internal_revenue_service tege appeals_division n los angeles street los angeles ca release number release date date uil code department of the treasury certified taxpayer_identification_number person to contact eric m wong employee id number tel fax refer reply to ap la emw in re tax years years dear this is a final adverse determination as to your exempt status under sec_501 as an organization described under sec_501 of the internal_revenue_code our adverse determination was made for the following reason s you did not establish that you were operated exclusively for educational charitable or other exempt purposes as required by sec_501 of the internal_revenue_code you did not engage primarily in activities which accomplish one or more of the exempt purposes specified in sec_501 sec_1_501_c_3_-1 contributions to your organization are not deductible under code sec_170 you are required to file federal form_1120 for the years shown above by executing form 906-c closing_agreement on final_determination covering specific matters you have waived your right to contest this determination under the declaratory_judgment provisions of sec_7428 of the internal_revenue_code you have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access your tax information and can help you get answers you can call and ask for taxpayer_advocate assistance taxpayer_advocate assistance cannot be used as a substitute for established ifrs procedures formal appeals procedures etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determinations or extend the time fixed by law that you have to file a petition in the united_states tax_court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this final adverse determination of your exempt status as required by code sec_6104 if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely karen a skinder appeals team manager cc tax_exempt_and_government_entities_division org address department of the treasury internal_revenue_service n robinson mc 4900-okc oklahoma city oklahoma taxpayer_identification_number form tax_year s ended person to contact id number contact numbers telephone fax certified mail - return receipt requested dear we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals officer will review your case the appeals_office is independent of the director eo examinations the appeals_office resolves most disputes informally and promptly the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f if we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do not protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and thank you for your cooperation sincerely renee b wells acting director eo examinations enclosures publication publication report of examination letter catalog number 34809f department of the ee internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit y ear period ended 20xx 20xx legend org organization name address address dir-4 2ns companies city city directors organization organization state state vo-1 co-2 xx dir-1 date dir-2 dir-3 co-3 co-4 co-5 issues whether orgs org dba organization is operated exclusively for exempt purposes described within internal_revenue_code sec_501 whether org had the substantial nonexempt purpose of providing debt management program services to the general_public whether org was operated for the purpose of serving private rather than public interests facts background and history orgs org dba as organization was initially created by dir-1and dir-2 a husband and wife and also members of the board_of directors dir-1 was the initial board chairman one board member quit the board to pursue private interests leaving the directors’s and one other board member on a three-member board initially dir-2 was designated as the president and dir-1 as vice president secretary and treasurer it was also resolved that dir-1 and dir-2 would serve as the day-to-day co-operations directors of the organization dir-1 and dir-2 were also authorized to sign checks certificate and articles of incorporation were filed with the secretary of state of state as a domestic non-profit corporation may 19xxk org’s stated purpose is organized exclusively for one or more of the purposes as specified in sec_501 of the internal_revenue_code including for such purposes the making of distributions to organizations that qualify as exempt_organizations under sec_501 of the internal_revenue_code or corresponding section of any future federal tax code the articles of incorporation also states org’s purpose is financial actions including but not limited to budgeting living with credit and debt free living negotiate payments between creditors and consumers obtain the negotiated payments from consumers and pay the creditors the education of the general_public about responsible financial actions through print radio television seminars lectures video and individual counseling to circulate financial products and seminars developed or purchased to aid consumers in the the payment of debt debt management department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer schedule no or exhibit year period ended 20xx 20xx org dba organization payment of debt debt management budgeting living with credit and debt free living aid whenever possible in the enhancement of a persons credit through negotiations with creditors ’ to on march 19xx the internal_revenue_service irs issued letter to org stating that it was exempt from federal_income_tax as an organization described under sec_501 of the internal_revenue_code irc or the code org also received an advanced ruling that it was publicly supported within the meaning of sec_509 of the code on january 20xx the irs issued letter confirming exempt status under sec_501 with a definitive ruling that org was a publicly_supported_organization described under sec_509 on february 20xx the irs notified org of a pending examination of its books_and_records to be conducted beginning march 20xx specifically form_990 for the tax_year ended december 20xx was selected for examination the examination was subsequently expanded to include the tax_year ended december 20xx and org was notified in writing of the audit expansion on may 20xx in the beginning of org’s existence the organization’s principal office was located org’s current mailing address is address city state the physical office location is address city state at address city state the organization was relocated to city sometime during 20xx and resumed operations at address city state until sometime in 20xx when the organization was moved to the current address address governance org was initially created per certificate and articles of incorporation filed with the state secretary of state office on may 19xx article four indicates five initial corporate directors however only four are listed the four listed are dir-2 and dir-1 dir-3 and dir-4 at the first meeting of the board_of directors on september 19xx three board members were present dir-1 and dir-2 and dir-3 according to minutes dir-1 was unanimously voted the chairperson and dir-2 was elected secretary further it was resolved that dir-2 d and dir-1 were assigned signing authority for all checks drafts and other instruments obligating the corporation to pay money in addition to their board member positions dir-1 and dir-2 are also self-elected officers of org during the initial meeting it was noted during election of officers a unanimous vote to elect dir-2 as president and dir-1 as vice president treasurer secretary it was also resolved that dir-1 and dir-2 would act as the day-to-day co-operations directors officer compensation was discussed and established as follows form a rev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items org dba organization schedule no or exhibit year period ended 20xx 20xx dollar_figure president vice president secretary treasurer dir-2 dir-1 dir-1 dir-1 it was resolved the salaries will be waived until the corporation is on a more financially sound footing these salary amounts were never realized in any year of this examination or prior years subsequent annual board meetings usually took place in the first quarter of each year it is noted in all meetings board minutes indicate dir-1 and dir-2 were present as directors as well as board members aside from dir-1 and dir-2 other board members would come and go usually never leaving a board_of more than three members present during meetings dir-1 the father of dir-1 and now deceased attended some of the meetings as a board member during the examination the directors’s stated they have always found it difficult to attract new board members because of liability concerns of potential board members bylaws article sec_1 directors states the corporation shall have three or more directors bylaws article sec_11 quorum for meetings states a quorum shall consist of a majority of the members of the board_of directors as long as the majority is three or more of the members of the board_of directors also no business shall be considered if the required quorum is not present and the only motion the chair shall entertain is a motion to adjourn for the following annual board meetings for which a quorum was present a majority of the attendees were shown to be family members 09-14-19xx initial meeting - two out of three attending board members are family members three out of four attending board members are family members 06-10-19xx two out of three attending board members are family members three out of four attending board members are family members 04-13-20xx two out of three attending board members are family members 03-05-20xx two out of three attending board members are family members 02-05-20xx two out of three attending board members are family members 02-03-20xx two out of three attending board members are family members 01-03-20xx two out of three attending board members are family members 01-10-20xx two out of three attending board members are family members 02-06-20xx two out of three attending board members are family members 01-08-20xx two out of three attending board members are family members form a rev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service form_886 a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx with two sometimes three of the attending members being members of the directors family the board is effectively a family controlled board activities debt management program tp provides as one option to a client’s financial difficulties a debt management plan also referred to as debt consolidation the agreement enables org to provide debt management services where by the client agrees to make payments to org which are then disbursed to the client’s creditors the agreement states the purpose of the debt consolidation program is to educate the client on financial matters get the client out of debt and save the client money org services include negotiating lower payments lower interest rates reduction in late fees reduction in over-the-limit fees and indicates creditor benefits will vary depending on the creditor and their particular debt management plan org will assist in preparing a household budget negotiate with creditors and handle payments the client or org may cancel the agreement at anytime with hour written notice org will notify creditors once a dmp is completed a monthly fee is charged to process money orders cashier checks and electronic payments dollar_figure in 20xx dollar_figure in 20xx through co-1 a one-time set-up fee of dollar_figure is charged and is included with first payment and is to cover the cost of labor involved in data entry and paperwork involved in establishing a client into the dmp client is to agree to making a voluntary monthly contribution of dollar_figure to cover the expenses of the dmp for unsecured debt and an additional dollar_figure for educational material to cover the cost of monthly mail outs to clients both of these contributions is to be included with the client’s monthly payment all contributions fees charges or expenses of org are deducted first from the client’s monthly payment to org before client’s creditors are paid org’s dmp agreement also stipulates the client will incur an additional dollar_figure contribution if any unsecured debt is included in the plan all contributions in the event of discontinuing the dmp are non-refundable client is to agree not to hold org or any of it’s employees directors or officers responsible for any claim suit or action which may arise as a result of the dmp agreement for negligence in addition to the already mentioned fees and charges an additional dollar_figure fee may be automatically deducted by org for any funds not paid_by client’s bank for any reason and also an increase in the monthly payment amount by dollar_figure dollar_figure in 20xx the agreement summary page includes the client’s identifying information amount of debt owed negotiated monthly payment amount estimated time to complete the plan and monthly payment due_date nowhere in the agreement is there mention of any fees or other charges being eligible for waiver or reduction in hardship situations per information provided by org in 20xx a total of caller leads were worked by phone of these clients signed dmp agreements of this total signed up using money orders for payment and utilized the electronic_fund_transfer option the only information provided for 20xx wa sec_21 cleints signed dmp agreements department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx organization indicated it conducts most all of it’s business with clients over the telephone or by email there are no in-office visits or counseling sessions org indicated it on average spends about minutes per initial call with additional time expended if follow-up consultation is required this average time is for all calls whether or not the client signs a dmp agreement during the initial call bills are discussed and creditor information is obtained and a budget is worked with the client over the phone or the client can email or call back with information tp did not provide information about how the fees are determined simply that they are spelled out in the contract tp indicates fees are voluntary however the wording in the dmp agreement indicate these fees are required organization indicated of clients pay the fee this does not indicate the clients would pay if they knew they didn’t have to apparently the organization does not volunteer this waiver information unless asked according to the organization fees waivers depend on the budget information directors and certified counselor are authorized to waive fees and are considered upon request by the client for those fees waive all are fully waived there are no partial waivers ifa client does not want to pay the fee tp claims counselor is instructed to waive the fee without manager consultation again however waivers of fees are not volunteered information provided to the client and is provided only if the client raises the question tp claims it does not turn away clients because they do not want to pay their fees about percent of clients on dmps did not pay any fees due to hardship situations tp claims it will work with both unsecured and secured debt and actually encourages this so the client can work toward being totally debt free tp stated monthly payment amount and payment term is determined by the creditor qualification for a dmp depends on the budget and whether or not dmp payments are affordable after determining disposable income ifa client has less disposable income than the determined monthy dmp payment the counselor works with the client to rework budget revising spending where possible org indicated there is no minimum monthly payment required no minimum total debt a client must have and no maximum amount of income a client must have to qualify fora dmp ifa client does not qualify for a dmp the counselor helps to rework their budget initially and then refer them to different social services in their area have the client go to their local church or have them look in the phone book or go online to obtain services in their area tp states they do not refer clients to specific organizations by name when a client is put on a dmp a contract is faxed or emailed to the client to read over and complete it is then faxed or mailed back permissions for the tp withdrawal funds from their department of the treasury - internal_revenue_service form acrev page -- a gs ssg gf se a department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit y ear period ended 20xx 20xx bank account or they can send in a money order client forms are reviewed for accuracy prior to implementing payments are only accepted by bank draft or money order cashier check if a client does not enroll into a dmp the tp may send educational information to the client fees charged during 20xx and 20xx for setting clients up on debt management programs include an up-front one-time dollar_figure fee a required monthly dollar_figure voluntary contribution to cover expenses of the dmp and an additional dollar_figure monthly voluntary contribution for educational materials the dollar_figure fee is for unsecured credit card debt only if client wishes to also add secured debt or other type of debt an additional dollar_figure monthly contribution is required dollar_figure month fee for processing of money orders cashier checks or electronic payments there is also a dollar_figure fee for any funds not paid_by the client’s bank similar fees were also charged in 20xx there is also a inquiry made as to the number of clients assisted during 20xx organization responded by saying all clients were put on debt management plans of all leads received about were put on dmps and the remainder were sent educational materials statistical information provided show sec_91 total clients signed up for dmps in 20xx during the examination tp stated they had decided to shut down the business as they are receiving fewer and fewer clients stating the for-profit debt settlement companies are taking more clients away from them coupled with the fact many of their current clients are graduating from their debt management plans from this information it appears the dmp activity is a very important activity for this organization and crucial to the funding and existence of this organization counseling sessions org’s exempt_purpose as stated during the initial interview is to reach people with financial problems and provide education and educational materials in a christian format during 20xx- 20xx activities primarily consisted of taking calls from individuals with debt credit related problems the counselor listens to the caller evaluates the client’s situation and makes a determination of possible workable solutions which include debt management programs education working with creditors referral to other organizations and credit repair during 20xx-20xx the organization published a limited amount of educational materials but did possess and have access to significant amounts of third party pamphlets booklets brochures and forms to carry out the education of their clients in conjunction with the telephone counseling session some of the sources of educational materials include the federal trade commission ftc various credit card companies and other sources department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items org dba organization schedule no or exhibit year period ended 20xx 20xx agent’s observation of office activity to include listening in to call-ins revealed sporadic calls some days there are few if any calls and other days there are more callers seem to be mainly interested in getting on a debt management plan partly due to the dmp promotion on their website depending on the caller’s situation dictates what action is taken if the caller is determined to require a personal in-office counseling session requiring time to sort through bills and perform budgeting analysis and discussion of lifestyle changes then the caller is referred to other organization’s affiliated with co-2 tp does not do in-office counseling only by phone most callers hear about the organization online thru the website if the caller calls in for a debt management plan the information is received over the phone or mailed in the dmp agreement is then provided either by mail or online for the individual to sign a budget is worked up over the phone with the client as the counselor inquires about creditors owed types of expenditures made nature of employment family size living arrangements and other factors which are considered to basically determine whether or not the client can afford to realistically work within a debt management plan educational as previously mentioned during 20xx-20xx the organization published a limited amount of educational materials but did possess and have access to significant amounts of third party pamphlets booklets brochures and forms to carry out the education of their clients in conjunction with the telephone counseling session verbal educational information by telephone during the call-in or mailed information was provided to about one-half of the dmp sign-ups in connection with the telephonic counseling session was the extent of education information provided by the organization the examination revealed most of the educational information provided to clients by mail was information provided at no charge or minimal cost to the organization from various third parties to include governmental organizations and credit card companies the tp did not do much in the way of educational outreach ie seminars etc tp indicated it’s very difficult getting local schools to buy into this organization’s desire to provide seminars because of the christian component inherent in the tp’s activity and the issues of conflict between church and state tp has previously set up workshops and seminars in-house and advertised but very low turnout or no turnout caused the workshops to be discontinued org also stated they prepared for workshops which no one attended it was claimed they spent hours preparing for these workshops organization indicated intention present to provide outreach but the fact remains no significant outreach education was conducted therefore educational outreach activities was shown to effectively be discontinued department of the treasury - internal_revenue_service form 886-a rrev page -- department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items org dba organization schedule no or exhibit y ear period ended 20xx 20xx tp indicated many of their clients just want a quick fix to their problems and are not interested in change_of behavior or lifestyle they simply want their problems to go away in these situations the client is asked for the necessary information to place the client on a debt management plan and receives an up-front fee in addition to the monthly payments paid to the tp by the client which is sent to client creditors however the tp does make repeated attempts to provide the needed education through mailings of educational materials whether they ask for it or not loans from officers during the examination organization disclosed dir-1 and dir-2 had loaned money to org for startup costs initially when the organization was established during the mid 90’s additional loans were also made to cover a shortage of capital during operations in 20xx the following information regarding the loan activity was provided 20xx totals 20kx 20xx loan balance on january loan repayment activity dir-1 dir-2 co-3 directors other personal charges made by directorss toward loan deduction co-4 and misc charges payee unknown mispostings corrections to loan acct security service card loan balance on december additional loan activity additional loans made to org by dir-1 and or dir-2 total additions to loan total loan reduction department of the treasury - internal_revenue_service form acrev page -- form 886a department of the treasury - internal_revenue_service schedule no or exhibit year period ended name of taxpayer 20xx 20xx explanation of items org dba organization the organization balance_sheet for the year ended 20xx showed a balance of dollar_figure owed to the directorss by org during the examination the agent attempted to establish amounts loaned loan dates existence of loan documentation containing loan terms etc the organization provided a spreadsheet showing as of 20xx a balance owed to the directorss of dollar_figure during 20xx an additional dollar_figure was loaned to org from the directorss as well as an additional dollar_figure later that year in 20xx 20xx and 20xx various amounts were paid to the directorss to pay back the loan additional loans from the directorss were being made to org again absent any loan documentation being drawn up for the loans during 20xx it was shown many significant payments being made to the directorss in an apparent attempt to pay back the directorss as they had indicated during the examination they were going to shut down the organization not only did the loan get paid back but the directorss continued to receive additional payments after the loan was paid as there is no loan documentation there is no substantiation that the payments received by the directorss are in fact amounts deemed to be repayment for a loan they claimed to have made to org contrary to statements by the directors there is no board resolution in board minutes for any loan activity form_990 signed by dir-1 reports a dollar_figure beginning of year balance on a loan from an officer director trustee or key_employee page line in 20xx and dollar_figure beginning of year balance for 20xx however on schedule a part iii question 2b the organization answers no to the question of whether a loan was made with a trustee director officer key_employee or member of their family additionally no interest_expense was reported on page line neither org or either of the directors’s have provided any other documentation evidencing a loan no promissory note or other evidence_of_indebtedness no record of the rate and amount of interest no evidence of any security or collateral and no fixed maturity_date while there were some records of alleged repayments by org to the directors’s the repayments and the records were sporadic haphazard and informal information provided regarding reasons why the loans were necessary do not provide substantiation of the loans during the examination the directors provided documentation of a personal home equity loan they took out against their personal_property to create a funding source to loan funds to the exempt_organization they control the source of the funds loaned by the directors’s is not relevant to the issue of substantiation of a loan from the directors to the organization they control and are two separate transactions again no documentation of the loan from the officers to org was provided this issue is addressed under the intermediate_sanctions rules of internal_revenue_code sec_4958 for inurement and excess private benefit in a related case related_entity - co-5 form acrev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service form_886 a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx co-5 co-5 a for-profit entity previously controlled by dir-1 and dir-2 currently the directors of org co-5 was dissolved in 19xx shortly after org was incorporated tp stated in the examination that co-5 inc was in the business of credit report restoration but was dissolved in 19xx due to the credit repair organizations act of 19xx which prohibits selling of any credit repair services for an up front fee the act required that the clients would have months to pay the fee after the services were completed the state attorney_general had the sheriff serve papers to cease and desist the service of credit repair with up front fees and this is when co-5 was dissolved from all information gathered during the examination co-5 was dissolved for providing credit repair services for an upfront fee and was shutdown as a result of this activity org was then started up to provide credit counseling and debt management plans within a christian atmosphere credit repair for was not pursued by org 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 department of the treasury - internal_revenue_service form a rev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit y ear period ended 20xx 20xx sec_1_501_c_3_-1 of the regulations provides that an organization is not operated exclusively for one or more exempt purposes if its net_earnings inure in whole or in part to the benefit of private shareholders or individuals sec_1_501_a_-1 defines the words private_shareholder_or_individual in sec_501 to refer to persons having a personal and private interest in the activities of the organization 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 the term charitable is used in sec_501 of the code in its generally accepted legal sense and includes relief of the poor and distressed or of the under privileged as well as the advancement of education sec_1_501_c_3_-1 of the regulations provides that the term educational refers to a the instruction or training of the individual for the purpose of improving or developing his capabilities or b the instruction of the public on subjects useful to the individual and beneficial to the community 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 in revrul_69_441 1969_2_cb_115 the service found that a nonprofit organization formed to help reduce personal bankruptcy by informing the public on personal money management and aiding low-income individuals and families with financial problems was exempt under sec_501 of the code its board_of directors was comprised of representatives from religious organizations civic groups labor unions business groups and educational institutions the organization provided information to the public on budgeting buying practices and the sound use of consumer credit through the use of films speakers and publications it aided low- income individuals and families who have financial problems by providing them with individual counseling and if necessary by establishing budget plans under the budget plan the debtor department of the treasury - internal_revenue_service form a rev page -- schedule no or exhibit year period ended 20xx 20xx department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items org dba organization voluntarily made fixed payments to the organization which held the funds in a_trust account and disbursed the funds on a partial payment basis to the creditors the organization did not charge fees for counseling services or proration services the debtor received full credit against his debts for all amounts paid the organization did not make loans to debtors or negotiate loans on their behalf finally the organization relied upon voluntary contributions primarily from the creditors participating in the organization’s budget plans for its support the service found that by aiding low-income individuals and families who have financial problems and by providing without charge counseling and a means for the orderly discharge_of_indebtedness the organization was relieving the poor and distressed moreover by providing the public with information on budgeting buying practices and the sound use of consumer credit the organization was instructing the public on subjects useful to the individual and beneficial to the community thus the organization was exempt from federal_income_tax under sec_501 of the code revrul_71_529 1971_2_cb_234 held that a nonprofit organization providing assistance in the management of participating colleges’ and universities’ endowment or investment funds for a charge substantially below cost qualified for exemption under sec_501 of the code most of the operating_expenses of the organization including the costs of the services of the investment counselors and the custodian banks were paid for by grants from independent charitable organizations the member organizations paid only a nominal fee for the services performed these fees represented less than percent of the total costs of the operation by performing these services for a charge substantially below its cost the organization was performing a charitable activity for purposes of sec_501 of the code revrul_72_369 1972_2_cb_245 held that an organization formed to provide managerial and consulting services at cost to unrelated exempt_organizations did not qualify for exemption under sec_501 of the code providing managerial and consulting services on a regular basis for a fee is a trade_or_business ordinarily carried on for profit the fact that the services were provided at cost and solely for exempt_organizations was not sufficient to characterize the activity as charitable for purposes of sec_501 of the code furnishing the services at cost lacks the donative element necessary to establish this activity as charitable revrul_76_244 1976_1_cb_155 held that home delivery of meals to the elderly free or with charges on a sliding scale depending on recipients’ ability to pay is a charitable purpose revrul_78_99 1978_1_cb_152 held that the provision of individual and group counseling for widows based on their ability to pay is an educational activity revproc_84_36 1984_1_cb_541 provides in part that exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a form a rev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service explanation of items form_886 a name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx conclusion that the organization will clearly meet the particular requirements of the section under which exemption is claimed a mere statement of purposes or a statement that proposed activities will be in furtherance of such purposes will not satisfy this requirement the organization must fully describe the activities in which it expects to engage including the standards criteria procedures or other means adopted or planned and the nature of the contemplated expenditures where the organization cannot demonstrate to the satisfaction of the service that its proposed activities will be exempt a record of actual operations may be required before a ruling or determination_letter will be issued an organization must establish through the administrative record that it operates as a sec_501 organization denial of exemption may be based solely upon failure to provide information describing in adequate detail how the operational_test will be met american science foundation v commissioner tcmemo_1986_556 82_tc_215 pius xii academy v commissioner tcmemo_1982_97 exempt status can be recognized in advance of operations if proposed operations can be described in enough detail to permit a conclusion that the organization will clearly meet the requirements of sec_501 american science foundation v commissioner tcmemo_1986_556 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 the founding church of scientology v u s ct_cl the court of claims found as a damaging fact that one of the reasons scientology was organized as a religion was to evade regulation as one state was investigating scientology for operating a medical school without a license in consumer credit counseling service of alabama inc v united_states u s t c d d c the court held an organization that provided free information on budgeting buying practices and the sound use of consumer credit qualified for exemption from income_tax because its activities were charitable and educational the consumer credit counseling service which has been recognized as exempt under sec_501 in a group ruling is an umbrella organization made up of numerous credit counseling service agencies in this case these agencies provided information to the general_public through the use of speakers films and publications on the subjects of budgeting buying practices and the sound use of consumer credit they also provided counseling on budgeting and the appropriate use of consumer credit to debt-distressed individuals and families they did not limit these services to low-income individuals and families but they provided such services free of charge as an adjunct to the counseling function they offered a payment plan department of the treasury - internal_revenue_service form acrev page -- department of the treasury - intemal revenue service form 886a explanation of items schedule no or exhibit year period ended 20xx 20xx name of taxpayer org dba organization approximately percent of a professional counselor’s time was applied to the payment activity as opposed to an educational activity moreover the agencies only charged a nominal fee of up to dollar_figure per month for this service this fee was waived in instances when payment of the fee would work a financial hardship the agencies received the bulk of their support from government and private_foundation grants contributions and assistance from labor agencies and the united way an incidental in the service ruled that each of the amount of their revenue was from counseling fees agencies constituted organizations described in sec_501 however two years later the service notified the agencies that it had made a mistake and was reclassifying them under sec_501 the reasons given by the service for revocation of sec_501 c were that the agencies were not organized and operated exclusively for charitable or educational_purposes the debt management service is not limited to low-income individuals or families and fees are charged for the services rendered the court did not agree with the service and directed verdicts for the plaintiff providing information regarding the sound use of consumer credit is charitable because it advances and promotes education and social welfare these programs were also educational because they instructed the public on subjects useful to the individual and beneficial to the community the counseling assistance programs were likewise charitable and educational in nature because the community education and counseling assistance programs were the agencies’ primary activities the agencies were organized and operated for charitable and educational_purposes the limited debt management and creditor intercession activities were an integral part of the agencies’ counseling function and thus were charitable and educational undertakings even if this were not the case these activities were incidental to the agencies’ principal functions finally the court found that the law did not require that an organization must perform its exempt functions solely for the benefit of low-income individuals to qualify under sec_501 nonetheless the agencies did not charge a fee for the programs that constituted their principal activities a fee may be charged for a service that was an incidental part of an agency’s function but even when a fee was so charged it was nominal moreover even this nominal fee was waived when payment would work a financial hardship thus the court ordered that each of the plaintiff consumer credit counseling agencies was an organization described in sec_501 as a charitable and educational_organization see also credit counseling centers of oklahoma inc v united_states u s t c d d c in which the facts were virtually identical and the law was identical to those in the case styled consumer credit counseling centers of alabama inc v united_states discussed immediately above thus the court ordered that the consumer credit counseling agencies were described in sec_501 as charitable and educational organizations department of the treasury - internal_revenue_service form avrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx in 70_tc_352 the court found that a corporation formed to provide consulting services was not exempt under sec_501 because its activities constituted the conduct_of_a_trade_or_business that is ordinarily carried on by commercial ventures organized for profit its primary purpose was not charitable educational nor scientific but rather commercial the court found that the corporation had completely failed to demonstrate that its services were not in competition with commercial businesses the court found that the organization’s financing did not resemble that of the typical 501_c_3_organization it had not solicited nor had it received voluntary contributions from the public its only source_of_income was from fees from services and those fees were set high enough to recoup all projected costs and to produce a profit moreover it did not appear that the corporation ever planned to charge a fee less than cost and finally the corporation had failed to limit its clientele to organizations that were sec_501 exempt_organizations the court in 71_tc_1067 date found that an organization formed to educate people in hawaii in the theory and practice of est was a part of a franchise system which is operated for private benefit and therefore may not be recognized as exempt under sec_501 of the code the applicant for exempt status was not formally controlled by the same individuals controlling the for-profit organization owning the license to the est body of knowledge publications methods etc however the for-profit exerted considerable control_over the applicant’s activities by setting pricing the number and frequency of different kinds of seminars and training and providing the trainers and management personnel who are responsible to it in addition to setting price for the training the court found that the fact that the applicant’s rights were dependent upon its tax-exempt status showed the likelihood that the for-profit corporations were trading on that status the question for the court was not whether the payments made to the for-profit were excessive but whether it benefited substantially from the operation of the applicant the court determined that there was a substantial private benefit because the applicant was simply the instrument to subsidize the for- profit corporations and not vice versa and had no life independent of those corporations in p l l scholarship v commissioner t c an organization operated bingo at a bar for the avowed purpose of raising money for scholarships the board included the bar owners the bar’s accountant also a director of the bar as well as two players the board was self-perpetuating the court reasoned that because the bar owners controlled the organization and appointed the organization’s directors the activities of the organization could be used to the advantage of the bar owners the organization claimed that it was independent because there was separate_accounting and no payments were going to the bar the court was not persuaded department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx a realistic look at the operations of these two entities however shows that the activities of the taxpayer and the pastime lounge were so interrelated as to be functionally inseparable separate accountings of receipts and disbursements do not change that fact the court went on to conclude that because the record did not show that the organization was operated for exempt purposes but rather indicates that it benefited private interests exemption was properly denied in st louis science fiction limited v commissioner t c memo date the court reviewed the annual convention of a science fiction organization it held that while the conventions may have provided some educational benefit to some of the individuals involved that social and recreational purposes and private benefit predominated the court distinguished 75_tc_337 in which the organization provided public art education by using juries to insure artistic quality and integrity petitioner relies heavily upon 75_tc_337 in support of its contention that it is tax-exempt in goldsboro art league the taxpayer was an organization that operated two art galleries that exhibited and sold artworks we held that the taxpayer was tax-exempt under sec_501 because it was organized and operated exclusively for an exempt purpose--art education we noted that in order to insure artistic quality and integrity the artworks displayed were selected by jury procedures we also noted that the taxpayer was the only such museum or gallery within its county or any contiguous county we held that it served public rather than private interests and that its sales activities were incidental to advancing its exempt_purpose by contrast petitioner in this case did not apply any controls to insure the quality of the books and artworks sold at its convention also the tone of petitioner's convention is substantially if not predominantly social and recreational rather than educational in addition petitioner's huckster's room and art auction provided substantial benefit to private interests that is not incidental to its exempt_purpose consequently we think the case goldsboro art league is clearly distinguishable on its facts from the instant case in church by mail inc v commissioner t c memo aff'd 765_f2d_1387 co cir the tax_court found that a church was operated with a substantial purpose of providing a market for an advertising and mailing company owned by the same people who controlled the church the church argued that the contracts between the two were reasonable but the court_of_appeals pointed out that the critical inquiry is not whether particular contractual payments to a related for-profit organization are reasonable or excessive but instead whether the entire enterprise is carried on in such a manner that the for-profit organization benefits substantially from the operation of the church in easter house v united_states 846_f2d_78 fed cir aff'g cl_ct the court found an organization that operated an adoption agency was not exempt under section form acrev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx c of the code because a substantial purpose of the adoption activity was a non-exempt commercial purpose it found that the adoption services did not further the exempt purposes of providing educational and charitable services to the unwed mothers and children rather the services for unwed mothers and children were merely provided incident to the organization’s adoption service business moreover the court found that adoption services do not in of themselves constitute an exempt_purpose the court agreed with the irs’ determination that the agency operated in a manner not distinguishable from a commercial adoption agency first the agency’s operation made substantial profits and there was a substantial accumulation of capital surplus in comparison to direct expenditures by the agency for charitable and educational_purposes second the agency’s operation was funded completely by substantial fixed fees charged adoptive parents it relied entirely on those fees and sought no funds from federal state or local sources nor engaged in fund raising programs nor did it solicit contributions in fact the agency had no plans nor intention to seek contributions government grants or engage in fund raising relative to its operations third the fixed fees the agency charged adoptive parents were not subject_to downward adjustment to meet potential adoptive parents’ income or ability to pay fourth the agency’s membership was organized into classes of memberships single life member member and ordinary member and fifth the agency functions by means of a paid staff of to persons with no volunteer help in international postgraduate medical foundation v commissioner t c memo the court found an organization that ran tours aimed at doctors and their families was operated to benefit the private interests of an individual who controlled the organization and a for-profit travel agency h c tours that handled all of its tour arrangements the organization used the h c tours exclusively for all travel arrangements there was no evidence that the organization solicited competitive bids from any travel agency for travel arrangements for its tours other than h c tours the organization physically located its office within the offices of h c tours which provided it secretarial clerical and administrative personnel for a fee equal to h c tours’ costs the organization spent percent of its revenue on travel brochures prepared to solicit customers for tours arranged by the travel agency the brochures emphasized the sightseeing and recreational component of the tours but did not describe the medical curriculum for the seminars and symposia that was the basis for exemption educational activities occurred on less than one-half of the days on a typical tour the court found that a substantial purpose of the organization’s operations was to increase the income of h c tours the president of h c tours controlled the organization and exercised that control for the benefit of h c tours moreover the administrative record supported the finding that the organization was formed to obtain customers for h c tours form 886-a rev department of the treasury - internal_revenue_service page -- department of the treasury - internal_revenue_service form 886a name of taxpayer explanation of items schedule no or exhibit year period ended 20xx 20xx org dba organization in 283_fsupp2d_58 d d c the court relied on the commerciality doctrine in applying the operational_test because of the commercial manner in which an organization conducted its activities courts have found that an organization was operated for a non-exempt commercial purpose rather than for a tax-exempt purpose among the major factors courts have considered in assessing commerciality are competition with for profit commercial entities extent and degree of below cost services provided pricing policies and reasonableness of financial reserves additional factors include inter alia whether the organization uses commercial promotional methods eg advertising and the extent to which the organization receives charitable donations the court maintained that if private individuals or for-profit entities have either formal or effective_control of a non-profit organization it was presumed that the organization furthered the profit-seeking motivations of those private individuals or entities this was the case even when the organization was a partnership between a non-profit and a for-profit entity citing 113_tc_47 the credit repair organizations act croa u s c section et seq effective date imposes restrictions on credit repair organizations including forbidding the making of untrue or misleading statements and forbidding advance_payment before services are fully performed u s c section 1679b sec_501 organizations are by definition excluded from regulation under the croa the croa defines a credit repair organization as a any person who uses any instrumentality of interstate commerce or the mails to sell provide or perform or represent that such person can or will sell provide or perform any service in return for the payment of money or other valuable consideration for the express or implied purpose of - i improving any consumer’s credit record credit history or credit rating or ii providing advice or assistance to any consumer with regard to any activity or service described in clause i u s c section 1679a the courts have interpreted this definition broadly to apply to credit counseling agencies the federal trade commission’s policy is that if an entity communicates with consumers in any way about the consumers’ credit situation it is providing a service covered by the croa 21_fsupp2d_424 n d n j in ftc v gill 265_f3d_944 cir aff'g 183_fsupp2d_1171 the appellate court inferred that a credit repair organization that first promised a free consultation but charged fees in advance of the full performance of services was being subsequently operated as a charity primarily for purposes of evading regulation under the croa department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx in credit counseling centers v s portland a 2d s c me the supreme credit card companies commonly make payments to credit counseling court of maine denied state tax exemption to a credit counseling agency that provided significant benefits to creditors agencies of a portion of the funds they receive from clients of the agencies these payments are known as fair share payments and are a source of substantial funding for credit counseling agencies in this case the credit counseling agency received percent of its income from fair share payments from credit card companies at the rate of to of debt payments government position first you lack the public support and public control that are characteristic of a charitable_organization seeking to serve the public you are not supported by contributions from the general_public government or private_foundation grants or assistance from the united way with only an incidental part of your revenue from counseling fees as were the credit counseling agencies in consumer counseling service of alabama and credit counseling centers of oklahoma supra in fact you do not even have a fundraising program to solicit such contributions according to your 20xx and 20xx forms you receive all your revenue from fees from setting up client’s dmps fair share from creditors and credit repair fees you are similar to the organization described in b s w group supra in which the court cited lack of solicitation and sole support from fees as factors disfavoring exemption though you indicated you provide educational pamphlets brochures and other educational media and also store a considerable amount of educational material at your facility premises you submitted no evidence that you provide any significant educational programs or activities further based on the information you submitted you have not established that you operate for educational_purposes within the meaning of sec_501 training an individual to develop his capabilities or instructing the public on subjects useful to the individual and beneficial to the community are both educational_purposes recognized as exempt see sec_1_501_c_3_-1 of the regulations financial counseling could be carried out as an educational activity consumer credit counseling service of alabama inc v united_states revrul_69_441 supra while education is a broad concept the service and the courts require that some rigor must be evident in st louis science fiction limited supra the court made it clear by contrasting the applicant with goldsboro that an organization must have an educational program not a predominantly non-educational program with some random educational features the information you submitted provides no basis to conclude that you offer either education to the public on subjects useful to the individual and beneficial to the community or training to the individual it is essentially devoid of any support that you provide education the information you provided during the examination demonstrates that counseling activities and educating the public on credit issues are an insubstantial part of the activities you conduct department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx an analysis of the information provided shows that you are operated primarily for the nonexempt purpose of operating a for-profit business that your primary activity is to promote and to further your private business interests is reflected in the fact that the vast majority of your revenue at least will be derived from fees charged to clients enrolled in your debt management program though you may view some of the fees you charge as voluntary contributions we have determined that they are in fact fees received in exchange for the sale of a program related service you have not provided any evidence that the fees to be charged to clients enrolled in your dmps are any less than would be paid_by individuals serviced by a for-profit credit counseling company in airlie foundation v commissioner supra one of the factors considered in assessing commerciality was the extent and degree of below cost services provided you provided no evidence that your clients ever receive free services or can pay according to their ability the fact that the vast majority of your clients you estimate will pay some amount of your requested contribution is evidence that your clients do not perceive these payments as voluntary additionally your dmp agreement provided to clients does not stipulate any waiverability or reduction of the dollar_figure monthly voluntary contribution to cover your dmp expenses and the dollar_figure monthly voluntary contribution to cover educational materials thus it would appear that you have a traditional business mentality that emphasizes that you are operated to make money not to give away free or reduced priced services that you may or may not immediately make a profit would not be conclusive proof that you are not operating a business venture unlike the agencies in consumer credit_counseling_services of alabama you receive only token or no support from contributions from the general_public government or private_foundation grants or assistance from the united way in fact you have virtually no fundraising programs to solicit such contributions according to financial information submitted and information reported on your form_990 primarily all revenues are derived from client fees service charges first payments and fair share payments related to your debt management program for- profit business enterprises are supported by fees paid_by those who receive services while charitable institutions often do provide services to individuals the cost is generally subsidized by contributors who do not receive anything in return in b s w group inc v commissioner supra the court cited lack of solicitation and sole support from fees as negative factors for exemption see also easter house v united_states supra you have not shown that revenue from operation of your dmp is used for any purpose other than to cover operating_expenses a large proportion of your revenue is expended to pay dmp related costs in having a paid staff with no volunteer help and having little or no direct expenditures_for charitable purposes you are similar to the organization described in easter department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx house v united_states supra where the court determined that the organization was not exempt because its conduct of adoption services was in furtherance of a non-exempt commercial purpose you reported significant advertising expenditures like many commercial businesses you advertised in local media and other publications you also had your own website developed to promote and sell your services in ways that are typical for any for-profit business though you initially indicated in interviews you did not advertise for other businesses we note your display of many hyperlinks to other for-profit business’s websites containing information about those businesses and advertisements of their products and services thereby providing a private benefit to those businesses though you stated the links are reciprocal links aimed to increase your search engine standing the fact remains links to for-profit entities existed on your website whereby a visitor to your website is afforded the opportunity to provide a benefit to those companies though your website has been changed the prior version is noted see u s c section et seq this statute it appears your organization was established in the same time frame in which the for-profit entity u s a credit inc formerly controlled by your current directors was dissolved 19xx you indicated in interviews that the local sheriff’s office served notice to u s a credit that it was to cease and desist the charging of clients an up-front fee for credit repair services forbidden under the credit repair organization act of 19xx imposes restrictions on credit repair organizations including forbidding advance_payment before services are fully performed u s c section 1679b sec_501 organizations are by definition excluded from regulation under the croa as stated above the courts have interpreted the croa so as to apply to the activities of credit counseling organizations during the years under examination you received fees charged to clients for credit repair services you have not substantiated the fees were not charged in advance of the service provision your apparent attempt to avoid regulation under the croa also indicates that you continue to operate for a substantial non-exempt purpose an organization cannot prove that it is entitled to exemption where one of its purposes is the avoidance of regulation see the foundation church of scientology v u s ct_cl since that is one of your purposes you are not entitled to exemption in addition to operating for substantial non-exempt purposes under sec_1 c - d ii of the regulations an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public benefit rather than a private interest an organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals the creator or his family shareholders of the organization or persons controlled directly or indirectly by such private interests you failed to submit sufficient information to document a loan to you by it’s creators further you have failed to show that you do not substantially benefit the private interests of the creators through the loan payments made to them absent a loan document there is no substantiation of loan terms to department of the treasury - internal_revenue_service form acrev page -- department of the treasury - internal_revenue_service form 886a explanation of items name of taxpayer org dba organization schedule no or exhibit year period ended 20xx 20xx include regular payment amounts interest rate collateral etc typically banks would require collateral and interest absent any documentation there is no way to establish accurate loan information made additional draws resulting in dollar_figure now being owed to your organization as of your 20xx balance_sheet this represents funds which inure to the benefit of the creators dir- and dir-2 also after the loan to the creators was paid back during 20xx the creators then you also provide substantial private benefit to credit card companies in a manner similar to the organization in credit counseling centers v s portland fair share is commonly defined as that amount the organization receives from the creditors for each payment remitted to them in the absence of any charitable or meaningful educational activities you are operating as a collection agency for these companies the fair share paid_by the credit card companies would undoubtedly result in significant savings over the possible costs of not recovering any of the unpaid debt owed them thus these companies clearly realize substantial financial benefits through their business relationship with you you have not shown that you have a governing board that would be considered as representative of a broad cross-section of the community your current board apparently consists of only two or three individuals of which two members are the creators which are husband and wife this would indicate a closely-held family controlled board viewed as more likely to be concerned with their narrow private interests than with benefiting the general_public your governing board is unlike the board_of directors described in revrul_69_441 supra that was comprised of representatives from religious organizations civic groups labor unions business groups and educational institutions assuming you continued to function with your current two-person board_of directors and have a paid individual receiving compensation_for a role outside of being a director you would be in violation of the restriction on interested directors a board with so few people could be based on our examination of your organization operations and records and interviews conducted and in light of the applicable law we have determined that you are not operated for exempt purposes rather you are primarily operated for the non-exempt purpose of furthering your business interests and those of it’s creators dir-1 and dir-2 through the marketing and sale of dmps to the general_public any activities involving authentic credit counseling provided to a genuine charitable_class along with the provision of credit education to the general_public would be purely incidental to your predominant non-exempt purpose of operating and carrying-on an ordinary for-profit credit counseling business conclusion orgs org dba organization is not operated exclusively for exempt purposes described within internal_revenue_code sec_501 department of the treasury - internal_revenue_service form 886-arev page -- form_886 a name of taxpayer explanation of items department of the treasury - internal_revenue_service schedule no or exhibit year period ended 20xx 20xx org dba organization org engaged in a substantial nonexempt purpose of providing debt management program services to the general_public org was operated for the purpose of serving private rather than public interests accordingly you no longer qualify for exemption as an organization described in sec_501 of the code effective january 20xx and you must file federal_income_tax returns contributions to you are no longer deductible under sec_170 of the code taxpayer position taxpayer position is unknown as of the mailing of this report department of the treasury - internal_revenue_service form 886-acrev page --


- internal_revenue_service department of the treasury date date quu449 person to contact badge number contact telephone number contact address last day to petition_tax_court date al lo sf certified mail dear sir or madam this is a final revocation letter as to your exempt status under sec_501 of the internal_revenue_code the revocation of your exempt status is effective for year ending date for the following reason s you are not organized and operated exclusively for exempt purposes within the meaning of internal_revenue_code sec_501 you have not been engaged primarily in activities which accomplish one or more exempt purposes you are not a charitable_organization within the meaning of sec_1 c -1 d contributions to your organization are no longer deductible effective date if you decide to contest this determination in court you must initiate a suit for a declaratory_judgment in the united_states tax_court the united_states court of federal claims or the district_court of the united_states for the district of columbia before the day after the please contact the clerk of date of this final adverse determination_letter was mailed to you the appropriate court for rules regarding filing petitions for declaratory judgments by referring to the enclosed publication892 you may write to the united_states tax_court at the following address second street nw washington dc since your exempt status has been revoked you aré required to file form_1120 u s_corporation income_tax return for all years beginning on or after august identified in the instructions for those returns income_tax returns for subsequent years are to be filed with the appropriate service_center you also have the right to contact the office_of_the_taxpayer_advocate however you should first contact the person whose name and telephone number are shown above since this person can access you tax information and can help you get answers you can call and ask for the taxpayer_advocate assistance or you can contact the advocate from the site where this issue was determined by writing to brooklyn office metrotech center fulton street brooklyn ny taxpayer_advocate assistance cannot be used as substitute for established irs procedures formal appeals processes etc the taxpayer_advocate is not able to reverse legal or technically correct_tax determination nor extend the time fixed by law that you have to file a petition in court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling we will notify the appropriate state officials of this action as required by sec_6104 of the internal_revenue_code this letter should be kept within your permanent records if you have any questions please contact the person whose name and telephone number are shown above sincerely enclosures publication a mcclern gi acting qrector eo examinations department of the treasury ve tax_exempt_and_government_entities_division internal_revenue_service tege eo examinations l t on ee taxpayer_identification_number form tax_year s ended __ person to contact id number contact numbers telephone fax certified mail - return receipt requested dear sir or madam we have enclosed a copy of our report of examination explaining why we believe revocation of your exempt status under sec_501 of the internal_revenue_code code is necessary if you accept our findings take no further action we will issue a final revocation letter if you do not agree with our proposed revocation you must submit to us a written request for appeals_office consideration within days from the date of this letter to protest our decision your protest should include a statement of the facts the applicable law and arguments in support of your position an appeals offic icer r will review your case the appeals offic ice is independent of the director eo examinations the appeals_office resolves most disputes informally and prompily the enclosed publication the examination process and publication exempt_organizations appeal procedures for unagreed issues explain how to appeal an internal_revenue_service irs decision publication also includes information on your rights as a taxpayer and the irs collection process you may also request that we refer this matter for technical_advice as explained in publication if we issue a determination_letter to you based on technical_advice no further administrative appeal is available to you within the irs regarding the issue that was the subject of the technical_advice letter catalog number 34809f __ lf we do not hear from you within days from the date of this letter we will process your case based on the recommendations shown in the report of examination if you do nat protest this proposed determination within days from the date of this letter the irs will consider it to be a failure to exhaust your available administrative remedies sec_7428 of the code provides in part a declaratory_judgment or decree _under this section shall not be issued in any proceeding unless the tax_court the claims_court or the district_court of the united_states for the district of columbia determines that the organization involved has exhausted its administrative remedies within the internal_revenue_service we will then issue a final revocation letter we will also notify the appropriate state officials of the revocation in accordance with sec_6104 of the code you have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matter that may not have been resolved through normal channels gets prompt and proper handling you ‘may call toll-free and ask for taxpayer_advocate assistance if you prefer you may contact your local taxpayer_advocate at _ if you have any questions please call the contact person at the telephone number shown in the heading of this letter the most convenient time to call if we need to contact you if you write please provide a telephone number and y thank you for your cooperation r c johnson director eo examinations enclosures publication publication report of examination letter catalog number 34809f form_886 a department of the treasury - intemal revenue service explanation of items name of taxpayet schedule no or exhibit year period ended facts in our letter s dated we requested information necessarv to conduct an examination of your books_and_records for the year ended received the requested information as of this date we have not and sec_1_6033-2 of the income_tax regulations provides in part that every organization which is exempt from tax shall submit such additional information as may be required by the internal_revenue_service for the purpose of inquiring into its exempt status since you have not provided the requested information we propose to revoke your organization’s exemption from federation income tay veran --ction c entity you will be required to file the appropriate federal_income_tax of the internal_revenue_code effective as a taxable return form 886-a ev department of the ‘treasury - internal_revenue_service page -j-