not president additionally research revealed president’s association with co-3 the state secretary of state web site for co-3 shows that the corporation is a domestic for-profit corporation incorporated december 19xx the corporation was rated as active and in good standing the description of its purpose was real_estate sales and development the mailing address shown was address city state telephone number phone the registered agent's name was president the officers listed were president president ra-1 vice-president ra-2 secretary treasury form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit for bb explanations of items name of taxpayer tax identification_number org ein year period ended 20xx president also provided a copy of the state of state annual report for january 20xx the annual report shows the following e e e e name and address of organization org address city state description of actual activity and contact their creditors to resolve the problems inactive to counsel individuals with credit problems registered agent's name and address president address city state the officers directors name president-president director v p -vice- president director treasurer-secretary treasurer director form_990 return of organization exempt from income_tax irs records indicate that org did not file form_990 for the period under examination or for prior and subsequent years related_organization at or about the same time president also submitted an application_for org state credit under code sec_501 state credit’s exemption under sec_501 was revoked by the irs in september 20xx in correspondence of october 20xx president offered the following statement with respect to the relationship with state credit where org refers to org and org refers to org org applied for it’ sec_501 in 19xx and it was approved it was not until many years later that it received an adverse_ruling from the irs org was not restarted it went ahead with the c recommendation only to find out as you stated the credit granters did in effect not recognize a c because they were only familiar with c organizations thus we receive no dmp funds and lacked operating funds org web site state credit web site was reviewed at website a copy of the home page was printed and shown as exhibit a according to exhibit a the opening page of the web site contains the introduction heading org below the heading the statement welcome to org was displayed after the introduction heading the following statement was displayed org org is a non-profit community service offering e free confindential personal stewardship counseling education debt management programs and negotiating with creditors in eliminating debt in the fastest time period possible form 886-a 1-19xx catalog number 20810w - page__-q publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org ein year period ended 20xx e free budget credit debt financial and housing counseling with a bonded certified licensed professional our consumer advocates are here to help lower interest rates fees and monthly payments credit reports and evaluation establish budget and financial goals stop collection calls harassment pay off debts in the fastest time period possible automatic bill payment settle accounts for as low a sec_50 money management education debt consolidation on the same page the web site showed the address and telephone number for contact information as follows address city state tel fax toll free research of state credit was also conducted at the state secretary of state web site according to the state secretary of state web site org is a domestic nonprofit corporation incorporated november 19xx the corporate status is shown as active the stated purpose of the organization was reported as comprehensive credit counseling education establishing voluntary debt repayment programs the mailing address was reported at address city state registered agent’s name and address was president address city state the officers listed are president-- president stratford whiting-- vice-president treasurer--secretary and v p -- treasurer the law sec_501 of the internal_revenue_code establishes standards that a credit_counseling_organization must satisfy for exemption under sec_501 or sec_501 as follows the organization provides credit_counseling_services tailored to the specific needs and circumstances of consumers the organization makes no loans to debtors and does not negotiate the making of loans on behalf of debtors the organization provides services for the purpose of improving a consumer's credit record credit history or credit rating only to the extent that such services are incidental to providing credit_counseling_services and form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx name of taxpayer org tax identification_number explanations of items ein year period enced 20xx the organization does not charge any separately_stated fee for services for the purpose of improving any consumer's credit record credit history or credit rating the organization does not refuse to provide credit_counseling_services to a consumer due to the inability of the consumer to pay the ineligibility of the consumer for debt management plan enrollment or the unwillingness of the consumer to enroll in a debt management plan the organization establishes and implements a fee policy which requires that any fees charged to a consumer for services are reasonable allows for the waiver of fees if the consumer is unable to pay and except to the extent allowed by state law prohibits charging any fee based in whole or in part on a percentage of the consumer's debt the consumer's payments to be made pursuant to a debt management plan or the projected or actual savings to the consumer resulting from enrolling in a debt management plan at all times the organization has a board_of directors or other governing body which is controlled by persons who represent the broad interests of the public such as public officials acting in their capacities as such persons having special knowledge or expertise in credit or financial education and community leaders not more than percent of the voting power of which is vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization's activities and not more than percent of the voting power of which is vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization's activities the organization does not own more than percent of the total combined voting power of any corporation the profits interest of any partnership which is money repairing credit or providing debt_management_plan_services payments processing or similar services and in the trade_or_business of lending the organization receives no amount for providing referrals to others for debt_management_plan_services and pays no amount to others for obtaining referrals of consumers the credit counseling provision of the pension_protection_act of defines credit_counseling_services as credit_counseling_services are the provision of educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit the assisting of individuals and families with financial problems by providing them with counseling or any combination of such activities the provision defines debt_management_plan_services as debt_management_plan_services are services related to the repayment consolidation or restructuring of a consumer's debt and includes the negotiation with creditors of lower interest rates the waiver or reduction of fees and the marketing and processing of debt management plans form 886-a 1-19xx catalog number 20810w - page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit rev january 19x name of taxpayer tax identification_number year perod ended org 20xx ein c of the code provides in part for the exemption of civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare an organization is operated exclusively for the promotion of social welfare if some way the common good and general welfare of the people of the community an organization embraced within this section is one which is operated to bring about civic betterment and social improvements it is primarily engaged in promoting in sec_1_501_c_4_-1 provides that an organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way the common good and general welfare of the community an organization embraced within this section is one that is operated primarily for the purpose of bringing about civic betterments and social improvements the regulations require that an organization claiming exemption under c of the code must operate for the benefit of the community as a whole rather than for the benefit of a limited group compare revrul_78_69 1978_1_cb_156 which holds that an organization providing rush hour commuter bus service to all residents of a community qualifies for exemption under c with revrul_55_311 1955_1_cb_72 which holds that a local association of employees operating a bus primarily for the convenience of its members does not so qualify also compare revrul_62_167 1962_2_cb_142 which holds that an organization retransmitting television signals for the benefit of an entire community qualifies for exemption under c with revrul_54_394 1954_2_cb_131 which holds that an organization providing television on a cooperative basis does not qualify additionally erie endowment v united_states 2d holds that a nonprofit corporation formed to obtain and operate a low-cost housing cooperative was held not to be a civic league or social_welfare_organization because it did not offer a program of service to benefit the community-at-large revrul_78_50 1978_1_cb_155 jan states in part that a nonprofit organization that processes consumer complaints concerning products and services provided by business establishments meets with the parties involved to encourage resolution of the problem recommends a fair solution and if the proposed solution is not accepted informs the parties about appropriate judicial or administrative bodies that may be used to resolve the disputes qualifies for exemption under c of the code revrul_65_299 1965_2_cb_165 states in part that a nonprofit organization that was formed to assist families and individuals with financial problems and to help reduce the incidence of personal bankruptcy in the community qualifies as a social_welfare_organization under sec_501 of the code revproc_2007_52 with respect to revocation or modification of a determination states in part the revocation or modification of a determination_letter or ruling recognizing exemption may be form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number year period ended org ein 20xx retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 of the code applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization in credit counseling centers v s portland a 2d s c me the supreme court of maine denied state tax exemption to a credit counseling agency that provided significant benefits to creditors credit card companies commonly make payments to credit counseling agencies of a portion of the funds they receive from clients of the agencies these payments are known as fair share payments and are a source of substantial funding for credit counseling agencies in this case the credit counseling agency received percent of its income from fair share payments from credit card companies at the rate of to of debt payments org will be allowed days to review the examination_report and respond taxpayer's position government's position based on the information provided by org we conclude that org is not operated for an exempt_purpose as described in c for an organization to be exempt under c it must be organized and operated exclusively for the promotion of social welfare an organization is operated exclusively for the promotion of social welfare if some way the common good and general welfare of the people of the community it is primarily engaged in promoting in sec_501 of the internal_revenue_code sets restrictions on who may serve on the governing board_of a credit_counseling_organization this includes public officials community leaders and persons having special knowledge or expertise in credit or financial education no more than percent of the board may be employees of the organization creditors or those who will benefit financially in any other way org does not have a board_of directors or a governing body that is controlled by persons who represent a broad interest of the public such as public officials acting in their capacities such as persons having special knowledge or expertise in credit or financial education and community leaders org has not established that its operated for the common good and general welfare of the people of the community during the course of the examination it was noted that org submitted conflicting information concerning the actual activities of the organization in the initial interview president claimed that the services offered by org were counseling to distressed homeowners and first-time homebuyers form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit rev e364 10xx name of taxpayer org explanations of items a tax identification_number year period ended ein 20xx org's articles of incorporation application_for exemption and information provided on form stated org’s activities as providing counseling in personal stewardship education in debt management programs and negotiating with creditors in eliminating debt the evidence suggests that org has been inactive since its inception the state secretary of state web site reported the status of the organization as inactive to counsel individuals with credit problems and contact their creditors to resolve the problems’ however president claimed that the organization is only inactive to the extent that the organization receives no income has no paid employees all persons are volunteers and all expenses are paid_by myself ie office supplies travel etc service to needy homeowners in this way can provide some sort of the organization has no employees and no operating funds the volunteer officers as indicated in its application and to the secretary of state are also inactive except for president president claimed to be the only active officer and the only counselor it appears that president is operating org in a manner similar to a sole_proprietorship business than a corporation moreover the organization does not have or distribute newsletters newspaper articles advertisements brochures pamphlets or maintain financial statements to show its operations accordingly org has not established that it has maintained a traditional business model such as maintaining records hiring employees or maintaining a formal office the regulations require that an organization claiming exemption under c of the code must operate for the benefit of the community as a whole rather than for the benefit of a limited group compare revrul_78_69 1978_1_cb_156 which holds that an organization providing rush hour commuter bus service to all residents of a community qualifies for exemption under sec_501 with revrul_55_311 1955_1_cb_72 which holds that a local association of employees operating a bus primarily for the convenience of its members does not so qualify also compare revrul_62_167 1962_2_cb_142 which holds that an organization retransmitting television signals for the benefit of an entire community qualifies for exemption under sec_501 with revrul_54_394 1954_2_cb_131 which holds that an organization providing television on a cooperative basis does not qualify additionally erie endowment v united_states 2d holds that a nonprofit corporation formed to obtain and operate a low-cost housing cooperative was held not to be a civic league or social_welfare_organization because it did not offer a program of service to benefit the community-at-large the concept of social welfare includes the provision of benefits to the community at large the providing of benefits to a narrow group of recipients in most cases is not considered as promoting social welfare is the government's position that the org operation is in a manner that is materially different it from that represented in under penalties of perjury of august 20xx org represented that it was a community service_organization providing budget credit debt counseling stewardship and repayment programs to its application_for exemption in org’s application_for exemption signed form 886-a 1-19xx -_publish no irs gov sea ee oreo catalog number 20810w page schedule number or exhibit irev an oon name of taxpayer explanations of items tax identification_number year pariad ended org ein 20xx provide counseling to families and individual who have credit debt problems to include assistance in developing and utilization of a plan for liquidation of debts to promote educational programs and tools dealing with the wise and unwise use of credit budgeting and money management these activities were initiated in march 20xx at address city state provided by counselors at org revocation of a determination_letter may be retroactive if the organization operated in a manner materially different from that originally represented rev_proc 20xx-52 sec_601_201 rev_proc 20xx-4 on the form questionnaire org listed their internet site address as website however after inspecting that site it was determined that the site refers to org as the provider of credit counseling and debt solutions the web site provided complete details on the services offered by org irs records indicate that the org had its exempt status revoked in february 20xx according to the org website for 20xx and 20xx the services offered were the following e e free confindential personal stewardship counseling education debt management programs and negotiating with creditors in eliminating debt in the fastest time period possible free budget credit debt financial and housing counseling with a bonded certified licensed professional the website further advertised that the organization can help in the following ways e e e e e e e e e lower interest rates fees and monthly payments credit reports and evaluation establish budget and financial goals stop collection calls harassment pay off debts in the fastest time period possible automatic bill payment settle accounts for as low a sec_50 money management education debt consolidation the web site also showed the address of address city state telephone fax toll free based on the information submitted it appears that org is operating as state credit which was revoked by the irs in february 20xx the web site address given by org was that of state credit's web site address the officers and board listed on the application_for exemption and state secretary of state are the same as state credit moreover the services and purposes form 886-a 1-19xx ss a ia eee catalog number 20810w page__15 -_publish no irs gov form 886-a rev january 19xx name of laxpayer org schedule number or extubit explanations of items tax identification_number - year period ended ein 20xx stated for org are those of state credit org is continuing on the operations of state credit even though state credit was revoked by the irs in february 20xx in the organization’s correspondence of march 20xx to the irs org enclosed a copy of state credit's form_990 return along with completed form a review of the completed form disclosed the following information e e e e e e president wrote in the name of the organization as org and employer_identification_number ein president responded to yes to have a web site and wrote in the org website as website provided the organization service as consumer credit_counseling_services debt management services and debt negotiation services the organization offered education and or counseling consumers in person writing or using electronic means helping consumers consolidate debts negotiating with creditors on behalf of consumers to lower interest rates waive fees adjust balances or restore acceptable credit ratings the educational material outreach and credit counseling activities were the same activities as org with respect to governance the organization stated that it is governed by a community- based board that includes significant representation by religious organizations civic groups labor unions educational institutions and business groups the organization also marked that it is governed by a board that has no familial or business relationships and is independent of creditors contractors employees or others with a financial interest in the organization with respect to governance--governing board information the organization stated that there are governing board members no governing board members are compensated board members with backgrounds in personal finance board member with background in education and in nonprofit_organizations a review of the return revealed that the return was signed by president on march 20xx and the officers listed were the same as org a review of the cover letter attached to the correspondence disclosed the state credit logo address telephone number and operating hours were the same as org the state credit logo on the letterhead showed as follows org a comprehensive credit counseling service non-profit organization conclusion form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer org tax identification_number year period ended - ein 20xx in order to qualify for exemption under c an organization must be both organized and operated to achieve a purpose that is described under that code section orgs has failed to demonstrate that it is operated in accordance with internal_revenue_code c and q governing qualification for tax exemption under the code accordingly the tax-exempt status of org as an organization described in c of the code should be revoked org is required to file income_tax returns on form_1120 for all years beginning after december 20xx form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service


department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc pa apjp ajkeyso tl-n-5374-00 uil memorandum for district_counsel brooklyn district from blaise g dusenberry acting senior technician reviewer branch administrative provisions judicial practice cc pa apjp subject significant service_center advice credit of overpayment this responds to your request for significant service_center advice in connection with questions posed by the brookhaven customer service_center we have restated the issue as follows issue where the service seeks to credit an overpayment shown on an early filed return against an outstanding tax_liability from an earlier year may the credit be deemed to occur prior to the due_date for filing the taxpayer’s return for the year of the overpayment conclusion based on the facts you describe an overpayment shown on the taxpayer’s early filed return may be credited against an outstanding tax_liability prior to the due_date for filing the return for the year of the overpayment facts a taxpayer’s account shows an unpaid federal_income_tax liability for which the statute_of_limitations on collections expired on date the taxpayer’s income_tax return was filed on date and showed an overpayment_of_tax resulting from withholding and estimated_tax payments that exceeded the computed income_tax on date the service processed the taxpayer’s income_tax return and credited the overpayment against the outstanding tax_liability you ask whether the tl-n-5374-00 service may legally credit the overpayment prior to the due_date of the return date law analysis sec_6072 of the internal_revenue_code code provides that income_tax returns made on the basis of the calendar_year shall be filed on or before the 15th day of april following the close of the calendar_year as the statute indicates taxpayers may file prior to the due_date nothing in the code prohibits the service from accepting these early filed returns assessing the tax_shown_on_the_return and issuing a refund for any claimed overpayment in fact it has long been the practice of the service to process early filed returns and refund overpayments claimed thereon sec_6201 of the code authorizes the service to summarily assess all taxes determined by the taxpayer and shown on his or her return the service’s assessment of the taxes shown on the taxpayer’s return establishes the taxpayer’s liability for such taxes the service determines whether an overpayment exists by applying the payments against the tax_liability reported by the taxpayer sec_31 of the code provides that the amount withheld as tax under chapter ie wage withholding shall be allowed to the recipient of the income as a credit against the tax imposed sec_6315 of the code provides that payment of estimated income_tax or any installment thereof shall be considered payment on account of the income taxes imposed by subtitle a for the taxable_year sec_301_6315-1 of the regulations on procedure and administration provides that the aggregate amount of the payments of estimated_tax should be entered upon the income_tax return for the taxable_year as payments to be applied against the tax_shown_on_the_return an overpayment is the amount by which payments made by the taxpayer exceed the amount of tax which is properly due 332_us_524 sec_6402 of the code authorizes the service to credit the amount of any overpayment against any liability in respect of an internal revenue tax on the part of the person who made the overpayment sec_6402 does not specify the date on which an outstanding liability is deemed paid_by credit of an overpayment however the courts have long held that an outstanding tax_liability is considered paid_by a credit on the date the credit is allowed u s v swift co 282_us_468 the code is consistent providing in sec_7422 that for purposes of civil refund actions the credit of an overpayment of any_tax in satisfaction of any_tax liability shall be deemed to be a payment in respect of such tax_liability at the time such credit is allowed emphasis added tl-n-5374-00 as we read your request for advice it appears that the service_center is concerned whether the taxpayer’s income_tax_withholding and estimated_tax payments can be treated as tax_payments prior to the due_date of the taxpayer’s return we agree that for some purposes wage withholding and estimated_tax payments are not deemed tax_payments until the due_date of the taxpayer’s income_tax return specifically sec_6513 provides that for purposes of sec_6511 relating to the statute_of_limitations on refunds and sec_6512 relating to tax_court petitions an individual taxpayer’s withholding_tax and estimated_tax payments shall be deemed paid on the last day prescribed for filing the return for the taxable_year determined without regard to extensions however we note that b treats wage withholding and estimated_taxes as paid on the due_date of the return only for certain limited purposes not at issue in your request we note that wage withholding and estimated_tax payments are methods for collecting the income_tax and are specifically allowed as credits against the tax_shown_on_the_return see 528_us_431 accordingly where the taxpayer files an early return claiming the withholding and estimated payments against his or her tax_liability pursuant to sec_31 and sec_6315 of the code the service may credit any overpayment shown on the return against any outstanding tax_liability if you have further questions please contact andrew keyso at


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc intl plr-163016-01 date date you deferral years legend registered retirement savings_plan year x dear this replies to a letter dated date submitted on your behalf by your authorized representative in which you request an extension of time under sec_301_9100-3 to elect the provisions of revproc_2002_23 2002_15_irb_744 additional information was submitted in letters dated date and date the information submitted for consideration is substantially as set forth below the ruling contained in this letter is predicated upon facts and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as a part of the audit process prior to becoming united_states residents in july of year x you established and contributed to canadian registered retirement savings plans plans no contributions have been made to these plans since you became united_states residents in in re plr-163016-01 addition no distributions have been made by these plans all united_states tax returns have been timely filed but without elections under revproc_2002_23 to defer united_states income_tax on current earnings_of the plans and without reporting earnings on these plans on your annual federal_income_tax returns for the deferral years the facts submitted under penalties of perjury describe the circumstances surrounding the failure_to_file the elections you are requesting relief before the failure to make the elections have been discovered by the irs sec_301 -1 b provides that an election includes an application_for relief in respect of tax and defines a regulatory election as an election whose due_date is prescribed by a regulation a revenue_ruling revenue_procedure notice or announcement sec_301_9100-1 provides that the commissioner has discretion to grant a taxpayer a reasonable extension of time under the rules set forth in sec_301_9100-3 to make a regulatory election under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides that requests for relief subject_to this section will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and the grant of relief will not prejudice the interests of the government in the present situation the election provided in revproc_2002_23 is a regulatory election within the meaning of sec_301_9100-1 therefore the commissioner has discretionary authority under sec_301_9100-1 to grant you an extension of time provided that you satisfy the standards set forth in sec_301_9100-3 based on the facts and circumstances of this case we conclude that you satisfy the standards of sec_301_9100-3 accordingly you are granted an extension of time until days from the date of this ruling letter to elect the provisions of rev_proc for the deferral years as provided in sec_301_9100-1 the granting of an extension of time is not a determination that you are otherwise eligible to make the elections no ruling has been requested and none is expressed as to the application of any other section of the code or regulations to the facts presented a copy of this ruling letter should be associated with the deferral years this ruling is directed only to you who has requested it sec_6110 provides that it may not be used or cited as precedent in re plr-163016-01 pursuant to a power_of_attorney on file in this office a copy of this letter is being sent to your authorized representative sincerely associate chief_counsel international by s allen goldstein allen goldstein reviewer enclosure copy for sec_6110 purposes