department of the treasury internal_revenue_service washington d c t a x e x e m p t a n d g o v e r n m e n t e n t i t i e s d i v i s i o n --- -------------- tax years ----------------- ---------------------- contact number identification_number form required to be filed employer_identification_number contact person ---------------- number release date uil date date --------------------------------------- ------------------------------- ------------------------------------------- ------------------------------------ dear ------------- this is our final_determination that you do not qualify for exemption from federal_income_tax as an organization described in 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 file the returns in accordance with their instructions and do not send them to this office failure_to_file the returns timely may result in a penalty we will make this letter and our proposed adverse determination_letter available for public inspection under code sec_6110 after deleting certain identifying information please read the enclosed notice notice of intention to disclose and review the two attached letters that show our proposed deletions if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter if you have any questions about your 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 enclosure notice redacted proposed adverse determination_letter redacted final adverse determination_letter lois g lerner director exempt_organizations rulings agreements sincerely t a x e x e m p t a n d g o v e r n m en t e n t i t i e s department of the treasury internal_revenue_service washington d c d i v i s i o n date date ------------------------------------ --------------------------- -------------------------------------- --------------------------------- uniform issue list contact person ----------------- identification_number ------------- contact number ------------------- fax number ------------------- employer_identification_number ---------------- legend a ------------------------ m ------------------------------------------------------------------------- ------------------------------------------------------------- dear ------------- we have considered your application_for recognition of exemption from federal_income_tax under 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 facts you were incorporated on a as a nonprofit corporation your articles of incorporation provide that you were formed to reduce the burdens of government within the meaning of sec_501 of the code and to benefit and support the public purposes and activities of m article third b of your articles of incorporation provides that you will provide develop encourage sponsor administer service and manage programs designed to efficiently channel the appropriate forms of financial resources and consulting services into low-income communities historically unable to attract private or conventional financing article third c provides that you will assist entrepreneurs small businesses nonprofit_corporations and community based organizations to start purchase expand stabilize or preserve their business activities article fourth provides that you have all of the powers and authority available to you pursuant to the nonprofit corporation act of the state in which you operate you are requesting foundation classification status as an organization described in sec_509 of the code based on your relationship with m your sole member is m and m is described in sec_501 and is a publicly_supported_organization m appoints your governing board m was formed to relieve the poor and distressed by stimulating economic development m accomplishes its purpose by providing an array of financial products typically below-market rates or with terms not customarily obtainable and business capacity building services m operates in a manner designed to prevent or reverse the deterioration of low-income substandard or economically depressed neighborhoods m is certified by the department of treasury as a community development financial_institution cdfi m is also certified as a community development entity cde m established a for-profit limited_liability corporation llc to receive an allocation of new market tax_credits nmtcs the llc is a cde you were formed to provide management and other services to the llc and any other for-profit entities established by m for similar purposes in addition you will provide these services to unrelated entities you indicate that your primary source of financial support will be management fee income under the new market tax_credit program nmtc program there are three programs in which cde’s which receive an allocation of nmtcs may participate the bank enterprise awards program the financial assistance program and the native american initiatives the parent is certified to participate in the financial assistance program the nmtc program was initiated to stimulate economic and community development and job creation in the nation’s low-income communities by attracting capital from the private sector the nmtc program provides tax_credits to investors who make qualified equity investments in cdes the community development financial institutions fund cdfi fund annually selects cdes to receive allocations of nmtcs a cde is a for-profit nonprofit or governmental entity treated as a domestic_corporation or partnership a whose primary mission is serving or providing investment capital for low-income communities or low-income persons b which maintain accountability to residents of low-income communities through their representation on any governing board_of the entity or on any advisory board to the entity and c is certified by the cdfi fund an organization must be certified as a cde in order to benefit from the nmtc program a cde may participate in the nmtc program in two different ways a it may apply to the cdfi fund for an allocation of tax_credits which in turn may be offered by the cde to its investors in exchange for equity investments in the cde or b it may receive loans or investments from and sell qualifying_business loans to other cdes that have successfully competed for allocations of tax_credits cdes may under certain circumstances transfer allocations to one or more subsidiary organizations the organizations may transfer_tax credit allocations only to those subsidiaries that are also certified as cdes cdes are required to invest the proceeds of the qualified equity investments in low-income communities the funds may be used for a wide variety of activities including loans to or equipment investments in businesses loans to or equity investments in real_estate projects capitalization of other cdes financial counseling and other services m currently holds a membership interest in the llc as managing partner of the llc you hold a interest it is anticipated that m will establish additional limited_liability corporations similar to llc you will solicit banks other financial institutions corporations or individuals as potential investors in the llcs these llcs have or will have two classes of membership class a and b class a interests will be owned by investor members who will not participate in the day-to- day management of the llc and will have restricted rights to vote on certain major events class a membership interests will typically be between and class b is the managing member whose ownership_interest will typically not exceed initially approximately of your time manpower and expense will be devoted to managing the llc and any future for-profit subsidiaries of m as the manager of the llc you ensure that the llc follows the requirements of the nmtc program ensure that all of the llc’s assets are used to make investments in and offer financial and technical products and services to individuals and entities in low income economically distressed and disadvantaged neighborhoods provide various services to capital recipients through the llc including screening of all applicants and the rendering of technical and managerial assistance to capital recipients compile data and issue reports as needed to comply with the requirements of all relevant federal and state programs as well as the requirements of lenders investors and contributors and compile and maintain data and records and prepare financial and other reports necessary to meet the requirements of the nmtc program in the future less of your time will be devoted to managing the llc you will to serve as the manager of any other for-profit entities established by m to take advantage of the nmtc program the services you provide to those entities will be as described above in addition to these activities you will provide the services described above to unrelated for- profit entities established to take advantage of and participate in other federal and state funded programs targeted at improving economic opportunities in low income or economically depressed geographic areas this activity will not exceed of your time manpower and expense you will charge fees based on the product and services rendered management fees charged will generally range from to of the total assets under management you indicate that all fees to for-profit subsidiaries of m are discounted from commercial rates and are non-standard in their terms and conditions in a letter dated date your authorized representative provides additionally although applicant charges management fees it is expected that its activities will be subsidized by m further it is stated that funds received from management activities will not be sufficient to cover your costs law sec_501 of the code exempts from federal_income_tax corporations organized and operated exclusively for charitable educational and other purposes provided that no part of the net_earnings of which inures to the benefit of any private_shareholder_or_individual 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 of the purposes specified in such section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides 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 and b do not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities that in themselves are not in furtherance of one or more exempt purposes sec_1_501_c_3_-1 of the regulations provides that an organization will be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities that 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 provides that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest thus to meet the requirements of this subsection it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests sec_1_501_c_3_-1 of the regulations provides that an organization may meet the requirements of sec_501 although it operates a trade_or_business as a substantial part of its activities if the operation of such trade_or_business is in furtherance of the organization's exempt_purpose or purposes and if the organization is not organized or operated for the primary purposes of carrying on an unrelated_trade_or_business revrul_54_305 1954_2_cb_127 describes an organization whose primary purpose is the operation and maintenance of a purchasing agency for the benefit of its otherwise unrelated members who are exempt as charitable organizations the ruling held that the organization does not qualify for exemption under the predecessor to sec_501 of the code because its activities consisted primarily of the purchase of supplies and the performance of other related_services which are considered an ordinary trade_or_business revrul_70_535 1970_2_cb_117 provides that a nonprofit organization formed to provide managerial developmental and consultative services to low and moderate income housing projects for a fee does not qualify for exemption under sec_501 the organization’s primary activity was the carrying on a business by managing low and moderate income housing projects in a manner similar to organizations operated for profit revrul_72_369 1972_2_cb_245 describes an organization formed to provide managerial and consulting services for nonprofit_organizations to improve the administration of their programs its primary activities were to enter into agreements with unrelated exempt_organizations to provide managerial and consulting services on a cost_basis the ruling held that an organization was not exempt merely because its operations were not producing profit in this case the organization was not exempt because its primary activity of providing managerial and consulting services for a fee was a trade_or_business ordinarily carried on for profit the fact that services were provided at cost solely to exempt_organizations was not sufficient to characterize the activity as charitable within the meaning of sec_501 of the code revrul_74_587 1974_2_cb_162 holds that a nonprofit organization formed to relieve poverty eliminate prejudice reduce neighborhood tensions and combat community deterioration through a program of financial assistance in the form of low cost or long-term loans to or the purchase of equity interests in various business enterprises in economically depressed areas is exempt under sec_501 of the code revrul_76_419 1976_2_cb_146 holds that a nonprofit organization that purchases blighted land in an economically depressed community converts the land into an industrial park and encourages industrial enterprises to locate new facilities in the park in order to provide employment opportunities for low income residents of the area is operated exclusively for charitable purposes and qualifies for exemption under sec_501 of the code in 326_us_279 the supreme court held that the presence of a single non-exempt purposes if substantial in nature will destroy the exemption regardless of the number or importance of truly exempt purposes in 70_tc_352 the court considered the petition for exemption under sec_501 of the code of an organization which was formed for the purpose of providing consulting services primarily in the area of rural-related policy and program development the organization’s goals are to help entities deal with problems they face regarding the external environments within which they operate changing priorities and implementing realistic internal planning and management policies another important goal of the organization is to improve clients’ understanding of governmental policy processes and methods of becoming more effective in their work through public and private funding in ruling that the organization did not qualify for exemption under sec_501 the court indicates that the organization’s primary purpose was not charitable but rather commercial since its activities constitute to conduct of a consulting business of the sort which is ordinarily carried on by commercial ventures for profit the criteria the service uses to determine if an organization’s activities further the charitable purpose of lessening the burdens of government are contained in revrul_85_1 1985_1_cb_177 and 1985_1_cb_178 the criteria are first that a governmental_unit considers the organization’s activities to be its burden and second that the activities actually lessen that burden relevant factors in determining whether a governmental_unit considers an organization’s activities to be its burden include an invitation by the governmental_unit to the organization to take part in any activity actually being performed by the governmental_unit whether the governmental_unit has control_over the activities of the organization if a governmental_unit appoints all of the directors of an organization that is strong evidence that the government considers the activity to be its burden if on the other hand a governmental_unit appoints less than half of the directors the fact that a governmental_unit appoints some members to the board is less significant a close interrelationship and attitude of cooperation between the governmental_unit and the organization whether the governmental_unit has actually undertaken this activity itself whether there have been formal actions by a legislative body or other official actions by the governmental_unit establishing that it expressly accepts the activity as a governmental burden and recognizes the organization as acting on its behalf whether the organization regularly receives funding from the government in the form of general grants as opposed to fees for services provided whether the activity is one that the governmental_unit may under state or local law conduct itself even if an organization does not independently qualify for exemption it may qualify if it is an integral part of an sec_501 organization provided it is not a feeder_organization within the meaning of sec_502 an otherwise properly organized and operated organization could derivatively qualify for exemption as an integral part if it performs essential services for an exempt_organization and the services if performed by the exempt_organization itself would not be an unrelated_trade_or_business and the exempt_organization exercises sufficient control and close supervision based on all the facts and circumstances to establish the equivalent of a parent and subsidiary relationship see revrul_78_41 1978_1_cb_148 trust to satisfy malpractice claims against a hospital if the equivalent of a parent-subsidiary relationship is established dealings between the parent and it tax-exempt subsidiary that would not otherwise have resulted in unrelated_trade_or_business are considered to be merely a matter of accounting rather than unrelated_trade_or_business activity under sec_513 see revrul_77_72 1977_1_cb_157 indebtedness owed to a labor_union by its wholly owned tax-exempt subsidiary is not acquisition_indebtedness within the meaning of sec_514 since the parent-subsidiary relationship shows the indebtedness to be merely a matter of accounting rationale c organizational_test as noted above sec_1_501_c_3_-1 of the regulations provides that an organization’s organizing instrument must limit its purposes to one or more exempt purposes and may not expressly empower the organization to engage otherwise than as an insubstantial part of its activities in activities that not in furtherance of one or more exempt purposes your articles of incorporation provide that you were formed to among other things provide develop encourage sponsor administer service and manage programs designed to efficiently channel the appropriate forms of financial resources and consulting services into low-income communities historically unable to attract private or conventional financing as well as assisting entrepreneurs small businesses nonprofit_corporations and community based organizations to start purchase expand stabilize or preserve their business activities further your articles provide that you have all of the powers and authority available to you pursuant to the nonprofit corporation act of the state in which you operate thus your articles specify purposes outside operational_test the scope of those allowed by sec_501 of the code in addition they expressly empower you to engage in activities that are not in furtherance of one or more of the purposes enumerated at sec_501 since they state that you have the powers and authority available to you pursuant to the nonprofit corporation it is a clearly established principle of the law of charity that a purpose is not charitable unless it is directed to the public benefit not every purpose which is beneficial to the community however is deemed charitable as a general_rule providing services of an ordinary commercial nature in a community even though the undertaking is conducted on a nonprofit basis is not regarded as conferring a charitable benefit on the community unless the service directly accomplishes one of the established categories of charitable purposes your primary activity consists of providing management and other services to for-profit and other entities to assist those entities in operating efficiently and within the requirements set by local state and federal agencies based on the information submitted your services do not directly accomplish any of the established categories of charitable purposes you state that you will provide managerial_services to related for-profit entities as well as unrelated for-profit non-profit and governmental entities unlike the organizations described in rev ruls and you do not directly further a charitable purpose your operations are indistinguishable from those described in rev ruls and like those organizations you do not directly further a charitable purpose through your provision of management and other services at least of the services you provide will be provided to for profit entities in spite of the fact that the provision of services in those revenue rulings was limited to tax exempt entities the organizations were held not to qualify under sec_501 your primary activity of providing managerial and consulting services for a fee is a trade_or_business ordinarily carried on for profit you operate in a manner similar to that of the organization described in b s w group inc supra your provision of management and other services constitutes a trade_or_business your primary purpose is not charitable but rather commercial like that organization your primary source of support will be fees from the provision of services you indicate that m will subsidize your activities since the income generated will not be sufficient to cover your costs thus you will serve the private interests of the llc and similar organizations as well as the investors in those organizations by providing services at less than fair-market value your primary purpose is to operate a trade_or_business providing management and other services to for profits and unrelated entities thus you are not qualified for tax-exempt status since you have a substantial nonexempt purpose see better business bureau v united_states supra with respect to the lessening of burdens rationale to support your claim to status as an organization described in sec_501 of the code you do not meet any of the criteria enumerated above accordingly you do not lessen the burdens of government with respect to the pertinent part of the integral part rationale an organization may derivatively qualify for exemption as an integral part if it performs essential services for its tax exempt parent and the services if performed by the exempt_organization itself would not be an unrelated_trade_or_business the provision of managerial and other services if provided by m to it’s for profit subsidiaries and unrelated organizations would be an unrelated_trade_or_business further using the integral part basis an organization must perform essential services solely for its parent and its parent’s tax exempt subsidiaries you will not limit the provision of services to your parent and the tax-exempt subsidiaries of your parent thus you do not meet the criteria for the integral part basis a status sec_509 of the code defines the term private_foundation as an organization described in sec_501 other than organizations described in sec_509 or sec_509 provides that the term private_foundation does not include an organization that a is organized and operated exclusively for the benefit of to perform the function of or to carry out the purposes of one or more organizations described in sec_509 or b is operated supervised or controlled by or in connection with one or more organizations described in sec_509 or c is not be controlled directly or indirectly by one or more persons who would be disqualified persons as defined in sec_4946 if the organization were a private_foundation other than foundation managers as defined in sec_4946 and organizations described in sec_509 and sec_1_509_a_-4 of the regulations provides that an organization is organized exclusively for one or more purposes specified in sec_509 of the code only if its articles of organizations i limit the purposes of such organization to one or more of the purposes set forth in sec_509 ii do not expressly empower the organization to engage in activities which are not in furtherance of purposes set forth in sec_509 iii state the specified publicly supported organizations and iv do not expressly empower the organization to operate to support or benefit any organization other than the specified publicly supported organizations stated in its articles of organization organizational_test sec_1_509_a_-4 of the regulations provides in pertinent part that a supporting_organization will be regarded as operated exclusively to support one or more specified publicly supported organizations only if it engages solely in activities which support or benefit the specified publicly supported organizations such activities may include making payments to or for_the_use_of or providing facilities for individual members of the charitable_class benefited by the specified publicly supported further that section provides that an organization will be regarded as operated exclusively to support or benefit one or more specified publicly supported organizations even if it supports or benefits an organization other than a private_foundation which is described in sec_501 and is operated supervised or controlled directly by or in connection with such publicly supported organizations or which is described in sec_511 however an organization will not be regarded as operated exclusively if any part of its activities is in furtherance of a purpose other than supporting or benefiting one or more specified publicly supported organizations sec_1_509_a_-4 of the regulations provides in pertinent part that a supporting_organization is not required to pay over its income to the publicly supported organizations in order to meet the operational_test it may satisfy the test by using its income to carry on an independent activity or program which supports or benefits the specified publicly organizations all such support must however be limited to permissible beneficiaries in accordance with subparagraph of this paragraph your articles of incorporation provide that you were formed to among other things provide develop encourage sponsor administer service and manage programs designed to efficiently channel the appropriate forms of financial resources and consulting services into low-income communities historically unable to attract private or conventional financing as well as assisting entrepreneurs small businesses nonprofit_corporations and community based organizations to start purchase expand stabilize or preserve their business activities further your articles provide that you have all of the powers and authority available to you pursuant to the nonprofit corporation act of the state in which you operate your articles do not limit your purposes to one or more of the purposes set forth in sec_509 expressly empower you to engage in activities which are not in furtherance of purposes set forth in sec_509 and expressly empower you to operate to support or benefit organizations other than m thus you do not meet the organizational_test described at sec_1_509_a_-4 of the regulations the carrying on of a trade_or_business is not an activity which supports or benefits m your activities are distinguished from the activities described in sec_1_509_a_-4 of the regulations which refers to activities such as making payments to or for_the_use_of or providing facilities for individual members of the charitable_class benefited by the specified publicly_supported_organization you do not limit recipients of your services to permissible beneficiaries as described in sec_1 a e of the regulations the organizations you will provide services to are not members of a charitable_class nor are they organizations described in sec_501 of the code and operated supervised or controlled directly by or in operational_test connection with m your activities will further a purpose other than supporting or benefiting m thus you do not meet the requirements of either sec_1_509_a_-4 or accordingly you do not meet the operational_test described at sec_1_509_a_-4 conclusion based on our analysis of the information provided we have concluded that you are neither properly organized nor properly operated under sec_501 of the code you fail the organizational_test because your articles of incorporation specify activities purposes and powers outside the scope of sec_501 you fail the operational_test for a number of reasons you have failed to establish that you will be operated for a charitable purpose in fact the information provided establishes that you will operate for the substantial non-exempt purpose of operating a business further your activities will result in more than an insubstantial amount of private benefit to for-profit and unrelated organizations and the investors in those organizations accordingly you do not qualify for exemption as an organization described in sec_501 of the code and you must file federal_income_tax returns even if you were described in sec_501 you are not an organization described in a of the code 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 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 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 internal_revenue_service te_ge xxxxxxxxxxxxxx xxxxxxxxxxxxxxxx constitution ave n w washington dc please send your protest statement form_2848 and any supporting documents to this address you may also fax your statement using the fax number shown in the heading of this letter if 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 you have any questions please contact the person whose name and telephone number are shown in the heading of this letter lois g lerner director exempt_organizations rulings agreements sincerely


internal_revenue_service number release date index number ----------------------------- -------------------------------------- ----------------------------------- ------------------------- ---------------------------- department of the treasury washington dc person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc corp b03 - plr-112423-04 date date ---------------------------------- taxpayer --------------------------------------------------------------------------- date dear ---------------- ---------------------- we respond to your date request that we supplement our letter_ruling dated date plr-153043-03 the original letter_ruling the legend abbreviations facts proposed transaction representations and caveats appearing in the original letter_ruling are hereby incorporated by reference except as modified below for purposes of this ruling the original letter_ruling addresses certain federal_income_tax consequences of the restructuring of taxpayer’s operations under sec_382 of the internal_revenue_code and related provisions of the code and the income_tax regulations we ruled that the replacement of each existing class of taxpayer common and preferred_stock with the newly issued classes of stock having the same priority and the same entitlement to distribution and the issuance of each class of exchanged taxpayer common_stock and exchanged taxpayer preferred_stock to the common equity_trust and the preferred equity_trust respectively does not result in an owner shift for purposes of sec_382 in addition we ruled that any interests received by the creditors of taxpayer in satisfaction of their claims are not stock for purposes of determining whether there has occurred an ownership_change under sec_382 on any testing_date statement for the bankruptcy plan filed with the bankruptcy court on date an amended bankruptcy plan and an amended disclosure statement were filed with the court on date with further amendments having been filed prior to the issuance of the original letter_ruling these rulings were based in part on the bankruptcy plan and related disclosure plr-112423-04 the bankruptcy plan was filed on date subsequent to the issuance of the original letter_ruling the fifth amended bankruptcy plan you ask whether this development has an adverse effect on the original letter_ruling in your request you state that you wish to inform us that another amendment of based upon the information and representations submitted with the original and supplemental ruling requests we rule as follows the modifications to the facts and the proposed transaction from the original letter_ruling as described in the fifth amended bankruptcy plan will not adversely affect the qualification of the transaction under sec_382 and will have no adverse effect on any of the rulings set forth in the original letter_ruling which will remain in full force and effect the rulings contained in this letter and the original letter_ruling are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination we express no opinion on the tax treatment of the transaction under any other provisions of the code or regulations or the tax treatment of any conditions existing at the time of or effects resulting from the transaction that are not specifically covered by the original letter_ruling or this supplemental letter_ruling of the code provides that it may not be used or cited as precedent any income_tax return to which it is relevant letter are being sent to taxpayer and a second authorized representative in accordance with the power_of_attorney on file with this office copies of this this ruling letter is directed only to the taxpayer requesting it sec_6110 a copy of this letter together with the original letter_ruling must be attached to sincerely ______________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


department of the treasury internal_revenue_service te_ge eo examinations commerce street mc 4920dal dallas tx tax_exempt_and_government_entities_division date release number release date uil code taxpayer_identification_number form tax periods ended december 20xx december 20xx person to contact identification_number contact telephone number our adverse determination as to your exempt status was made for the following reason s this is a final_determination that you do not qualify for exemption from federal_income_tax under internal_revenue_code the code sec_501 as an organization described in code sec_501 for the tax periods above dear certified mail based on your activities and financial records you do not qualify for exemption from federal_income_tax under sec_501 of the code since you are engaged in business with the general_public by regularly providing your facilities and services to the public for use upon payment of established fees these fees are over the limit as provided in revproc_71_17 as amended by public law and the income from these sources is inuring to the benefit of your-members because it is used for the maintenance and improvement of your facilities you are required to file income_tax returns on form_1120 these returns should be filed with the appropriate service_center for tax periods ended december 20xx and december 20xx we have secured forms for tax periods ended december 20xx and december 20xx 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 these courts at the following addresses united_states tax_court second street nw washington d c united_states court of federal claims madison place nw washington d c united_states district_court for the district of columbia constitution avenue nw washington d c the taxpayer_advocate_service tas is an independent organization within the irs that can help protect your taxpayer rights tas can offer you help if your tax problem is causing a hardship or you’ve tried but haven’t been able to resolve your problem with the irs free tas will do everything possible to help you visit taxpayeradvocate irs gov or call if you qualify for tas assistance which is always if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely publication enclosure margaret von lienen director eo examinations gs yi internal_revenue_service department of the treasury tax exempt and government entities exempt_organizations examinations certified mail - return receipt requested dear date taxpayer_identification_number oo form tax_year s ended dec 20xx and dec 20xx person to contact id number contact numbers telephone fax manager’s name id number manager’s contact number response due_date why you are receiving this letter we propose to revoke your status as an organization described in sec_501 of the internal_revenue_code code enclosed is our report of examination explaining the proposed action what you need to do if you agree if you agree with our proposal please sign the enclosed form_6018 consent to proposed action - sec_7428 and return it to the contact person at the address listed above unless you have already provided us a signed form we'll issue a final revocation letter determining that you aren’t an organization described in sec_501 if we don't hear from you if you don’t respond to this proposal within calendar days from the date of this letter we'll issue a final revocation letter failing to respond to this proposal will adversely impact your legal standing to seek a declaratory_judgment because you failed to exhaust your administrative remedies effect of revocation status if you receive a final revocation letter you'll be required to file federal_income_tax returns for the tax_year s shown above as well as for subsequent tax years what you need to do if you disagree with the proposed revocation if you disagree with our proposed revocation you may request a meeting or telephone conference with the supervisor of the irs contact identified in the heading of this letter you also letter rev catalog number 34809f may file a protest with the irs appeals_office by submitting a written request to the contact person at the address listed above within calendar days from the date of this letter the appeals_office is independent of the exempt_organizations division and resolves most disputes informally for your protest to be valid it must contain certain specific information including a statement of the facts the applicable law and arguments in support of your position for specific information needed for a valid protest please refer to page one of the enclosed publication how to appeal an irs decision on tax-exempt status and page six of the enclosed publication the examination process publication also includes information on your rights as a taxpayer and the irs collection process please note that fast track mediation referred to in publication generally doesn’t apply after we issue this letter you also may request that we refer this matter for technical_advice as explained in publication please contact the individual identified on the first page of this letter if you are considering requesting technical_advice if we issue a determination_letter to you based on a technical_advice_memorandum issued by the exempt_organizations rulings and agreements office no further irs administrative appeal will be available to you contacting the taxpayer_advocate office is a taxpayer right you have the right to contact the office_of_the_taxpayer_advocate their assistance isn’t a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate can't reverse a legally correct_tax determination or extend the time you have fixed by law to file a petition in a united_states court they can however see that a tax matter that hasn't been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at internal_revenue_service office_of_the_taxpayer_advocate for additional information if you have any questions please call the contact person at the telephone number shown in the heading of this letter if you write please provide a telephone number and the most convenient time to call if we need to contact you thank you for your cooperation enclosures report of examination form_6018 publication publication sincerely paul a marmolejo acting director eo examinations letter rev catalog number 34809f department of the treasury internal_revenue_service tax_exempt_and_government_entities_division exempt_organizations examinations date date taxpayer id number form tax periods ended december 20xx december 20xx person to contact id number contact numbers telephone fax dear on date congress enacted the protecting americans from tax hikes act of path act of p l sec_406 of the path act extends declaratory_judgment rights under sec_7428 of the internal_revenue_code from c organizations to all c organizations these rights apply to adverse determinations of tax-exempt status including revocations and disqualifications of tax-exempt status this section of the path act of applies to all revocations and disqualifications issued on or after date we issued you a final revocation or disqualification letter during this time period we are now reissuing a revocation letter because you are entitled to file a declaratory_judgment action with respect to the loss of your tax-exempt status your reissued letter is attached the basis for the loss of your exempt status has not changed if you have any questions you can call me at the telephone number shown in the heading of this letter need to contact you if you write please provide a telephone number and the most convenient time to call if we thank you for your cooperation sincerely reviewer attachment 90-day final adverse determination_letter schedule number or exhibit form 886-a rev date name of taxpayer year period ended dec 20xx dec 20xx tax identification_number explanations of items issue whether c other than sec_501 c or c during the tax years cited above met the requirements of any tax-exempt status under section law irc 2015-code-vol sec_501 exemption from tax on corporations certain trusts etc c clubs organized for pleasure recreation and other nonprofitable 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 social clubs are permitted to receive a certain amount of income from the general_public and investments because p l substituted substantially_all for exclusively in sec_501 the limitations imposed by this change are and no more than of revenue from investments no more than of revenue from non-members facts an organization may self-declare themselves to be tax-exempt under the sections of c of the internal_revenue_code except for those cited above for the subject years disclosed that the organization was operated as examination of was held to operate as a commercial business because it was a for-profit business operated as a for-profit business and advertised events to which the general_public was invited there were no effective methods to segregate guest revenue from member revenue the admission of the general_public does not provide an exempt_purpose for a social_club nor does it provide a valid purpose for exemption under any other section of c for which a self-declarer may claim tax exemption did not have adequate internal controls in place to ensure that only members and their own personal guests attended events in their building nor did they have controls in use which reliably segregated member from non-member revenues finally the amount of non-member income exceeded nonmember use of club facilities and or services on its gross_receipts from finally the corporate documents specified provisions which lack detail and do not require the development and maintenance of detailed specification of exempt_purpose written policies for internal control annual disclosure of any conflicts of interest no objection is taken to the articles and by-laws although these documents have been amended since the years under examination these amendments will be sent to the administrative files unit in cincinnati no objection was catalog number 20810w form 886-a page publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev date explanations of items name of taxpayer tax identification_number year period ended dec 20xx dec 20xx in general steps taken to the corporate documents as they contain no impermissible provisions have been taken to increase the participation of the board_of directors in organization matters and to document the adoption by management of new control provisions which new management has adopted subsequent to the years under examination taxpayer position has agreed to re-state their forms and 990-t on form_1120 for the two years under exam agent received these 1120’s on august 20xx agent’s review of the forms corporate tax returns show that the org correctly converted the series information returns to the for these tax returns were then completed and sent to this office by xx and xx agent's findings in the examination organization by the agent for signature complete and file form_1024 although it is understood not to be required the poa indicates that he will request that submission of these tax returns effectively conveys their agreement with form 6018-a was not signed as it was not presented to the government position it is not required that it believes that the requirements are met for the exemption the it is the government position that the poa has expressed his agreement with agent’s conclusion that the org did not meet the requirement for exception under any part of sec_501 other than or exemption under sec_501 sec_501 or sec_501 requires the approval of an application filed on form_1023 or as the organization does not meet the requirements of any eligible section of c then is disqualified not revoked as a social_club under sec_501 file form_1024 if they wish to re-declare themselves to be a social_club under sec_501 for the years that were disqualified from tax exemption fye dec 20xx and 20xxx must file as a taxable corporation on forms - which has been done this is to further state that the examination did not cover the year ended dec 20xx and the organization may self- declare for that year if government expresses no opinion as to whether december 20xx the organization has not shown that it meets the requirements of c or any other part of sec_501 for which exemption does not require a formal determination of qualification based on the filing of form_1023 or a sec_501 itis therefore required to report its income on corporate tax form_1120 for 20xx and 20xx during which years it failed to meet such requirements for exemption failed to meet the requirements of any non-excluded part of section publish no irs gov department of the treasury-internal revenue service qualifies for exemption as of form 886-a catalog number 20810w conclusion page


department of the treasury internal_revenue_service washington d c date o f f ic e o f c h ief c o u n sel index number number info release date dear this responds to your letter of date in which you request a ruling concerning your federal employment_tax status under the internal_revenue_code you state that you were not an employee earning taxable wages for the tax_year ending date you conclude that although you realized a gain in compensation_for your services it is not recognized by the internal_revenue_code in addition you state that this issue is a factual matter and does not raise any questions of law except those involving jurisdiction sec_6501 of the internal_revenue_code states that the internal_revenue_service can assess additional tax for a year allow a claim_for_refund by the taxpayer or take collection action only within a specific time limit in general this time limit known as the statute of limitation i sec_3 years from the date the original tax_return was filed or years from the date the tax was paid whichever is later because your request involves a taxable_year closed by the statute of limitation we are unable to take any_action concerning your requested ruling if you have any questions or need additional information please contact malcolm l funn identification_number of my staff at sincerely office of division counsel associate chief_counsel tax exempt government entities harry beker chief health welfare branch


number release date id office uilc cca_2010100515555542 -------------- from ------------------------- sent tuesday october pm to --------------------- cc ------------------------- subject as requested ------------ on september i sent an email to several attorneys in ----- confirming that 308_us_389 is good law and that we are still following it so that a taxpayer would be considered to have filed a superseding first return which would be the original return as long as it's filed by the extended due_date i think we're on pretty solid ground that if it is after the extended due_date all bets are off we also have a couple revenue rulings that follow it in spirit see rr rr rr let me know if you need anything further


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division release number release date date contact person identification_number contact number employer_identification_number uil 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 failure_to_file the returns timely may result in a penalty 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 if you disagree with our proposed deletions follow the instructions in notice if you agree with our deletions you do not need to take any further action in accordance with code sec_6104 we will notify the appropriate state officials of our determination by sending them a copy of this final letter and the proposed adverse letter you should contact your state officials if you have any questions about how this determination may affect your state responsibilities and requirements if you have any questions about this letter please contact the person whose name and telephone number are shown in the heading of this letter federal iicome 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 holly o paz director exempt_organizations rulings and 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 contact person identification_number contact number fax number employer_identification_number uil legend g organization name h foreign_entity name j country name k country name m staie name x 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 sec_1 are you precluded from exemption under sec_501 of the code because you lack control and discretion over funds beiow yes for the reasons described do your activities constitute a substantial non-exempt purpose precluding you from exemption under sec_501 of the code yes for the reasons describe below does your lack of detail cause you to be disqualified from exemption under sec_501 of the code yes for the reasons described below letter cg catalog number 47630w facts you were previously granted exemption under sec_501 of the code your exemption was revoked due to non-filing of form_990 for three consecutive years accordingly you submitted this new form_1023 application_for exemption for reinstatement under notice_2011_43 you were incorporated on date x in the state of m your articles of incorporation in pertinent part state this m organization is the exclusive us representative of g in foreign_country j better known by its acronym your name was essentially the same as that of g until you filed an amendment with the state of m about six years later the amendment changed your name to a name very similar to h a european for profit entity with which you are involved you recently amended your name with the state of m to combine your previous two names you have donated two pieces of medical equipment to foreign_country j you also indicated you are the exclusive us representative of g in foreign_country j and that you are engaged in the following activities e e e a surveillance and mobile communications program for foreign_country k acityscape program which provides housing for a town in foreign_country j an archaeologically-significant program to protect and preserve the science and culture of historically-important and shipwrecked cargoes and artifacts of historical vessels and contemporary ships in order to protect and preserve the vessels and ships form the rampant unauthorized treasure-hunting and to protect the history and culture of the region you are currently engaged in a surveillance and mobile communications program for foreign_country k the goal of the program is to protect and preserve the indigenous and mainstream populations of a specific rain forest at the common border of foreign countries j and k from destruction and extinction the program is also designed to provide surveillance detect and interdict the increasing flow of illegal narcotics in the _ aggressive hands of the militant narco-terrorists who are advancing out of foreign_country j across the border into k with destinations into other foreign countries as well as the us this is an attempt to improve the overall welfare and safety of the region when asked about your surveillance and mobile communications program you said the program is designed by you in consultation with a major defense contractor to protect the us's vital interests by halting or reducing significantly the out-of-control flow of letter cg catalog number 47630w yon illegal narcotics and weapons trafficking and the consequential narco-terrorism to that end the defense network is designed to provide surveillance detect and interdict manned or mechanized movement by land sea and air of the illegal goods in movement over through or around the region you provided a proposal available to government officials that contained details including extensive background information and a mission statement for your surveillance project this statement included maps of areas determined to be the primary line of anti-drug defense it further said the program is available for presentation in hardcopy-delivery or electronic-mail formation it consists of a 47-page detailed proposed and itemized budget the budget itemizes the cost to transport and install operate and maintain a 25-kilometer section of highest- tech state-of-the-art land sea air radar surveillance and radio communication defense network at any point generally along the border of foreign_country j and k through the rain forest the cost to provide surveillance for the entire border is over dollar_figure million the additional costs necessary to provide for construction of supporting infrastructure including power communications roadways etc are approximately dollar_figure million you are in the process of trying to present the program to us government officials including those in the state department if the us government determines they will fund the program it is your understanding that us authorities would work with their counterparts in the foreign government of k who would exercise their prerogative to approve the program to determine the disposition of the program’s funding and installation operation and maintenance you said the government of k has expressed interest in implementing this program and the program is charitable in that it is intended to protect and preserve the law enforcement and security health and welfare of the usa’s populations and their vital interests you willspend of your time and resources on your surveillance project you provided the following inconsistencies concerning this project o o o it will be funded by the united_states which would act in collaboration with k you then said budgets to install and operate the program would be funded by the us government you continued to say that you would not receive any funds from the us government but then you said if you did receive any funds from the us government you would follow all rules required by a 501_c_3_organization regarding your city scape program you said you will not provide financial resources for this activity but it will come from h an organization in europe when asked about the details of your relationship with h you replied the relationship is between g and h the resources will be made by credit transfer from h to your bank account where it will be credit transferred to finance the entire housing project the funds you receive from h will be transferred to a bank in foreign_country j then the funds will be transferred to g the organization located in foreign_country j which is managed by the bank and by the fiduciary entity which is responsible to effect the payments in advance of the letter cg catalog number 47630w projects which will be properly signed and certified by the auditory sic entity under the control of the government of j the foreign organization g located in j is the one who represents you however you said you do not operate as an intermediary rather you form part of the entire organization for the construction and delivery of the housing to each of the poor families h agreed to fund the project because they lend later you indicated h is a for-profit entity and it has offices in several european countries h is controlled by its board_of directors and its general assembly you said your association with h is through g support to christian communities when asked about your control_over the money flowing from europe to the foreign_country j you said the money will be managed and controlled through an international audit everything these audits are supervised by the for-profit h and by all of the control and fiscal entities in the foreign_country j the international audit exercises strict controls for each payment that is made we can be assured the money is used for charity and not to help a for-profit business because everything is controlled dollar by dollar so it can reach all the poor families through the controls that the international audit exercises and the control and security of j h the european organization controls when asked for more details regarding the low-income_housing project you said the poor families in foreign_country j are protected by the foreign_country j through their democratic institutions and internal controls this helps further your exempt status as this aid goes oriented to the communities that have been affected for the winter wave and the population that has been found in the state of forced displacement the auditors’ administrators and the agencies of control and supervisors in the foreign county j will manage the project h the european organization has the project plan which distributes the monies for development of projects in foreign_country j h starts with the engineers and architects to construct the homes the construction activities will be managed by expert construction engineers and architects and selected based upon their experience knowledge and track record regarding the management of your projects and how the projects are overseen and how often inspectors visit the project you said the h the european company places people to contribute the monies all the supervision is revised by the international auditors delegate of sic time complete sic the administrators of work that to be sic the responsible for watching for its faithful compliance the international auditors you do not impose any restrictions to make sure that your housing remains affordable to low-income residents you do not provide social services to residents a part of the housing is paid with the subsidy of the government approximately dollar_figure minimum is paid_by the poor family approximately dollar_figure -_- you will rely on g the foreign letter cg catalog number 47630w and very organization located in j to make the selection regarding who qualifies in terms of low- income housing levels there is no application form used for admission nor could you provide any contracts or agreements moreover you indicated the persons who administer the housing project do not live in the us they live in foreign_country j you further indicated the public is made aware of the program through ads placed in the offices of the mayors to announce to the poor families that need the homes the homes will each accommodate or the current number of residents in each facility is or municipality will have sports installation sic recreation and healthy dissemination for the families for the sports installations five persons will consist of the family and two guests for a total of seven which will participate in the various sporting events regarding whether residents will rent or purchase housing form you you said the half is bought and the other value of the home is given gift in an attempt to clarify you said the housing units in each about this project you wrote the mayors of the municipalities and the families that are going to receive homes together perform the town planning then h the european company starts with the engineers and architects to construct the homes the construction activities will be managed by expert construction engineers and architects they will be selected based upon their experience knowledge and track record you later said funds are transferred to poor families to construct housing and the purpose of these funds is to help needy families to eradicate poverty the families account for its use because the money is transferred for the construction of the housing units and to sic each family will account for_the_use_of the housing unit they will be accountable to the control and fiscal organizations both at the national and international level the oversight will be through the foreign government j and the international auditors which are appointed by h concerning the city scape program you initially indicated the goal is to provide units of safe modern comfortable housing for homeless and under-sheltered families because of the civil war in j this program will help you achieve your mission of designing and implementing humanitarian programs in j construction has not yet begun this activity is jointly administered by you g and h a for profit european entity the government of j as well as the families which receive the units a part of the housing is paid with the subsidy of the government approximately dollar_figure and very minimum is paid_by the poor family approximately dollar_figure located in j to make the selection regarding who qualifies in terms of low-income_housing levels letter cg -_ you will rely on g catalog number 47630w you later stated that there is no application form used for admission when asked for a copy of your housing contracts or agreements you indicated the persons who administer the housing project do not live in the us they live in foreign_country j regarding whether residents will rent or purchase housing you said the half is bought and the other value of the home is given gift the public is made aware of the program through ads placed in the offices of the mayors to announce to the poor families that need the homes the homes will each accommodate or the current number of residents in each facility is or the housing units in each municipality will have sports installation sic recreation and healthy dissemination for the families for the sports installations five persons will consist of the family and two guests for a total of seven which will participate in the various sporting events no further details were provided in an attempt to clarify you said you subsequently said money is transferred to poor families the purpose of the funds is to help families in need and to eradicate poverty the funds will be used to construct housing units the families account for its use because the money is transferred for the construction of the housing units and to sic each family will account for_the_use_of the housing unit they will be accountable to the control and fiscal organizations both at the national and international level the oversight will be through the foreign government j and the international auditors which are appointed by h your revenue for the past years was approximately dollar_figure about dollar_figure your expenses totaled you were funded entirely out of the personal funds of the board_of directors you also did not file form_990 because you did not solicit or receive contributions or pay out any salaries or expenses to staff your form_1023 indicates you plan to fundraise through email solicitation you are currently governed by your founder her son cofounder as president and vice president the positions of corresponding secretary and recording secretary are held by a mother and her son no salaries are paid law sec_501 of the internal_revenue_code_of_1986 provides for the exemption from federal_income_tax for organizations described in sec_501 such organizations are recognized as exempt if they are organized and operated exclusively for religious charitable and educational_purposes sec_1_501_c_3_-1 of the regulations states that in order to be exempt as an organization described in sec_501 of the code an organization must be both organized and operated exclusively for one or more of the purposes specified in such letter cg catalog number 47630w section if an organization fails to meet either the organizational_test or the operational_test it is not exempt sec_1_501_c_3_-1 of the regulations 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 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 sec_1_501_c_3_-1 of the regulations provides that an organization is not organized or operated exclusively for any of the purposes specified in sec_501 of the code unless it serves a public rather than a private interest sec_1_501_c_3_-1 of the regulations defines the term charitable as including the relief of the poor and distressed or of the underprivileged and the promotion of social welfare by organizations designed to lessen neighborhood tensions to eliminate prejudice and discrimination or to combat community deterioration the term charitable also includes the lessening of the burdens of government revproc_2012_9 superseding revproc_90_27 1990_1_cb_514 sec_4 provides the internal_revenue_service will recognize the tax-exempt status of an organization only if its application and supporting documents establish that it meets the particular requirements of the section under which exemption from federal_income_tax is claimed section dollar_figure states that a determination_letter or ruling on exempt status is issued based solely upon the facts and representations contained in the administrative record it further states the applicant is responsible for the accuracy of any factual representations contained in the application any oral representation of additional facts or modification of facts as represented or alleged in the application must be reduced to writing over the signature of an officer or director of the taxpayer under a penalties of perjury statement the failure to disclose a material fact or misrepresentation of a material fact on the application may adversely affect the reliance that would otherwise be obtained through issuance by the service of a favorable determination_letter or ruling section dollar_figure states that the organization must fully describe all of the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures letter cg catalog number 47630w revrul_63_252 1963_2_cb_101 states that contributions to certain domestic charitable organizations are deductible if it can be shown that the gift is in fact to or for_the_use_of the domestic organization and that the domestic organization is not serving as an agent for or channel for a foreign charitable_organization in reaching this conclusion the revenue_ruling states that it seems clear that the requirements of sec_170 of the code would be nullified if contributions inevitably committed to go to a foreign organization were held to be deductible solely because in the course of transmittal to the foreign organization they came to rest momentarily in a qualifying domestic organization in such cases the domestic organization is only nominally the donee the real donee is the ultimate foreign recipient in each case the question to be decided is whether the amounts paid to the domestic organization are deductible under sec_170 of the code revrul_66_79 1966_1_cb_48 amplifies revrul_63_252 to provide that contributions to a domestic charity that are solicited for a specific project of a foreign charitable_organization are deductible under sec_170 of the code if the domestic charity has reviewed and approved the project as being in furtherance of its own exempt purposes and has control and discretion as to the use of the contributions this conclusion is reached because the contributions received by the domestic charity are regarded as for_the_use_of the domestic organization and not the foreign organization receivitig the grant from the domestic organization in 485_us_351 108_sct_1179 99_led_368 the supreme court held that an organization must prove unambiguously that it qualifies for a tax exemption in better business bureau of washington d c inc v united_states 326_us_179 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 in 74_tc_531 an action for declaratory_judgment pursuant to sec_7428 the tax_court considered an adverse_ruling by the irs on an application_for exempt status as a church the applicant had declined to furnish some information and made answers to other inquiries that were vague and uninformative on the basis of the record the court held that the applicant had not shown that no part of its net_earnings inures to the benefit of the family or that petitioner was not operated for private benefit in peoples prize v commissioner t c memo the court upheld the service's determination that an organization failed to establish exemption when the organization failed to provide requested information the court stated applicant has letter cg catalog number 47630w for the most part provided only generalizations in response to repeated requests by the service for more detail on prospective activities such generalizations do not satisfy us that applicant qualifies for the exemption application of law you are not as described in sec_501 of the code and sec_1 c - a of the income_tax regulations because you are not exclusively organized and operated for charitable purposes you are not described in sec_1_501_c_3_-1 of the regulations because your surveillance and mobile communications program for foreign_country k does not accomplish a purpose described in sec_501 moreover the city scape housing program is under the direct and complete control of the for-profit company h and h is using you as an intermediary to provide funding for this program you are not as described in sec_1_501_c_3_-1 of the regulations because you are serving the private interests of g and h h is using you as an intermediary to funnel money to g in order to fund their projects h has complete control_over the funding and the cityscape program furthermore your activities are not charitable as defined in sec_1 d of the regulations your involvement in preparing and presenting a surveillance and mobile communications program for the us government to fund is not charitable your role as an intermediary to funnel money from h to g is also not an exempt_purpose as required by revproc_2012_9 you have not established that you are organized and operated exclusively for exempt purposes you provided inconsistent and incoherent information when we asked for specific details regarding your operations as required by section dollar_figure of this rev_proc you did not fully describe all of the activities in which you expect to engage including the standards criteria procedures or other means adopted or planned for carrying out the activities the anticipated sources of receipts and the nature of contemplated expenditures you have also failed to provide adequate details io allow us to determine that any portion of your activities would qualify for exemption however the information you did provide regarding activities you have already conducted indicates you do not qualify for exemption under sec_501 of the code you have no control_over how the funds that you transfer to g are used and thus you are a conduit as described in described in revrul_63_252 you act as a channel for h a foreign organization to transfer funds to g you are only nominally the donee the real donee is the ultimate foreign recipient g therefore it cannot be concluded that these funds are being used exclusively for exempt purposes described in sec_501 letter cg catalog number 47630w unlike the organization described in revrul_66_79 the contributions you receive are not for your use rather they are for_the_use_of g you are the us organization which collects funds from h and merely forwards this funding to g h remains in control of the funds the cityscape housing program will not accomplish a charitable purpose as described in revrul_67_138 because you relinquish all control to h g and foreign governments realistically you have no housing program as you simply transfer money from h to g because h appears to be the primary administrator of the housing program the funding that passes through you remains in control of h you have not proven unambiguously that you qualify for a tax exemption as in united_states v wells fargo bank supra likewise as in the above-cited case of bubbling well church you have given inconsistent vague answers the responses you provided did not include the details required to establish exemption under sec_501 of the code as described in peoples prize v commissioner supra for example you did not provide a description of your role in the surveillance project your responses about the city scape program were incoherent as in bubbling well church your application_for tax-exempt status calls for open and candid disclosure of all facts bearing upon your operations and finances to assure that there is not abuse of the revenue laws as that disclosure has not been made the logical inference is that the facts if disclosed would show that your fail to meet the requirements of sec_501 as indicated in better business bureau supra the supreme court held that the presence of a single non-exempt purpose if substantial in nature would destroy a claim for exemption regardless of the number or importance of truly exempt purposes h b foreign governments and or contractors would be in control of this activity this substantial non-exempt purpose precludes you from qualifying for exemption in addition your involvement in the surveillance project also shows that you have more than insubstantial non-exempt purposes applicait’s position in a final attempt to secure more details regarding your activities we asked additional questions and you responded to our point inquiry with the following what is the requirement for the irs to renew the c which was issued on date x if all the entities for which the irs issues approval of the c are given the same requirements what is the normal established time for the irs to renew a c letter cg catalog number 47630w we await your kind reply given that we need to present this information to the government of j given that these projects will be developed within the framework of the bilateral between the two governments it is important for you to take into account that the resources for the development of the projects come from europe if we do not present the c by a specific date date provided was two days after this response was written the entities in europe will no longer provide the funds which will be to the detriment of thousands of families we await your answers based upon what is established by law service response to applicant’s position you disregarded our request for the significant details we needed to substantiate your operations rather you asked questions about the exemption-granting process your response did not address any of the items requested conclusion you are being denied for the following three separate reasons any one of which standing alone is sufficient for denial of exemption you have not demonstrated that you have discretion and control_over funds sent to g that insure funds are being exclusively used for purposes described in sec_501 you are operating for more than insubstantial exempt purposes for example your narco terrorism program is not accomplishing a purpose described in sec_501 c the manner in which your housing program is operated is also not accomplishing a purpose described in sec_501 finally you are operating for the private benefit of h lastly your lack of detail and clarity regarding your proposed programs causes you to be disqualified from exemption under sec_501 of the code 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 letter cg catalog number 47630w types of information that should be included in your appeal can be found on page of publication under the heading regional_office appeal the statement of facts item must be accompanied by the following declaration 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 documeits 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_7428 provides in part that a declaratory_judgment or decree shall not be issued in any praceeding 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 we do not hear from you within days we will issue a final adverse if you do not intend to protest this determination you do not need to take any further action determination_letter that letter will provide information about filing tax returns and other matters please send your protest statement form_2848 and any supporting documents to the applicable address letter cg catalog number 47630w 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 holly o paz director exempt_organizations rulings and agreements enclosure publication catalog number 47630w letter cg


internal_revenue_service number release date index number ------------------------ ----------------------- ------------------------ ---------------------------------------------- --------------------------------- in re -------------------------------------------- ---------------------------------------------- --------------------------------------- ------------------------- department of the treasury washington dc person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b3 - plr-163588-03 date date -------------------------------------------- ------------------------------------- --------------------- x ----------------------------------------- country a --------------------------------------- d1 d2 d3 d4 dear ---------------- ----------------- ---------------------- --------------------------- ------------------------------------ this letter responds to your letter dated date requesting a ruling under sec_301_9100-1 and sec_301_9100-3 of the procedure and administration regulations that x be granted an extension of time to make an election to be treated as a disregarded_entity under sec_301_7701-3 facts according to the information submitted x was formed as a private limited_company under the laws of country x’s sole shareholder a acquired all outstanding shares of x on d1 and intended x to be treated as a disregarded_entity for federal_income_tax purposes effective no later than d2 however a inadvertently failed to timely file a form_8832 entity classification election a became aware of the failure to timely file a form_8832 on d3 a request for relief under sec_301_9100-1 and sec_301_9100-3 was filed on d4 law and analysis sec_301_7701-1 provides that the classification of organizations that are recognized as separate entities is determined under sec_301_7701-2 sec_301_7701-3 and sec_301_7701-4 sec_301_7701-3 provides that a business_entity that is not classified as a corporation under sec_301_7701-2 or an eligible_entity can elect its classification for federal tax purposes as provided in sec_301_7701-3 sec_301_7701-3 provides that except as provided in sec_301 b unless the entity elects otherwise a foreign eligible_entity is a partnership if it has two or more members and at least one member does not have limited_liability an association if all members have limited_liability or disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that an eligible_entity may elect to be classified other than as provided in sec_301_7701-3 by filing a form_8832 with the service_center designated on the form_8832 sec_301_7701-3 provides that an election made under sec_301_7701-3 will be effective on the date specified by the entity on form_8832 or on the date filed if no date is specified on the election form the effective date specified on form_8832 cannot be more than days prior to the date on which the election is filed and cannot be more than months after the date on which the election is filed sec_301_9100-1 provides that the regulations under sec_301_9100-2 and sec_301_9100-3 provide standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election under this section sec_301_9100-1 further provides that sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-1 provides that a regulatory election includes an election whose due_date is prescribed by a regulation published in the federal_register sec_301_9100-3 provides that requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that subject_to sec_301_9100-3 through iii a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election reasonably relied on a qualified_tax professional if the taxpayer knew or should have known that the professional was not i competent to render advice on the regulatory election or ii aware of all relevant facts conclusion sec_301_9100-3 provides that a taxpayer will not be considered to have based solely on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result x is granted an extension of time of days from the date of this letter to make an election under sec_301_7701-3 to be treated as disregarded_entity for federal tax purposes effective d2 x should make the election by filing a properly executed form_8832 and attaching a copy of this letter to the election a copy is enclosed for that purpose this ruling is directed only to the taxpayer requesting it sec_6110 of the internal_revenue_code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office we are sending a copy of this letter to x enclosures cc copy of this letter copy for sec_6110 purposes sincerely s heather c maloy associate chief_counsel passthroughs special industries