tax_exempt_and_government_entities_division number release date legend org organization name org address department of the treasury internal_revenue_service tege eo examinations mail stop dal commerce st dallas texas date date dil dollar_figure xx date address address taxpayer_identification_number person to contact employee identification_number employee telephone number phone fax last date for filing a pleading with the tax_court the claims_court or the united_states district_court for the district of columbia certified mail dear this is a final adverse determination regarding your exempt status under section dollar_figure c of the internal_revenue_code the code our favorable determination_letter to you dated february 20xx is hereby revoked and you are no longer exempt under sec_501 of the code effective january 20xx the revocation of your exempt status was made for the following reason s you have failed to produce documents to establish that you are organized and operated exclusively for exempt purpases within the meaning of internal_revenue_code section dollar_figure c and that no part of your net_earnings inure to the benefit of private shareholders or individuals you failed to respond or cooperate with repeated reasonable requests to allow the intern revenue service to examine your records regarding your receipts expenditures or activities as required by ilr c sec_6001 sec_6033 a and rey rul 1959_1_cb_627 organizations are not operated exclusively for exempt purposes if the net earings of the organization inure in whole or in part to the benefit of private shareholders or individuals of the organization see treas reg sec_1_501_c_3_-1 during the years 20xx and 20xx we have determined that the organization was operated for a substantial non-exempt purpose of serving the private interests of the foundation's creators as such you have not operated exclusively for exempt purposes and have operated for the benefit of private interests of individuals in contravention of the requirements of sec_1_501_c_3_-1 i contributions to your organization are no longer deductible under sec_170 after january 20xx you are required to file income_tax returns on form_1041 u s income_tax return these returns should be filed with the appropriate service_center for the ‘for estates and trusts tax_year ending december 20xx and for all tax years thereafter in accordance with the instructions of the return form_990 pf is required for each year until private_foundation_status is terminated under sec_507 processing of income_tax returns and assessments of any taxes due will not be delayed should a petition for declaratory_judgment be filed under sec_7428 of the internal_revenue_code if you decide to contest this determination under the declaratory_judgment provisions of sec_7428 of the code a petition to the united_states tax_court the united_states claims_court or the district_court of the united_states for the district of columbia must be filed before the day after the date this determination was mailed to you please contact the clerk of the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication you may write to the united_states tax_court at the following address ‘you also 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 see the enclosed publication taxpayer_advocate_service - your voice at the irs for taxpayer_advocate telephone numbers and addresses we will notify the appropriate state officials of this action as required by code sec_6104 ‘you should contact your state officials if you have any questions about how this final_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 douglas shulman commissioner by vicki hansen acting director eo examinations enclosures publication publication notice tax exempt and org address department of the treasury intornal revenue service te_ge eo examinations commerce street dallas tx date taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - retum receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 c x3 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter ifyou 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 wil 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 intemal revenue service irs decision publication also includes information on your rights as a taxpayer and you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice the irs collection process letter aiciog number tf 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 ar 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 interna 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 c 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 pracess 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 tollttee 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 marsha a ramirez director exempt_organizations enclosures publication publication report of examination letter catalog number 24808f explanation of items form name of taxpayer org schedule or exhibit no year ended 20x12 20xx 20xx legend org organization name state founder ra ra trustee trustee xx date address address manager manager hs-1 hs-1 founders founders com1 company city city xyz founder issues whether the org continues to qualify for exemption from federal_income_tax as an organization described under sec_501 c of the internal_revenue_code within the meaning of sec_509 facts the org hereinafter referred as eo exempt_organization was created on november 20xx in city xyz with a_trust agreement between the co-1 of city xyz founder and founder and trustee as the trustees according to form_1023 application_for recognition of exemption dated jamuary 20xx the teust was organized and would operate exclusively for religious charitable educational scientific and literary purposes the trust would be classified as a private_foundation and planned to be a grant-making trust the trust would make grants to other sec_501 c organizations classified as public_charities for religious educational scientific and literary purposes the trust would develop operating procedures to assure that it adhered to the rules of the sec_4941 sec_4942 sec_4943 sec_4944 and sec_4945 as applicable to private_foundations the foundation would be funded by its creators founder and trustee the organization's sources of financial support were going to be coming from donations from the charitable_trust creator sec_90 and investment_income the use of office space and equipment was going to be donated by the founders a collection of coins donated by founder and trustee was also shown on form_1023 as follows department of the treasury - internal revenue sorvice form 886-a explanation of items form name of taxpayer org year ended 20xx12 20xx 20xx schedule or exhibitne fair_market_value in december number type of coins __ denomination _of coins__20xx gold gold gold silver grand total the org was determined exempt from federal_income_tax under sec_501 described in sec_501 of the internal_revenue_code according to determination_letter dated february 20xx total according to 990-pe for the tax years ending december 20xx and 20xx the eo owns a rv vehicle and a pop-up trailer search showed nevertheless that several other vehicles are listed in xyz and xyz under the org’s name see exhibit a there was no evidence provided by the org to support the need of having these types of vehicles to accomplish its ‘exempt purpose on june 20xx founders purchased real_property consisting of a residence and acres of land in city xyz from hs-1 and received evidence of title by a warranty deed with vendor's lien the following day the founders transferred the property to the org using a cash warranty deed that included an assumption of encumbrances on the property the organization’ s 20xx fotm 990-pf return of private_foundation lists the property as a depreciable asset and includes a liability described as note payable home loan corp the case file documents that the founders use this property as their personal_residence no rental income is reported on the forms 990-pf the eo checked no on part vii-b line i a of the 20xx form_990-pf which asks if during the year the organization engage d in the sale_or_exchange of property with a disqualified_person the maintenance and utility bills of this property have been paid with eo resources according to 990-pfs on record the eq was contacted in february 20xx by a revenue_agent from xyz the eo tequested the audit to be moved to city xyz since according to founder his case was very complicated and the books_and_records were too voluminous his request was granted and the case was transferred to a revenue_agent in city xyz an appointment was scheduled for the eo on october 20xx and mailed out to the bo department of the treasury - internal_revenue_service -2- form form 886-a name of taxpayer org explanation of items ‘schedule or eenbitne year ended 20xx12 20xx 20xx accompanying the letter of appointment were publication your taxpayer rights and an idr information_document_request founder called the agent requesting additional time since as per founder the case was very complicated and the books_and_records were too voluminous a new date was granted as per founder’s request the internal_revenue_service requested in letters dated october october and october 20xx the eo to provide books_and_records for examination to verify the correctness of income or gross_receipts deductions and credits and to determine that the organization is operating in the manner stated and for the purpose set forth in its application_for recognition of exemption for the tax periods ending december 20xx and 20xx the org replied to these letters each time by asking for additional time refusing to have the examination at the eo's site and complaining that the irs was contacting him by phone instead of exclusively in writing xyz also present at the examination were ra revenue_agent and a new appointment was granted as per founder’s request which he confirmed by telephone to the ra despite his previous specific request not to have any phone contact with the irs on november 20xx pincite founder and trustee appeared for the examination at the irs location in manager manager as per founder’s request they were allowed to voice record the interview and brought two recorders the irs also hada recorder as soon as the interview started founder presented a public servant questionnaire see exhibit b to the agent and manager to fill out for him before any questions asked this questionnaire is a page document that contains personal information questions the irs personnel refused to complete the questionnaire until irs attorneys approve on it founder decided not to provide any information other than his name and chose to terminate the examination at that point the service noted that when the founders came into the office contrary to what founder had previous stated regarding voluminous books_and_records they were only cartying one small briefcase with a couple of vanilla folders inside summons for the eo’s books_and_records were served on december 20xx requiring the founders as trustees to appear at the city pod on january 20xx pincite and respectively and produce the organization’s books_and_records as described in the summons at their appearance this site was chosen because it was closer to the eo’s physical address when personnel from the service and the city sheriff's department attempted to personally serve the summons at the address property founder indicated by telephone he would come to the gate but then failed to appear service was obtained through the founders post-office box and certificates of service returned the founders failed to appear at the designated time and place nor have the founders produced any of the requested books_and_records these actions show the org’s unwillingness to cooperate with the service_department of the treasury - internal_revenue_service -3- form 886-a form name of taxpayer org explanation of items ‘schedule or exhibit no ‘year ended 20xx12 20xx 20xx on november 20xx the organization was sent a letter together with form sec_872 consent to extend the time to assess tax asking for consent to extend the statute_of_limitations on the 20xx form_990-pf for the organization and both founders a signed certified mail receipt was received back but the signed forms were never returned a letter and form sec_872 applicable to the founder 20xx form 1040s was mailed separately to both trustee and founder by certified mail but the packages were returned as unclaimed there is no evidence that the foundation made the required qualifying distributions at the time prescribed as the books_and_records were not provided for years ending on december 20xx 20xx and 20xx up to the date of this report no bo books_or_records have been produced nor has the eo provided responses to any irs requests for information law record keeping requirements sec_6001 of the code provides that every person liable for any_tax imposed by the code or for the collection thereof shall keep adequate_records as the secretary_of_the_treasury or_his_delegate may from time to time prescribe sec_6033 of the code provides except as provided in sec_6033 every organization exempt from tax under sec_501 shall file an annual return stating specifically the items of gross_income receipts and disbursements and such other information for the purposes of catrying out the internal revenue laws as the secretary may by forms or regulations prescribe and keep such records render under oath such statements make such other returns and comply with such rules and regulations as the secretary may from time to time prescribe sec_1 6001-i a of the regulations in conjunction with sec_1_6001-1 provides that every organization exempt from tax under sec_501 of the code and subject_to the tax imposed by sec_511 on its unrelated_business_income must keep such permanent books or accounts or records including inventories as are sufficient to establish the amount of gross_income deduction credits or other matters required to be shown by such person in any return of such tax such organization shall also keep such books_and_records as are required to substantiate the information required by sec_6033 sec_1_6001-1 states that the books_or_records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law dapariment of the treasury - internal_revenue_service -4- form 886-a explanation of items form name of taxpayer org year ended 20xx12 20xx 20xx schedule or exhibit no treas reg i provides that every organization which has established its right to exemption from tax whether or not it is required to file an annual return of ioformation shall submit such additional information as may be requited by the district_director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter_f sec_501 and the following chapter of the code and lr c sec_6033 revrul_59_95 1959_1_cb_627 concems an exempt_organization that was requested to produce a financial statement and statement of its operations for a certain year however its records were so incomplete that the organization was unable to furnish such statements the service held that the failure or inability to file the required information_return or otherwise to comply with the provisions of sec_6033 of the code and the regulations which implement it may result in the termination of the exempt status of an organization previously held exempt on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status in accordance with the above cited provisions of the code and regulations under sec_6001 and sec_6033 organizations recognized as exempt ftom federal_income_tax must meet certain reporting requirements these requirements relate to the filing of a complete and accurate annual information and other required federal tax forms and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted tax-exempt status and fo determine its liability for any unrelated_business_income_tax exclusively exempt purposes required sec_501 exempts from federal_income_tax fand or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or for the prevention of cruelty to children or animals no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual so substantial part of the activities of which is carrying on propaganda or atherwise attempting to influence legislation and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of any candidate for public_office corporations and any community chest regulation sec_1 c -1 c provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more 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 regulation sec_1_501_c_3_-1 provides that an organization is not operated exclusively for department of the treasury - internal_revenue_service -5- form form 886-a name of taxpayer org explanation of items schedule or eehibitne year ended 20xx12 20xx 20xx ‘one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals the words private_shareholder_or_individual refer to persons having a personal and private interest io the activities of the organization regulation sec_1 -1 i provides 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 to meet the requirement of this subdivision it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests in revrul_67_5 1967_1_cb_123 it was held that a foundation controlled by the creator's family was operated to enable the creator and his family to engage in financial activities which were beneficial to them but detrimental fo the foundation operated for a substantial non-exempt purpose and served the private interests of the creator and his family therefore the foundation was not entitled to exemption from federal_income_tax under sec_501 it was further held that the foundation was revproc_90_27 1990_1_cb_514 date provides that a ruling or determination_letter recognizing exemption may be revoked or modified by a notice to the trust to whom the ruling or determination_letter originally was issued enactment of legislation or ratification of a tax_treaty a decision of the united_states supreme court issuance of temporary or final regulations or issuance of a revenue_ruling revenue_procedure or other statement published in the intermal revenue bulletin the revocation or modification may be retroactive if the organization omitted or misstated a material fact gperated in a manner materially different from that originally represented ot in the case of organizations to which sec_503 applies engage in a probibited transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction volved a substantial part of the corpus or income of such organization where there is a material_change inconsistent with exemption in the character the purpose or the method of operation of an organization revocation or modification will ordinarily take effect as of in cases where a ruling or determination_letter was issued in error the date of such material_change or is na longer in accord with the holding of the service when sec_7805 relief is granted see sec_15 and of rev_proc retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination_letter is modified or revoked government’s position in accordance with the foregoing it is therefore recommended that the exempt status of the org be revoked effective january 20xx department of the treasury - internal_revenue_service -6- form 886-a form name of taxpayer org explanation of items schedule or eenwtne year ended 20xx12 20xx 20xx itis the irs's position that the organization failed to meet the reporting requirements under sec_6001 and sec_6033 to be recognized as exempt from federal_income_tax under dollar_figure c of the internal_revenue_code the organization failed to respond to repeated reasonable requests to provide evidence to support the form_990-pf and consequently failed to provide evidence of exempt_activities to warrant its exemption founder exec trustee and trustee secretary trustee are using the exempt_organization assets for private benefit there was no evidence presented to justify the use of real_property and recreational vehicles acquired by the organization to serve exempt purposes which include the making of distributions to organizations that qualify as exempt_organizations under sec_501 of the internal_revenue_code the eo’s level of private benefit rises to a more than insubstantial level and the private benefit is ongoing the courts have found that when an organization operates for the benefit of private interests such as designated individuals the creator or his family or persons directly or indirectly controlled by such private interests the organization by definition is not organized and does not operate exclusively for exempt purposes taxpayer's position we bave not obtained the taxpayer's position due to exempt organization's unwillingness to cooperate and provide any information or documentation for the examination conclusion the org does not qualify for exemption from federal_income_tax as an organization described under sec_501 of the internal_revenue_code within the meaning of sec_509 a the organization failed to provide evidence to substantiate its exempt_activities as required by lr c sec_6001 and sec_6033 and does not operate exclusively for exempt pumposes the organization’s exempt status should be revoked effective to january 20xx the effect of this determination will be that the org is required to file form_1041 u s income_tax return for estates and trusts should be filed for tax years ending december 20xx 20xx 20xx and 20xx subsequent returns are due no later than day of the month following the close of the trust's accounting_period form_990-pf return should also be filed for the tax period ending december 20xx note form_990-pf is required for each year until private_foundation_status is terminated under irc department of the treasury - intemal revenue service -t- form 886-a form explanation of items name of taxpayer org schedule or exhibit no year ended 20xx12 20xx 20xx sec_507 department of the treasury - internal_revenue_service form