department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division number reiease date date contact person identification_number contact number employer_identification_number form required to be filed tax years uil dear this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in internal_revenue_code sec_501 recently we sent you a letter in response to your application that proposed an adverse determination the letter explained the facts law and rationale and gave you days to file a protest since we did not receive a protest within the requisite days the proposed adverse determination is now final because you do not qualify for exemption as an organization described in code sec_501 donors may not deduct contributions to you under code sec_170 you must file federal_income_tax returns on the form and for the years listed above within days of this letter unless you request an extension of time to file instructions and do not send them to this office penalty file the returns in accordance with their failure_to_file the returns timely may result in a we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you agree with our deletions you do not need to take any further if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal_income_tax status and responsibilities please contact irs customer service pincite-829-1040 or the irs customer service number for businesses the irs customer service number for people with hearing impairments is if you have any questions about your sincerely holly o paz director exempt_organizations rulings and agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter tax_exempt_and_government_entities_division department of the treasury internal_revenue_service washington d c date date contact person identification_number contact number fax number employer_identification_number uil sec_501 legend b c h j k l q r s law law name name name name date business name state w dollars amount x dollars amount dear we have considered your application_for recognition of exemption from federal income based on the tax under sec_501 of the information provided we have concluded that you do not qualify for exemption under sec_501 of the code the basis for our conclusion is set forth below internal_revenue_code code issue do you qualify for exemption under sec_501 of the code no for the reasons described below do you meet the organizational_test under sec_501 of the code no for the reasons described below do you meet the operational_test under sec_501 of the code no for the reasons described below alternate issue do you meet the provisions described in q no for the reasons described below facts k your president and registered agent and l your vice president and k’s wife are foreclosure specialists and previously owned and operated r providing foreclosure prevention and counseling services the attorney_general in the state of s made a consumer complaint against r and k about months before you were formed r and k paid restitution of about one thousand dollars and court fees of about five hundred dollars to settle the allegations that they acted as a credit services the settlement states r and k deny any liability organization in violation of band c for the matters alleged by the plaintiff while the plaintiff made the agreement to avoid the uncertainty of litigation and the expense of the trial r was later dissolved r was in the business of you were incorporated on q as a nonprofit corporation under the state of s which was about three months after k’s settlement with the state attorney_general your articles of incorporation state you are organized e e e e to provide foreclosure prevention and counseling services to provide information and assistance to help avoid foreclosure to help establish workable and responsible payment arrangements through debt management programs to help educate individual clients as well as the community on the wise use of credit and money management your primary activity is providing foreclosure prevention and counseling services to homeowners who face possible foreclosure you limit your services to individuals who are employed but who previously experienced a recognizable hardship you find out the clients' ability to pay your fee upon assessing their situation and screen the clients prior to agreeing to work with them you will advertise your services by letters brochures and other methods and focus your services on those who have attempted to work out a solution with the mortgage company but were denied or having a difficult time reaching an agreement your counseling services typically consist of one session which takes about one to three hours your process is as follows you discuss the hardship which led to the possible foreclosure you review the client’s a employment status b commitment to work diligently in keeping the home and c mortgage and property details including the interest rate and types of loans such as an adjustable rate mortgage current property value mortgage balance property taxes and homeowners insurance you request a detailed monthly financial_accounting including monthly household_income and itemized monthly expenses you advise the client of any expenses that can be reduced you consider the following factors before you permit the client to enter into a contract for your services e e e e e e e e what hardship or hardships did the client encounter ls the hardship temporary or permanent has the hardship ended how many are there in the household if anyone is unemployed is temporary or permanent it how many months is the client behind has the client attempted a workout with the mortgage company has the client been able to resume making any mortgage payments has the client applied for a homeowner's exemption you do not your next step is signing the client into your counseling program sign a client whom you believe you cannot help your determination is based on the client's answers to the above questions you make sure that every client you but sign achievable you believe that a mortgage company looks favorably on a family with a completed or recently completed hardship a positive_income a budget and the ability to resume their mortgage the mitigation process is clear understanding that difficult has a according to your client contract you provide the following services on behalf of your client for a dollar amount the client pays at the time of the contract is signed however you did not provide the amount or how you determine how much a client pays the contract states you will e e e e contact the client's mortgage company and obtain information related to the nature and extent of the existing defaults in the client's mortgage loan obligations work with the client to attempt to fix the existing defaults in the client's mortgage loan obligations address how to cure the existing mortgage loan defaults with a representative of the client's mortgage company and attempt to formulate an acceptable resolution to avoid the foreclosure of the client's mortgage loan obtain on behalf of the client if necessary the legal representation of an attorney in the pending foreclosure case to keep apprised of the status of such legal action and to delay such legal action and if possible to provide time to negotiate a resolution by curing delinquencies the contract also addresses the client's obligations and rules including the following fully cooperate with you in your effort to seek the forbearance clients will agreement negotiate a repayment program or other agreement to terminate the foreclosure action clients must make available to you all documents needed for you to address issues towards a resolution of repairing a client's delinquent mortgage obligation if not timely you may withdraw and a client forfeits all fees the contract may be terminated by you in cases where the client fails to provide the requested documents in a timely manner without fee refund the client shall deposit funds in a designated account in an amount determined by the client’s loan arrearages for as long as you determine based on the client's when you financial situation the client controls and maintains the account have negotiated a settlement with the client's mortgage company the client agrees to pay the settlement amount directly to the mortgage company if a client does not cannot or will not deliver the funds to the mortgage company you have the right to withdraw representation without the refund of any fees to clients the client shall perform all other reasonable requests and or instructions from you necessary to cure the existing mortgage loan defaults and or a forbearance or repayment of some type of such arrearage the agreement requires clients to acknowledge and agree that failure to furnish any changes in their financial personal or economic situation information will constitute a breach of contract and cause the termination of the agreement upon the termination of the contract you will be relieved of all responsibility obligation to perform and any liability the fee paid_by the clients upfront will be moreover the agreement states if this agreement is terminated prior forfeited to the conclusion of servicer performance of any portion of the process the fee due shall be calculated based on actual time invested at about dollar_figure per hour you will provide your clients an introductory letter and a comprehensive checklist of documents they must sign the documents consist of the following e e e e an authorization of release of information to you which allows you to obtain information from the mortgage company a mortgage authorization release form which allows the mortgage holder to release information to you an agreement of agency your agreement with the client the notice of the three-day cancellation policy this states the client can cancel the agreement without any penalty within three days after signing it your brochure advertises that you are a mortgage mitigation specialist phrases in the brochure are as follows notable catch the lender does not want to take your home in fact when a lender has too many homes in foreclosure it limits their ability to borrow most of the time bankruptcy is not necessary we help you to reach an agreement to help you keep your home you did not explain how much you charge for your services however you do require an provide any services according to your upfront fee from the agreement your agreement indicates the clients may have an option to pay the fee in two installments within a certain period and the fee is not refundable clients before you you do not have a fee waiver policy for the people who cannot afford your fees currently your sole income source is from the fees you charge as you have not received any funding from governments or charities you stated you will apply for the grants but you did not provide any details or plans during the processing of your application you provided the following e e e the you only submitted an incomplete lease agreement for your office space agreement was between r and an unrelated landlord you did not provide any explanation or details as to how you decided to assume r's lease we requested board meeting minutes but you were unable to provide any your initial form_1023 only indicates k and l as board members you later identified h as your president ceo and j as your board member no information was submitted to show when or how they were appointed or who appointed them law sec_501 of the code provides that an organization described in sec_501 shall be exempt from taxation sec_501 of the code provides that corporations may be exempt from tax if they are organized and operated exclusively for charitable or educational_purposes and no part of their net_earnings inures to the benefit of any private_shareholder_or_individual sec_501 of the code provides that organizations which provide credit_counseling_services as a substantial purpose shall not be exempt from taxation under sec_501 unless they are described in sec_501 or sec_501 and they are organized and operated in accordance with the following requirements a the organization-- i provides credit_counseling_services tailored to the specific needs and circumstances of consumers i makes no loans to debtors other than loans with no fees or interest and does not negotiate the making of loans on behalf of debtors iii provides services for the purpose of improving a consumer's credit record credit history or credit rating only to the extent that such services are incidental to providing credit_counseling_services and iv does not charge any separately_stated fee for services for the purpose of improving any consumer's credit record credit history or credit rating b the organization does not refuse to provide credit_counseling_services to a consumer due to the inability of the consumer to pay the ineligibility of the consumer for debt management plan enrollment or the unwillingness of the consumer to enroll in a debt management plan c the organization establishes and implements a fee policy which-- i requires any fees charged to a consumer for services are reasonable ii allows for the waiver of fees if the consumer is unable to pay and law prohibits charging any fee iii except to the extent allowed by s based in whole or in part on a percentage of the consumer's debt the consumer's payments to be made pursuant to a debt management plan or the projected or actual savings to the consumer resulting from enrolling in a debt management plan d at all times the organization has a board_of directors or other governing body- i which is controlled by persons who represent the broad interests of the public such as public officials acting in their capacities as such persons having special knowledge or expertise in credit or financial education and community leaders ii not more than percent of the voting power of which is vested in benefit persons who are employed by financially directly or indirectly from the organization's activities other than through the receipt of reasonable directors' fees or the repayment of consumer debt to creditors other than the credit_counseling_organization or its affiliates and the organization or who will iii not more than percent of the voting power of which is vested in benefit persons who are employed by financially directly or indirectly from the organization's activities other than through the receipt of reasonable directors’ fees the organization or who will sec_501 defines for purposes of sec_501 the term credit_counseling_services to mean i the providing of educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit ii the assisting of individuals and families with financial a combination of the activities problems by providing them with counseling or described above iii sec_1_501_c_3_-1 of the income_tax regulations regulations provides that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the to meet either the purposes specified organizational_test or the operational_test it is not exempt an organization fails in such section if section organized organization c -1 b i of exclusively for one regulations the or more exempt purposes only provides that an organization its is articles of if a limit the purposes of such organization to one or more exempt purposes and b do not expressly empower the organization to engage otherwise than as an in activities that in themselves are not in insubstantial part of furtherance of one or more exempt purposes its activities sec_1_501_c_3_-1 of the regulations provides that an organization will be it engages regarded as operated exclusively for one or more exempt purposes only if primarily in activities that accomplish one or more of such exempt purposes specified in sec_501 of the code an organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose - c -1 c of the regulations provides that not section operated exclusively for one or more exempt purposes if its net_earnings inure in whole sec_1_501_a_-1 of or in part to the benefit of private shareholders or individuals the regulations defines the words private_shareholder_or_individual in sec_501 of the code to refer to persons having a personal and private interest in the activities of the organization an organization is sec_1_501_c_3_-1 of the regulations provides that an applicant organization is not organized or operated exclusively for one or more of the purposes specified in of this subparagraph unless it serves a public rather than a private subdivision i is necessary for an interest thus to meet the requirement of this subdivision it is not organized or operated for the benefit of private organization to establish that it interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_501_c_3_-1 of the regulations provides that the term educational as used in sec_501 of the code relates to a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community in revrul_69_441 1969_2_cb_115 the service found that a nonprofit organization formed to help reduce personal bankruptcy by informing the public on personal money management and aiding low-income individuals and families with financial problems was exempt under sec_501 of the code its board_of directors were comprised of representatives from religious organizations civic groups labor unions business groups and educational institutions the organization provided information to the public on budgeting buying practices and the sound use of consumer credit through the use of films speakers and publications it aided low-income individuals and families who have financial problems by providing them with individual counseling and if necessary by establishing budget plans under the budget plan the debtor voluntarily made fixed payments to the organization holding the funds in a_trust account and disbursing the funds on a partial payment basis to the the organization did not charge fees for counseling services or proration creditors the debtor received full credit against his debts for all amounts paid the services finally organization did not make loans to debtors or negotiate loans on their behalf the organization relied upon contributions primarily from the creditors participating in the organization's budget plans for its support the ruling found that by aiding low-income individuals and families who have financial problems and by providing without charge counseling as a means for the orderly discharge_of_indebtedness the organization was relieving the poor and distressed moreover by providing the public with information on budgeting buying practices and the organization was instructing the public on the sound use of consumer credit subjects useful to the individual and beneficial to the community thus the organization was exempt from federal_income_tax under sec_501 of the code the ruling compared this holding with the holding of revrul_65_299 which holds that a nonprofit organization formed to advise counsel and assist individuals in solving their financial difficulties by budgeting their income and expenses and effecting an orderly program for the payment of their obligations qualifies for exemption from federal_income_tax under sec_501 of the code rather than under sec_501 a number of outside the context of credit counseling individual counseling has in revrul_78_99 instances been held to be a tax exempt charitable activity c b free individual and group counseling of widows revrul_76_205 1976_1_cb_154 free counseling and english instruction for immigrants revrul_73_569 1973_2_cb_178 free counseling to pregnant women revrul_70_590 1970_2_cb_116 clinic to help users of mind-altering drugs revrul_70_640 1970_2_cb_117 free marriage counseling revrul_68_71 c b career planning education nominal charge through free vocational counseling overwhelmingly the counseling activities described in these rulings were provided free and the organizations were supported by contributions from the public publications sold and at a in 326_us_279 66_sct_112 90_led_67 the supreme court held that the presence of a single nonexempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes v commissioner 70_tc_352 the court found that a in b s w group inc corporation formed to provide consulting services did not satisfy the operational_test under sec_501 of the code because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for but rather profit not commercial it had not solicited nor had it resemble that of typical sec_501 organizations received voluntary contributions from the public its only source_of_income was fees from services and those fees were set high enough to recoup all projected costs and to moreover it did not appear that the corporation ever planned to produce a in addition the court found that the organization's financing did its primary purpose was not charitable educational or scientific profit finally the corporation did charge a fee less than cost organizations that were sec_501 exempt_organizations not limit its clientele to in consumer credit counseling service of alabama inc u s t c d d c the court held that an organization that provided free information on budgeting buying practices and the sound use of consumer credit qualified for exemption from income_tax because its activities were charitable and educational united_states v service agencies counseling these agencies of numerous credit the consumer credit counseling service of alabama is an umbrella organization made provided up information to the general_public through the use of speakers films and publications on the subjects of budgeting buying practices and the sound use of consumer credit they also provided counseling on budgeting and the appropriate use of consumer credit to debt-distressed individuals and families they did not limit these services to low-income individuals and families but they did provide such services free of charge as an adjunct approximately to the counseling function they offered a debt management plan percent of a professional counselor's time was applied to the debt management plan as opposed to education the agencies charged a nominal fee of up to dollar_figure per month for the debt management plan this fee was waived in instances when payment of the fee would work a financial hardship the professional counselors employed by the organizations spent about percent of their time in activities such as information dissemination and counseling assistance rather than those connected with the debt management programs the primary sources of revenue for these organizations were provided by government and private_foundation an grants contributions and assistance from labor agencies and the united way thus the court concluded incidental amount of their revenue was from service fees organization each described in sec_501 as a charitable and educational_organization see also credit counseling centers of oklahoma inc v united_states u s tax cas d d c in which the facts were virtually identical and the law was identical to united_states those in consumer credit counseling service of alabama inc discussed immediately above plaintiff consumer credit counseling agencies was an the of v in easter house v u s cl_ct affd 846_f2d_78 fed cir cert_denied 488_us_907 109_sct_257 102_led_246 the court found an organization that operated an adoption agency was not exempt under sec_501 of the code because a substantial purpose of the agency was a nonexempt commercial purpose the court concluded that the organization did not qualify for exemption under a sec_501 because its primary activity was placing children for adoption in the court manner indistinguishable from that rejected the organization's argument that the adoption services merely complemented the health related_services to unwed mothers and their children rather the court found that the health-related services were merely incident to the organization's operation of a commercial adoption agency of itself did not serve an exempt_purpose the an adoption service which in and of organization's sole source of support was the fees it charged adoptive parents rather than contributions from the public the court also found that the organization competed with for-profit adoption agencies engaged in substantial advertising and accumulated substantial profits accordingly the court found that the business_purpose and not the advancement of educational and charitable activities purpose of plaintiffs adoption the organization was not operated service was its primary goal exclusively for purposes described in sec_501 easter house cl_ct pincite- held that and in 950_f2d_365 the court_of_appeals upheld a tax_court decision that an organization operating restaurants and health food stores a manner consistent with the doctrines of the seventh day adventist church did not in qualify for exemption under sec_501 of the code because the organization was the court found that the operated for a substantial nonexempt commercial purpose organization's activities were presumptively commercial because the organization was in competition with other restaurants engaged in marketing and generally operated in a manner similar to commercial businesses in 283_fsupp2d_58 d d c the court relied on the commerciality doctrine in applying the operational_test because of the commercial manner in which this organization conducted its activities the court found that it was operated for a non-exempt commercial purpose rather than for a tax exempt_purpose as the court stated have major courts factors considered among the assessing commerciality are competition with for profit commercial entities extent and and degree of below cost services reasonableness of financial reserves additional factors include inter alia whether the organization uses commercial promotional methods eg advertising and the extent to which the organization receives charitable donations provided policies pricing in in solution plus inc v commissioner tcmemo_2008_21 the tax_court held that a credit_counseling_organization was not exempt under sec_501 because it was not organized and operated exclusively for educational or charitable purposes and the organization was formed by an individual impermissibly served private interests with experience selling debt management plans the founder and his spouse were the the organization did not have only member's of the organization’s board_of directors any meaningful educational program or materials for providing to people who contacted the organization and its financial education seminars for students constituted an insignificant part of the organization’s overall activities the court held that the organization's purposes were not educational because its enroll activities market determine eligibility primarily structured and are for to its purposes are not to inform consumers about understanding individuals in dmps _ the cause of and devising personal solutions to consumers’ financial problems or to consider the particular knowledge of individual callers about managing their personal finances the tax_court also held that the organization's purposes were not charitable a charitable_class that are because its potential customers are not members of because they will be turned away unless they benefited in meet the criteria of the participating creditors a 'non-select manner officer and employee the tax_court further held the organization would operate for the private interests of its founder because the founder and spouse were the only directors the founder was the the only the organization was a family-controlled organization's dmp sales activity levels business that he personally would run for financial gain using his past professional experience marketing dmps and managing a dmp call center the court further held that the organization’s principal activity of providing dmp services which were only provided if approved by a caller's creditors furthered the benefit of private interests his compensation was based part and on in finally the tax_court held that the facts in credit_counseling_services of alabama _v united_states u s t c d d c stand in stark contrast because the sale of dmps is the primary reason for solution plus's existence and its charitable and educational_purposes are at best minimal application of law sec_501 of the code sets forth two main tests for an organization to be recognized as exempt an organization must be both organized and operated exclusively for purposes described in sec_501 of the code and sec_1_501_c_3_-1 of the regulations you fail both tests organizational_test you do not meet the requirements in sec_1_501_c_3_-1 of the income_tax regulations your articles of incorporation state you are organized to e e provide foreclosure prevention and counseling services provide information and assistance to help avoid foreclosure help establish workable and responsible payment arrangements through debt management programs help educate individual clients as well as the community on the wise use of credit and money management because your purpose clause is too broad you are purposes described in the regulations not organized exclusively for e operational_test is to satisfy the c operational tests operated exclusively for one or more exempt purposes see sec_1_501_c_3_-1 of the regulations you failed to establish you are operated exclusively for one or more exempt purposes an organization must establish that it your activities are not educational purpose not described in sec_1_501_c_3_-1 of the your counseling activities are foreclosure regulations because the to gather financial preventions services for a fee information from potential clients to determine whether they are good candidates for your services moreover the terms concerning client obligations and responsibilities in your client contract substantiates that your counseling sessions are not an educational activity within the meaning of the regulations furthermore you do not the focus of your counseling is your counseling provide of to is e operate a substantive on-going educational program e dedicate any revenue to activities involving educational programs e allocate any expenses to training employees or provide training instruction therefore you have failed to demonstrate that your counseling sessions are designed the to c -1 d i of the regulations community within the meaning of section thus you are not operated exclusively for educational_purposes within the meaning of sec_501 of the code you are not like the organizations in consumer credit counseling service of alabama supra and revrul_69_441 for example beneficial individual useful and the to to e e the methods used in your counseling sessions are not structured to improve your clients’ understanding of their financial problems or their skills in solving them the purpose of your counseling sessions is to cure the existing defaults in the clients’ mortgage loan obligations you are similar to the organization in solution plus you did not provide evidence that you help clients develop an understanding of the cause of their financial problems or a plan to address their financial problems you provided no evidence that you intend to in fact you generally only establish long-term counseling relationships with your clients have one session in addition like the organization in the court case your efforts are focused on informing potential clients about your foreclosure prevention services and signing a contract with them rather than on conducting a meaningful educational program you have a substantial nonexempt commercial purpose you are not as described in sec_1_501_c_3_-1 of the regulations because you are primarily providing foreclosure prevention services in a commercial manner in fact you took over the operation of r your founder’s k business after it settled a complaint with the state attorney_general in addition you are staffed by the same counselors as r in addition the fact that you limit your services to those and using the same venue who are employed and screen you clients after finding out their ability to pay before agreeing to work with them illustrates your commercial intent moreover your fee structure demonstrates your commercial intent for example e you require a large upfront fee e you charge a high hourly rate of about dollar_figure e you have a stringent refund policy you are similar to the organizations in easter house supra airlie supra and living faith supra because you are operating like a for profit business furthermore your commercial intent is substantiated by the following provisions in your contract e e clients will fully cooperate with you in your effort to seek forbearance agreement negotiate a repayment program or other agreement to terminate the foreclosure action clients must make available to you all documents needed for you to address issues towards a resolution of repairing a client's delinquent mortgage obligation if not timely you may withdraw and a client forfeits all fees the contract may be terminated by you in cases where the client fails to provide the requested documents in a timely manner without any fee refund you are not like the organization described in consumer credit counseling service of alabama you are receiving your revenue primarily from service fees while these organizations relied on the bulk of their support from government and private_foundation grants contributions and assistance from labor agencies and the united way inurement private benefits you are not described in sec_1_501_c_3_-1 of the regulations because you are not operated exclusively for exempt purposes your net_earnings inure to the benefit of k and l this is indicated by the following e e you are taking over the operations of r which was the for profit business owned by your founder k and his wife l after r settled a lawsuit with the attorney_general you took over r’s lease agreement e kandlare budgeted to receive a salary of fifty thousand dollars and are your only employees in addition the current make up of your board indicates inurement because you did not present any evidence as to whether the new board members have been actively involved in your operations and participated in any major decisions you are similar to the organizations in nelson v commissioner and christian echoes national ministry inc v united_states because you have failed to show that you are operating exclusively for exempt purposes and not for the private interests of k and l sec_501 of the code an organization that provides educational information on financial topics or financial counseling to homeowners who are at risk of foreclosure is providing credit_counseling_services within the meaning of sec_501 of the code thus even if you had established that you engage in such activities as a substantial purpose to be exempt from taxation you must in addition to complying with the requirements of sec_501 comply with the provisions of sec_501 you do not comply with sec_501 of the code the code requires a credit_counseling_organization to provide credit_counseling_services tailored to the specific however your services only focus on the needs and circumstances of consumers mortgage mitigation services you actually limit your services to the people who have a high probability to succeed with your mortgage mitigation services this clearly indicates credit you have little therefore you counseling services to the consumers within the meaning of q failed to meet the requirement of sec_501 of the code no educational purpose or provide tailored intention or to the code you also do not comply with sec_501 and ii requires an exempt credit_counseling_organization to establish and implement a fee policy which requires that any fees charged to a consumer for services are reasonable and allows for the waiver of fees if the consumer is unable to pay however you did not show that you have a fee policy in your form_1023 application nor in your responses therefore you failed to meet the requirement of sec_501 of the code the initial form_1023 indicates that k and l will be compensated as your employees and it appears that they are the actual decision makers for your major organizational matters and operators of your day-to-day operations although you later added two new directors it appears that they were appointed by k and l you failed to provide any any involvement your board in decision making therefore your organizational matters or have any authority governing body does not comply with sec_501 that requires that at all times the organization must have a board_of directors or other governing body not more than percent of the voting power of which is vested in persons who are employed by minutes to show the new directors’ meeting had organization the organization's activities because two out financially from your operation or who will benefit financially directly or indirectly of four governing members will from the benefit had you established that you provide educational information on financial topics or risk of foreclosure as a substantial financial counseling to homeowners who are at purpose and that you otherwise met the requirements of sec_501 your failure to satisfy the requirements of sec_501 would prevent you from being exempt from taxation under sec_501 conclusion in summary you are not organized exclusively for exempt purposes because your articles do not limit your purposes to one or more exempt purposes you also fail the operational_test because you are not operated exclusively for educational or charitable purpose specifically you fail the operational_test for exemption under sec_501 of the code because your mortgage mitigation counseling services are commercial in in addition nature and you have the substantial private purpose of benefiting k and l you fail to qualify under sec_501 of the code because you compensate two of your governing members out of four and your mortgage mitigation counseling is not tailored to the individual client accordingly you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns contributions to you are not deductible under sec_170 a protest if you believe this determination is incorrect to you have the right to file protest you must submit a statement of your views and fully explain your reasoning you must submit the statement signed by one of your officers within days from the date of this letter we will consider your statement and decide if the information affects if your statement does not provide a basis to reconsider our our determination you can find more determination we will forward your case to our appeals_office information about the role of the appeals_office in publication exempt_organization appeal procedures for unagreed issues types of information that should be included in your appeal can be found on page of the statement of facts publication under the heading regional_office appeal’ item must be accompanied by the following declaration declare that have examined the statement of facts under penalties of perjury presented in this appeal and in any accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete the declaration must be signed by an officer or trustee of the organization who has personal knowledge of the facts your appeal will be considered incomplete without this statement if an organization’s representative submits the appeal a substitute declaration must be the representative prepared the appeal and accompanying included stating documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct that an attorney certified_public_accountant or an individual enrolled to practice before the if you want internal_revenue_service may represent you during the appeal process a proper power_of_attorney representation during the appeal process you must file form_2848 power_of_attorney and declaration of representative if you have not you can find more information about representation in publication already done so all forms and publications practice_before_the_irs and power_of_attorney mentioned in this letter can be found at www irs gov forms and publications if you do not file a protest within days you will not be able to file a suit for declaratory_judgment in court because the internal_revenue_service irs will consider the failure code section to appeal as a failure to exhaust available administrative remedies b provides in part that a declaratory_judgment or decree shall not be issued in any proceeding unless the tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia determines that the it organization involved has exhausted all within the irs of the administrative remedies available to if you do not intend to protest this determination you do not need to take any further if we do not hear from you within days we will issue a final adverse action determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address mail to deliver to internal_revenue_service eo determinations quality assurance room p o box cincinnati oh if you may fax your statement using the fax number shown in the heading of this letter you fax your statement please call the person identified in the heading of this letter to confirm that he or she received your fax internal_revenue_service eo determinations quality assurance main street room cincinnati oh if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely lois g lerner director exempt_organizations enclosure publication


internal_revenue_service p o box cincinnati oh number release date date date department of the treasury employer_identification_number contact person - id number contact telephone numbers phone fax eo legend uil x name of foundation y name of grant-making program z name of state x dollar amount range dear we have considered your request for advance approval of your grant-making program under sec_4945 of the internal_revenue_code dated date our records indicate that x was recognized as exempt from federal_income_tax under sec_501 of the code and that it is classified as a private_foundation as defined in sec_509 your letter indicates that x will operate a grant-making program called y the purpose of the program is to provide high school classroom teachers early in their careers with opportunities for growth and development with the goal of strengthening commitment to interest in and effectiveness of public school classroom teaching y was established to award up to grant awards in amounts of x to school districts in z to allow public high school classroom teachers to have learning experiences to enhance their effectiveness as teachers the number of awards may be increased if the program proves effective awards are given to public high schools or school districts to be used for the benefit of public high school teachers in the first five years of their careers nominated by their principals who submit letters describing a proposed learning experience that the award would allow them to pursue to enhance their effectiveness as teachers no disqualified persons of x including members of the selection committee x’s officers directors and substantial contributors or members of their families are eligible for awards under the program invitations to participate in the program will be sent to the principal of each senior high school in z the principal will be asked to return a postcard indicating whether or not the school intends to nominate a qualified teacher principals who elect to participate shall nominate a teacher candidate at his or her school in the first five years of his or her career who lays out a proposed learning experience who the principal deems will most benefit and who is most worthy of the award the principal and the teacher candidate will then submit two letters of up to two pages in length to x one from the principal that addresses who the candidate is and why he or she is recommended and one from the candidate explaining the learning experience he or she wants to pursue and why including a proposed budget x will appoint a selection committee composed of an experienced public high school principal an experienced public school teacher and an experienced higher education educator the selection committee is assigned the task of selecting up to applicants that they believe best fit the purposes of the program in making their selection they take the following into consideration e e the feasibility of the proposed project being carried out as described the likelihood that the project will contribute to the teaching effectiveness of the candidate e the likelihood that the project will encourage the candidate to remain in a teaching career and e the reasonableness of the dollar cost to complete the proposed project after individual selection committee members have formed a preliminary judgment on each application the entire committee will meet as a group to discuss their findings and make the final selection of applicants to receive awards if the selection committee believes there should be an adjustment to a proposed project budget they may make such changes within the limitation of the program’s guidelines the list of awardees will be forwarded to x and the board_of directors will formally approve the recommended awards x will send an award letter to each successful candidate and his or her principal a formal grant agreement will be signed by the appropriate_official in each school or school district indicating that the funds will be used as described in the project proposal the awardees will sign a letter indicating they agree to carry out the project as described in the proposal and submit a final report on their experience unsuccessful applicants will receive a letter informing them of their outcome and thanking them for participating x will send award checks to the schools or school districts of the chosen award recipients for the purpose of supporting that award recipient in completing his or her submitted teacher experience x may also organize a celebration luncheon at which teachers and principals will be recognized within one year after the grant of the award each teacher selected and his or her principal will provide a letter reporting on the use of the awarded funds in accordance will the letters submitted and the benefits gained from the supported activities the school or school district will make the funds available to the chosen teachers and ensure that the funds are expended for the purposes described in the teachers’ proposals x may also conduct follow-up inquiries after two or more years regarding the effectiveness of the program x will maintain case histories showing recipients of each award including the name of the recipient school district and the teacher to be supported addresses purpose and amount of award x represents that it will maintain all records relating to individual grants including information obtained to evaluate grantees and to identify whether a grantee is a disqualified_person x represents that it will i arrange to receive and review grantee reports annually and upon completion of the purpose for which the grant was awarded ii investigate diversions of funds from their intended purposes to ensure grant funds held by a grantee are used for their intended purposes and iii take all reasonable and appropriate steps to recover diverted funds sec_4945 and b of the code impose certain excise_taxes on taxable_expenditures made by a private_foundation sec_4945 of the code provides that the term taxable_expenditure means any amount_paid or incurred by a private_foundation as a grant to an individual for travel study or other similar purposes by such individual unless such grant satisfies the requirements of subsection g sec_4945 of the code provides that sec_4945 shall not apply to individual grants awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance if it is demonstrated that the grant constitutes a scholarship or fellowship_grant which is subject_to the provisions of sec_117 and is to be used for study at an educational_organization described in sec_170 gi the grant constitutes a prize or award which is subject_to the provisions of sec_74 if the recipient of such prize or award is selected from the general_public or the purpose of the grant is to achieve a specific objective produce a report or similar product or improve or enhance a literary artistic musical scientific teaching or other similar capacity skill or talent of the grantee sec_53_4945-4 of the regulations provides that to secure approval a private_foundation must demonstrate that i its grant procedure includes an objective and nondiscriminatory selection process ii such procedure is reasonably calculated to result in performance by grantees of the activities that the grants are intended to finance and iii the foundation plans to obtain reports to determine whether the grantees performed activities that the grants are intended to finance based on the information submitted and assuming your award programs will be conducted as proposed with a view to provide objectivity and nondiscrimination in making the awards we have determined that your procedures for granting the awards comply with the requirements contained in sec_4945 of the code and that awards granted in accordance with such procedures will not constitute taxable_expenditures within the meaning of sec_4945 this determination is conditioned on the understanding that there will be no material_change in the facts upon which it is based it is further conditioned on the premise that no grants will be awarded to foundation managers or members of the selection committee or for a purpose that is inconsistent with the purpose described in sec_170 of the code the approval of your award program procedures herein constitutes a one-time approval of your system standards and procedures designed to result in awards which meet the requirements of sec_4945 of the code this determination only covers the grant programs described above thus approval shall apply to subsequent award programs only as long as the standards and procedures under which they are conducted do not differ materially from those described in your request we have not considered whether grants made under your procedures are excludable from the gross_income of recipients under sec_117 of the code any funds you distribute to individuals must be made on a true charitable basis in furtherance of the purposes for which you are organized therefore you should maintain adequate_records and case histories so that any or all award distributions can be substantiated upon request by the internal_revenue_service this determination is directed only to the organization that requested it sec_6110 of the code provides that it may not be used or cited as a precedent you must report any future changes in your grant making procedures please keep a copy of this letter in your permanent records we have sent a copy of this letter to your representative as indicated in your power_of_attorney if you have any questions please contact the person whose name and telephone number are shown above sincerely yours robert choi director exempt_organizations rulings and agreements


id office uilc cca-868430-08 number release date from ------------------- sent wednesday august am to ------------------ cc --------------------------------------------------------------------------------------------------------------------------- ------------------------- subject re quick tefra question sec_6233 only applies if a partnership return is filed if no partnership return is filed and there is no partnership then the tefra procedures do not apply we would just issue a notice_of_deficiency to the taxpayer containing whatever adjustment we determine appropriate we would not create a substitute for return for a non-existent entity


internal_revenue_service number release date index numbers ----------------------------------------------- -------------------------------------- ------------------------------ -------------------- ---------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- id no ------------ telephone number -------------------- refer reply to cc corp b03 plr-126517-08 date date legend parent ---------------------------------------------------------------------------- ------------------------------------------------------------------- -------------------------------------- sub --------------------------------- ------------------------------- ------------------------------------------------------------------- sub --------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------- llc -------------------------------------------------------------------------------------------- ------------------------------------------ offering --------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------- --------------------------------------- offering ------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------ state x date ------------ ----------------------- plr-126517-08 a b c d e f --------------- ---------------- ------------------- ------------------- ---------------- ------------------------------------ dear ---------------- we respond to your representative’s letter dated date requesting rulings as to the federal_income_tax consequences of a transaction additional information was submitted in a letter dated date the information submitted is summarized below the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for rulings verification of the information representations and other data may be required as part of the audit process statement of facts parent is a publicly-traded holding_company which is the common parent of a consolidated_group parent a state x corporation owns all of the stock of sub and sub owns all of the stock of sub both sub and sub are state x corporations and members of parent’s consolidated_group sub owns all of the stock of llc llc is an entity disregarded from its owner sub for federal_income_tax purposes on date parent made two public offerings of securities offering and offering offering and offering may be referred to as the offerings parent paid an underwriting fee of dollar_figurea for offering and dollar_figureb for offering the net_proceeds were dollar_figurec from offering and dollar_figured from offering llc underwrote the offerings and received an aggregate fee of dollar_figuree aggregate underwriting fee for providing these services dollar_figurea plus dollar_figureb llc incurred certain expenses in providing the underwriting services of dollar_figuref underwriting expenses when the dollar_figuref underwriting expenses were netted against the dollar_figuree aggregate underwriting fee llc realized a net profit net underwriting profit the net_proceeds of the offerings were used for general corporate purposes plr-126517-08 applicable law sec_1_1502-13 provides that the attributes of an intercompany_item or corresponding_item are all of the item's characteristics except amount location and timing necessary to determine the item's effect on taxable_income and tax_liability attributes include treatment as excluded from gross_income or as a noncapital nondeductible amount sec_1_1502-13 provides that the separate_entity attributes of s's the member transferring property or providing services intercompany items and b's the member receiving the property or services corresponding items are redetermined to the extent necessary to produce the same effect on consolidated_taxable_income and consolidated_tax_liability as if s and b were divisions of a single corporation and the intercompany_transaction were a transaction between divisions sec_1_1502-13 provides that under sec_1_1502-13 s's intercompany_item might be redetermined to be excluded from gross_income or treated as a noncapital nondeductible amount ruling based solely on the information submitted and representations made we rule as follows the aggregate underwriting fee incurred by parent in the offerings is not deductible or amortizable now or in the future accordingly the net underwriting profit will be redetermined to be excluded from sub 1’s gross_income under sec_1 c i of the income_tax regulations and will have no effect on the consolidated_taxable_income of parent’s consolidated_group sec_1_1502-13 caveat we express no opinion about the tax treatment of any transaction described above under other provisions of the code and regulations or the tax treatment of any condition existing at the time of or effect resulting from any of these transactions that is not specifically covered by the above rulings procedural statements this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent a copy of this ruling letter must be attached to the federal_income_tax return of the parent consolidated_group for the taxable_year in which the transaction covered by plr-126517-08 this letter is consummated alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their returns that provides the date and control number of the letter_ruling pursuant to the power_of_attorney on file in this office copies of this letter are being sent to parent’s authorized representatives sincerely ken cohen senior technician reviewer branch office of associate chief_counsel corporate cc


department of the treasury internal_revenue_service dec uniform issue list setier ractsr cole ees legend taxpayer a ira x date credit_union b oear amount a amount b credit_union b account dollar_figure this is in response to a letter dated date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the cade taxpayer a age asserts that on date he met with representative z of credit_union b taxpayer a asserts that his failure to accomplish a rollover of amount b was due to the error of a representative of credit_union in filling out the wrong form and in failing to follow taxpayer 4’s instructions the following facts and representations have been submitted under penalty of perjury in support of the ruling requested to discuss his annual required_minimum_distribution from ira x page on date taxpayer a visited credit_union b to request his annual required_minimum_distribution from ira x the representative of credit_union b financial representative z prepared papers for taxpayer a to sign which were intended to be an election to withdraw taxpayer 4’s calendar_year distribution from ira x however credit_union b’s representative mistakenly prepared an authorization for an asset withdrawal and transfer as a result amount a the required_minimum_distribution amount was distributed to taxpayer a and amount b the remainder of ira x was transferred to credit_union b account s a non-ira savings account taxpayer a received his first quarterly statement from that account shortly after the end of the day period taxpayer a immediately returned to credit_union b and attempted to correct the error but credit_union b refused to do so taxpayer a returned and spoke to another representative of credit_union b who referred taxpayer a to the service taxpayer a has not used amount b for any other purpose required minimum based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount b contained in sec_408 of the code the code sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 e of the code provides that the rollover provisions of sec_408 do not apply to any amount required fo be distributed under sec_408 a sec_408 a of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or i the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 page sec_408 b of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira ff at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 d3 a i from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the cade where the failure to waive such requirement would be against equity ar good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with taxpayer a's assertion that his failure to accomplish a rollover of amount b was due to the failure of credit_union b's representative z to follow taxpayer a’s instructions therefore pursuant to sec_408 i of the code the service hereby waives the 60-day roflover requirement with respect to the distribution of amount b from ira x pursuant to this ruling letter taxpayer a is granted a period of days measured from the date of the issuance of this letter_ruling to make a roltover contribution of an amount equal to amount b to an ira or iras described in code sec_408 provided ail other requirements of code sec_408 except the 60-day requirement are met with respect to such page ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 please note that pursuant to code sec_408 this ruling letter does not authorize the rollover of the code sec_401 minimum required distributions no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 kx3 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact xxx please address all correspondence to ‘se-t ep ra t3 sincerely yours employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose