department of the treasury internal_revenue_service te_ge eo examinations commerce street mc dal dallas tx tax_exempt_and_government_entities_division release number release date uil code nov date person to contact identification_number telephone number in reply refer to last date for filing a petition with the tax_court february 20xx certified mail - return receipt requested dear this is a final adverse determination_letter that your exempt status under sec_501 of the internal_revenue_code irc is revoked recognition of your exemption under sec_501 is revoked effective october 20xx our adverse determination was made for the following reason s you have not established that you are operated exclusively for an exempt_purpose or that you have been engaged primarily in activities that accomplish one or more exempt purposes within the meaning of sec_501 contributions to your organization are revenue code not deductible under section of the internal file federal_income_tax returns on form_1120 these returns should be you are required to filed with the appropriate service_center for the year ending september 20xx and for all years thereafter processing of income_tax returns and assessment of any taxes due will not be delayed should revenue a petition for declaratory_judgment be filed under sec_7428 of the code internal if you decide to contest this determination in court you must initiate a suit for declaratory_judgment in the united_states tax_court the united_states claim court or the district_court of the united_states for the district of columbia before the day after the date this determination was mailed to you contact the clerk of the appropriate court for the rules for initiating suits for declaratory_judgment the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights we can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs ifyou qualify for our assistance which is always free we will do everything possible to help you visit taxpayeradvocate irs gov or call we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours for mary a epps acting director exempt_organizations examinations enclosure publication internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations department of the treasury date date taxpayer_identification_number form tax_year s ended september 20xx 20xx person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number response due_date certified mail - return receipt requested dear if we don't hear from you why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 after we issue the final revocation letter we'll announce that your organization is no longer eligible for contributions deductible under sec_170 of the code letter rev catalog number 34809f if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal 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 for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you letter rev catalog number 34809f internal_revenue_service office_of_the_taxpayer_advocate thank you for your cooperation enclosures report of examination form_6018 publication publication sincerely margaret von lienen director eo examinations letter rev catalog number 34809f schedule no or form 886-a exhibit name of taxpayer year period ended 20xx09 20xx09 tax identification_number issue whether is operated exclusively for tax-exempt purposes and should be considered tax-exempt under internal_revenue_code sec_501 19xx as a non- profit domestic_corporation form_1023 was received by the service on june 20xx in the answer to part iv narrative description of activities the facts was incorporated under the laws of the state of on november organization stated it was incorporated for the purpose of serving the public of offered were to promote and facilitate economic and community development the focus of revitalizing the enhance the capabilities of organizations delivering services to the senior citizens and the disabled of as anon-profit organization will apply for grants for which a public agency is not eligible these grants will counties the then be used to support and expand programs focused on health housing nutrition care and other regional issues facing today’s elderly especially those with low incomes the services to be will be to counties in according to the determination_letter the taxpayer was granted exemption as a 501_c_3_organization with a public charity status of b a vi on april 20xx the effective date of exemption is november 19xx during the examination of the organization agent discovered that the organization was actively engaged in the rental of its facility from which it earns the major portion of its gross_income in addition the majority of the expenditures of the organization are for the purpose of maintaining the property the organization did not file form 990-t to report its rental income the forms for the years of examination reports no expenses related to promoting and facilitating economic and community development during the course of the examination it was also discovered that the form_990 schedule a submitted by the taxpayer was not correctly prepared agent used data provided by the organization to prepare corrected schedule a the taxpayer was unable to pass the one-third support_test in part iii of form_990 schedule a of any of the two years the date used to compute the public support percentage was obtained from previously filed forms of the taxpayer additionally the taxpayer has shown little or no activity in the areas in which it applied for tax-exempt status law sec_501 of the code exempts from federal_income_tax organizations organized and operated exclusively for charitable educational and other exempt purposes provided that no part of the organization’s net_earnings inures to the benefit of any private_shareholder_or_individual sec_1 c a states that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the organizational_test states in that an organization is organized exclusively for one or more exempt purposes only if its articles of organization referred to in this section as its articles as defined in subparagraph of this paragraph a b limit the purpose of such organization to one or more exempt purposes and do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance or one or more exempt purposes sec_1_501_c_3_-1 the operational_test states that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more exempt purposes specified in sec_501 an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose sec_1_501_c_3_-1 sec_1_501_c_3_-1 states that an organization may be exempt as an organization described in sec_501 if it is organized and operated exclusively for one or more of the following purposes a religious b charitable c scientific d testing for public safety e literary f educational or g prevention of cruelty to children or animals sec_1 c states that an organization may meet the requirements of sec_501 although it operates a trade_or_business as a substantial part of its activities if the operation of such trade_or_business is in furtherance of the organization’s exempt_purpose or purposes and if the organization is not organized or operated for the primary purpose of carrying on an unrelated traded or business as defined in sec_513 in determining the existence or nonexistence of such primary purpose all the circumstances must be considered including the size and extent of the trade_or_business and extent of the activities which are in furtherance of one or more exempt purposes an organization which is organized and operated for the primary purposes of carrying on an unrelated_trade_or_business is not exempt under sec_501 sec_513 states that an unrelated_trade_or_business is one which is any trade_or_business the conduct of which is not substantially related aside from the need of such organization for income or funds or the use it makes of the profits derived to the exercise or performance by such organization of its charitable educational or other purpose or function constituting the basis for its exemption under sec_501 sec_514 provides that for purposes of this section the term debt-financed_property means any property which is held to produce income and with respect to which there is an acquisition_indebtedness as defined in subsection c at any time during the taxable_year sec_514 provides that for purposes of this section the term acquisition_indebtedness means with respect to any debt-financed_property the unpaid amount of- a the indebtedness incurred by the organization in acquiring or improving such property b the indebtedness incurred before the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition or improvement and c the indebtednessincurred after the acquisition or improvement of such property if such indebtedness would not have been incurred but for such acquisition or improvement and the incurrence of suchindebtedness was reasonably foreseeable at the time of such acquisition or improvement sec_1_509_a_-3 states that sec_509 excludes certain types of broadly publicly supported organizations from private_foundation_status an organization will be excluded under sec_509 if it meets the one-third support_test under sec_509 and the not more-than-one-third support_test under sec_509 sec_1_509_a_-3 state that an organization will meet the one-third support_test if it normally receives from permitted sources more than one-third of its support in each taxable_year from a combination of - i gifts grants contributions or membership fees and ii gross_receipts from admissions sales or merchandise performance of services or furnishing of facilities in an activity that is not an unrelated_trade_or_business within the meaning of sec_513 subject_to certain limitations taxpayer’s position is unknown taxpayer’s position government’s position a taxpayer will meet the one-third support_test if it normally receives more than one-third of its support from a combination of gifts grants contributions or membership fees and gross_receipts from admissions sales of merchandise performance of services or furnishings of facilities in an activity that is not an unrelated_trade_or_business subject_to certain limitations taxpayer claims to tax-exempt by virtue of being classified under sec_501 and claims to receive more than of its support from contributions membership fees and gross_receipts from activities related to its exempt functions-subject to certain exceptions and no more than of its support from gross_investment_income and unrelated_business_taxable_income less sec_511 tax from businesses acquired by the organization after june 19xx as part of the examination of the agent recalculated the form_990 schedule a for the tax years ending september 20xx and september 20xx see appendix the data used to compute the public support percentage was obtained from the previously filed forms of the taxpayer the taxpayer was unable to pass the on-third test in part iii of form_990 schedule a for any of the two years the taxpayer has shown little or no activity in the areas in which it applied for tax exempt status in order to pass the operational_test must be operated exclusively for tax exempt purposes and any activities that are not in furtherance of an exempt_purpose must be insubstantial as per sec_1 c - c organization has failed to consistently file form 990-t to report its rental activities as the property is debt financed the lack of any financial support and the fact that there is no discussion of the organizations stated purpose shows that there is little or no activity in conducting the main purpose for which the organization applied for exemption the facts have shown that the primary purpose of this organization is to operate a rental service of its property due to the extent of rental activities the lack of any activity or discussion of any non-profit services and the lack of funds geared toward charitable activities it has been determined that the taxpayer has failed to meet the test described in sec_1_501_c_3_-1 because the organization is organized and operated for the primary purpose of carrying on an unrelated_trade_or_business cannot be considered to be exempt under sec_501 because its primary purpose is carrying on an unrelated_trade_or_business the rental of property a based on a review of the organizations books_and_records conclusion exempt under sec_501 the tax exempt status for this organization should be revoked as of october 20xx is not tax form 886-a rev page cat no 20810w department of the treasury -internal revenue service


tax_exempt_and_government_entities_division number release date department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas date date taxpayer_identification_number person to contact uil code employee identification_number employee telephone number certified mail return receipt dear this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code our favorable determination_letter to you dated september 19xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s organizations described in sec_501 and exempt under sec_501 a must be operated exclusively for exempt purposes you have failed to establish that you are operated exclusively for exempt purposes and that no part of your net_earnings inures to the benefit of private shareholders or individuals to be exempt under sec_501 an organization cannot be organized or operated for profit and it must operate exclusively to promote social welfare per sec_1_501_c_4_-1 the facts stated on the form_990 and the examination revealed you have a substantial amount of income from your primary purpose is your welfare purposes it is not your exclusive purpose because you have devoted most of your time to the you have not been able to substantially use your time to fulfill your purposes listed in the articles of incorporation you have not performed enough of the activities stated in the articles of incorporation such as to foster and encourage the training and education of all citizens regardless of economic station in order that a true democracy may exist among all of our citizens the sec_501 clearly states organizations should not carry operation that amount of income would indicate your although you do contribute grants and benefits for social on business with the general_public in a manner similar to organizations which are operated for profit met the requirements to remain exempt under sec_501 is not operated for an exempt_purpose therefore you have not it is clear your you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for the tax_year beginning january 20xx and for ali tax years thereafter in accordance with the instructions of the return processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to the united_states tax_court at the following address united_states tax_court second street nw washington dc you also have the right to contact the office_of_the_taxpayer_advocate the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you've tried but haven't been able to resolve your problem with the irs f you qualify for tas assistance which is always free tas will do everything possible to help you visit taxpayeradvocate irs gov or call lf you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely paul a marmolejo acting director eo examinations enclosures publication department of the treasury internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations capitol av suite ms47100ma omaha ne date date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers manager's name id number manager’s contact number response due_date certified mail - return receipt requested dear why you are receiving this letter enclosed is a copy of our report of examination explaining why revocation of your organization's tax-exempt status is necessary what you need to do if you agree lf you agree with our findings please sign the enclosed form 6018-a consent to proposed action and return it to the contact at the address listed above we'll send you a final letter revoking your exempt status if we don’t hear from you if we don’t hear from you within calendar days from the date of this letter we'll process your case based on the recommendations shown in the report of examination and this letter will become final letter 3640-r cataiog number 59432g effects of revocation in the event of revocation you'll be required to file federal_income_tax returns for the tax_year s shown above file these returns with the contact at the address listed above within calendar 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 what you need to do if you disagree with our findings if you disagree with our position you may request a meeting or telephone conference with the supervisor of the contact identified in the heading of this letter you also may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter if you and appeals don’t agree on some or all of the issues after your appeals_conference or if you don’t 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 you may also request that we refer this matter for technicai advice as explained in publication please contact the person identified in the heading of this letter if you’re considering requesting technical_advice if we send a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office then no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate service tas tas is your voice at the irs this service helps taxpayers whose problems with the irs are causing financial difficulties who have tried but haven’t been able to resolve their problems with the irs and those who believe an irs system or procedure is not working as it should if you believe you are eligible for tas assistance you can call the toll-free number or tty tdd for more information go to www irs gov advocate if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate letter 3610-r catalog number 59432g for additional information if you have any questions please call the contact at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation sincerely margaret von lienen director eo examinations enclosures report of examination form 6018-a publication publication letter 3610-r catalog number 59432g schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended 20xx issue should the exempt status of sec_501 of the internal_revenue_code irc as an organization described in sec_501 be revoked for all years beginning on january 20xx due to the public operation of a as the primary activity referred to as the organization under facts the organization was founded in october in 19xx the organization received its ruling date september 19xx under the group exemption number xxxx from the internal_revenue_service the organization's articles of incorporation article if states the purpose the objects and purposes of the corporation shall be as follows to to to to to and operation the organization’s website states the operation times of the saturday from a m to p m except thursday the sunday hours are from a m to p m the website lists all the closing times are at the on mondays the website lists the management's discretion the following holidays that they are closed are new year’s day easter sunday mother's day thanksgiving and christmas day the days that the new year's eve and christmas eve is listed on the website the and these times are also listed at the starts pincite a m generally closes early are are from tuesday to contains an form_990 and 990-t the revenue reported on the form_990 for the reported on the form_990 is dollar_figure goods sold cogs for the 990-t and the in addition there were other deductions of dollar_figure on the form 990-t the total of listed on the form_990 are dollar_figure expenses totals dollar_figure totals dollar_figure and is dollar_figure dollar_figure dollar_figure idollar_figure dollar_figure the total revenue the cost of reported on the forms for the the total expenses revenue membership dues fundraiser events govt grants form_990 dollar_figure dollar_figure dollar_figure grants to govt orgs grants to individuals benefits expenses dollar_figure dollar_figure dollar_figure form 886-a department of the treasury-internal revenue service catalog number 20810w - page_4 publish no irs gov schedule number or exhibit fm explanations of items name of taxpayer tax identification_number year period ended 20xx all other contri total dollar_figure_ dollar_figure_ other salaries wages total dollar_figure dollar_figure these are revenue expenses that relate to their social weifare purpose activities inspected the scholarship bank account and it had receipts of dollar_figure received from various fundraisers the income is cae de ai ke ahs the f_r in february march october and december plays in the is usually raffles or pools some type of fundraising event while there were deposits made from the winter of dollar_figure in april usually in the spring can be done every week the 20xx year deposited dollar_figure for meat raffles in new because is now able to sale fireworks in the last few years comes from the sale of fireworks of dollar_figure in this is of dollar_figure the for scholarships tnitially they gave out scholarships for scholarships for all higher education technical schools included was the original account now they give at the organization has their scholarship program open to anyone in the area the article ill of the aols state law lr c sec_501 sec_26 u s c a sec_501 exemption from tax on corporations certain trusts etc c a civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare or local associations of employees the membership of which is limited to the employees of a designated person or persons in a particular municipality and the net_earnings of which are devoted exclusively to charitable educational or recreational purposes form 886-a department of the treasury-internal revenue service catalog number 20810w publish no irs gov page_ scheduie number or exhibit form 886-a rev date name of taxpayer explanations of items tax identification_number year period ended 20xx b subparagraph a shall not apply to an entity unless no part of the net_earnings of such entity inures to the benefit of any private_shareholder_or_individual c -1 civic organizations and local associations of employees a civic organizations- in general a civic_league_or_organization may be exempt as an organization described in sec_501 if- i it is not organized or operated for profit and ii it is operated exclusively for the promotion of social welfare promotion of social welfare- i in general 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 people of the community an organization embraced within this section is one which is operated primarily for the purpose of bringing about civic betterments and social improvements a social_welfare_organization will qualify for exemption as a charitable_organization if it falls within the definition of charitable set forth in paragraph d of sec_1_501_c_3_-1 and is not an action_organization as set forth in paragraph c of sec_1_501_c_3_-1 ii political or social activities the promotion of social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public_office nor is an organization operated primarily for the promotion of social welfare if its primary activity is operating a social_club for the benefit pleasure or recreation of its members or is carrying on a business with the general_public in a manner similar to organizations which are operated for profit see however sec_501 and sec_1 c -1 relating to business_leagues and similar organizations a social_welfare_organization that is not at any time after date exempt from taxation as an organization described in sec_501 may qualify under sec_501 even though it is an action_organization described in sec_1 c - c i or iv if it otherwise qualifies under this section for rules relating to an organization that is after date exempt from taxation as an organization described in sec_501 see sec_504 and sec_1_504-1 the taxpayer and the taxpayer’s power_of_attorney are in agreement of the recommendation of revocation the know it would result in a popular and lucrative started as a fundraiser many years ago the organization did not business government’s position the revenue reported on the form_990 for the reported on the form_990 is dollar_figure dollar_figure idollar_figure is dollar_figure the total revenue the total of expenses form 886-a department of the treasury-internal revenue service catalog number 20810w page_ publish no irs gov schedule number or exhidit a explanations of items name of taxpayer tax identification_number year period ended 20xx totals dollar_figure and the total expenses listed on the form_990 are dollar_figure the conclusion of these figures resulted in of the revenue not ks dollar_figure related to the of the expenses are for expenditures other than the from the to be exempt under sec_501 an organization cannot be organized or operated for profit and it must operate exclusively to promote social welfare per sec_1 c - a i the facts stated on the form_990 and the examination revealed the organization has a substantial amount of income - income would indicate the primary purpose of the organization is the organization does contribute grants and benefits for social welfare purposes it is not the organization’s exclusive purpose because the organization has devoted most of its time to the _ organization has not performed enough of the activities stated in the aols such as the sec_501 clearly states organizations should not carry on business with the general_public in a manner similar to organizations which are operated for profit it is clear the is not an exempt_purpose therefore the organization has not met the requirements to remain exempt under sec_501 it has not been able to substantially use its time to fulfill the purposes listed in the aols the operation that amount of although the due to the fact that the organization has conducted activities that are not within the purview of internal_revenue_code sec_501 the internal_revenue_service is proposing that the exempt status of this organization be revoked for all years beginning on or after january 20xx please submit the form_1120 u s_corporation income_tax return for the tax periods ending january 20xx 20xx and 20xx you will also be required to file the form_1120 for the period ending january 20xx piease send the signed returns and report to attn internal_revenue_service form 886a catalog number 20810w page_ publish no irs gov department of the treasury-internal revenue service


internal_revenue_service number release date cc el ct-119435-98 cc el ct-109857-98 uiln date memorandum for assistant regional_counsel criminal tax from subject barry j finkelstein assistant chief_counsel criminal tax attorney’s fees awards under the hyde amendment and the equal_access_to_justice_act eaja public law title vi sec_617 111_stat_2440 commonly referred to as the hyde amendment enables a prevailing_party in a criminal case to recoup attorney’s fees and litigation expenses from the government in cases where the government’s position was vexatious frivolous or in bad faith the hyde amendment was enacted as a criminal counterpart to the equal_access_to_justice_act eaja u s c which authorizes courts to award attorney’s fees and costs in most civil cases the hyde amendment applies to the conduct of the investigating agency as well as department of justice prosecutors thus the service may be wholly or partially liable for payment of such awards based on the conduct of its personnel during the underlying criminal investigation and or referral of a case for prosecution attached for your information is a discussion of the statutory framework governing such awards and developing case law the hyde amendment incorporates the procedures and limitations contained in the eaja but unlike the eaja it shifts the burden to the defendant to establish he was the prevailing_party and prove the government’s position was vexatious frivolous or in bad faith to assist courts in determining whether to make an award the law permits courts to receive evidence ex_parte or in_camera including classified evidence or evidence which may reveal confidential or undercover information or matters occurring before a grand jury if a prevailing_party meets the burden_of_proof the party will be entitled to attorney’s fees and expenses unless the court finds special circumstances make such an award unjust since the enactment of the hyde amendment two years ago this law has spurred a regular course of post trial motions for attorney fee awards in criminal cases case law enacted date the hyde amendment applies to any criminal case instituted during fiscal_year and in any fiscal_year thereafter cc el ct-109857-98 under the hyde amendment is still in its infancy a handful of published federal district_court opinions and more than a dozen unpublished ones have rendered some important guidance in applying the law and construing its provisions generally these courts have based their decisions on a plain reading of the law as discussed in the attached document some courts have found it necessary to read certain eaja provisions broadly to effectuate the intended purpose of the hyde amendment attachment awards of attorney’s fees and costs under the hyde amendment the hyde amendment was enacted as part of a appropriations bill and is recorded as a statutory note to u s c 3006a relating to court appointed counsel the hyde amendment provides in its entirety as follows during fiscal_year and in any fiscal_year thereafter the court in any criminal case other than a case in which the defendant is represented by assigned counsel paid for by the public pending on or after the date of the enactment of this act may award to a prevailing_party other than the united_states a reasonable attorney's fee and other litigation expenses where the court finds that the position_of_the_united_states was vexatious frivolous or in bad faith unless the court finds that special circumstances make such an award unjust such awards shall be granted pursuant to the procedures and limitations but not the burden_of_proof provided for an award under section of title united_states_code to determine whether or not to award fees and costs under this section the court for good cause shown may receive evidence ex_parte and in_camera which shall include the submission of classified evidence or evidence that reveals or might reveal the identity of an informant or undercover agent or matters occurring before a grand jury and evidence or testimony so received shall be kept under seal fees and other expenses awarded under this provision to a party shall be paid_by the agency over which the party prevails from any funds made available to the agency by appropriation no new appropriations shall be made as a result of this provision i equal_access_to_justice_act eaja overview the hyde amendment just like the eaja is a limited waiver of sovereign immunity allowing awards of costs and attorney fees against the united_states and its agencies since the hyde amendment derives much of its statutory form and substance from the eaja the following provides an overview of eaja procedures and limitations made applicable under the law there are two distinct methods for a district_court to award attorney’s fees under the eaja under subsection b a district_court may award attorney’s fees to the same extent that any other party would be liable under the common_law or under the terms of any statute which specifically provides for such an award since the common_law allows awards of attorneys fees in only a few exceptional cases and most statutes do not specifically provide for such awards most eaja litigation arises under the more inclusive terms of subsection d of the eaja under subsection d a a district_court is mandated to award attorney’s fees to a prevailing_party against the government unless the court finds the government was substantially justified in its legal u s c b and d cc el ct-109857-98 position or there are special circumstances that make an award unjust however as discussed below subsection d erects certain threshold requirements and other limitations not applicable under subsection b perhaps the most significant consequence in proceeding under subsection d is that the calculation of the amount of the fees is tied to criminal justice act c j a rates currently dollar_figure hr whereas a district_court awarding fees under subsection b may use prevailing market rates which can greatly exceed the c j a cap courts addressing hyde amendment claims generally have followed the eaja procedures and limitations set forth under subsection d b accordingly applications for an award of fees and expenses must be filed with the court within days of final judgment timely submission of an eaja application is a jurisdictional prerequisite to governmental liability for attorney fees a party seeking an award under subsection d must establish certain threshold criteria show the party is a prevailing_party show the party is eligible to receive an award contain an itemized statement of the amount of the award sought and allege the position_of_the_united_states was not substantially justified the term prevailing_party is not well defined by the eaja but is generally understood as the party who wins the relief sought in the particular action a party need not obtain total victory in the case to be entitled to fees as a prevailing_party but need only obtain u s c d b see grivois v brown vet app vet app application filed on 31st day after judgment became final was untimely see also owens v brown vet app vet app party may not correct a defective application after expiration of day filing period onstead v brown vet app vet app reconsideration denied vet app u s c d b the eaja does not provide a general definition of the term but does provide a definition of the term for specific application in eminent_domain cases u s c d h see 901_f2d_1508 10th cir cc el ct-109857-98 his desired result as to any significant issue thus most decisions to award attorney fees under subsection d will be based on the nature of the case and the totality of the circumstances subsection d applications must establish the prevailing party’s eligibility to receive an awarddollar_figure eligibility is based on a net_worth limitation and the ripeness of the statutory claim for attorney’s fees these eligibility limitations are established within the statutory definitions of the terms party and final judgment the term party is defined to exclude individuals whose net_worth at the time the action was filed exceeded dollar_figure million as well as the owners of an unincorporated business or any partnership corporation association or organization whose net_worth at the time the action was filed exceeded dollar_figure million charitable organizations are exempted from this limitation thus the application must show the prevailing party’s net_worth was under the applicable ceiling ripeness requires a showing that a final judgment has been rendered in the case the eaja defines final judgement to mean a judgment that is final and not appealable and includes an order of settlement subsection d applications must provide an itemized statement of the amount of the award soughtdollar_figure the fees and expenses which may be recouped in subsection d awards are specifically enumerateddollar_figure finally subsection d applications must allege the position of the government was not substantially justifieddollar_figure whether the position of the government was substantially justified is determined on the basis of the record including the record with respect to the action or failure to act by the agency upon which the civil_action is based which is 489_us_782 see generally 57_f3d_980 10th cir 24_f3d_1414 c a d c u s c d b u s c d b and g respectively u s c d g u s c d b u s c d a u s c d b cc el ct-109857-98 made in the civil_action for which the award is sought id the supreme court has defined the term substantially justified for purpose of the eaja as meaning justified in substance or in the main that is justified to a degree that could satisfy a reasonable persondollar_figure a position is substantially justified even though incorrect if a reasonable person would think it correct that is if it had a reasonable basis in law and factdollar_figure the government has the burden of proving that its position was substantially justified for purposes of the eajadollar_figure reasonableness is determined by a totality of the circumstances and not by any single factordollar_figure ii attorney’s fees under the hyde amendment the operative language of the hyde amendment provides that a court in any criminal case may award a prevailing_party reasonable attorney’s fees and other litigation expenses where the court finds the position_of_the_united_states was vexatious frivolous or in bad faith unless the court finds that special circumstances make such an award unjust a alternate statutory provisions to base awards b or d although the language of the hyde amendment incorporates the procedures and limitations of the eaja by reference to it does not refer more specifically to either of its alternative procedures provided in subsections b and d decisions in civil cases under the eaja have found that parties who elect to proceed under b are not subject_to the procedures and limitations of d eg limiting fees to c j a rates until recently all hyde amendment cases to date sought awards under the procedures enumerated in d however one district_court has held as a matter of law that the hyde amendment permits awards under either of these two eaja provisions 34_fsupp2d_346 e d va 487_us_552 e e o c v o g spring and wire forms speciality co 38_f3d_872 cir cert_denied 513_us_1198 991_f2d_132 4th cir 930_fsupp_1466 d utah 921_fsupp_704 d colo 845_fsupp_894 d d c doria v brown vet app vet app howyer v brown vet app vet app cc el ct-109857-98 the holland court found the language of the hyde amendment unambiguous and that congress did not intend to limit an applicant's rights to those granted by d the court found no reason to believe the hyde amendment intended to confer lesser rights upon criminal defendants than the eaja conferred upon civil litigants accordingly the court held applicants in criminal cases may make the same election as civil litigants in claims under the eaja and thus the defendants could proceed under b free of d limitations discussed below by holding that defendants can bypass the restrictions in subsection d the holland court has significantly expanded the potential for substantial recoveries under the hyde amendment b awards under subsection d in order to recover attorney’s fees and expenses under the hyde amendment the moving party must establish four threshold criteria in his application the application must show the party is a prevailing_party show the party is eligible to receive an award contain an itemized statement of the amount of the award sought and allege the position_of_the_united_states was vexatious frivolous or in bad faith although the remedy provided by the hyde amendment is modeled on the eaja and framed by eaja procedures and limitations there are a few important distinctions between the statutes additionally case law developing under the hyde amendment has created some legal nuances the most obvious distinction between the statutes is that the hyde amendment pertains to criminal and not civil cases what may not be so obvious here however is that the term case in this context has been interpreted to include a subpoena to appear before a grand jury and a subsequent motion to quash 31_fsupp2d_542 n d w va date dollar_figure the district_court in viglianco rejected the government’s argument that a grand jury proceeding in which criminal charges or an indictment have not been filed does not constitute a criminal case the court’s decision was guided in part by the definition of the term case provided by black's law dictionary ie a general term for an action cause suit or controversy at law or in equity a question contested before a court of justice and aggregate of facts which furnishes occasion for the exercise of the jurisdiction of a court of justice a judicial proceeding for the determination of a controversy between the parties wherein rights are enforced or protected or wrongs are prevented or redressed continued cc el ct-109857-98 another distinction is that the position_of_the_united_states at issue is evaluated as to whether it was vexatious frivolous or in bad faith and not whether it was substantially justified the hyde amendment does not define the terms vexatious frivolous or bad faith or provide any illustrative examples courts generally have referred to definitions provided in black’s law dictionary and case law when evaluating the position of the government in the underlying case see eg u s v gardner 23_fsupp2d_1283 n d okla black’s law dictionary defines the term frivolous to mean of little weight or importance and the term vexatious to mean without reasonable or probable cause or excuse the supreme court has defined vexatious to mean frivolous unreasonable or without foundation even though not brought in bad faith 434_us_412 the term bad faith according to black’s law dictionary implies the conscious doing of a wrong because of dishonest purpose or moral obliquity in law enforcement contexts the supreme court has defined bad faith to include a reckless disregard for the truth 438_us_154 thus for example concealing brady material constitutes bad faith for purposes of the hyde amendment 22_fsupp2d_667 w d mich another important distinction is the hyde amendment specifically excepts the government from bearing the burden_of_proof otherwise applicable under the eaja accordingly the prevailing_party bears the burden of showing the government’s position was vexatious frivolous and in bad faith iii developing case law a filing period day rule subject_to reasonableness exception in 22_fsupp2d_667 w d mich the defendant was a foreign manufacturer of radio equipment indicted for importing federally banned radio equipment the government agreed to dismiss the case with prejudice after trial had begun due to problems that developed in the continued the court also was guided by decisions arising in a different context which supported the proposition that an issue involving a subpoena is a sufficient case to establish jurisdiction under article iii of the u s constitution citing 873_f2d_67 4th cir where issues relating to the subpoena of a federal inspector in a civil case in state court properly were removed to federal district_court although the underlying civil case was not 386_f2d_129 pincite 4th cir where the district_court properly took cognizance of case regardless of whether the contempt proceeding was civil criminal or sui generis cc el ct-109857-98 government’s case four months after dismissal the defendant moved for attorney’s fees under the hyde amendment the motion was grounded upon the contention the government acted in bad faith by concealing brady material -- including e-mail communications with the federal communications commission regarding public confusion about federal regulations concerning the importation of electronic equipment and the need for public notices to clarify those regulations the defendant did not discover the government’s failure to disclose this information until after the case was dismissed subsection d b of the eaja requires applications for attorney’s fees be made within days of final judgment notwithstanding this limitation the court found there was no judicial precedent as to how the temporal bar should apply to cases where the government’s bad faith in concealing exculpatory evidence was not revealed until after the expiration of the day period the court refused to apply a strict reading of the limitation period finding such a reading is diametrically opposed to the purposes of the hyde amendment and would convert the law into an empty legislative promise the court concluded that in order to give effect to congress’ purpose and words a further reasonable_time period beyond days after judgment should be permitted for the filing of an application_for attorney’s fees the court then ordered briefing from the parties as to the exact amount of the award b prevailing_party in 23_fsupp2d_1283 n d okla the defendant was a tax preparer indicted on eighteen counts of assisting in the preparation of fraudulent tax returns in violation of sec_7206 and three counts of concealing assets in his bankruptcy the first three counts alleged gardner prepared false tax returns for i r s undercover agents in a series of motions the government was permitted to dismiss without prejudice eight of the tax counts and all three bankruptcy counts the government subsequently moved to dismiss the remaining counts without prejudice the district_court granted the motion with the exception of the first three tax counts involving the i r s undercover agents those counts were dismissed with prejudice on a finding that there was no actual tax matter at issue with respect to the false returns prepared gardner then moved for an award of attorney’s fees pursuant to the hyde amendment the district court’s consideration of this issue was a matter of first impression in the absence of any evidence of legislative intent to the contrary the district_court determined the intent of the hyde amendment was to import the eaja to the fullest extent possible to the criminal context based on the totality of the circumstances cc el ct-109857-98 including the litigation chronology and the fact that gardner won the relief he sought the district_court found gardner was a prevailing_party within the meaning of the hyde amendment the district_court granted gardner’s motion and ordered discovery to enable gardner to establish his entitlement to attorney fees and litigation expenses under the hyde amendment in so ruling the district_court made special note that the eaja requires review of the underlying agency action at issue the district_court expressly held that the term position_of_the_united_states includes the activities of the agency involved in the matter and is not limited to the litigating position taken by the department of justice other courts agree with this view see 22_fsupp2d_667 w d mich actions by fcc 34_fsupp2d_346 e d va action by fdic ultimately an award was granted under the terms of a settlement agreement c acquittal alone is insufficient for award of attorney’s fees in 16_fsupp2d_759 s d tex the defendant was indicted by a grand jury on one count of conspiracy and three counts of aiding_and_abetting federal program bribery in violation of u s c sec_371 and sec_666 at the conclusion of the government’s case in chief the defendant moved for a judgment of acquittal after examining the evidence in the light most favorable to the government the district_court determined a rational trier of fact could not have found the essential elements of the offense beyond a reasonable doubt and granted the defendant’s motion the defendant then filed a motion to recover attorney's_fees and litigation expenses from the justice_department pursuant to the hyde amendment on review of the motion the district_court determined the defendant did not carry his burden_of_proof to entitle him to an award of attorney’s fees he provided no evidence the government instituted its charges against him in a vexatious or frivolous manner or in bad faith at most he simply relied on the district court's granting of the judgment of acquittal as support for his motion for attorney's_fees while the district_court determined the government had not carried its burden pursuant to rule a it carefully examined and considered the evidence before reaching that determination several items of evidence produced against the defendant during the trial undermined his position that the charges were frivolous or brought in bad faith these items included video and audio tape recordings of meetings between the defendant and his co-conspirators indicating their intention to bribe certain officials the court determined the government exercised proper discretion when it decided to charge the defendant with the counts of conspiracy and aiding_and_abetting federal program bribery thus the court denied the defendant’s motion for attorney’s fees see also united_states v cc el ct-109857-98 troisi 13_fsupp2d_595 n d w va acquittal alone does not automatically entitle that party to compensation under the statutory scheme d hyde amendment award under subsection b in 34_fsupp2d_346 e d va the defendants the president and ceo of a bank were investigated by the fdic regarding seven loan transactions the defendants cooperated fully in the fdic investigation no evidence of criminal wrongdoing was uncovered and the matter was resolved administratively under a settlement agreement the fdic then initiated and reopened a criminal_referral of the defendants on bank fraud charges stemming from the same loan transactions they were indicted tried and acquitted on all counts of bank fraud the prevailing defendants moved for attorneys fees and litigation expenses pursuant to the hyde amendment and u s c b of the eaja based on an amount stipulated by the parties the district_court awarded the two prevailing defendants a total of dollar_figure in attorneys fees and litigation expenses as discussed above the court first held the defendants could proceed under b free of d limitations the court then considered the issue of vexatiousness it framed the applicable test as whether the defendants had proven that a reasonable fdic decision maker and a reasonable prosecutor knew or should have had reason to know the criminal referrals and the continued prosecution were lacking justification intended to harass or constituted harassment by process of law based on a preponderance_of_the_evidence the court concluded the defendants proved the conduct of both the fdic and the prosecutor were vexatious with regard to the fdic the court found the initiation and reopening of the criminal_referral were motivated by impermissible considerations the fdic used the threat of criminal prosecution and attendant publicity to unduly influence the settlement of the administrative action and the fdic impermissibly used the criminal_referral as a substitute for its admittedly unsuccessful civil administrative proceedings against the defendants the court then found prosecution’s conduct was a corollary of the fdic's vexatious use of criminal proceedings to accomplish its civil administrative enforcement objectives the prosecution possessed no evidence of criminal conduct no evidence of the requisite criminal intent for each count and deliberately misled the court to obtain admission of certain favorable evidence the court apportioned the amount of the award on a pro_rata basis because prosecutions are controlled in the final instance by the u s attorney's office the court found it should bear the greater portion the court found of the obligation should be borne by the department of justice and the remaining by the fdic


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date conex-154435-09 uil number info release date the honorable lindsey o graham united_states senate washington dc attention ------------------- dear senator graham i am responding to your inquiry dated date on behalf of your constituent --------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ----------------------------------- ------------------to provide large-scale biomass_fuel sourcing ------------- and future domestic power generation ------------------request cash payments for investments made in their biomass_fuel production facilities under section of the american_recovery_and_reinvestment_act_of_2009 arra under section of arra a taxpayer may apply for and receive from the department of treasury a cash payment for percent of the cost of a qualifying open- loop biomass facility the treasury_department defines a qualifying open-loop_biomass facility in the section program guidance available at the website www treas gov recovery shtml to include a facility that uses open-loop_biomass to produce electricity section of arra uses the definition of a qualifying open-loop_biomass facility in sec_45 of the internal_revenue_code the code sec_45 of the code requires an open-loop_biomass facility to produce electricity to qualify for the production_tax_credit ------------ wrote that sec_45 provides an exception to the requirement that a qualifying open-loop_biomass facility produce electricity and that the treasury department’s application of the program guidance is discretionary sec_45 provides c credit eligibility in the case of any facility described in subparagraph a if the owner of such facility is not the producer of the electricity the person eligible conex-154435-09 for the credit allowable under subsection a shall be the lessee or the operator of such facility this section merely allows the lessee or operator of a qualifying open-loop_biomass facility instead of the owner to receive the production_tax_credit the term such facility in sec_45 means a facility that produces electricity and does not include a facility that only produces open-loop_biomass fuel the requirement that a qualifying open-loop_biomass facility produces electricity is based on the language of the statute and is not discretionary i hope this information is helpful if you have any questions please contact me or ------ ------------------------ at -------------------- for further assistance sincerely charles b ramsey chief branch office of associate chief_counsel passthroughs and special industries