department of the treasury internal_revenue_service washington d c governme nt entities divesion release number release date date date uil code contact person identification_number contact number employer_identification_number form required to be filed tax years 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_failure_to_file the returns timely may result in a file the returns in accordance with their 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 instructions in notice action if you agree with our deletions you do not need to take any further if you disagree with our proposed deletions follow the 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 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 in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely robert choi director exempt_organizations rulings agreements enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division date date uil code dear contact person identification_number contact number fax number employer_identification_number we have considered your application_for recognition of exemption from federal_income_tax under sec_501 of the internal_revenue_code code based on the information provided we have concluded that you do not qualify for exemption under sec_501 the basis for our conclusion is set forth below facts you were formed in as a nonprofit corporation under state law your articles of incorporation state that your purposes include to improve the quality of health care available to consumers by initiating breakthrough improvements in safety and the value of health care and to provide tools information and support to patients and other purchasers of health care services you were founded by large corporations and large healthcare insurance_companies the large corporations made initial capital contributions totaling dollar_figure and the healthcare insurance_companies made initial capital contributions totaling dollar_figure million your certificate of incorporation states that you are managed by a governance committee the rules by which the governance committee operates are included in your bylaws currently your governance committee consists of persons of whom are appointed by your participating large corporations employer members and your participating large healthcare insurance_companies health plan members’ collectively members’ in your application_for exemption you state that your primary goals are to adopt from existing sources a set of standardized performance measures of quality and efficiency for hospitals and physicians aggregate available data to produce detailed provider performance data to measure quality and efficiency at the hospital and patient level make provider performance data available to employees and members of participating employers and health_plans and to the general_public and support efforts to create a patient-driven market for open and accessible information about hospital and physician performance your first priority is to promote the adoption of standardized performance measures of healthcare quality and efficiency your focus is on transparency so that healthcare recipients can easily access information on quality and cost needed to compare and select doctors hospitals and treatment options you will consolidate manage and process healthcare data collected from your employer members and your health plan members once processed the resulting aggregate data may be used to rank the quality and efficiency of healthcare providers you state that your members will submit claims data on approximately million individuals you will aggregate and manipulate the data in a data warehouse a repository from which provider performance will be measured you state that your members may make the health care provider performance data available to individual consumers although you do not and cannot require your members to do so the health plan members will decide how to use the data to develop new health plan products networks services and provider performance enhancement programs you state that your health plan members may make the data broadly available to all their interested enrollees and clients you state that the data will be used to develop better healthcare and better standards for measurement you state that you expect to collect data on up to percent of the physicians and percent of the hospitals in the united_states you state that as your programs develop you will make information regarding your approach to improving the cost and efficiency of health care more widely available to the general_public you have contracted with various vendors to purchase information_technology services metrics for data analysis project management data aggregation and oversight and strategy you receive all your revenues from your employer members and your health plan members consisting of two components initial membership dues and monthly support payments you have entered into agreements data use and confidentiality agreements with your employer members under which each employer member will pay annual membership dues of dollar_figure per year dollar_figure per year for employer members who join in also entered into agreements funding agreements with health plan members under which each health plan member will pay a one-time membership fee of dollar_figure additionally employer members and health plan members will make monthly support payments the amount of which is based on a series of formulas that take into account the number of covered lives each member contributes to your database you have currently you have employer members and health plan members the annual membership dues and monthly support payments your members have made and are expected to make are kek kink eh actual actual estimated employer members dollar_figure keke koe dollar_figure ek kkk kik health plan members spezeireh wee ee iialaialialalal total we weak kak ke kk kk kkk kik dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure kkk kee your members receive similar benefits which include the opportunity to e e e e participate in a focused public policy message supporting the concepts of data release and provider performance transparency participate in quarterly membership updates and annual meetings and network with the other employer members and health plan members and provide input into your activities and participate on your committees your employer members receive summary-level results from the data aggregation process and your health plan members receive detailed line-item claims data which they can use to perform in-depth analysis of the results you state that you plan to provide the results of your findings to your employer members which will provide these results to their respective employees your health plan members which will provide these results to their respective enrollees and the general_public through a website and or publications you state that once you obtain a sufficient level of data aggregation and achieve the requisite credibility threshold you plan to release these data to the public on a website either directly or in partnership with another tax-exempt_organization active in the health care provider environment you state that your governance board has approved the development of a website through which the results of your provider performance data will be made available to the general_public in addition you expect but cannot require your health plan members to use the results to educate physicians and hospitals about the quality and efficiency of their performance you state that you have not yet reached the stage where your data meets the high threshold of credibility that you require prior to a broad release of your results law sec_501 of the code provides that for an organization to be described in sec_501 it must be organized and operated exclusively for exempt purposes including charitable scientific and educational_purposes sec_1_501_c_3_-1 of the income_tax regulations regulations states that an organization will be regarded as operated exclusively for one or more exempt purposes onlly 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 sec_1_501_c_3_-1 of the regulations states that an organization is not organized or operated exclusively for one or more tax-exempt purposes unless it serves a public rather than a private interest to meet this requirement an organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_501_c_3_-1 of the regulations states in part that the term charitable in sec_501 of the code includes relief of the poor and distressed or of the underprivileged advancement of religion advancement of education or science lessening of the burdens of government and promotion of social welfare by organizations designed to accomplish any of the above purposes sec_1_501_c_3_-1 of the regulations states that the term educational in sec_501 of the code includes the instruction of the public on subjects useful to the individual and beneficial to the community sec_1_501_c_3_-1 of the regulations states that a scientific_organization must be organized and operated in the public interest research is not synonymous with scientific and the nature of particular research depends on the purpose which it serves scientific research does not include activities incidental to commercial or industrial operations scientific research is treated as being carried on in the public interest if among other things the results of such research are made available to the pubic on a nondiscriminatory basis revrul_69_545 1969_2_cb_117 holds that a non-profit hospital that benefits a broad cross section of its community by having an open medical staff and a board_of trustees broadly representative of the community operating a full-time emergency room open to all regardless of ability to pay and otherwise admitting all patients able to pay either themselves or through third party payers such as private health insurance or government programs such as medicare may qualify as an organization described in sec_501 of the code revrul_74_614 1974_2_cb_164 describes an organization that was created and controlled by tax-exempt colleges and universities the organization devised and operated a regional computer network to enable its member institutions including faculties and students to benefit from research and scientific information developed by other member institutions and the federal government it conducts an information clearinghouse responsive to the research needs of its member-users the computer network is not used for administrative matters such as class scheduling billing or processing applications the organization is supported by governmental grants contributions and membership dues the ruling concluded that the organization is advancing education revrul_76_455 1976_2_cb_150 involves a nonprofit that was organized to encourage and assist in the establishment of nonprofit regional health data systems to conduct scientific studies with regard to quality utilization and effectiveness of health care agencies to educate those involved in health care as to the deficiencies in the quality utilization and effectiveness of health care and health care agencies and to make proposals to remedy such deficiencies it provided all services to health care institutions government bodies and the general_public without charge the ruling concludes that the research and study are carried on to provide educational and scientific benefits to the general_public and therefore it qualifies for exemption under sec_501 of the code revrul_77_69 1977_1_cb_143 describes an agency that was organized and operated pursuant to federal statute to establish and maintain a system of health planning and resource development aimed at providing adequate health care for a specified geographic area it was funded by federal grants and managed by government officials and members of the public the organization gathered and analyzed health data established health system plans and goals coordinated activities with professional standards review organizations reviewed and approved grant applications for federal funds and assisted states in reviewing health services capital expenditures the organization promoted the health of the residents of the area in which it functioned and met the requirements of lessening the burdens of government and therefore operated for charitable purposes under sec_501 of the code revrul_80_287 1980_2_cb_185 provides that a nonprofit lawyer referral service does not qualify for exemption under sec_501 of the code the organization aided persons who did not have an attorney by helping them select one in exchange for a nominal service charge any attorney who was a member of a local bar association could apply for placement on the referral list in exchange for an application fee because a substantial purpose of the organization was aiding the legal profession the organization was not organized or operated exclusively for charitable purposes even though its lawyer referral service did provide some public benefit revrul_81_29 1981_1_cb_329 describes an organization that otherwise qualified for exemption under sec_501 of the code it assists academic research libraries and agencies and other library organizations in exchanging bibliographic information through a computer network the organization did not provide other services such as routine administrative services to its member libraries libraries of colleges and universities which are exempt under sec_501 and libraries of state and federal governmental agencies as well as non-exempt libraries of business entities the organization derives its income from each of its member libraries for the cost of computer time used plus service charges this ruling concluded that by making bibliographic information available to researchers the organization advances education within the meaning of sec_501 of the code and sec_1_501_c_3_-1 of the regulations the fact that the information is furnished to non-exempt libraries does not detract from the educational value of the information itself its members include historical societies and revrul_81_276 1981_2_cb_128 describes a professional standards review organization psro established pursuant to a federal statute to review health care practitioners’ and institutions’ provision of health care services and items for which payment is made under medicare and medicaid and determine whether the quality of services met professionally recognized standards of care no payments under medicare or medicaid could be made before the services were reviewed and approved by the organization by taking on the government's burden of reviewing the quality of services provided under medicare and medicaid the organization lessened the burdens of government and promoted health in a charitable manner any benefit to members of the medical profession from such activities was incidental to the benefit the organization provided in promoting health and lessening the burdens of government therefore the organization qualified for exemption under sec_501 of the code in revrul_85_110 a sec_501 hospital performed diagnostic laboratory testing upon specimens from the private office patients of the hospital’s staff physicians and upon specimens from patients of medical clinics not connected with the hospital this revenue_ruling concluded that there is no substantial causal relationship as required in sec_1_513-1 of the regulations between the achievement of the hospital's exempt purposes and its provision of diagnostic laboratory testing services on specimens from persons who are not its patients therefore this activity constituted an unrelated_trade_or_business under sec_513 of the code in 326_us_279 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes the court found that a trade_association had an underlying commercial motive that distinguished its educational program from that carried out by a university and therefore the association did not qualify for exemption 302_f2d_934 ct_cl cert_denied 372_us_976 described an organization that had a stated aim of teaching and disseminating economic knowledge published two semi-monthly periodicals available for subscription and provided investment advice services for a fee the court held that this organization did not qualify for exemption under sec_501 of the code because its commercial purpose of selling investment advice was primary and not incidental to its educational purpose in 70_tc_352 the tax_court considered the qualification for exemption under sec_501 of the code of an organization formed to provide consulting services for a fee to nonprofit and tax exempt_organizations in the areas of health and health delivery systems housing vocational skills and cooperative management in concluding that the organization did not qualify for exemption the court noted that t he critical inquiry is whether petitioner's primary purpose for engaging in its sole activity is an exempt_purpose or whether its primary purpose is the factors such as the particular manner in which an organization's nonexempt one of operating a commercial business producing net profits for petitioner activities are conducted the commercial hue of those activities and the existence and amount of annual or accumulated_profits are relevant evidence of a forbidden predominant purpose in 72_tc_687 aff'd 625_f2d_804 cir the court held that while selling prescription pharmaceuticals to elderly persons at a discount promotes health the pharmacy did not qualify for recognition of exemption under sec_501 of the code on that basis alone because the pharmacy operated for a substantial commercial purpose it did not qualify for exemption under sec_501 in washington research foundation v commissioner t c memo the tax_court held that an organization that facilitates transfer of technology from nonprofit organizations’ labs for public use through licensing arrangements with private industry did not qualify for exemption under sec_501 of the code because the immediate benefit of its activities redounds to private industry and the nonprofit research institutions and only indirectly to the general_public and because these activities are commercial in nature and not in direct furtherance of exempt purposes living faith inc v commissioner f 2d cir involved an organization established by the seventh day adventist church to carry out its health ministry through operation of two vegetarian restaurants and health food stores the court sustained the irs's denial of tax exemption under sec_501 of the code because the organization was operated for a substantial non-exempt commercial purpose the court found that the 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 iit research institute v united_states cl_ct the claims_court determined that contracts between an organization and various federal government agencies or federal government contractors constituted scientific research within the meaning of sec_1 c -1 d of the regulations because they involved the use of observation or experimentation to formulate or verify facts or natural laws could only have been performed by an individual with advanced scientific or technical expertise added to knowledge within a particular scientific field involved the application of mathematical reasoning and or involved attempts to systemize or classify a body of scientific knowledge by collecting information and presenting it in a useful form the claims_court also concluded that the term research as used in sec_1_501_c_3_-1 of the regulations research but also applied research such as testing and experimental construction and production cl_ct pincite was intended to include not only fundamental 92_tc_1053 concerned a school that trains individuals for careers as political campaign professionals the court held that the organization did not exclusively serve purposes described in sec_501 of the code because it operated on a partisan basis thereby serving private interests more than incidentally the court found that the organization was created and funded by persons affiliated with a particular political_party and that most of the organization's graduates worked in campaigns for that party's candidates consequently the court concluded that the organization conducted its educational activities with the objective of benefiting the party's candidates and entities although the candidates and entities benefited were not organization insiders the court stated that the conferring benefits on disinterested persons who are not members of a charitable_class may serve a private interest within the meaning of sec_1_501_c_3_-1 of the regulations in 985_f2d_1210 cir the court held that a pre-paid health care organization that arranges for the provision of health care services only for its members benefits its members not the community as a whole under the community benefit standard the organization must benefit the community as a whole to be recognized as promoting health in the charitable sense of c in 49_f3d_1395 cg cir amended by 58_f3d_401 cir the court_of_appeals upheld the two grounds on which the tax_court decided that an applicant for exempt status as a charitable provider of affordable housing was not qualified for exempt status first the applicant’s proposed activities included a substantial nonexempt purpose to provide the benefit of state and federal tax_credits to for-profit partners second the benefits inured in part to private individuals who were in one case closely related to those who organized pioneers 113_tc_47 aff'd 242_f3d_904 9th cir provides that a nonprofit organization may form partnerships or enter into contracts with private parties to further its charitable purposes on mutually beneficial terms so long as the nonprofit organization does not thereby impermissibly serve private interests the tax_court held that the operational standard is not satisfied merely by establishing whatever charitable benefits the partnership may produce finding that the nonprofit partner lacked formal or informal control sufficient to ensure furtherance of charitable purposes affirming the tax_court the ninth circuit held that ceding effective_control of partnership activities to the for-profit partners impermissibly serves private interests f 3d pincite 325_f3d_1188 cir involved an operator of health maintenance organizations that served approximately one-quarter of utah’s residents and approximately one-half of its medicaid population the court held that the organization failed to meet the community benefit standard to qualify for exemption under sec_501 of the code because its sole activity was arranging for health care services for its members in exchange for a fee the court said that providing health-care products or services to all in the community is necessary but not sufficient to meet the community benefit standard rather the organization must provide some additional benefit that likely would not be provided in the community but for the tax exemption and that this public benefit must be the primary purpose for which the organization operates analysis we have concluded that you are not operated exclusively to promote health under sec_501 of the code or to further any other tax-exempt purpose within the meaning of sec_501 and sec_1_501_c_3_-1 of the regulations rather you are operated primarily for a non-exempt purpose ie to operate a commercial business and a cooperative enterprise primarily for the benefit of your members any public purposes for which you may operate are only incidental to this primary non-exempt purpose in addition you are operated primarily to provide substantial private benefit to your members which is prohibited by sec_1_501_c_3_-1 therefore we cannot recognize you as an exempt_organization under sec_501 of the code tax-exempt purpose promotion of health the promotion of health has long been recognized as a charitable purpose under common_law see restatement second of trusts sec_368 sec_372 4a austin w scott and william f fratcher the law of trusts sec_368 sec_372 4th ed however not every activity that generally promotes health furthers exclusively charitable purposes under sec_501 of the code for example selling prescription pharmaceuticals promotes health but pharmacies cannot qualify for recognition of exemption under sec_501 on that basis alone federation pharmacy services inc supra nor does a hospital primarily further a charitable purpose solely by offering health care services to the public in exchange for a fee see revrul_69_545 supra rather a hospital must be organized and operated primarily for the benefit of the community as evidenced by such factors as a board that represents the community operation of an emergency room provision of charity care medical training or medical_research for example a health_maintenance_organization that is operated primarily for the purpose of benefiting its paying subscribers does not qualify for exemption solely because the community also derives health benefits from its activities see geisinger health plan supra and ihc health_plans inc supra you do not provide healthcare services directly to patients unlike the hospital in revrul_69_545 your activities consist of gathering healthcare data from your funding members analyzing this data and making the results of your analysis healthcare provider performance data available to your members in essence you are providing information to your employer members and to your health plan members so that the employer members can reduce their costs of providing employee health benefits to their employees and your health plan members can improve their health insurance products for their clients with the expectation of helping them to reduce their costs furthermore these services directly and substantially benefit your members to the extent the general_public benefits from your activities these benefits are based on and derived from the manner in which your members choose to use the data they receive from you the healthcare provider performance data are merely information that your members may use to reduce the cost of providing healthcare benefits to the extent the community may realize benefits from these data in the form of reduced healthcare costs this would be similar to the benefits a community derives when healthcare providers use more effective and efficient medical_supplies equipment and current health information to diagnose illnesses and diseases and treat their patients the provision of such tools to healthcare providers generally does not serve exclusively tax-exempt purposes as the court noted in ihc health_plans inc supra pincite in giving form to the community-benefit standard we stress that ‘not every activity that promotes health supports tax exemption under sec_501 for example selling prescription pharmaceuticals certainly promotes health but pharmacies cannot qualify for exemption under sec_501 on that basis alone ’ revrul_98_15 in other words engaging in an activity that promotes health standing alone offers an insufficient indicium of an organization's purpose numerous for-profit enterprises offer products or services that promote health in several revenue rulings the internal_revenue_service concluded that an organization was promoting health within the meaning of sec_501 of the code even though it was not directly providing medical_care to patients because it improved the effectiveness of health care provided by others see revrul_77_69 supra and revrul_81_276 supra however the organizations in these revenue rulings were created pursuant to federal statutes and worked closely with the government to support its health care responsibilities you were not established pursuant to any federal statute and no government agency supports your activities you state that you intend to make the results of your analysis healthcare provider performance data available to the general_public through a website however you have provided no details nor explained how you intend to operate this program you also state that you expect your employer members will make this information available to their employees to assist them in becoming better consumers of healthcare services you have no authority to dictate how your members may or may not use this information in any event the ultimate goal of your activities is to provide healthcare data to your members how your members may use this information has no bearing on whether your activities primarily further a chartable purpose within the meaning of sec_501 of the code therefore although your activities may indirectly promote health in a general sense they do not primarily promote health in a charitable manner within the meaning of sec_501 of the code and sec_1_501_c_3_-1 of the regulations education furthering education is an exempt_purpose within the meaning of sec_501 of the code see sec_1_501_c_3_-1 of the regulations the regulations explain that the term educational in sec_501 of the code includes the instruction of the public on subjects useful to the individual and beneficial to the community see sec_1 c - d i of the regulations you will be giving healthcare provider performance data exclusively to your funding members you will not be providing educational_services to individuals or to the community you will not be informing individuals or the public on a topic to develop their capabilities within the meaning of sec_501 -1 d of the regulations in addition your activities will not constitute instructing the public on subjects that are beneficial to the community within the meaning of sec_501 -1 d of the regulations you are unlike the organization in revrul_74_614 supra because you are not controlled by tax-exempt educational organizations and you do not operate as a regional computer network which these organizations and their students and faculties can use to share research and scientific information supra because none of the recipients of your healthcare provider performance data will be tax-exempt or governmental academic research libraries and agencies or other library organizations rather you will give these data only to your funding members you also differ from the organization described in rev_rul you state that you intend to make the results of your analysis healthcare provider performance data available to the general_public through a website however you have provided no details nor explained how you intend to operate this program therefore your primary activities do not further education within the meaning of sec_1 c -1 d of the regulations scientific research the advancement of science is an exempt_purpose within the meaning of sec_501 of the code see sec_1_501_c_3_-1 of the regulations the term scientific as used in sec_501 of the code includes the carrying on of scientific research in the public interest not all research or study is scientific for purposes of sec_1 c - d of the regulations scientific research does not include activities of a type ordinarily carried on as an incident to commercial or industrial operations although you expect to develop a very large database of health data and will analyze these data extensively to develop healthcare provider performance data that you will distribute to your members these activities are not scientific in nature you will not be conducting any scientific studies similar to those conducted in revrul_76_455 supra where one of the organization's principal activities was to conduct scientific studies with regard to the quality utilization and effectiveness of health care agencies in this ruling the organization studied existing health care facilities determined methods and practices that would provide better medical services to the general_public and disseminated the results of such studies to the general_public unlike the organization in revrul_76_455 supra your activities involve the analysis of large amounts of healthcare data to evaluate healthcare provider performance your activities do not resemble any of the characteristics of scientific research articulated in iit research institute v united_states supra rather your activities are beyond the testing or demonstration phase furthermore you will distribute the healthcare provider performance data to your members but you have not established that you will disseminate these data to the general_public accordingly your activities do not constitute scientific research within the meaning of sec_1_501_c_3_-1 of the regulations and in any event research is not your primary purpose substantial non-exempt purpose an organization is 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 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 see sec_1_501_c_3_-1 of the regulations providing services of an ordinary commercial nature regardless of whether the undertaking is conducted on a nonprofit basis and is beneficial to the community does not further a charitable purpose unless the service directly accomplishes a tax-exempt purpose see revrul_80_287 supra the sale of health-related goods and services eg laboratory services pharmaceuticals hmo services consulting services does not exclusively further charitable purposes because such activities serve a substantial non-exempt commercial purpose see eg federation pharmacy services supra sale of pharmaceuticals to senior citizens was presumptively commercial because such activity was normally pursued by commercial enterprises revrul_85_110 supra exempt hospital’s provision of laboratory testing services to non-patients served non-charitable purposes washington research foundation supra facilitating transfer of technology from nonprofit_organizations to the public through licensing arrangements with for-profit companies is commercial in nature and american institute for economic research supra primary purpose of securities analysis publication was commercial you were founded and initially funded by large corporations and large healthcare insurance_companies all of which made large initial capital contributions these and other large corporations and healthcare insurance_companies comprise your current members which consist of employer members and health plan members you are managed by a governance committee most of whom are appointed by your employer members and health plan members you receive all your operating revenues from your members who pay monthly support payments based on the number of covered lives each contributes to your database your employer members will use this data to improve the healthcare insurance benefits they provide to their employees and to lower their costs of providing these benefits you expect but cannot require your employer members to share this data with their respective employees you also expect that your health plan members will use this data to improve the efficiency of their operations and to reduce the pricing of their health insurance products thereby resulting in cost savings to the health plan members’ employer clients and their respective employees you state that you plan to share the results of your analysis of healthcare provider performance data with the general_public by means of a public website however you have provided virtually no information relating to this endeavor thus your activities are not inherently charitable but are more like activities carried on by for-profit businesses a factor that supports the commercial nature of your activities see eg living faith inc supra organization’s health food stores and restaurants were in competition with for-profit organizations and ihc health_plans supra health_plans resembled and competed with commercial insurance providers further you will receive part of the funding for your operations from monthly support payments from your employer members and health plan members the amount of which is based on a series of formulas that take into account the number of covered lives each member contributes to your database this funding mechanism is essentially a fee-for-service structure similar to the manner in which for-profit businesses charge their clients in proportion to the services they receive this fee structure also suggests that you have a non-exempt commercial purpose see eg b s w group inc supra and living faith supra thus your primary activities are operating healthcare data analysis and data distribution services for the benefit of your for-profit members this is a commercial business and is a cooperative enterprise that primarily benefits your members therefore your activities serve a substantial non-exempt purpose under sec_1_501_c_3_-1 of the regulations the provision of commercial services may serve primarily charitable purposes when those services are provided exclusively to tax-exempt organizations are an essential function of such organizations and are provided for a fee that is substantially below cost see revrul_71_529 supra and revrul_72_369 supra however you are not providing services exclusively to exempt_organizations but solely to non-exempt organizations any charitable or educational benefits the public may derive from your healthcare data analysis and data distribution services are merely incidental to your principal purpose of benefiting your members thus your activities do not primarily further an exempt_purpose therefore you are not operated exclusively for one more exempt_purpose under sec_501 of the code see sec_1_501_c_3_-1 of the regulations an organization will not be regarded as operated exclusively for one or more exempt purposes under sec_501 of the code if more than an insubstantial part of its activities is not in furtherance of an exempt_purpose better business bureau of washington d c inc supra substantial private benefit an exempt_organization must be organized and operated exclusively for exempt purposes pursuant to sec_1_501_c_3_-1 of the regulations an entity that is organized or operated to serve private rather than public interests cannot be recognized as operating exclusively for exempt purposes see sec_1_501_c_3_-1 and american campaign academy supra the tax_court explained that prohibited private benefits may include an advantage profit fruit privilege gain or interest see american campaign academy pincite the structure of an organization may also help convey the advantage or gain housing pioneers supra the court found private benefit in a partnership that was structured to secure tax benefits for the for-profit partners in redlands surgical services supra the court found that the for-profit partners used the partnership to restrict competition from the exempt hospital partner in in determining whether an organization's activities confer an impermissible private benefit the court in american campaign academy supra looked to whether the beneficiaries of the organization's activities are also the parties who founded fund and direct the organization you are in effect a cooperative enterprise consisting of large employers and large insurance_companies that gathers healthcare data from your members analyzes the data and provides the results of your analysis healthcare provider performance data to your members who will use these data in their respective businesses your health plan members will use these data in an effort to reduce their costs of providing health insurance to their clients your employer members will use these data in an effort to reduce the costs of providing healthcare benefits to their respective employees like the partnerships in housing pioneers supra and redlands surgical services supra your goal is to confer economic benefits on your for-profit members thus you are organized and operated primarily for their private benefit rather than primarily for public purposes you state that your employer members and health plan members may give their respective employees and enrollees healthcare provider performance data and you plan to make this data available to the general_public which information may help these individuals selecting healthcare providers however based on the information submitted the extent of this benefit to the general_public is likely to be remote uncertain and incidental whereas the economic benefit to your members’ private economic interests is likely to be primary and substantial therefore because you are organized and operated primarily to provide substantial private benefits to your members contrary to the prohibition in sec_1_501_c_3_-1 of the regulations you are not organized and operated exclusively for exempt purposes under sec_501 of the code conclusion you are not operated exclusively for one or more exempt purposes within the meaning of sec_501 of the code and sec_1_501_c_3_-1 of the regulations rather you are operated primarily for a non-exempt purpose ie to operate a commercial business and a cooperative enterprise primarily for the benefit of your members any public purposes for which you may operate are only incidental to this primary non-exempt purpose in addition your are operated primarily to provide substantial private benefit to your members which is prohibited by sec_1_501_c_3_-1 therefore you do not qualify for recognition of exemption under sec_501 of the code as an organization described in sec_501 accordingly contributions to you are not deductible under sec_170 of the code and you must file federal_income_tax returns you have the right to file a protest if you believe this determination is incorrect to 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 our determination your protest statement should be accompanied by the following declaration under penalties of perjury declare that have examined this protest statement including accompanying documents and to the best of my knowledge and belief the statement contains all the relevant facts and such facts are true correct and complete you also have a right to request a conference to discuss your protest this request should be made when you file your protest statement an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you if you want representation during the conference procedures you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so for more information about representation see publication practice_before_the_irs and power_of_attorney all forms and publications 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 to protest as a failure to exhaust available administrative remedies code sec_7428 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 organization involved has exhausted all of the administrative remedies available to it within the irs 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 determination action 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 this address internal_revenue_service rekeakekeekkiakk krkkhhaakeekrkkhkeekk constitution ave n w washington dc you may also fax your statement using the fax number shown in the heading of this if you fax your statement please call the person identified in the heading of this letter to letter confirm that he or she received your fax if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter in accordance with the power_of_attorney currently on file with the internal_revenue_service we are sending a copy of this letter to your authorized representative sincerely robert choi director exempt_organizations rulings agreements


t c memo united_states tax_court kenny a pearce petitioner v commissioner of internal revenue respondent docket no 19796-07l filed date kenny a pearce pro_se william f castor for respondent memorandum findings_of_fact and opinion thornton judge pursuant to sec_6330 petitioner seeks judicial review of respondent’s determination to proceed with a proposed levy to collect petitioner’s unpaid federal_income_tax liability for the issues for decision are 1unless otherwise indicated all section references are to the internal_revenue_code whether respondent is prohibited from making the proposed levy under sec_6331 because of a pending offer by petitioner for an installment_agreement and whether respondent abused his discretion in rejecting an installment_agreement that petitioner offered during the collection_due_process_hearing cdp hearing findings_of_fact on date petitioner’s representative submitted form_9465 installment_agreement request offering an installment_agreement to pay dollar_figure per month toward petitioner’s federal_income_tax liabilities for and through by letter dated date respondent’s revenue_officer informed petitioner’s representative that the installment_agreement offer had been denied and that he had days to appeal the denial by scheduling a conference with the revenue officer’s group manager the manager the letter also stated that additional information was needed to continue in the financial review in a letter dated date petitioner’s representative requested an appeal through respondent’s collection_appeals_program cap on date the revenue_officer spoke with petitioner’s representative advised him that he needed to schedule a conference with the manager and advised him that respondent would provide information concerning the amounts and conditions of an acceptable installment_agreement only if petitioner provided sufficient information to make such a determination on date the manager spoke with petitioner’s representative who indicated that he wanted more time to discuss an acceptable installment_agreement amount with the revenue_officer by letter dated date petitioner’s representative withdrew the cap request stating that he would first meet with the revenue_officer and would then renew his cap request if they could not reach agreement on date petitioner’s representative spoke with the revenue_officer to learn what she might consider to be an acceptable amount for an installment_agreement the revenue_officer indicated that she was still reviewing petitioner’s bank statements and other financial information and could not yet provide an acceptable amount by letter dated date petitioner’s representative provided the revenue_officer with some additional bank statements and indicated a desire to move forward with the cap process and or conclude an installment_agreement on date respondent sent petitioner a letter final notice--notice of intent to levy and notice of your right to a hearing with respect to his federal_income_tax liability in response on date petitioner’s representative submitted form request for a collection_due_process or equivalent_hearing indicating that petitioner intended to make an installment_agreement offer and that he disagreed with the proposed levy because a prior installment_agreement is still pending on date respondent’s settlement officer held a cdp hearing with petitioner’s representative the settlement officer concluded that petitioner’s previous installment_agreement offer was no longer pending after date when petitioner’s representative withdrew the cap request the settlement officer stated that he could consider collection alternatives only if petitioner were in compliance with filing_requirements and the financial information supported a proposal the settlement officer stated that he would consider giving petitioner time to file his delinquent form_1040 u s individual_income_tax_return if they could reach a resolution on a collection alternative petitioner’s representative indicated that petitioner still wanted an installment_agreement and thought that dollar_figure per month might be an appropriate amount the parties agreed however that the financial information then available was insufficient to determine petitioner’s ability to pay accordingly the settlement officer was unable to recommend an installment_agreement of dollar_figure per month petitioner’s representative had no other proposal on date respondent issued a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination with respect to petitioner’s tax_year sustaining the proposed levy in the notice_of_determination respondent determined that no installment_agreement offer was pending when the notice_of_intent_to_levy was issued and that an installment_agreement was not appropriate because petitioner had failed to provide documentation needed to determine his ability to pay and had failed to file his form_1040 petitioner residing in arkansas petitioned this court for review a collection procedures opinion sec_6330 requires the secretary to furnish a person notice and opportunity for a hearing before making a levy on the person’s property at the hearing the person may raise any relevant issue relating to the unpaid tax or proposed levy including spousal defenses challenges to the appropriateness of the collection action and offers of collection alternatives sec_6330 once the commissioner’s appeals_office issues a notice_of_determination the person may seek judicial review in this court sec_6330 because petitioner has not challenged his underlying tax_liability our review is for abuse_of_discretion 114_tc_604 under this standard of review the question is whether respondent’s determination was arbitrary capricious or without sound basis in fact or law see eg 125_tc_301 affd 469_f3d_27 1st cir in his petition petitioner assigns as error that the notice_of_intent_to_levy was improper because petitioner had made an offer for an installment_agreement that was still pending when respondent issued the notice and respondent improperly denied petitioner’s request for an installment_agreement in the cdp hearing b pendency of installment_agreement offer the internal_revenue_service irs generally may not levy on the property of a person who has pending an offer for an installment_agreement with respect to the unpaid tax sec_6331 a proposed installment_agreement becomes pending when it is accepted for processing sec_301_6331-4 proced admin regs the proposed installment_agreement remains pending until the irs accepts the proposal the irs notifies the taxpayer that the proposal has been rejected or the proposal is withdrawn by the taxpayer id if the irs rejects the offer the prohibition against levy continues for another days unless the person files an appeal with respondent’s office of appeals in which case the prohibition continues during the pendency of the appeal sec_6331 sec_301 a proced admin regs if the irs rejects a proposed installment_agreement and within days the taxpayer makes a good-faith revision of it the prohibition on levy applies while the revised proposal is pending sec_301_6331-4 proced admin regs on date petitioner through his representative made an offer for an installment_agreement to pay his outstanding tax_liabilities including his tax_liability by letter dated date the revenue_officer formally informed petitioner’s representative that the offer had been rejected petitioner nevertheless alleges that an installment_agreement offer was pending as of date the date the notice_of_intent_to_levy was issued with respect to his liability petitioner has not filed a brief and has otherwise done little to help the court understand his position as best we understand it petitioner believes that on date the 2as a threshold matter it might be questioned whether sec_6331 bars the irs from issuing a notice_of_intent_to_levy as opposed to actually making a levy during the pendency of an installment_agreement offer petitioner’s contentions assume that it does and respondent has not expressly argued otherwise because we conclude that there was no installment_agreement offer pending either when respondent issued the notice_of_intent_to_levy or when he made his final_determination to proceed with the proposed levy we need not and do not give this issue further consideration irs effectively rescinded its date denial of petitioner’s installment_agreement offer by acknowledging that petitioner’s date offer remained pending the record does not support this position the record indicates that by letter dated date petitioner’s representative withdrew his request for a cap appeal indicating that he wished to meet with the revenue_officer ostensibly to discuss with her what might be an acceptable installment_agreement amount in fact petitioner’s representative and the revenue_officer had further communications but were unable to reach agreement on an installment_agreement insofar as the record reveals these discussions did not result either in petitioner’s making a good- faith revision of his date offer or in the revenue officer’s making an offer that might be considered to have been pending when either the notice_of_intent_to_levy or the notice_of_determination was issued we further conclude that no appeal of the rejected installment_agreement offer was pending when respondent issued either the notice_of_intent_to_levy or the notice_of_determination in her date letter rejecting petitioner’s installment offer the revenue_officer advised petitioner that he had days to appeal by scheduling a conference with her manager although petitioner’s representative requested an appeal in his date letter he withdrew the request in his date letter insofar as the record reveals he never filed a new request for an appeal much less within the 30-day deadline set forth in the revenue officer’s date letter petitioner’s representative informally made a new offer for an installment_agreement during the cdp hearing as discussed below however the settlement officer properly rejected it before issuing the notice_of_determination in sum we conclude that there was no offer for an installment_agreement pending when respondent issued the notice_of_intent_to_levy or the notice_of_determination c installment_agreement offer proposed during cdp hearing during the cdp hearing on date petitioner’s representative proposed a new installment_agreement the settlement officer rejected it partly because petitioner failed to provide documentation necessary to determine his ability to pay although petitioner asserts in his petition that he cooperated with the irs in every material respect the record does not support this assertion we conclude that the settlement officer did not abuse his discretion in rejecting the proposed installment_agreement see 123_tc_1 affd 412_f3d_819 7th cir to reflect the foregoing decision will be entered for respondent 3as an additional ground for rejecting the proposed installment_agreement the notice_of_determination cites petitioner’s failure_to_file his federal_income_tax return petitioner attacks this determination on various grounds none of which we find to be well founded in any event because we sustain respondent’s determination on other grounds it is unnecessary to address this issue further


oo utl w a2p department of the treasury person to contact employee id number tel fax refer reply to in re tax period s ended form required to be filed employer_identification_number internal_revenue_service appeals_office s pine island road suite plantation fl release number release date date date a name b address certified mail dear this is a final adverse determination as to your exempt status under sec_501 of the internal_revenue_code irc it is determined that you do not qualify as exempt from federal_income_tax under sec_501 our adverse determination was made for the following reason s you do not qualify for exemption under sec_501 of the code since your primary activity is to fumish on a rental basis a facility to a sorority and to carry out the day to day operations of that sorority's alumni activities your historic preservation activity is incidental to your primary purpose of supporting the activities of the active members and alumni of the sorority the public receives only an incidental benefit from your ongoing maintenance and preservation of the sorority house which is found on the national register of historical places your primary purpose is serving the sorority through housing and social activities which are not qualifying under c you do not qualify for exemption as an organization described in sec_501 of the code contributions to you are not deductible under sec_170 you do remain exempt under sec_501 if you decide to contest this determination under the declaratory_judgment provisions of code sec_7428 a petition to the united_states tax_court the united_states court of claims or the district_court of the united_states for the district of columbia must be filed within days from the date this determination was mailed to you contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a petition form from the united_states tax_court write to the united_states tax_court second street n w washington d c 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 is not able to reverse legally correct_tax determinations nor extend the time fixed by law that you have to file a petition in 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 if you want taxpayer_advocate assistance please contact the taxpayer_advocate by calling and ask the taxpayer_advocate for assistance or you can contact the taxpayer_advocate for the irs office that issued this adverse determination by writing to the office_of_the_taxpayer_advocate west 15th street suite helena mt 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 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 charles fisher team manager department of the treasury internal_revenue_service washington d c contact person identification_number contact number fax number employer_identification_number uil dollar_figure tax_exempt_and_government_entities_division date date legend c sorority h university p state u date dear we have considered your application_for recognition of exemption from federal_income_tax under internal_revenue_code sec_501 based on the information provided we have concluded that you do not qualify for exemption under code sec_501 the basis for our conclusion is set forth below issue do you meet the organizational_test under c of the code no for the reasons below do you qualify for exemption under sec_501 of the code no for the reasons below o b facts you are a corporation formed on u and operate pursuant to the laws of the state of p you are currently a c organization that owns and operates property for the benefit of the c sorority at the h your amended articles of incorporation state your purposes in part as to acquire by lease purchase construction acceptance of gift or otherwise a proper and suitable house or home for c at h and to acquire by lease purchase construction acceptance of gift or otherwise proper and suitable houses or homes for any chapter of the sorority and to acquire by lease purchase construction acceptance of gift or otherwise all proper and suitable rooms quarters house or homes for_the_use_of sorority alumnae to purchase own lease or rent use construct accept gifts of occupy and maintain rooms buildings houses homes and premises for the purposes herein mentioned either for or on behalf of the corporation itself or for hire the articles of incorporation also state you are formed exclusively for charitable religious educational and scientific purposes within the meaning of sec_501 of the internal_revenue_code or corresponding section of any future federal tax code your bylaws state the purposes of this corporation shall be as stated in the articles of incorporation of the corporation as amended and to acquire hold lease and convey such real and or personal_property for the purpose of furnishing financial aid and assistance in the education of students at the h with c to preserve the real_property that is the chapter house owned by the corporation a certified_historic_structure to cultivate fraternal relations among alumnae professors and active members of c to advance and promote the general interests of c to assist with the need for education support of c members as they pursue college degrees at the h you state the specific purposes and description of activities for which you were formed are as follows first to acquire hold lease and convey such real and or personal_property for the purpose of furnishing financial aid and assistance in the education of students at the h with c access to study facilities includes a library and study rooms second a very significant purpose of yours is to preserve the real_property that is the chapter house owned by the corporation the property owned is on the national register of historic places third to cultivate fraternal relations among alumnae professors and the active members of c fourth to advance and promote the general interests of c fifth we determined that there was a need for educational support of members of c as they pursue college degrees at the h as the members of the sorority struggle to balance the need to work with the amount of time that must be devoted to educational pursuits it has become increasingly difficult to focus the required attention to studies and to achieve academic excellence educational support from our group will allow members to focus more time on academics your initial activity description was as follows capital campaign -- this is being conducted by alumnae members of c the capital campaign is centered in p but will reach across the country to all living members of c and family of deceased members this capital campaign will further our tax-exempt purpose in that the money we raise will be given to members of c for scholarships educational improvements to the chapter facility and the betterment and long term preservation and maintenance of the historically registered facility initially about total time will be dedicated to preparing for and executing the capital campaign and post campaign activities very little funds will be used to support the capital campaign necessary expenditures are covered by funds that are budgeted for this purpose of our your info for potential members is the same information provided to all prospective members of c your mission statement c is an organization of women which seeks for every member throughout her life bonds of friendship mutual support opportunities for self-growth respect for intellectual development and an understanding of and an allegiance to positive ethical principles ten reasons to join e c embraces ancient greek values of goodness truth beauty and ethical living c stresses social responsibility and philanthropy as integral to citizenship c is a single sex oasis in a mainly coed campus environment c is a family away from home breaking down campus-size and impersonality c provides sisterhood support via alumnae organizations in hundreds of cities c sustains members in bad times celebrates good times and shares all times e e e c offers a surprising diversity of background and interest among its members c focuses on academics and helping its members to appreciate learning c provides leadership and organizational management opportunities c helps members in personal growth self-awareness esteem and confidence c emphasizes the importance of inter-personal cooperation despite different viewpoints your financial data for years used to directly support the day to day operations of c through shows thatover of total revenue was rent from c was only members of c to cover the cost of the day-to-day operations of c of your income while over came from various fees from some of these fees were described as follows e maintenance fee c is paying you for routine maintenance of facility and contacts and insurance premiums for the academic year e regular board fee c is paying you for operating costs of the facility including kitchen meals house upkeep salaries and wages for the academic year e transient board fee c is paying you for some meals for live-out members of d as well as operating costs of facility including kitchen meals house upkeep salaries and wages for the academic year e house fee c is paying you to ensure operating costs of facility are covered including kitchen meals house upkeep salaries and wages for the academic year these fees are paid to you directly support the day-to-day activities of c which is a c organization your financial data for years used to directly support the day to day operations of c through also shows of total expenses were some of these expense accounts were described as follows e house department account used for salaries food supplies utilities and minor repairs any excess at end of year is to be used for maintenance and upkeep of house for the academic year e insurance account used for property and content insurance of the facility as well as directors’ and officers’ insurance e routine upkeep repairs account used for building repairs computer repairs summer cleaning summer lawn care equipment repairs painting and other routine upkeep repairs e major repairs redecorating account used for redecorating and major improvements that are not designated or restricted in any way for historical restoration or historical preservation minutes from meeting agendas show along with reports on the chapter house that you also discuss events among current and former students that belong to c this includes bids for potential new members fundraising events and activities for alumni such as brunches balls conventions and payments of dues e-mail correspondence shows discussions relating to certain events for fundraising of the alumni association of c and the recruitment of new members into that alumni association including events such as homecoming banquets and various fundraisers you included with your application information forms for new alumni members and how their dues would be used a chart of your activities shows along with multiple fundraisers supporting the house you conduct brunches celebrations dinners parties and various other social functions to further the purposes of serving your alumni you have indicated interactions with parents and family members the school football team school professors and social functions for members and guests as activities you open your building for photo shoots weddings and related_services and for school related celebrations in addition to renting the house to current members of c law sec_501 of the code provides for the exemption from federal_income_tax of corporations organized and operated exclusively for charitable or educational_purposes provided no part of the net_earnings inures to the benefit of any private_shareholder_or_individual sec_501 of the code clubs provides for the exemption from federal_income_tax of corporations organized for pleasure recreation and other nonprofit purposes substantially_all of the activities of which are for such purposes and no part of the net_earnings of which inures to the benefit of any private shareholder sec_1 c -1 a of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1 c - b i of the regulations state that an organization is organized exclusively for one or more exempt purposes only if its articles of organization a limit the purposes of such organization to one or more exempt purposes b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities which in themselves are not in furtherance of one or more exempt purposes sec_1 c -1 c of the regulations provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_501 of the code an organization must not engage in substantial activities that fail to further an exempt_purpose sec_1 c -1 d ii organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest to meet this requirement it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests of the regulations provides that an organization is not revrul_64_118 1964_1_cb_182 an organization does not qualify for exemption from federal income_taxation under sec_501 of the code where its primary activity is to furnish on a rental basis a chapter house to a fraternity which is composed of students a corporation fund or foundation so organized may however under proper circumstances be classified as a club organized and operated exclusively for pleasure recreation and other nonprofit purposes and exempt from federal_income_tax under the provisions of sec_501 of the code revrul_67_391 1967_2_cb_190 a nonprofit organization formed to develop and distribute a community land-use plan may be exempt from tax sec_1_501_c_3_-1 sec_501 ‘86 code revrul_69_573 1969_2_cb_125 holds that a college fraternity that maintains a chapter house for active student members is exempt from federal taxation under sec_501 rather than sec_501 therefore contributions to the fraternity are not deductible under sec_170 revrul_69_573 citing 307_f2d_357 5th cir and 60_f2d_50 2d cir states that although the typical college fraternity does in some degree contribute to the cultural and educational growth of its members during their student years that is not its primary purpose such an organization is primarily a social_club in that its major functions are to provide a meeting place for its members living quarters and the headquarters for their entertainment revrul_75_470 1975_2_cb_207 preservation of buildings having historical or architectural significance a nonprofit organization formed to promote an appreciation of history through the acquisition restoration and preservation of homes churches and public buildings having special historical or architectural significance and to open the structures for viewing by the general_public qualifies for exemption sec_1_501_c_3_-1 sec_501 '86 code revrul_86_49 1986_1_cb_243 preservation of properties having historical or architectural significance ‘an organization formed for the purposes of preserving the historic or architectural character of a community through the acquisition and occasional restoration of historically or architecturally significant properties and subsequent disposition of these properties qualifies for exemption under sec_501 sec_1_501_c_3_-1 sec_501 '86 code in 326_us_279 the u s supreme court ruled that an organization which engaged in some educational activities but pursued non-profit goals outside the scope of the statute was not exempt under sec_501 the supreme court held that the presence of a single non-exempt purpose if substantial in nature will destroy a claim for exemption regardless of the number or importance of truly exempt purposes application of law based on the information you provided in your application and supporting documentation we conclude that you are not operated for exempt purposes under sec_501 of the code you have a mix of charitable and social recreational activities therefore you are not serving exclusively c purposes per sec_1 c - b i of the regulations you fail the organizational_test as your articles of incorporation do not limit your purposes to those compliant under c your organizing document lists acquiring a suitable home for c any chapter of c or any alumnae of c as one of your purposes this does not further an exclusively c purpose sec_1_501_c_3_-1 of the regulations provides that an organization operates exclusively for exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified in sec_501 of the code you engage in substantial non-exempt activities by supporting the social and recreational activities of c this is done by promoting the general purposes of c and in the recruitment of new members for this reason you fail the operational_test sec_1_501_c_3_-1 of the income_tax regulations provides that in order to be exempt as an organization described in sec_501 an organization must be both organized and operated exclusively for one or more purposes specified in such section as shown above you fail both the organizational and operational tests and therefore do not qualify for exemption under c you are not organized or operated exclusively for exempt purposes unless you serve a public rather than a private interest per sec_1 c -1 d ii of the regulations while one of your purposes is to maintain the house which constitutes a c activity for historical preservation this is not an exclusive purpose or activity you also serve social and recreational purposes in a more then substantial manner by supporting the alumni functions of c which are consistent with your designation as a social_club under c since you are not serving exclusive c purposes you do not meet the qualifications for exemption under the section you are very similar to revrul_64_118 where your primary activity is to furnish on a rental basis a chapter house to a fraternity composed of students your given activities are to acquire hold lease and convey such real and or personal_property for the purpose of furnishing financial aid and assistance in the education of students at h with c second to preserve the real_property that is the chapter house for this reason you do not meet the qualification for exemption under c similar to revrul_69_573 you are a college sorority alumnae association that maintains a chapter house for active student members and are exempt from federal taxation under sec_501 rather than c although the typical college sorority does in some degree contribute to the cultural and educational growth of its members during their student years that is not its primary purpose such an organization is primarily a social_club in that its major functions are to provide a meeting place for its members living quarters and the headquarters for their entertainment your given activities include various alumni social gatherings and events and documents provided with your application show your intent on increasing and maintaining alumni members your given purposes also are not limited to those that are exclusively c and include cultivating fraternal relations among alumnae professors and the active members of c while you have indicated your intention to maintain a building on the historical register as a qualifying activity as separate from the existing alumni activities details given with your application e mails agendas the membership materials show that you remain one in the same the ruling in better business bureau held that the presence of a single non-exempt purpose if substantial in nature will destroy a claim for exemption regardless of the number or importance of truly exempt purposes though the maintenance of a historical building furthers a c purpose this is not your only activity nor is it an exclusive activity you have listed various events that demonstrate a social purpose for the benefit of and to further the existence of the alumni association while your given purpose is to maintain the house the facts show that you are still conducting the ongoing activities of a membership and alumni chapter and any c purposes are incidental applicants position you are preserving a certified_historic_structure on the national historic registry under sec_170 c iv and sec_170 c ii and just renting that structure to a sorority chapter you support this position by citing revenue rulings and you state the key differences between revrul_64_118 and you is that preservation of a historical structure has come into play between and today public policy has changed to consider saving and preserving historical structures as conservation and conservation is considered a charitable purpose as a part of that broad public policy you also cited several private letter rulings that cannot be used as precedent here service response to applicant’s position you do not qualify for exemption under sec_501 c of the code since your primary activity is to furnish on a rental basis a facility to a sorority and to carry out the day to day operations of that sorority's alumni activities your preservation activity is incidental to your primary purpose of supporting the activities of the active members and alumni of the sorority the public receives only an incidental benefit from your ongoing maintenance activities your primary purpose is serving the sorority through housing and alumni activities which are not qualifying under c you differ from rr and in that you are not maintaining the house for the benefit or education of the general_public but rather to allow for members of sorority to have a residence while you have indicated the house is on occasion opened for tours this was only done during parents and homecoming weekend and for events such as weddings and school related celebrations the organization in rr formed to provide land use plans and on rare occasions would acquire land the plan would eliminate future blight and provide education to the general_public and was therefore serving c purposes you own and maintain one building in addition to other activities not serving exclusive c purposes and are therefore dissimilar to the organization in that ruling conclusion based on the facts and information provided you fail the organizational_test as you are not organized or operated exclusively for c exempt purposes you conduct more then an incidental amount of social and recreational activities and exist to serve members rather then the general_public therefore you are not described in sec_501 of the code 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 you do remain exempt under sec_501 you have the right to file a protest if you believe this determination is incorrect to 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 our determination if your statement does not provide a basis to reconsider our determination we will forward your case to our appeals_office you can find more 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 publication under the heading regional_office appeal must be accompanied by the following declaration the statement of facts item under penalties of perjury declare that have examined the statement of facts 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 included stating that the representative prepared the appeal and accompanying documents and whether the representative knows personally that the statements of facts contained in the appeal and accompanying documents are true and correct an attorney certified_public_accountant or an individual enrolled to practice before the internal_revenue_service may represent you during the appeal process if you want representation during the appeal process you must file a proper power_of_attorney form_2848 power_of_attorney and declaration of representative if you have not already done so you can find more information about representation in publication practice_before_the_irs and power_of_attorney all forms and publications 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 to appeal as a failure to exhaust available administrative remedies code sec_7428you 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 organization involved has exhausted all of the administrative remedies available to it within the irs if you do not intend to protest this determination you do not need to take any further action if we do not hear from you within days we will issue a final adverse 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 internal_revenue_service eo determinations quality assurance main street room cincinnati oh 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 if if you have any questions please contact the person whose name and telephone number ‘are shown in the heading of this letter sincerely lois lerner director exempt_organizations enclosure publication


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division mar epma it fl re dear this letter is in response to your request dated date with respect to the above-referenced defined benefit pension_plan pursuant to revproc_90_49 1990_2_cb_620 for the plan_year commencing date revproc_90_49 sets forth the procedure whereby under certain circumstances a disallowance of the deduction of employer contributions to a qualified defined benefit pension_plan may be obtained thereby fulfilling a condition under which such contributions could revert to the employer this ruling is directed only to the organization that requested it sec_61 k of the internal_revenue_code provides that it may not be used or cited by others as precedent based upon the information submitted we have determined that contributions amounting to dollar_figure which were made for the plan_year commencing date may be considered as disallowed solely for the purpose of applying revrul_91_4 c b therefore the return of contributions not exceeding dollar_figure would not adversely affect the qualified status of the plan provided this reversion occurs no later than one year from the date of this letter however if it is not returned by your tax filing_date including extensions filed for and granted the tax under sec_4972 would apply in granting this approval we are not expressing any opinion as to the accuracy or acceptability of any calculations or other material submitted with your request when filing form_5500 for the plan_year commencing date a copy of this letter must be attached to the schedule b actuarial information a copy of this letter should be sent to the enrolled_actuary servicing the plan we have sent a copy to the if you have any questions regarding this matter please contact - also please refer written replies to ere paleppend matic pippins mando employee_plans actuarial group