department of the treasury person to contact employee id number tel fax refer reply to in re eo revocation form required to be filed tax period s ended last date for filing a petition with the united_states tax_court internal_revenue_service appeals_office release number release date date apr - uil c certified mail legend a be c dear this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code irc recognition of your exemption under sec_501 revoked effective date if you decide to contest this determination under the declaratory_judgment provisions of code sec_7428 a petition to the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia must be filed within days from the date this determination was mailed to you contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a tax_court second street n w washington d c petition from the united_states tax_court write to the united_states our adverse determination was made for the following reason in addition under sec_1_501_c_3_-1 an organization will be your organization is not operated exclusively for exempt purposes under sec_1 c - d ii an organization is not operated exclusively for exempt purposes unless it serves a public rather than a private interest it engages primarily in activities regarded as operated exclusively for one or more exempt purposes only if which accomplish one or more such 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 private interest and or a substantial part of your purpose you did not serve a public rather than a activities were not in furtherance of an exempt_purpose accordingly you are not an organization described in sec_501 contributions to your organization are not deductible under code sec_170 you are required to file federal_income_tax returns on form_1120 for any years which are still open under the statute_of_limitations based on the information you furnished it appears that returns should be filed you should file any returns due for these years or beginning with the year ending date later years with the internal_revenue_service center cincinnati oh as applicable for processing of income_tax returns will not be delayed because you have filed a petition for a declaratory_judgment under code sec_7428 if you have questions about this letter you may write to or call the contact person whose name telephone number and irs address are shown on the first page of this letter telephone number the best time for us to call you if we need more information and a copy of this letter to help us identify your account keep the original letter for your records f you prefer to call and the telephone number is outside your local calling area there will be a long distance charge to you if you write please include your you also have the right to contact the office_of_the_taxpayer_advocate you can call and ask for taxpayer_advocate assistance or you can contact the nearest taxpayer_advocate office by calling or writing to local taxpayer_advocate n robinson stop okc oklahoma city ok taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate is not able to reverse legally correct_tax determinations nor extend the time fixed by law that you have to file a petition in the u s tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely appeals team manager sss e ee aes division alf 79ar org address department of the treasury internal_revenue_service attn tege eo-as mc 4900-okc n robinson oklahoma city ok taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear president we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in if we issue a determination_letter to you based on technical_advice no publication further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code 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 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 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 thank you for your cooperation sincerely vicki l hansen acting director eo examinations enclosures publication publication report of examination letter catalog number 34809f name of taxpayer explanations of items attachment a page of a 12-31-20xx - report of examination of form_990 legend org organization name county county trst chairwoman chairwoman ind-1 2nd 4th g state state address address xx date ind st bene attorney attorney trst-1 int-1 notary notary co-1 thru co-21 emp-1 int thru companies city city bene-1 emp the examination reviewed the activity and financial transactions of org hereafter ‘org’ of the year ended 31-20xx org had not filed information_return form_990 return of organization exempt from income_tax for the year ended 12-31-20xx org did file form_990 for the year ended 12-31-20xx the examination reviewed records provided by org and discussed with org’s trustee trst-1 trst-1’ the organization’s activities its financial transactions and the persons and entities involved in those activities and transactions the following is a detail of org’s activities reported assets 20xx financial transactions and the entities with which it had some relationship to the extent disclosed by trst-1 or the documentation org provided the examination for reference the following is a topical index e oee oooescocosooooooooooocooooooooooooooooooo sec_1 a org and application_for exemptions cceccsccsescsscseceerenenseneeeeesiessenecsenersseessesecnecsenesssseceeaenranerestenen sec_1 b declaration of trust of the orgi occ cceceneeeestesesesseeseesesesnseneseseneenecesneniessensesssssesseresnecseeseenesnessaeaneenan sec_4 c cold ceccccccccccccccccscsceseseeseeecseeeeaeeessesensceeeseveceessesscscaessssesacsessesesesessenscseneecesaseetieeersusssrarsssessesaseseseenecasrenssaags d relationship between org and co-1 ccccecccsesssseesesteeserseneetererenesteneeeecassecaesseesensenesseceeseneerneneneneeey eee seensseeseeeseeeeeeeeceeeeeeeee etter e snd taeee le cpcee oses cree cases e eeg erg ce ete e org org reserve c eccccccecccececceeceeseeseeeneene f org and entity oo ccccccceseecececescseeeseseeseenerseeeessesscaessessassessecaessssesenerseneceeerssatenecsessesnacaesrssessenegnersessenega sec_11 eects ccc ce esse eneeneesteeneesnestereneenesseesnensrasiaerseseneneeneeeaenrenagne sec_12 g org claim of sovereign immunity oc h assets reported on form_990 for year ended 12-31-20xx subtrusts ce scsseeesseeeeeetetenseeeeeneees org financial transactions in 20xx oc ceeeseceeeeseeseeseesceeeseenecsesnecnersesnecaeereraeeseneereesssnscseneenenserseneereeneas funds deposited to org’s bank account in 20xx cceceseetetrer etre reeetteeeesseeseereneenetiecntnererees funds from services t0 co-2 cccccccccssscecceseeecesenneeeeeneneeeeeeeeenseepeeeeeeeeneeeeeeeenneeeeeennee sees eenenerenaeeeeeenas funds disbursed from org’s bank account 20xx eeeceeeeseeseesneeeceeseeneeersnneeressnaeetersneseernnes j org’s activities in 2oxx eeseteeeesenessessesessseceessssessesessesesseeessessssereseesssnerasesesseseneseesassssessenecsearenenera sec_21 eee soeceeosooooooooooeooooooooooooooooo sec_25 a position of the internal_revenue_service oo ccccccsscetseseececeeeneeeneeeneeenseeeuceseesesesrsecesseceeereeetnreeneseneassensersaega sec_27 position of org eccccccccccccccesscccsssecessescssseccsscccnseecsuscecsnecseasessneeeseneaesssssasateesssaescesesenseceevenesspiseesiasaeseaseneneessaesen sec_31 facts a org and application_for exemption org was established by a declaration of trust dated may 20xx the declaration of trust states the org and the co-3 who hereby declare and agree that they have received this day from co-1 as donor the sum of dollar_figure and that they will hold and manage the same and any additions to it in trust department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of tne 12-31-20xx a report of examination of form_990 see related sections that follow for additional information on co-1 and org the declaration of trust provides org is to be governed in all respects by the laws of the state of state and the co-3 neither org nor the co-3 signed the declaration of trust the declaration of trust does not name trustees but was signed by trst-1 and trst-2 hereafter trst-2’ as trustees org represented to the examination that trst-2 was an employee of the related_entity org but that he had at various times in 20xx been paid_by org for services he had provided org in a statement org provided the examination in february 20xx trst-1 terminated trst-2 as a org trustee with trst-2’s termination trst-1 became org’s sole trustee though the declaration of trust states it was made may 20xx it was not until november 20xx months later that the declaration of trust was signed by the two trustees trst-1 and trst-2 in fact the declaration was signed after org had applied to the internal_revenue_service in july 20xx seeking determination that it is an organization described in sec_501 of the internal_revenue_code ‘irc’ in july 20xx org submitted to the internal_revenue_service ‘irs’ form_1023 application_for recognition of exemption under sec_501 of the internal_revenue_code for determination that it is an organization described in sec_501 its application org stated it was not a corporation or a_trust but an association the application when initially submitted did not include org’s declaration of trust but instead included the articles of incorporation and charter of org org org hereafter ‘org’ these articles state that they had been executed may 20xx as is subsequently noted org is a separate_entity controlled by trst-1 and the co-1 as the organizing documents submitted with the application_for exemption were not org’s on november 20xx the irs informed org by letter that a copy of its organizing documents would have to be provided before a determination could be made whether the organization was an organization exempt under irc section dollar_figure c in response org provided the described declaration of trust the declaration of trust document is described in greater detail in section b the information and documents that are part of the submitted form_1023 were in its completion of the form_1023 org stated its activities would be acquire suitable land and quality buffalo for the establishment of self-sustaining buffalo elk moose antelope and deer herds and related flora and fauna to prosper and for the purpose of providing food for native american people from the harvest of bulls barren heifers and disabled animals enrolled members of subscribing tribes and their spouses are eligible for entry with special regard given for conduct of ceremonies powwows indian rodeos and traditional observances and rituals department of the treasury - internal_revenue_service form 886-a explanations of items attachment a page of ee 12-31-20xx name of taxpayer - report of examination of form_990 general_public will be charged a fee admission for camping wildlife observation photography hiking fishing etc indian conducted-fee based hunts for surplus animals which meat to be distributed to org subscribing tribes so far as possible co-4 lands will be located near subscribing tribe’s reservations or near cities in which subscribing tribes’ members reside every attempt will be made to put the land in trust with the united_states for the benefit of the tribes supervised by org board subject_to rules and regulations jointly agreed to by the org board and org board_of governors subject_to the laws of the tribes and the united_states activity will be initiated as soon as org begins making an income of such income is designated for the co-4 and or donations and contributions made to the co-4 org stated its financial support would be principal source of support is to be of all co-ss principal and interest which will be invested in the co-4 may increase or decrease depending upon income of the org support from donations and contributions it stated its fundraising program would be co-4 is dependent upon the co-s for a portion of its support contributions will be accepted by the co- and a fee for admission to the co-4 lands wi sp be charged to the general_public general_public will also pay to bring down a buffalo with sp all but ibs of meat going to the subscribing tribes in response to the question does the organization control or is controlled by any other organization org responded ‘yes’ and stated co-4 is established as a part of the co-5 co-4 will be regulated by the org board pursuant to rules established with the org board_of governors co-4 staff will be supervised by the org board in response to the question is the organization financially accountable to any other organization org stated co-4 shall be managed subject_to the authority of the org board jointly subject_to approval of org board_of governors in a financially safe and sound manner org’s response to item part i that ask whether the organization is required to file form_990 is no its explanation is no tribal government organized under the power and authority of the inherent and aboriginal sovereignty of the tribe’s the united_states constitution and federal charter of the tribe’s tribe’s constitution united nations charter united nations declaration of human rights the state indian welfare act u s c a the indian reorganization act u s c a the indian financing act of u s c a and indian tribal governments treated as states for department of the treasury - internal_revenue_service form 886-a name of taxpayer 12-31-20xx explanations of items attachment a page of ee a report of examination of form_990 certain purposes requirement for tax-exempt_bonds sec_7871 subsection c internal_revenue_code_of_1986 u s c a the articles of incorporation and charter of org stated org’s object and purpose to be to carry on and conduct a federal native american credit program pursuant to the indian reorganization act u s c a state indian welfare act u s c a indian financing act of u s c a and indian tribal governments treated as states for certain purposes requirements for tax-exempt_bonds sec_7871 subsection c of internal_revenue_code_of_1986 u s c a and the subscribing tribe s’ federal corporate charters and the u s and tribal constitutions the credit program will include the host-country u s and tribal regulated international investment depositories wholesale federal bond banking savings safe deposit and trust business and branches thereof as is now or may hereafter be authorized by law subsequent to the irs’s november 20xx letter requesting org’s organizing document and the receipt of the declaration of trust the irs issued a determination_letter dated november 20xx stating org was determined to be an organization described in sec_501 as a newly created organization exempt under sec_501 based upon the public support information submitted in the application org was determined not to be a private_foundation but a publicly_supported_organization for the duration of the advance_ruling period november 20xx through december 20xx org was also informed that at the end of the advance_ruling period org would be required to provide financial information so that it could be determined whether it met the support requirements as a publicly_supported_organization during the advance_ruling period or whether it would be classified as a private_foundation from the beginning date the november 20xx letter also informed org that it was not required to file form_990 return of if its gross_receipts organization exempt from income_tax if its gross_receipts each year are normally dollar_figure or less exceeded the dollar_figure filing threshold it should file form_990 for each year in the advance_ruling period and the return is required to be filed by the day of the month after the end of the annual_accounting_period b declaration of trust of the org the declaration of trust consisting of ten parts is the document org belatedly presented as its organizing document it states stating the declaration was made on may 20xx the declaration of trust further states declaration of trust made as of the day of may 20xx by the org and the co-3 who hereby declare and agree that they have received this day from co-1 as donor the sum of dollar_figure and that they will hold and manage same and any additions to it in trust of note as previously noted neither org nor the co-3 signed the declaration of trust’ but was instead signed by trst-1 and trst-2 on november 20xx as trustees in interviews of chainwoman chairwoman of the co-6 of state on may 20xx and may 20xx on the issue of the co-6's dealings with ‘ trst-1 org and org chairwoman had no recollection of the co-6 having executed such a declaration of trust or of such declaration having received official tribal sanction through a vote in the tribe's tribal council its executive and legislative function review of resolutions and related documents of the co-6 and of the tribe’s economic development committee that pertained to or referenced the examination's department of the treasury - internal_revenue_service form 886-a name of taxpayer year ended explanations of items attachment a page of 12-31-20xx report of examination of form_990 in its second part the declaration of trust provides the trustees may receive and accept property whether real personal or mixed by way of gift bequest or devise from any person firm trust or corporation to be held administered and disposed of in accordance with and pursuant to the provisions of this declaration of trust but no gift bequest or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a charitable_organization or for other than charitable purposes within the meaning of such terms as defined in article third of this declaration of trust or as shall in the opinion of the trustees jeopardize the federal_income_tax exemption of this trust pursuant to sec_501 of the internal_revenue_code or the corresponding section of any future federal tax code the third part of the declaration of trust part a provides a the principal and income of all property received and accepted by the trustees to be administered under this declaration of trust shall be held in trust by them and the trustees may make payments or distributions from income or principal or both to or for_the_use_of such charitable organizations within the meaning of that term as defined in paragraph c in such aco-18nts and for such charitable purposes of the trust as the trustees shall from time to time select and determine and the trustees may make payments or distributions from income or principal or both directly for such charitable purposes within the meaning of that term as defined in paragraph d in such aco-18nts as the trustees shall from time to no part of the net time select and determine without making use of any other charitable_organization earnings_of this trust shall inure or be payable to or for the benefit of any private_shareholder_or_individual part c of part three provides in this declaration of trust and in any amendments to it references to charitable organizations or charitable_organization mean corporations trusts funds foundations or community chests created or organized in the united_states or any of its possessions charitable purposes no part of the net_earnings of which inures or is payable to or for the benefit of any private_shareholder_or_individual and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation organized and operated exclusively for part d of part three provides t he term charitable purposes shall be limited to and shall include only religious charitable scientific literary or educational_purposes within the meaning of those terms as used in sec_501 of the internal_revenue_code or the corresponding section of any future federal tax code but only such purposes as also constitute public charitable purposes under the laws of trust of the state of state and the co-3 part five provides in part org org or trst-1 noted there is no documentation of any_action or any vote for the co-6's participation in the declaration of trust of org department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of year ended 12-31-20xx report of examination of form_990 the trustees serving under this declaration of trust are authorized to pay to themselves aco-1 8nts for reasonable expenses_incurred and reasonable_compensation for services rendered in the administration of this trust but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter part six outlines the discretionary powers provides the trustees and provides in part to invest and reinvest the principal income of the trust in such property real personal or mixed and in such manner as they shall deem proper no principal or income however shall be loaned directly or indirectly to any trustee or to anyone else corporate or otherwise who has at any time made a contribution to this trust nor to anyone except on the basis of an adequate interest charge and with adequate security part ten provides that the declaration of trust is to be governed in all respects by the laws of the state of state and the co-3 org has provided no indication that the co-6 participated in the declaration of trust or that the trust was an entity recorded to or registered with the appropriate functions within the co-6 additionally the examination found no record of the co-6’s participation in org’s declaration of trust when the examination interviewed co-6 tribal chairperson chairwoman and reviewed official documents of the co-6 co-6 tribal resolution or other official or unofficial records c co-1 the co-1 when it was amended april 20xx was renamed the co-1 the co-1 was established on january 19xx as a revocable_trust during the life of trst-1 also known as trst-1 and thereafter following his death it was to become an irrevocable_trust trst-1 was settlor of the trust trst-3 was named as trustee and co-7 as successor trustee the beneficiaries of the trust are trst-1’s three children and his companion and his children’s mother bene-1 while trst-1 is living the trustee is directed to distribute to or for the benefit of settlor and for the benefit of his children and himself so much of the trust income and corpus as settlor shall from time to time direct in writing for necessary living_expenses exclusive of judgments or liens of any kind initially and until further written notice from settlor to the trustee the trustee shall distribute to settlor the net trust income following the settlor’s death the co-1 divides into three separate trusts - - - trusta trust m which may be further divided into two trusts m- and m-2 trustb trust a authorizes the trustee to pay the trust’s net_income to trst-1’s named beneficiaries trst-1’s three children and his companion and his children’s mother bene-1 trust b appears to be similar to trust a and trust m with its sub-trusts were designed with the generation skipping transfer_tax in mind the following property was contributed to the trust and formed the trust corpus office equipment department of the treasury - internal_revenue_service form 886-a explanations of items attachment a page of year ended 12-31-20xx name of taxpayer report of examination of form_990 veteran’s administration monthly payments for trst-1’s disability a airstream travel trailer a gmc truck two quarter horses county property described as the address and the address of address address county and one thoroughbred ‘and state with a physical address of address city state other assets as they are determined the examination determined that the structure located at address city state was used by trst-1 as his residence as well as for the offices of org and the entity org org org on april 20xx the co-1 was amended pertinent amendments are as follows the trust was renamed the co-1 hereafter ‘co-1 the trusts were to be deemed an association of indians pursuant to the state indian welfare act and trst-1 specified that the choice of law governing substantive issues to be the laws of the state of state the org org act of 20xx and the model tribal business corporation act trst-1 created as a sub-trust of the co-1 two other trusts ii the co-8 and the org these sub-trusts were to be created from property of the co-1 as determined by trst-1 trst-3 was removed as trustee and trst-1 was named as trustee with bene-1 named as successor trustee the trust was amended to become an irrevocable_trust with trst-1 bene-1 and four children named as beneficiaries the fourth child bene-2 mae trst-1 is from an earlier marriage of trst-1 trst-1 became restricted in that he could not sell the county home-place without the written consent of bene-1 on june 20xx a memorandum of trust was signed by both trst-1 and bene-1 as trustees in it trst- names bene-1 as co-trustee and retains the right to revoke the trust at anytime with the written consent of bene-1 the memorandum of trust was filed with the county state clerk’s office on july 20xx trst-1 has stated co-1 is for federal tax purposes not a separate taxable entity and its transactions are reportable on his personal federal_income_tax return co-1 has not filed a federal information or income_tax return d relationship between org and co-1 during the examination of org trst-1 provided four documents that were represented as setting out the terms of the relationship between org and co-1 these documents are memorandum of understanding dated january 20xx and signed by trst-1 and bene-1 in which co-1 provides a b acres county pasturage with holding pen and vehicle storage area room business space law office with law library office equipment office furniture bathroom department of the treasury - internal_revenue_service form 886-a name of taxpayer 12-31-20xx explanations of items attachment a page of eee report of examination of form_990 e a o f kitchen facility with cold storage assorted tools utensils equipment upstairs offices and bathroom other_property as indicated as consideration for the property listed above org agreed to pay co-1 and its co-trustees trst-1 and bene-1 dollar_figure per month for the support of the co-1’s beneficiaries it also provides that org is to pay co- ‘a reasonable fee’ for any additional property co-1 make available for its use to pay vehicle mileage at the government rate defray the expense of insurance fuel and vehicle maintenance org was to pay for utilities and as t he co-1 has the purpose of providing income and housing for the bene-1-trst-1 family org could be evicted or be required to reduce space in order to accommodate family needs of the home if unable to pay dollar_figure per month ’ first addendum dated july 20xx is signed by trst-1 and bene-1 trst-1’s signature is dated july 20xx bene-1’s signature is not dated it states in part co-1 and trst-1 expect from time to time to transfer funds as a loan without interest for the use and benefit of org this addendum memorializes the following transfers a b c d the net_proceeds interest free from the 7-14-20xx sale of an office building in city state of dollar_figure the transfer of an award of attorney’s fee paid to trst-1 in the case of attorney v attorney county state in the aco-18nt of dollar_figure a veterans administration check ‘loaned’ in december 20xx and recaptured in december 20xx an acknowledgement that trst-1 and co-1 will from time to time add or take away loan monies from org’s accounts a resolution dated 7-01-20xx it is signed by trst-1 as org ceo not org and by bene-1 as trustee org chief co-4 officer the resolution states that the org co-4 had various plans and offers to establish investments that had not materialized that the family_trust and its trustees had provided the co-4 with most of its human financial and physical resources that the family_trust had an opportunity to perform search and recovery operations in contract with co-2 that coincides with the purpose and function of the org to perform buffalo habitat indian land and landowner surveys and the co-4 agreed to participate and direct the survey along with search and recovery operations with co- in accordance with the co-2 contract and the co-18 addendum attached hereto this addendum is the second addendum below the provision of services under the contract with co-2 was for the location recovery and return of electronic equipment borne aloft by a balloon-craft released by the third party the services and the revenues from these services are described in additional detail later in this document org states this facility is that which is addressed at address city state the acres are the lands surrounding the home at this address the examination in a telephone interview of trst-2 determined that during 20xx this home had been used by trst-1 bene-1 the person who was trst-1's wife and their family as their residence this structure has at this same time served as the offices of org co-9 and multiple entities that were established under the org umbrella a detail of which follows in this report as well as org department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of ae 12-31-20xx ae report of examination of form_990 second addendum dated july 20xx dated prior to the first addendum no explanation provided and signed by trst-1 and bene-1 as trustees the subject is stated as use of co-2 search and recovery contract proceeds to provide the means to perform buffalo and indian lands survey the addendum provides a that co-1 assigns the co-2 search and recovery contract to org to provide a transportation system throughout state to identify persons and land suitable for raising buffalo and or participation in org activity volunteers donors meat distribution participants trst-1 and bene-1 will be provided expenses for fuel food and lodging in connection with the performance of the co-2 contract b org will pay co-1 dollar_figure per month lease and rental compensation from the co-2 contract proceeds c as outlined in the co-18 of january 20xx it further provides payment as compensation of additional aco-18nts available to trst-1 and bene- or others for expenses and to compensate them for their labors in performing search and recovery operations of the co-2 contract org is to pay to or on behalf of trst-1 and bene-1 so much of the dollar_figure aco-18nts due and owing for the performance of the co-2 contract and buffalo land survey so as to support co- and its beneficiaries as a lease money consideration for_the_use_of co-1 resources assets and opportunities it provides that may be expended to reimburse or to compensate trst-1 and bene-1 for their services rendered on the co-2 contract e org org org the entity org ‘org’ org also known as org or org hereafter ‘org’ was purportedly created on may 20xx through a document styled as statute by trst-1 the indigenous nations federal credit program fcp org acct also referred to as the org act of 20xx hereafter ‘org act of 20xx’ and the caddo business corporation act the tribal ‘reserve’ is intended to be a financial intermediary institution for indian country which promotes social and economic development for indian nations by providing or facilitating the provision of long-term investment capital and capital credit for the development of tribal economies org will serve as a principal purchaser of tribal tax-exempt public and private_activity_bonds providing tribes with a ready market for their debt instruments org act of 20xx sec_3 the distribution of org ownership_interest not stated in the org act of 20xx is set out in the articles of incorporation and charter of org org org these articles of incorporation were signed by trst-1 as ceo org trst-3 secretary org chairwoman chairwoman co-6 of state and emp-1 secretary co-6 of state and are dated may 20xx the certificate of incorporation co-3 is signed by emp-1 secretary co-6 of state and notary and was filed may 20xx these articles provide that the org’s capitalization shall be big_number shares with a par_value of dollar_figure per share ownership is designated to be - - or big_number shares tribal ownership with these shares to be owned by the subscribing tribes or dollar_figure shares to be owned by the native founders charitable_remainder_trust representing individual indian ownership and department of the treasury - internal_revenue_service form 886-a name of taxpayer 12-31-20xx explanations of items attachment a page of vana - report of examination of form_990 - the remaining big_number shares to be owned by investors either native american individuals non-indian individuals or tribal ownership of the big_number shares available for tribal subscription 1big_number shares are owned by the co-3 who received those shares in return for of their reservation branch credit program no other indian_tribe has acquired shares of the dollar_figure allocated to the co-8 co-1 has provided documents indicating that big_number shares are attributed to individuals who have worked in the activities of org and org the remaining shares available to tribal subscription big_number to the co-8 big_number shares and the big_number available to investors are owned and controlled by co-1 trst-1 states that co-1 received the big_number investor shares as compensation_for trst-1’s services in preparing tra establishing org and the relationships with indian tribes org’s business plan according to the business operations plan is to serve as tribal credit program trustee escrow agent and financial intermediary for tribes issue tax exempt bonds and underwrite tribal bond issues on behalf of tribes for domestic investors seeking tax-exempt_bonds tied to tribe’s essential government functions establish a reserve sinking_fund and bond pool to collateralize tribal bond issues establish corresponding and cooperative relationships with national banks and other foreign jurisdiction depositories and attract foreign capital investors to purchase tribal bonds obtain u s guarantees and oversee development projects adherence to authorized budget and pertinent u s and tribal laws crate economies of scale in the credit program with audits and project oversight for federal and tribal compliance investigate and assess contractors sources of capital_investment and prospective bond purchasers for financial creditability so as to adhere to state u s and tribal anti-money laundering u s bank secrecy and internal revenue laws and regulations coordinate bond issues and underwriting provide uniform tribal regulation of financial agencies an coordinate tribal credit programs operations with federal agencies of the united_states departments of treasury interior and bene-4 in the context of the present government-to-government policy of the united_states vis-a-vis tribes provide an intertribal investment pool and source of revenue for tribal shareholders and intertribal business and cooperative associations to govern the same establish co-4 to acquire lands through purchase and donations to provide suitable locations for wind power generators buffalo grazing and native american indian communities built around ecological and economic sustainability org act of 20xx consists of one act and various sub-acts’ section states that for tribes who subscribe to shares the power and authority to establish the indigenous nations federal credit program org act tra and indigenous federal charter association org org proceed from the following - inherent and aboriginal sovereignty of the tribes - the u s constitution the federal charter of the tribes and their tribal constitutions - the u n charter and u n declaration of human rights - the state indian welfare act u s c a department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of iranian 12-31-20xx - report of examination of form_990 - the indian reorganization act u s c a - the indian financing act of u s c a - internal_revenue_code sec_7871 sec_2 org act of 20xx states that the org is established as the sovereign financial entity of the subscribing tribe s and shall operate as a bond-based financial entity in which financial transactions shall be underwritten through the purchase sale or redemption of bills notes bonds or other instruments of indenture of the tribe s or the tribes’ political subdivisions operated under the name of the org ‘org’ org its purpose is to maintain a system of org credit programs and tribal reservation branch credit programs owned controlled and operated by the tribe in conjunction with other member tribes or federally recognized native corporations it shall be a body corporate and political and an essential government agency of the tribe s sec_47 provides for the org’s profit distributions with to be paid to the holders of the org’s capital stock according to the number of shares they hold to be paid to the subscribing indian tribes or to designated treasury shares for the benefit of the co-5 and the co-4 fund and the remaining to be paid to the native founders trust org has not filed any federal_income_tax or information returns f org and entity co-4 the org act of 20xx authorized an entity named the co-4 item sec_22 org may make certain limited loans and uses of org fund proceeds co-4 fund created org act of 20xx states co-4 fund created sec_311 co-4 chapter three org bond act states in part whereas many indians suffer from dietary diseases their traditional dietary sources having been destroyed that the purpose of this subsection is to bring native american bison back to the native american indian people and to restore a health diet and traditional food sources for indians and to make a profit by reserving lands upon which buffalo graze and prosper there is established as part of the co-5 a co-4 of all co-s principal and interest will be invested in the co-4 for the purpose of acquiring suitable land and quality buffalo for the establishment of self- sustaining buffalo elk moose antelope and deer herds and related indigenous flora and fauna and for the further purpose of providing food for native american people from the harvest of bulls barren heifers and disabled animals which harvest will be divided equally between the members of the subscribing tribes who will be required to bear the cost of slaughter and transport from their account with the org department of the treasury - internal_revenue_service form 886-a explanations of items eects page of name of taxpayer org year ended 12-31-20xx report of examination of form_990 the co-4 will serve valuable cultural scientific ecological purposes and will be regulated by the org board pursuant to rules joint established with the org board_of governors with coordination with the secretary of the u s department of the interior and interested state agencies admission to org co-4 property enrolled members of subscribing tribes and their spouses are eligible for entry subject_to rules established by org with the approval of the org board_of governors with special regard given for conduct of ceremonies powwows indian rodeos and traditional observances and rituals general_public fee admission for camping wildlife observation photography hiking fishing etc indian conducted - fee based hunts for surplus animals which meat to be distributed to org subscribing tribes non-indians pay an aco-18nt eg dollar_figure to bring down a buffalo with bow powder no lead bullets or slugs or rifle no hand guns the hunter is eligible for no more than pounds of meat the co-4 staff will be supervised by the org board subject_to rules and regulations jointly agreed to by the org board and the org board_of governors subject_to the laws of the tribes and the united_states sec_312 of the org act of 20xx co-4 powers of the org board over org trust and co-4 provides in part that the co-4 is under the authority of the org board and org board_of governors to distinguish the co-4 from org - org’s activity limited to exclusively sec_501 charitable activity the co-4’s activities are not limited to exclusively sec_501 purposes - org is managed and controlled by its trustees the co-4 is controlled by the org board - org applied for sec_501 exemption the co-4 has not applied for sec_501 exemption g org’s claim of sovereign immunity in documents provided the examination org asserted it is tribal entity and has derived sovereign immunity by virtue of that status org’s business operations plan states org is both federally and tribally chartered and is a indian-owned sovereign immune entity which services as an inter-tribal financial intermediary vehicle for the issuance and placement of irs-authorized non-exempt and tax-exempt tribal bonds org is eligible to receive u s guaranteed loans from a variety of programs to secure the tribe’s’ bond issues donations of money and property to the org co-4 and org return lucrative tax benefits to the donor org controls and coordinates these activities through our qualified lawyers and accountants and based upon our government-to-government relationship with the irs office of tribal governments the claim of sovereign immunity is also stated the org act of 20xx sec_2 sub sec_101 org org org that notes this act establishes the org org org as the sovereign financial entity of the subscribing tribe s department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 org has in court documents filed in case no this case’s documents org’s claimed sovereign immunity is said to be derived through the org’s relationship to or involvement with the indian_tribe the co-3 repeated this claim of sovereign immunity in org ’s claim of sovereign immunity is derived from the co-6 of state a recognized indian_tribe and org’s relationship with that tribe as has been established by following some of these documents have already been mentioned - the co-6 of state sometimes referred to as the co-3 is a federal_corporation that has received its corporate charter under the state indian welfare act of 49_stat_1967 it is in other words officially recognized by the federal government as an indian_tribe the tribe’s constitution and by-laws were ratified on january 19xx and its corporate charter was ratified on november 19xx the constitution and by-laws were amended in 19xx and again in 20xx in or around may 20xx trst-1 presented the co-6 with a proposal to improve the economic situation of the - co-6 of state the proposal included a caddo business corporation act that would provide tribe the statutory and regulatory framework for the establishment of caddo indian tribally chartered corporations prior to this co-6 of state did not have a business or corporation act the indigenous nations federal credit program org act the org act of 20xx to establish a financial intermediary institution for indian country which promotes social and economic development for indian nations by providing or facilitating the provision of long-term investment capital and capital credit for the development of tribal economies org will serve as a principal purchaser of tribal tax-exempt public and private_activity_bonds providing tribes with a ready market for their debt instruments org act sec_3 a share exchange and merger agreement wherein the co-6 of state exchanged of its reservation branch credit program for big_number shares in org from org a management agreement in which essentially all tribal credit program management positions are assigned to org or its assigns - co-3 resolution 05-20xx-04 dated may 20xx signed by chairwoman as chairwoman and emp-1 as secretary of co-6 of state in which the co-6 of state resolved and enacted the following i il iii iv v enacted the share exchange and merger agreement enacted the management agreement enacted the org org act of 20xx and the business corporation act authorized org and the org reservation branch credit program to use the ‘great seal of the tribe’ ratified and agreed to the articles of incorporation of org org’s status as a sovereign immune entity is unrelated to org’s sec_501 exemption as org’s status as a sovereign immune entity was not a factor in the determination that org was when the determination was made an organization described in sec_501 in its literature available on the internet and in its letterhead org claims to be a native american cooperative association this claim is echoed by trst-1 in a court document filed in case no entitled plaintiffs’ chairman trst-1 and org’s joint motion to dismiss defendants’ department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of year ended 12-31-20xx - report of examination of form_990 h assets reported on form_990 for year ended 12-31-20xx subtrusts for the year ended 12-31-20xx org did not file the annual information_return form_990 return of organization exempt from income_tax required for an organization exempt from federal_income_tax under sec_501 as it represents that it did not have gross_receipts of more than dollar_figure in the year ended 12-31-20xx org did file form_990 for the year ended 12-31-20xx reporting gross_receipts of dollar_figure total expenses of dollar_figure and total assets pincite-20xx of dollar_figuredollar_figure - land acres county - uncut rubies assigned irrevocably co-10 - state land assigned to trust co-11 - proven gold deposits co-12 its reports these assets as comprised of the following an dollar_figuredollar_figure dollar_figuredollar_figure dollar_figuredollar_figure the examination of org for the year ended 12-31-20xx determined the land is stated to be that land purchased in 20xx for dollar_figuredollar_figure and is shown as being jointly owned by three entities org co-9a state limited_liability_company trst-1 states org is the only member of co-9 a b org credit program and c the examination was provided documentation by org that established -the purchase of the land was financed with a promissory note of dollar_figuredollar_figure the reported dollar_figuredollar_figure aco-18nt in excess of the purchase_price and not representing the property’s fair_market_value is unsupported by documentation and org is unable to reconcile to the reported aco-18nt -in march 20xx dollar_figure that on 12-17-20xx had been deposited to an account entitled org co-4 c- trust co-13 was applied in part to principal payment and in part to interest payment -a new promissory note of dollar_figure was entered into by these three entities on 7-20-20xx reflecting the inclusion of accrued interest in the principal trst-1 stated that these acres were to be used for the various exempt projects of org to include - serving as the area in which a buffalo herd was to be developed the area being referred to as the ‘co- - to serve as the site at which fee paying customers would hunt buffalo so as to provide buffalo meat for distribution - habitat conservation serving as a conservation area for indigenous species - to sell or lease portions for use in commercial tourism development to serve a tourist destination and a vacation resort with camping hiking horseback riding fishing and thereby to further foster the expansion of commercial tourism in this region and promote native american business development - and to serve as the site for youth day camps with emphasis on urban and minority youth that would include those youths from the boys and girls clubs trst-1 states org through himself as org counterclaim and third party claim and brief in support filed with the district_court of county state on october 20xx in that pleading trst-1 states that org was created pursuant to the state indian welfare act usc sec communications with the bureau of indian affairs office however reveal that before a group of indians or tribes can be certified as an indian cooperative application with the bia must first be made no such application has been made by or on behalf of the co-6 and or org nor has certification as a native american cooperative association been granted department of the treasury - internal_revenue_service form 886-a explanations of items name of taxpayer org attachment a page of year ended 12-31-20xx report of examination of form_990 trustee and other individuals who were part of org’s operations were involved in and had worked towards establishing boys and girls clubs in state communities the examination determined that no development had been made to the acres though trst-1 states that org had begun training counselors that were to conduct the youth camps trst-1 disclosed that no youth camps were conducted trst-1 did note that org had in a later year conducted a buffalo hunt that it had paid to have the filmed with the intent of using the film in a promotional and marketing effort he noted that the dead animal had been butchered with some of the meat being used to prepare chili at org events at an absentee shawnee voter registration drive and at other events that he bene-1 or others had attended as representatives of org or events for which org was a sponsoring_organization trst-1 further noted that some of the buffalo meat had been distributed to promote org’s goal of developing a buffalo herd that would be used to reintroduce buffalo into the native american diet org did not own or contro dollar_figuredollar_figure uncut rubies dollar_figuredollar_figure of state land nor dollar_figuredollar_figure of gold deposits trst-1 provided the examination documents represented as creating entities referred to as a ‘subtrust’ of org which are said to have controlled assets or had been assigned an interest in assets that are stated to have such values trst-1 stated that the other org trustee trst-2 who had prepared the form_990 information_return for the year ended 12-31-20xx had incorrectly included as org’s assets the uncut rubies the state land and the gold deposits but had no explanation why he had signed the return with these substantial aco-18nts if it was incorrectly prepared trst-1 noted that each ‘subtrust’ had two trustees and that he had served as the trustee from org the other trustee was appointed by a third party who is supposed to have provided the asset or the interest in such asset being placed in the subtrust trst-1 explained that in general the subtrusts used the interest in these assets as collateral to solicit funds from investors for a number of projects such as the construction of a power plant or construction of a ski and summer resort these projects appear to have been championed by org or as trst-1 termed them individuals who had served as agents for org org’s involvement often was as the entity that would secure tax-exempt_bond funding given its sec_501 exemption for the projects the projects represented as enhancing the economies of the rural communities and indian tribes in the project’s vicinity were to have involved non-exempt entities and private investors who would plan manage construct and operate the project if and when it was completed a uncut rubies- org-co-14 also referred to as co-10 or the co-14 ina trust arrangement in which org and an individual emp-2 were trustees org stated the entity org-co-14 had been ‘assigned’ by ‘co-14’ co-14s rubies that had a retail replacement value of not less than dollar_figuredollar_figure no gemologist appraisal of dollar_figuredollar_figure was available to the examination no title deed invoice or any other as evidence of that involvement trst-1 has pointed to the formation of the boys and girls club of america that had been formed in city state and reported in the february 20xx edition of city newspaper the express-star that formation predates org's application_for exemption and org's declaration of trust department of the treasury - internal_revenue_service form 886-a name of taxpayer explanations of items attachment a page of peis 12-31-20xx - report of examination of form_990 document establishing the existence of big_number carats of ruby sapphire crystals listed in the subtrust’s schedule or the ownership of these stones was presented to the examination in addition no documentation was presented to the examination to support the stated_value or support any org interest in these gemstones trst-1 stated to the examination that these stones would be used to secure financing for investment the subtrust would make one investment disclosed in an engagement agreement was that these gemstones would be used as collateral in arranging the financing for the construction of the ‘org’ an explanation of this project follows below the agreement provided that in consideration for the gemstones assets used as collateral to include a ucc-1 filing on the assets for the financing by bond issuance of co-15 co-14 will receive dollar_figure at closing and a net profit cost bearing interest in the co-15 moreover in the event that investments are made in fuel production distribution or fuel purchase to create equitable ownership in that event co-16 will have a pro-rata share based upon the agreement or the ownership strategy contained within this provision in relation to other vertical energy integration strategies the subtrust documents did not specify the manner in which any of the other funds obtained through this agreement were to be invested trst-1 noted that the solicitation for the investor to this subtrust not been carried out by org but had been carried out by others arena enterprise’s compensation trst-1 signed the letter as chairman and ceo of org and as trustee for org ina letter to emp-2 representing co-16 reciting the terms of according to the documents of the ‘subtrust’ entity org would establish a bank account to hold the assets of the subtrust and execute a power_of_attorney to that account appointing trst-1 and emp-2 as the power of attorneys with trst-1 having final approval for all transactions and agreements for its involvement org may charge a reasonable and customary fee for establishing and managing a support_trust though trst-1 stated that org received no compensation or funds from the subtrust org disclosed to the examination that rubies with a represented value of dollar_figuredollar_figure were part of the collateral used to secure a loan of dollar_figuredollar_figure from by a state bank to ind-1 ‘ind-1 an individual connected with org in december 20xx though the loan proceeds were to pay certain up-front costs for the construction of a power plant ind-1 is the borrower on the promissory note org pledged as collateral for this loan a performance guarantee bond of dollar_figuredollar_figure issued by underwriters reinsurance co ltd in addition to collateralize the loan’s dollar_figuredollar_figure interest required by the bank org pledged two lots of rubies of total weight of dollar_figure kilograms that in some of the correspondence between the parties are represented as having a value of dollar_figuredollar_figure though trst-1 has stated that org received these gemstones through the co-10 arrangement org provided no documentation as to how it gained an interest in these rubies sufficient to have presented them to the bank as collateral department of the treasury - internal_revenue_service form 886-a name of taxpayer ces year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 the power plant whose up-front costs were to be paid with these loan proceeds as was represented to the bank is a revised from an earlier megawatt electricity generating power plant construction_project to be located near city state site for the megawatt facility was net city state ’ one of the project’s financing scenario was that org would issue tax-exempt_bond to finance the project this project is sometimes referred to as the co-9 power project project documentation indicates a project cost of dollar_figuredollar_figure for the megawatt facility dollar_figuredollar_figure for the megawatt facility beyond this dollar_figuredollar_figure loan to ind-1 there is no indication that any other financing was secured when ind-1 defaulted on the loan the lending bank sought to recover the funds and eventually brought suit against ind-1 org org and the insurance_company that had provided the performance guarantee bond during the litigation org in an agreed journal entry filed march 20xx in the case co-17 org and trst-1 as principal officer for the org plaintiff vs ind-1 org org co-4 underwriters reinsurance co ltd and emp-2 case no district_court of county state of state org through its counsel trst-1 agreed to the court’s order awarding all interest org had in these rubies to the plaintiffs b state lands- org co-4 co-18 also referred to as the org-co-18 subtrust and the co-11 in this trust arrangement org and a for profit enterprise co-18 co-18’ each appointed a trustee that would have joint power and authority with respect to the trust’s estate the declaration of trust indicates that co-18 convey assign transfer and deliver certain property to this subtrust though requested by the examination the schedule listing the property was not part of the documentation provided the examination by org the engagement agreement between org and co-18 states co-18 engages org as its consultant to assist co-18 in establishing an investment loan fund using org subtrust for which as compensation org will be paid of the total principal sum at the time the funds are placed in the org-co-18 subtrust in general dollar_figure of tax-exempt funding to be secured_by org would be used to finance the development of big_number acres of privately owned land within the fish lake national forest into a ski and summer resort development involving lifts big_number condominium units hotel and motel rooms a big_number sq ft of retail-commercial area and residential lots the documents provided to the examination by org did not establish who would develop operate and manage the project had the project been realized trst-1 represented to the examination that no financing was ever secured the development was not started and that org received no funds from the subtrust in a documents provided by org ‘city power project preliminary offering terms’ the stated project cost is dollar_figure and org will permit relocate construct and install a twenty megawatt power generating facility on two acres in city state with the intent of selling power to rural electric power retail customers as wee as the department of energy org and its partners will own the power plant and co-15 will operate and manage it the project's correspondence states that in order that the bonds qualify for tax exempt status the power plant would be owned by org and once constructed managed and operated by co-9 the entity co-9 a state limited_liability_company managed by trst-1 was involved in the project planning to construct and operate the or megawatt power plant fram documents trst-1 provided the exam ownership of co-9 was variously org inside the fence llc an state llc or org inside the fence llc town of city state others within org would be paid hourly rates from a dollar_figure month retainer that would be increased to dollar_figure month after ‘bond capitalization’ trst-1 states neither he co-1 org or org had any interest inside the fence llc other documents indicate trst-1 trst-2 and department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 org provided no documentation indicating it had received title to this real_property or that the real_property involved in this venture had a value of dollar_figuredollar_figure c proven gold deposits - co-12 in this trust arrangement also known as org-co-12 org and co-12 group llc served as trustees in the engagement agreement with co-12 group llc ‘co-12’ co-12 is to identify and acquire various assets and place in trust with org to include precious stones worth approximately dollar_figuremillion sp precious metals valued at dollar_figure and other assets from time to time which will be identified and engages org as its consultant to assist co-12 in establishing an investment loan fund using org subtrust and which subtrust account will be controlled by an agent appointed by co-12 pursuant to the attached ‘special power of attorney’ agreement the engagement agreement provision for compensation it states co-12 agrees that org will be paid of any org-co-12 returns on investments to be paid at quarterly intervals and or at the termination of this agreement co-12 group llc will be paid at quarterly intervals on all org-co-12 return on investment trst-1 stated that the strategy was to secure loans using the assets that would be placed in this subtrust as collateral and use those funds to finance investments and projects he noted that he was uncertain whether this entity was ever formalized and that org received no funds from the subtrust org provided no documentation indicating it had received any interest in mineral deposits or any gold holdings and trst-1 stated that org had not received any such interest org financial transactions in 20xx org’s 20xx revenues and disbursements were reviewed through the analysis of the deposits to and disbursements from org’s single bank account account co-19 city state stated below is information as to the sources of the deposited funds and the nature of the disbursements funds deposited to org’s bank account in 20xx org represents these deposits of dollar_figuredollar_figure are substantially_all of org’s receipts in 20xx table deleted org’s identification or explanation as to the source of the funds org states funds are a transfer of funds to org from co-1 through org org credit program org provided no documentation as to source of funds funds received from trst-1 as an interest free loan aco-18nt is dollar_figure payment received by trst-1 an state attorney as full satisfaction of his attorney’s lien of dollar_figure for his legal services to party trst-1 states this is a rent payment for party’s use of co-1’s travel trailer org provided no documentation as to source of funds funds received from co-1 as an interest free loan co-1 as seller receives dollar_figure as net_proceeds from the sale of its real_property located in city state department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 and payment from co-2 for retrieval and return of skysite electronic package to co-2 funds received from trst-1 trst-1 states these funds are from a disability payment made to him by the veterans administration the following day org disbursed dollar_figure to trst-1 attorney trust org states the disbursement made the day after the deposit was made was org’s repayment of trst-1’s loan to org the aco-1 8nts in and are specifically identified in the first addendum to the co-1 co-4 memorandum of understanding dated january 20xx previously described above in d funds from services to co-2 in october 20xx org entered into a ‘skysite recovery contractor agreement’ with an unrelated corporation co-2 hereafter ‘co-2’ trst-1 signed the agreement for org as chairman in the agreement co-2 is described as providing wireless communications_services and products operating over the co-2 network that utilizes a balloon-craft to transport an electronic package of ‘reflex transmitters and receivers’ referred to as a ‘skysite’ in the agreement co-2 engaged org to locate based on an approximate location provided org by co-2 retrieve and return to co-2 the skysite electronic package ie the transmitter receiver package for which org is paid a fee the agreement provides that org will be paid dollar_figure for each skysite delivered to co-2 within one week of co-2 providing the retrieval instructions dollar_figure if the skysite is returned between one and two weeks of org receiving the retrieval instructions and dollar_figure if after two weeks if the skysite is collected from a party the fee paid is dollar_figure the expenses of travel equipment etc incurred in providing co-2 these services is per the agreement the sole responsibility of the ‘contractor’ org the agreement also states that the ‘contractor’ will take those steps necessary to protect the environment the safety of himself and of third parties and the rights of third parties when performing these services acknowledging that the services necessarily includes hiking backpacking climbing scavenger hunting and other outdoor activities the ‘contractor’ represents that it has the special skills expertise and experience to be able to provide the services covered by the agreement trst-1 stated that he and bene- performed these services per the second addendum to the co-1 - co-4 memorandum of understanding dated july 20xx previously described above in d co-1 ‘assigned’ the contract to org for which trst-1 and bene-1 would be provided expenses for fuel food lodging in connection with their performance of this contract’s services org stated trst-1 and bene-1 volunteered to perform the co-2 contract and did not receive compensation_for those volunteer services in 20xx co-2 paid org dollar_figurefor these services org deposited dollar_figure of co-2’s payments to its bank account november 20xx a net deposit of dollar_figure payment was dollar_figure and dollar_figure returned to trst-1 as cash december 20xx dollar_figure trst-1 notes the remaining payment of dollar_figure not deposited to org’s account was cashed and used to cover the expenses_incurred in carrying out the search and recovery services org has stated the co-2 revenue is income from an activity related to its exempt status and not income from an unrelated business activity it states it is related as the business of org-org is to go upon lands throughout state to survey for land buffalo and volunteers to further the trust’s land-related functions and as the co-2 search and recovery contract performance involves the same related transportation network and it has served to facilitate in identifying land and buffalo for the org central mandated purpose which is to establish co-4s it states in the co-4 and co-2 contract business activities both businesses operated through the activities which department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 include mapping transportation surveying and entry on the land identifying land owners according to interest in the program and indian landowner status identifying flora and fauna identifying availability of lands or individuals for org projects org’s statement did not address how the retrieval and return of the skysite package which is the service for which co-2 paid were directly and substantially in furtherance of org’s charitable objectives funds disbursed from org’s bank account in 20xx the disbursements from org’s bank account totaled dollar_figure in 20xx of this aco-18nt the examination determined that the following aco-18nts were disbursed directly to trst-1 and to bene-1 for utilities to the house provided by the co-1 from which org org and org’s related entities and activities operated for expenses related to automobile s used by trst-1 or bene-1 for food and for personal type expenses table deleted a detail of these payments follows org’s payments made directly to trst-1 or for trst-1’s benefit table deleted see below for org’s response as to the reason for these disbursements payments made directly to bene-1 table deleted payments made by org for utilities to the house leased to it by co-1 table deleted automobile related payments table deleted payments for food and other personal type expenses table deleted the examination asked org to provide documentation for a sample of org’s payments so as to establish the disbursements were consistent with the organization’s exempt_activities the expenditures included payments to trst-1 to bene-1 to a gasoline company to three different utility companies and to the state state department of human services org in response to this request stated department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 a the payments to trst-1 and bene-1 were payments to trst-1 as trustee for the co-1 lease compensation due or as expense monies for org-org operations and co-2 contract operations or were aco-18nts paid them for co-2 contract support and fulfillment and to repair f-35 engine ford truck used in search and recovery and org-org survey operations or were utility payments related to co-18 and resolutions the co-18 and resolutions are those discussed in d above in which co-1 would provide real and personal_property to org for which org would ‘make available’ dollar_figure to co-1’s trustees trst-1 and bene-1 for the support of co-1’s beneficiaries ie trst-1 bene-1 and his family members that vehicle mileage would be determined at the us government rate so that org would defray the expense of insurance fuel and maintenance and pay the cost of utilities the examination noted that aco-18nts paid trst-1 and bene-1 were not entered into any accounting that indicated whether the payments made to trst-1 or bene-1 were rent payments under the terms of the co-18 and resolutions or reimbursements of expenses on a mileage rate or repayments of aco-18nts that had been received from trst-1 or co-1 as loans in fact org’s documentation included no accounting of the total of co-1’s loans to org nor of the outstanding loan balance org’s documentation did not include an accounting for the accrual of rent expenses due co-1 the total of such rent due or for the application of any of the payments made as a reduction of that rent expense the examination did determine that no form_1099 had been issued to trst-1 bene-1 or co-1 to report any part of these payments and that no form_w-2 issued to trst- or bene-1 org did not provide any documentation or accounting to substantiate any of the payment as reimbursement of org’s expenses for org’s payment of dollar_figure to the state of state department of human services trst-1 provided documentation establishing the payment as payment of a child_support payment he is required to make b with respect to the automobile expenses org ’s documentation consisted of service station invoices for services to two vehicles though org stated the payments were for vehicles used in the search and recovery services to co-2 it provided no documentation to substantiate the business use of these vehicles c the documentation for the utility payments did not establish the periods of service the property or location of service nor that the service was entirely org’s expense the documentation provided contained no accounting to substantiate the utility payments as payments of org’s expenses the examination determined that org issue no form_1099 to trst-i bene-1 or co-1 and none of these payments to trst-1 or bene-1 were reported on form_w-2 as compensation paid these individuals j org’s activities in 20xx org’s operations were officed in the structure located at address city state the same structure co-1 is represented as having leased along with furnishing to org this structure located on surrounding acreage that is referred to as pasturage is a two story building containing several rooms on two levels the first floor’s rooms department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 include a kitchen bathroom a number of smaller rooms and a large room that contains a large table bookshelves and desks the upstairs rooms include a bathroom a loft a storage room and a bedroom notably trst-1 also used this house as his residence the examination also determined that this location had also served as the offices for org the various activities and enterprises of org such co-9 and the various subtrusts that operated in 20xx and that all these operations had used the same space and equipment of co-1 ’ in 20xx org represented that its activities included the following a working towards the establishment of youth day-camps on the acres in county state described above the planned youth camps and the other outdoor and nature programs were to be conducted on this land that is often referred to as ‘co-4’ and was to include swimming horseback riding equestrian education canoeing yoga hiking rock climbing fishing and wildlife education though trst-1 stated org had no horses horseback and equestrian activities would have used horses provided by the horseback riding venture referred to as co-20 trst-1 stated that he had started training individuals who would serve as counselors trainers but that no youth camps were actually conducted b among the documentation presented by org as establishing that it had conducted activities in furtherance of its exempt objectives were the following applications for funds these applications were dated subsequent to 20xx but which were presented as representing the continuation of the activities of 20xx org co-4 proposal to the land and water conservation fund state tourism and recreation department dated january 20xx for the project named co-4 the submitted funding application requested dollar_figuredollar_figure and with the total project cost being estimated as dollar_figuredollar_figure the application stated that the remaining project funding would be from the org in the form of the donation of land acres valued at dollar_figuredollar_figure and from its donation of labor and equipment valued at dollar_figuredollar_figure the purpose of the requested grant was to p rovide outdoor and indigenous cultura education to minority and disadvantaged youths preserve indigenous keystone species maintain pow-wow grounds camping facilities nature tourism information fishing wildlife viewing native seed nursery and bison raising facilities org co-4 application_for funding to administration for native americans ana fy 20xx for new community based projects the funding title social and economic development strategies for native americans with the application due_date of april 20xx org stated the submitted application was intended to secure funds for a project entitled ‘operation noah’ that had a budget of dollar_figuredollar_figure in federal funds and dollar_figuredollar_figure in non- federal funds for a total project budget of dollar_figuredollar_figure the non-federal fund sources were to be in part revenue from guided buffalo hunt fees conducted on the land located in city state providing food services to state indian cultural events and the sale of buffalo meat fees from camping and eco-tourism activity ’ listed by org as twenty acres four rooms four personal computers copy equipment office furniture law office with library bedrooms kitchen facility with cold storage assorted tools utensils equipment several vehicles and storage area for vehicles and animals co-20 was per trst-1 not officially formed because the necessary paperwork was never filed with the state of state nevertheless the venture was an activity between org and individual emp-3 emp-3 would operate the horseback riding concessions at two sites park and co-21 both in the area of the acres in city state per its concessionaire lease agreements financing for the venture while it operated for a short time in 20xx was in part from funds from a line of credit secured_by the acres in city state trst-1 stated the concessions operated only for a short time were mismanaged by emp-3 and were not profitable though it had been intended that the youth camps horseback riding and equestrian activities would have been led by emp-3 using the horses of co-20 no youth camps horseback riding or equestrian activities were ever held department of the treasury - internal_revenue_service form 886-a explanations of items attachment a pave of name of taxpayer org year ended 12-31-20xx report of examination of form_990 the project’s stated objectives were wide-ranging and included to identify and establish networks for charitable and commercial buffalo and production distribution sp w iden the donative and volunteer base for operation noah and get more participation in first peoples’ coalition s tart-up one boys and girls club with south state city community partners and send children to nature-based and traditional cultural day-camps or a lesser a co-1 8nt on overnight outings distribute big_number pounds of buffalo meat to central state indians and to sel big_number pounds for profit to sustain charitable meat distribution network and youth programs co-4s for nature education and guided hunts primitive camping facility partnerships with hunting and bison grower communities c onduct education programs at co-4 to service community youth a quire three year leases on two suitable central state indian allotments to be used as a pilot program to bring buffalo to central state indian land-owner families it is noted that org did not receive any funding from either of these programs the examination’s review of the org-provided documentation also determined that org had not established the educational or cultural activities described in either of these applications at the acres in city state where the activities described in these applications were to be conducted c assisting in the establishment of boys and girls club in state city org’s literature stated the co-4 has individuals and corporate partners in establishing boys and girls clubs in south state city and rural communities afflicted with gang violence from other literature presented to the examination trst-1 and bene-1 in 20xx participated as representatives of org in meetings for the purpose of establishing a boys and girls club in south state city two other individuals listed as members of org’s board_of directors trst-3 and john edwards also participated in this effort documentation of this effort for the formation of this youth group included an application_for funds to the state city foundation on org letter-headed stationery the submission of a letter of inquiry for a grant application to samuel bene-3s noble foundation also on org letter-headed stationery in which org’s support for the boys and girls club was presented as one of its activity warranting grant support and a proposal for grant support to the farm aid organization to assist org in establishing boys and girls clubs for rural indian country youth according to the documents org provided these efforts for the formation of a boys and girls club continued into 20xx after which date there is no further indication the effort continued had this boys and girls club been formed it would have been an entity separate from org org itself did not conduct any educational or recreational program for youth c org states that it had provided internship to three students from the university of state two of these students int-1 ‘int-1’ and int-2 ‘int-2’ in the university’s native american studies program received no compensation the third student int-3 ‘int-3’ an engineering major received a small stipend each semester org stated that the interns assisted with the intertribal government sponsored group american indian exposition in a document titled goals and purposes with the org int-1’s goals were listed as expand on the knowledge of how to create economic development create funding for tribes to perform economic funding investigate the legal issues of economic development break the legal issues down to level grounds of understanding philosophical knowledge of tribal government int-2’s focus of internship stated on his application_for internship to the university’s native american studies program was tribal economic development with the objective for the internship being exposure and familiarity to economic development department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 org states that int-3’s internship was not formalized with the university and there is no similar statement of focus or objective org stated int-1’s internship culminated in his design of a youth camp and co-4 for his tribe and that the activities of the native american studies interns int-1 and int-2 were conducted for them to understand and assist their tribal government in economic development planning land use boys and girls clubs co-4s youth camps and the american indian expo it further noted that int-3 and int-2 had prepared and served buffalo products for the expo board the documentation org provided did not establish that the interns were provided a formalized training program or that their internship was with org the documents indicated that their services were to org and not org d the activities org stated it had participated in for the purpose of preserving indian culture were the following - voter registration event at absentee shawnee community center where it was promoted that org would provide free buffalo chili - a cooperative pecan harvest at the acres site in city state ie the co-4 where it was advertised that participants would share in the pecans harvested with org the promotional material stated that buffalo chili and cornbread could be purchased for dollar_figure - org’s statement that two of the university interns had prepared and served at some unspecified date ‘buffalo products’ to the american indian exposition board org stated that it had distributed information on the boys and girls club on a related after school program it had participated in trying to establish on its planned youth camps at the acres site located in city state at these events at all these events and at others trst-1 bene-1 and others involved in org’s mission org stated that it continued to promote its programs for economic development in the area it referred to ‘indian country’ for the restoration of buffalo and traditional foods to the native american diet for the establishment of a reserve to hold a buffalo herd and for the preservation of indigenous flora and fauna in the printed materials provided as supporting org’s exempt operations the proposed activities are activities that had they been carried out would have been carried out by entities other than org these planned activities promoting sustainable economic cultural development and land preservation and the bringing of wall street to the indian country main street involved non-exempt entities that included org org credit program co-9 the non-exempt entities created under the org umbrella such as org credit program org - liberty cooperative association org- warrior cooperative association org - spirit cooperative association and org - blue eagle cooperative association non-exempt entities that had each applied to the department of the treasury for certification as having met the eligibility requirements as community development entities cdes with a primary mission of serving or providing investment capital for low income communities or low income persons and the various ‘sub-trusts’ that had been represented as holding rubies land proven gold mining reserves despite the fact that org may have been involved in some way in the planned project or the promotional materials referred to org’s charitable objectives the development and promotion of these projects were not activities were not activities carried out in furtherance of org’s exempt objectives department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 law internal_revenue_code code sec_501 provides that organizations are determined to be exempt under this subsection where the organization is organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes and where no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual these requirements that the organization be organized and operated for exclusively charitable purposes is repeated in the federal_income_tax regulation reg at sec_1_501_c_3_-1 which states 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 code section if an organization fails to meet either the organizational_test or the operational_test it is not exempt the operational aspect often referred to as the operational_test is defined in reg c -1 c under the heading primary activities the ‘exclusively charitable’ aspect is further defined by the following an organization will be regarded as ‘operated exclusively' for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in 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 the non-exempt activity that would disqualify an organization from sec_501 exemption is defined in reg c -1 c distribution of earnings there the regulations provide that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals a ‘private shareholder or individual’ is defined in reg a -1 c as a persons having a personal and private interest in the activities of the organization the ‘operational test’ that an organization be ‘operated exclusively’ for charitable purposes is further defined in reg c -1 d ii there the regulations provide that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests it in the determination whether the organization was operated exclusively for one or more exempt purposes specified in sec_501 the court in 74_tc_846 noted that the organization’s founder having total control_over the management of the organization’s affairs controlled all its financial decisions the founder and his wife having executed vows of poverty had transferred all their possessions and income to the organization the court noted that over percent of the contributions the organization received mostly from the founder and his wife had been spent on the founder’s and his wife’s subsistence their unsubstantiated travel and upkeep and utilities of their home less than one percent of the contributions were spent on direct church related expenses the court found that despite also serving religious and charitable purposes a substantial purpose of the organization was to serve the private interests of the founder and his wife and the organization failed the operational_test and did not qualify as an organization under sec_501 department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 in 92_tc_1053 the court addressed another aspect of the of the operational_test whether the organization operated for the benefit of private interests it notes that not only must the organization not be operated for the benefit of private shareholders or individuals it must also not provide a benefit to private interests more than incidentally as the organization provided such private benefit more than incidentally the court determined it had a substantial nonexempt purpose and the organization was not primarily engaged in the exempt activity the court states the treasury regulations specify three conditions which must be satisfied for an organization to meet the operational_test 765_f2d_1387 cg cir affg c memo first the organization must be primarily engaged in activities which accomplish one or more of the exempt purposes specified in sec_501 sec_1 c -1 c income_tax regs second the organization's net_earnings must not be distributed in whole or in part to the benefit of private shareholders or individuals sec_1 c -1 c income_tax regs third the organization must not be an action_organization in defining ‘operated primarily for exempt purposes’ the court notes to establish that it operates primarily in activities which accomplish exempt purposes petitioner must establish that no more than an insubstantial part of its activities does not further an exempt_purpose sec c -1 c income_tax regs the presence of a single substantial nonexempt purpose destroys the exemption regardless of the number or importance of the exempt purposes 326_us_279 79_tc_793 the court first notes that if the organization’s net_earnings inure to private shareholders or individuals it will have failed the operational_test and not have operated exclusively for exempt purposes ‘when an organization operates for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests the organization by definition does not operate exclusively for exempt purposes prohibited private benefits may include an ‘advantage profit fruit privilege gain or interest ’ 78_tc_280 it notes that the determination whether the organization operates primarily for exempt purposes must go beyond the determination whether there the organization’s earnings inured to private shareholders it notes occasional economic benefits flowing to persons as an incidental consequence of an organization pursuing exempt charitable purposes will not generally constitute prohibited private benefits kentucky bar foundation v commissioner t c pincite thus should petitioner be shown to benefit private interests it will be deemed to further a nonexempt purpose under sec_1_501_c_3_-1 income_tax regs this nonexempt purpose will prevent petitioner from operating primarily for exempt purposes absent a showing that no more than an insubstantial part of its activities further the private interests or any other nonexempt purposes sec_1 c - l c income_tax regs the court then analyzes whether the organization transgressed the ‘public rather than private interest’ mandate of reg c -1 d ii by conferring benefits on persons not having a personal and private benefit in the activities of the organization it notes that while there are overlapping characteristics of the prohibitions against department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 private_inurement and private benefit they are two distinct requirements that must be independently satisfied the absence of private_inurement of earning to the benefit of a private_shareholder_or_individual does not in of itself establish that the organization is operated exclusively for exempt purposes it notes when the court concludes that no prohibited inurement of earnings exists it cannot stop there but must inquire further and determine whether a prohibited private benefit is conferred a n organization’s conferral of benefits on disinterested persons may cause it to serve ‘a private interest’ within the meaning of sec_1 c - d ii in 765_f2d_1387 cir aff'g tcmemo_1984_349 the court noted that church by mail inc ‘church’ paid twentieth century advertising agency ‘twentieth’ for services provided twentieth was owned and controlled by the two individuals who ran church the tax_court had found it unnecessary to consider the reasonableness of payments made by the applicant to a business owned by its officers in addressing whether church operated for a substantial non-exempt purpose the circuit_court of appeals in affirming the tax court’s decision stated the critical inquiry is not whether particular contractual payments to a related for-profit organization are reasonable or excessive but instead whether the entire enterprise is carried on in such a manner that the for-profit organization benefits substantially from the operation of the church est of hawaii v commissioner t c pincite see also 743_f2d_148 3d cir courts must look to all objective indicia from which a corporate actor's intent may be discerned 666_f2d_1096 7th cir cert_denied 456_us_983 72_led_861 102_sct_2257 it is necessary and proper for the lr s to survey all of the activities of an organization to determine whether a non-exempt purpose is furthered position of the internal_revenue_service a private benefit to trst-1 and to private individuals- org’s business ventures trst-1 as org’s co-trustee controlled all org’s financial decisions from that position of control trst-1 had directed org to participate in a number of projects that were intended to benefit org or co-9 and in turn either directly or through co-1 himself and his family as the principal_shareholder of org and the majority shareholder of co-9 through his trust co-1 the benefit would accrued to him with the success of the projects or through the compensation he would receive in these transactions org as an organization exempt under sec_501 was to be used to issue tax exempt bonds or arrange other tax-exempt_financing so as to capitalize the projects he had entered org in these projects included - - - the construction of a megawatt electricity generating plant in state for which org was to secure dollar_figuredollar_figure in tax exempt financing the plant would be managed and operated by co-9 of which was owned by org and at least of which was owned by another private for-profit enterprise inside the fence llc as part of this venture org was used as a guarantor to place gemstones in which it represented it had an interest as security for a dollar_figuredollar_figure loan to an individual though org stated it received none of the loan proceeds it appears that dollar_figure of these proceeds was used to pay interest and principal on the mortgage on the acres in city state it held in joint interest with org and co-9 the development of a ski and resort development in state for which org was to secure dollar_figure in tax exempt department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 trst-1 also involved org in a_trust arrangement where the plan was for the trust representing an interest in dollar_figuredollar_figure in gold reserves would secure investments or loans ‘collateralized’ by these reserves these funds were to be used for investments of an unspecified nature though org has indicated that org secured no financing or funds for investments through any of these arrangements the examination’s determination is that in each of these ventures a substantial benefit would have been provided to the participating party org’s involvement in these arrangements was intended to take advantage of its anticipated ability as an irc c organization to issue tax exempt bonds and use its status as an organization with an irs letter stating its is an sec_501 exempt_organization to impart credibility to the venture in participating in these transactions org operated for a substantial non-exempt purpose provide substantial private benefit to trst-1 a ‘private shareholder’ and to the other private interests who participated in these arrangements operating for a substantial non-exempt purpose org failed the operational_test and does not qualify for exemption under sec_501 it is the position of the internal_revenue_service that org’s exemption under sec_501 be revoked effective january 20xx b private benefit to trst-1 - trst-1’s business and personal expenses paid through org in control of all org’s financial transactions trst-1 has used org as the depositary of funds that in whole or in part would have been his taxable_income had he reported the income these funds included attorney fees he had earned proceeds from the sale of his real_property or income received from the services he provided co-2 for the search and recovery operation he performed in total roughly of org’s revenues were received from trst-1 or from the co-2’s payments it is the examination’s position that trst-1 used the funds he deposited into org and has characterized as loans for his personal benefit representing that org had leased both real and personal_property from his trust co-1 he states that some unspecified portion of the org’s payments to him were lease payments though org has no accounting of its total rent expense of the aco-18nt of the rent expense paid or of which payments represented lease payment the examination also determined that at the time org is represented as having leased the real_property that is addressed as address city state for its operations trst-1 and his family were living in the same house using it as their personal_residence in addition this property leased to org was also being used by org co-9 and the other entities and activities operating under the org umbrella as their offices all of which he controlled and which he was the substantial_shareholder or the majority shareholder in addition to whatever aco-18nt is to be classified as lease payments org’s disbursements included dollar_figure for payment of utility_services including cable television services to this house with that aco-18nt representing of org’s total expenditures of dollar_figure org represents that org had entered into an arrangement into with trst-1 and his trust agreeing that it would pay the expenses trst-1 and bene- had incurred in providing the search and recovery operations to co-2 the examination determined dollar_figure of org’s 20xx disbursements approximately of total disbursements were department of the treasury - internal_revenue_service form 886-a explanations of items attachment a page of name of taxpayer org year ended 12-31-20xx report of examination of form_990 for automobile related expenditures though org represented the expenses were incurred in conducting the search and recovery services there was no accounting to establish that the expenses were in fact business_expenses of org the proffered documentation of these disbursements were service stations repair or parts invoices and established no relationship between the service or part paid for and org’s activity in addition there was no accounting or other documentation that could be used to establish the business and personal_use of the automobiles these disbursements were said to be for in 20xx org’s disbursements included dollar_figure in payments to food stores convenience stores and miscellaneous other_payments for which absent documentation to establish the expenditure as related to org’s exempt operations are deemed expenditures_for trst-1 and his family’s personal benefit the sum of org’s disbursements directly to more bene-1 for automobile expenses utilities food and other miscellaneous purchases is dollar_figure of all of org’s expenditures and of the funds received from trst-1 none of the money expended either paid for trst-1’s benefit or paid directly to trst-1 and bene-1 were reported as compensation on either form_1099 as rent or other compensation or on form_w-2 as wages the examination determines that as org has not established these expenditures as being org exempt activity related expenses these expenditures were made for trst-1’s personal benefit using his control of org’s finances trst-1 did not report his receipt of the funds as income but deposited the funds into org’s bank account he characterized the transaction as a loan enabling any subsequent payment org would make to him as a loan repayment in conducting org’s business from his home he had org enter into a lease arrangement with a dollar_figure monthly lease obligation that also enabled him to characterize payments org made to him as lease payments while he and his family continued to live in the house org has incorrectly asserted that co-1 is by virtue of the fact that bene-1 and their children that are beneficiaries of the trust claim status as indians the co-1 enjoys some sort of exemption from the definition of private benefit it is the position of the internal_revenue_service that trst-1 through co-1 is both creator and grantor of org and is control of all org’s financial decisions has used org for his substantial private benefit org in so used was operated for a substantial non-exempt purpose and provided trst-1 substantial private benefit having been operated for a substantial non-exempt purpose org failed the operational_test and does not qualify for exemption under sec_501 is the position of the internal_revenue_service that org’s exemption under sec_501 be revoked it effective january 20xx c org was not primarily engaged in activities which accomplished one or more exempt purposes in addition to the ventures and their arrangements discussed above involving the development of the city electric generating power plant the development of the ski and vacation resort in state the plans to involve org in the investment scheme involving gold reserves the examination’s analysis of org’s activities determined that its remaining activities consisted in large part of activities that promoted the development of the acres in city state org held with the two non-exempt entities org and co-9 this included the involvement in the co-20 venture that sough to develop a horseback riding concession enterprise that would use these acres this department of the treasury - internal_revenue_service form 886-a explanations of items attachment a page of name of taxpayer org year ended 12-31-20xx report of examination of form_990 development is also reflected in the grant application submitted in january 20xx to the state tourism and recreation department one of the activities org indicated had been conducted in furtherance of its exempt objectives was trst-1’s and bene-1’s involvement in the planning and promotion for the formation of a boys and girls club though no such entity was organized they represented they had participated as representatives of org another activity conducted in furtherance of its exempt objective was the attendance at native american cultural events or other events involving issues relevant to native americans such as the voter registration drive though trst-1 or bene-1 participated or appeared at these events the documentation does not establish that their involvement was as representatives of org or of org they were often identified as associated with both entities and therefore this activity cannot be established as an exempt activity of org a similar conclusion is made with regards to the characterization that the involvement of interns is an exempt activity of org in the case of each of the three interns the documentation established that they worked for org and may have also done work for org if they had worked for org there was no indication that this work possessed sufficient educational attributes to establish their work at org as an exempt activity the fact is that org’s participation in using these interns is not an exempt activity having reviewed org’s activities the examination determined that org was not primarily engaged in activities to accomplish one or more exempt purposes specified in sec_501 and therefore failed the operational_test for an organization described in sec_501 the position of the internal_revenue_service is that org’s exemption under sec_501 be revoked effective january 20xx d org status under other sec_501 exemption under sec_501 is provided to c orporations and any community chest fund or foundation organized and operated exclusively for for the purposes stated in sec_501 the organizational requirements expressed in reg c -1 b as the ‘organizational test’ does not impart any exemption to the operational_test requirement expressed in reg c -i c for an organization to be determined to be described in sec_501 it must meet both the organization and the operational_test the examination has determined that regardless of org’s genesis it must meet both tests and org failed the operational_test summary position of internal_revenue_service the position of the internal_revenue_service it that for the reasons discussed in a b and c above org failed the operational_test as it was not primarily engaged in activities that accomplish one or more exempt purposes that it had operated for private benefit and had thereby been involved in a substantial non-exempt activity and that org’s exemption under sec_501 be revoked effective january 20xx org is advised that if its exemption is revoked effective january 20xx it will be required to file form_1041 u s income_tax return for estates and trusts for 20xx and subsequent years if it meets the requirements for filing this return department of the treasury - internal_revenue_service form 886-a name of taxpayer org year ended 12-31-20xx explanations of items attachment a page of report of examination of form_990 if org accepts this determination it need take no further action it may indicate its acceptance of this determination by completing the enclosed form_6018 filling in the name of the organization an authorized person signing completing the title section dating the form and returning it to if org does not agree with the proposed revocation it must submit to us at the address given above within days from the date of this letter a written request for appeals_office consideration to protest our decision your protest is to include a statement of facts the applicable law and arguments in support of your position if we do not hear from you within days from the date of this letter we will process this case based on this determination that org’s exemption under sec_501 is revoked effective january 20xx position of org org in response to the irs’s presentation of a preliminary statement proposing that org’s exemption be revoked disagreed in its response org stated trst-1 and bene-1 volunteered to perform the co-2 contract and did not receive compensation_for those volunteer services these voluntary activities constitute inurement to the public and not private benefit the co-2 contract allowed the enhancement and fulfillment of state indian communications technology buffalo lands survey and income production in support of the charitable activity the examination’s position is that trst-1 and bene-1 performance of services for co-2 was the performance of services by trst-1 and bene-1 ii for which co-2 paid compensation iii such compensation controlled by trst-1 and disbursed for trst-1’s and bene-1’s benefit without either reporting such as taxable_income org incorrectly characterizes such services as ‘volunteer’ as there was always an expectation that co-2 would pay for the services and that trst-1 controlling org would make those funds available for their personal benefit either to make cash payment or to pay their personal expenses - private benefit was not received exclusively by an individual rather co-1 co-1 is an oiwa usc and nabda usc cooperative association of indians any benefits were received not by an individual but by the state indian cooperative association beneficiaries of the co-1 bene-2 bene-3 bene-4 bene-5 trst-1 and bene-1 the examination’s position is that co-1 and co-1’s beneficiaries are a private shareholder and individual with regards to org that neither co-1 or its beneficiaries who are trst-1’s direct family members constitute a charitable_class and that org must meet sec_501 requirement that no part of the net_earnings inures to the benefit of any private_shareholder_or_individual to be exempt under that subsection during 20xx org-org performed extensive public trust functions in state indian energy education child and animal rights advocacy and cultural and ecological preservation programs food distribution and indian rights advocacy all of these charitable activities are chronicled in the grant applications and various other documents previously provided or made available department of the treasury - internal_revenue_service form 886-a attachment a page of explanations of items name of taxpayer org year ended 12-31-20xx report of examination of form_990 org’s claim that it had performed extensive public trust functions is not supported by documentation establishing that it had engaged primarily in activities that accomplish one or more exempt purposes specified in sec_501 and that no more than an insubstantial part of its activities was not in furtherance of an exempt_purpose the examination determined org’s activities included activities that promoted the benefit of private interest and that this non-exempt activity was a substantial part of org’s activity ‘ co-1 property was used to support the public trust functions of org-org the relationship between co-1 and org-org involved reasonable terms with adequate_consideration - the examination determined that the property co-1 is said to have leased to org was used by trst-1 for his personal benefit during 20xx trst-1 and his family continued to use the house and its furnishing as their home trst-1 continued to use this same property as his law office and as the offices for org co-9 and for all the other enterprises he had established under the org umbrella such other enterprises previously listed - the legal and equitable relationships between co-1 and org-org were created and are controlled pursuant to usc and and the co-6s resolutions and law and particularly the subject caddo business corporation act federal corporate charter indigenous nations federal credit program act and the org charter and articles of incorporation are controlling the examination determination is that org’s exemption under sec_501 is not established by the relationship org asserts existed between co-1 and org asa trust established by trst-1 for the benefit of his family members co-1 is a private_shareholder_or_individual as such term is used in sec_501 and in reg c -1 c where org operations provided benefit to trst-1 to co-1 to org to co-9 to any other non-exempt entity or private interest it operated for a private interest and not for a public interest not operate for exclusively exempt purposes failed the operational_test and will not be regarded as an organization exempt under sec_501 it therein did department of the treasury - internal_revenue_service form 886-a