‘internal revenue service appeals_office number release date date date certified mail department of the treasury taxpayer_identification_number person to contact tel fax tax period s ended uil this is a final adverse determination regarding your exempt status under sec_501 of the internal_revenue_code the code it is determined that you do not qualify as exempt from federal_income_tax under sec_501 of the code effective july 20xx the revocation of your exempt status was made for the following reason s contributions to your organization are not deductible under sec_170 of the code you are required to file federal_income_tax returns on forms for the tax periods stated in the heading of this letter and for all tax years thereafter file your return-with the appropriate internal_revenue_service center per the instructions of the return for further instructions forms and information please visit www irs gov if you were a private_foundation as of the effective date of revocation you are considered to be taxable private_foundation until you terminate your private_foundation_status under sec_507 of the code in addition to your income_tax return you must also continue to file form_990-pf by the 15th day of the fifth month after the end of your annual_accounting_period 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 code if you decide to contest this determination you may file an action for declaratory_judgment under the provisions of sec_7428 of the code in one of the following three venues united_states tax_court the united_states court of federal claims or the united_states district_court for the district of columbia a petition or complaint in one of these three courts must be filed within days from the date this determination_letter was mailed to you please contact the clerk of the appropriate court for rules for filing petitions for declaratory_judgment to secure a petition form from the united_states tax_court write to the united_states tax_court second street n w washington d c see also publication you also have the right to contact the office_of_the_taxpayer_advocate taxpayer_advocate assistance is not a substitute for established irs procedures such as the formal appeals process the taxpayer_advocate cannot reverse a legally correct_tax determination or extend the time fixed by law that you have to file a petition in a united_states court the taxpayer_advocate can however see that a tax matters that may not have been resolved through normal channels get prompt and proper handling if you want taxpayer_advocate assistance please contact the taxpayer_advocate for the irs office that issued this letter you may call toll-free for the taxpayer_advocate or visit www irs gov advocate for more information if you have any questions please contact the person whose name and telephone number are shown in the heading of this letter sincerely yours appeals team manager enclosure publication internal_revenue_service ed department of the treasury te_ge exempt_organizations examinations division commerce street mc dal dallas texas date sep org address certified mail - return receipt requested dear taxpayer_identification_number roam tax_year s ended person to contact id number contact numbers telephone fax 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 attar 2raq daw 44_9nna 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 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 sincerely sunita lough director eo examinations enclosures publication publication report of examination form_6018 form 4621-a attar waar daw 14_9nnaal schedule number or exhibdit form 886-a rev january 19xx explanations of items name of taxpayer june 20xx tax identification_number yearperiod ended org ein legend org - organization name state president dir through companies logo - logo xx - date address - address city - city website - website ein - ein poa - poa state - president - vice president - vice president dir-1 through dir-11 - through ra-1 through ra-17 - through ra co-1 through co-25 - whether org org is operated exclusively for religious or other exempt purposes within the scope of internal_revenue_code sec_501 issue history overview facts org ein ein was recognized as a tax-exempt_organization on october 20xx under sec_501 of the internal_revenue_code code org was incorporated on july 20xx as a non-profit corporation in the state of state the purpose of the organization as stated in its articles of incorporation is to be organized exclusively for charitable educational religious purposes within the meaning of c of the internal_revenue_code notwithstanding any other provision of these articles the corporation shall not carry on other activities not permitted to be carried on by a corporation exempt from federal_income_tax under sec_501 of the internal_revenue_code_of_1986 or the corresponding provision of any future united_states internal revenue law the articles of incorporation reported the mailing address of org as address city state and the registered agent was dir-1 per the articles the original officers of org included dir-1 dir-2 dir-3 and dir-4 org’s bylaws state under sec_2_1 that the business and property of the corporation will be managed and its corporate powers shall be exercised by the board_of directors org’s bylaws state that the executive committee will consist of the board_of directors and would have the same powers as the board_of directors org’s bylaws further state that the corporation shall have a president one or more vice presidents a secretary and a treasurer the bylaws state that the president is a director of the organization but other officers need not be directors the officers will be elected by the board_of directors at the annual meeting of directors a person may hold more than one office the bylaws also have a conflict of interest policy org’s bylaws state the following with respect to the duties of the officers e the president is the chief_executive_officer of the corporation and would manage the affairs of the corporation subject_to the directions of the board_of directors form 886-a 1-19xx of the treasury-internal revenue service_department catalog number 20810w -_publish no irs gov page schedule number or exhibit form 886-a rev january 19xx name of taxpayer org tax identification_number explanations of items ein yearlperiod ended june 20xx e e e the vice-president will act as the president in the absence of the president all vice- presidents shall perform the duties prescribed by the board_of directors the secretary has custody of the corporation records except the financial records the secretary records the meeting minutes of the board_of directors executive committee and directors the treasurer has custody of all corporate funds and financial records including keeping accurate accounts of receipts and disbursements state state law does not require org to have a license to operate or conduct business in state however org was issued a license by the state of state department of taxation for general excise_tax and withholding the licensing web page shows that org’s business began on january 20xx the state secretary of state web site reported org’s purpose as for charitable educational religious purposes the web site shows that org was incorporated on july 20xx mailing address address city state the registered agent's name was dir-5 address of address city state the state secretary of state web site listed the officers of org as follows with an effective date of july 20xx name title effective date dir-2 dir-5 dir-6 dir-7 dir-3 dir-8 president director vice-president director secretary director director director director july 20xx july 20xx july 20xx july 20xx july 20xx july 20xx it was noted that in the beginning of org's existence the organization's mailing address and principal office was located at the same address as its related organizations-co-6 and co-1 org's operational documents show org operated before its incorporation date exhibit b it was also noted that one of the original officers of org dir-1 was also an employee of co-6 and org form_1023 application_for recognition of exemption department of the treasury-internal revenue service form 886-a 1-19xx catalog number 20810w page_ publish no irs gov schedule number or exhibit form 886-a rev january 19xx explanations of items tax identification_number year period ended name of taxpayer org org applied for tax-exemption under code sec_501 on or about november 20xx _ the mailing address shown on the application was address city state the form_1023 application was signed by dir-2 as director of org on november 20xx june 20xx ein the year ending month of the annual_accounting_period was stated to be january to december’ the primary contact person was shown as dir-2 at telephone number part v of form_1023 listed the organization officers directors as follows name title compensation amount dir-2 president dir-3 dir-4 dir-1 secretary treasurer vice president none none none none part v of form_1023 questions 8a and 9a was marked no conceming having leases or other agreements with officers directors of org part vii of form_1023 question was marked no with respect to having a close connection with another organization part iv of form_1023 org stated the following with respect to its description of past present and planned activities professional counselors and bible scholars will provide theocratic doctrine to families and individuals on daily basis in xxx and upon request throughout the state of state of orgs efforts will be spent educating people of the truth found in the bible and providing those applicable tools to the burdened underprivileged and distressed while advancing religion and education to insure the word of god is not marginalized or its moral influence diminished thus lessening the burdens of government community and neighborhood tensions and combating community deterioration and juvenile delinquency org will be funded through public donation contributions and gross_receipts from the activities related to its exempt functions part v of form_1023 question 3a with respect to officers directors qualifications org reported the following name _ hours worked qualification __title dir-2 aa theology hrs wk counselor form 886-a 1-19xx catalog number 20810w page publish no irs gov department of the treasury-internal revenue service schedule nurnber or exhibit 886-a rew january name of taxpayer june 20xx tax identification_number year period ended org ein explanations of items -dir-3 dir-4 dir-1 aa accounting phd education ba divinity hrs wk hrs wk counselor counselor hrs wk bookkeeper part vi of form_1023 question 1a with respect to providing goods services or funds to individuals org stated the following about its program part vi of form_1023 question 1b with respect to providing goods services or funds to organizations org stated the following about its program part viii of form_1023 question 4a asked if the organization conducted fundraising the box yes was checked the organization responded as follows org educations services offers has not conducted any fundraising but may ask for a donation or contribution for the counseling and educational_services offered contributions will not be accepted with conditions imposed part vill -of form_1023 question asked if the organization owned or will publish own or have rights in music literature tapes artworks choreography or other intellectual_property the yes box was checked the organization responded as follows org educations services will own copyrights patents or trademarks fees will not be charged production to be determined part viil of form_1023 question asked if organization accepts contributions of real_property intellectual_property the yes box was checked the organization responded as follows q1 it is unclear exactly what are your activities you state in your narrative that the organization will provide biblical principles for faithful stewardship decisions since stewardship is the act of managing another's property finances or affairs you must tell us exactly what it is that your organization is doing submit a detailed description of all of the activities of the organization - past present and planned showing how you operate or will operate to achieve your purposes on june 20xx org was issued a letter by the determination specialist requesting for additional information with respect to org’s activities org responded in a letter dated june 20xx as follows ranartmant of the treasurv-internal revanun service carn rrr_a sav ratalnn abba mnoamal weet a ee wee n schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer june 20xx tax identification_number yearperiod ended org ein q1a its purpose and nature org responded as follows the earth is the lord’s and everything in it the world and all who live in it psalm for by him all things were created both in the heavens and on earth visible and invisible whether thrones or dominions or rulers or authorities all things have been created through and for him colossian sec_1 q1b frequency and duration org responded as follows the frequency of org will be available on a daily basis with duration of approximately fo minutes or as needed q1c how when where and by whom it was is or will be conducted org responded as follows org will be provided face to face and over the phone one on one and in groups services will be available on a daily basis and offered in churches homes schools community centers businesses and organizations upon request professional counselors bible scholars will offer the services qid the requirements a person or organization must meet in order to participate in or receive benefit from the activity org responded as follows org will be available to anyone and there will be no requirements to meet to participate or receive benefit q1e the amounts of any charges or fees and the basis for the amount org responded as follows form 886-a 1-19xx service_department of the treasury-internal revenue catalog number 20810w publish no irs cov page servi revenue schedule number or exhibit form 886-a rev january 19xx name of taxpayer org explanations of items tax identification_number june 20xx yearlperiod ended ein org will be offered to anyone at no cost or fee qif what the activity has accomplished or will accomplish org responded as follows org will accomplish advocating biblically based answers and solutions for daily living how we view god will determine how we live where there is no guidance the people fall but in abundance of counselors there is victory proverb sec_11 the way of a fool is right in his own eyes but a wise man is he who listens to counsel proverb sec_12 do not be conformed to this world but be transformed by the renewing of your mind that you may prove what is that good and acceptable and perfect will of god roman sec_12 qig state what percentage of the total time and effort of the organization is devoted to carrying out each activity org responded as follows of the total time and effort will be devoted to advocating biblically based answers and solutions for daily living q2 what month does your annual_accounting_period end org responded as follows org annual_accounting_period will end in december’ q3 describe your fundraising programs submit copies of any brochures pamphlets flyers advertisements newsletters newspaper articles or any other literature regarding your organization org responded as follows org does not have any fund raising the general_public will be made aware of services through existing multi-denominational church congregation notices public service announcements and word of mouth referrals through treatment facilities community service organizations and social service agencies grarm rrbr_a save patalan aluwhne anoamal n--- on eee en tee eee denariment of the treasurv-internal revenue service schedule nurmber or exhibit rev january 19xx form 886-a explanations of items tax identification_number yearlperiod ended name of taxpayer org q4 submit copies of any contracts leases or other agreements in which the organization is a party ein june 20xx org responded as follows org does not have any contracts leases or other agreements in which the organization is a party you indicate in the financial data page that compensation is planned submit a complete response to the following q5a the name and title relationship of such person to whom payment has been is being or will be paid org responded as follows org does not have any compensated officers directors trustees or members of their families or any individuals at present but plans to compensate a counselor biblical scholar and secretary q5b the nature and or purpose of payments org responded as follows the purpose of payments proposed will be salary q5c a detailed description of the position filled by the duties and services for which compensation will be paid org responded as follows principle duties and responsibilities of the counselor biblical scholar will be fo s n w a a o o o study god's word adhere to policies and procedures develop and implement biblically based answers and solutions based on public need seek out and assist with special community projects building and maintaining a highly visible servant based profile in the community and throughout the state responsible for offering available directions options actions services and assistance programs available throughout the church bodies city state or federal agencies as well as the private sector _ rime qaqr_a sa snr patatan rbambae mnoamae a wen a fon mee denartment of the treasurv-internal revenue service schedule number or exhibit rev january 19xx form 886-a explanations of items name of taxpayer june 20xx tax dentification number year period ended org ein secretary will be to a n s w k a p adhere to policies and procedure answer telephone in a timely and professional manner retrieve recorded messages from answering machine receive and direct visitors and general_public schedule appointments meetings seminars programs events provide prompt clear and concise communication and information of services to the public generate written correspondence and maintain accurate records on verbal and written communication q5d the amount time each person devotes to the position org responded as follows each person will devote approximately hours weekly to the position and the payment will not be affected by an upward or downward adjustment in time based on the need of the organization q5e the qualifications training background experience of such persons for the position duties services org responded as follows the qualification and requirements for a counselor biblical scholar are a willingness to serve a working knowledge and understanding that the bible is the inspired word of god that god is the creator owner and master of all and has retained ultimate control of every event a commitment to present gods truth advocating biblically based answers and solutions for daily living a four year degree excellent verbal and written communication skills and substantial prior experience in ministry servanthood management public relations education counseling and oral presentations professional appearance and attitude ability to lift ibs the qualifications and requirements for a secretary are a willingness to serve high school graduate or equivalent good verbal and written communication skills proficient computer skills and knowledge of general office procedures words per minute typing and key by touch ability to prioritize work assignments and recognize the importance of work accuracy professional appearance and attitude ability to life ibs q5f if any such person is employed outside the organization the hours per week and weeks per year devoted to such outside employment org responded as follows form 886-a 1-19xx department of the treasury-‘internal revenue service catalog number 20810w - page publish no irs aav schedule number or exhibit oom sba 0x00 explanations of items tax identification_number year period ended name of taxpayer org june 20xx ein org does not have any compensated employees at present but they would not be employed outside the organization q5g who determines compensation to be paid what criteria is used to determine compensation org responded as follows the board_of directors determines compensation to be paid the criteria will be based on comparable non-profit organizations ministries community services and public service organizations throughout the state q5h how do you or will you insure that all compensation paid is reasonable and in retum for services rendered org responded as follows org will insure all compensation paid is reasonable based on the salary paid for hours worked providing services to the public based on regular assessment and quality evaluations q5i does the organization pay or plan to pay any of the personal living_expenses of employees directors officers founders members etc _ org responded as follows org does not plan to pay any of the personal living_expenses of employees directors officers founders or members q6 you state that the organization will be funded through public donations contributions and gross_receipts from related activities provide an indication of your gross receipt income based on a reasonable and good_faith estimate of your future finances for a total of years for 20xx-20xx org responded as follows org will be funded through public donations contributions q7 you have projected occupancy expenses it appears that you plan to have a facility to conduct your activities will any part of your facilities be share with any private practice office or other commercial operation or as a personal_residence org responded as follows cane qrara sav patatan bteba aana - a nanartmant of tha treaciirv-internal ravanina garvire schedule nurnber or exhibit rev 886a explanations of items tax identification_number year period ended name of taxpayer org june 20xx ein org facility is not planned to be shared with any private practice office or commercial operation or as a personal_residence q8 if the organization plans to acquire property for a facility state how you plan to acquire it and whether it will be acquired from an officer director or other related_party including family members or a company in which any such person has a financial interest org responded as follows org plans to acquire property for a facility from resources collected in the form of grants contributions and donations it does not plan to acquire it from an officer director or other related_party q9 if your organization is will be involved in any form of credit counseling debt financing debt management money management or other forms of financial planning explain fully org responded as follows org listed several bible verses in its response a few examples are shown below let men regard us in this manner as servants of christ and stewards of the mystery of god it is required that stewards be found trustworthy 1corinthian sec_4 do not store up for yourselves treasures on éarth where moth and rust destroy and thieves break in and steal but store up for yourselves treasures in heaven where neither moth nor rust destroy or thieves break in and steal for where your treasure is there your heart will be also matthew it is better that you should not vow than to make a vow and not pay ecclesiaste sec_5 the wicked borrows and does not repay but the righteous is gracious and gives psalm the rich rules over the poor and the borrower becomes servant to the lender proverb sec_22 let no debt remain outstanding except to love one another he who loves his neighbor has fulfilled the law romans pe o pianertmant af tha trasemns tintarnal dawanna candan e qrgb_a sa snvunr nanames bbe padetnn aan - schedule number or exhibit rev january 19xx form 886-a explanations of items tax identification_number year period ended name of taxpayer org june 20xx ein a man lacking in senses pledges and becomes surety in the presence of his neighbor proverbs dishonest money dwindles away but he who gathers money little by little makes it grow proverbs he who ignores discipline comes to poverty and shame proverbs the heavy drinker and the glutton will come to poverty proverb on july 20xx org was issued correspondence to inquire as to whether org's would be engaging in financial management programs credit counseling programs debt management programs etc activities org responded to the correspondence on july 20xx in the correspondence org responded by saying that the organization will utilize the following educational materials on september 20xx org was issued another letter inquiring as to the organization’s credit counseling activities org responded to the inquiry in a letter of october 20xx q1 the organization's activities will consist of providing answers and solutions to questions and problems posed by individuals coming to the organization for assistance correct the organization’s assistance will encompass all areas of living correct the organization will not limit itself to providing counseling or assistance to just one topic such as marriage counseling org responded as follows org willl offer families and individuals biblically based guidance for the life circumstances they are contending with therefore your interpretation is accurate q2 provide the following information regarding the organization’s financial literacy programs form 886-a 1-19xx cataloa number 20810w pana nuthlich na ire naw department of the treasury-internal revenue servica schedule nurnber or exhibit form 886-a rev january 19xx explanations of items org name of taxpayer identify the individuals that organize and conduct the programs specifically identify the training knowledge and experience that each individual has in order to provide counseling in relation to the above topics such as credit debt borrowing etc tax ldeniification number yearlperiod ended june 20xx ein org responded as follows until org has the resources to hire staff the board members will organize and conduct the programs their training knowledge and experience consist of aa theology phd education ba divinity provide a detailed narrative describing the specific topics that are discussed during the programs submit the agenda or class schedule detailing the specific topics subjects discussed org responded as follows counseling education will be offered on a one on one basis with the need or concerns determined by the individual or family class topics subjects will be requested by the church body school civic organization business or non profit community service_organization possible topics subjects may include but are not limited to sexual immorality hatred discord jealousy truth lies self ambition greed covetousness respect death salvation wisdom eternity does the organization conduct its programs in conjunction with any other entity such as a credit counseling agency a credit repair organization and or an organization issuing credit cards does the organization refer its participants to any other entity for services such as a credit repair organization if so identify the entity that the organization refers participants also state how this entity was identified and selected submit copies of all contracts entered between the organization and the other entity if applicable and available org responded as follows no will the organization permit the individuals and or other entity that are involved in the programs to advertise or promote their products or services for example will the organization permit a financial planner to pass out his business card describe or even mention the services he provides during the programs org responded as follows no form 886-a 14-19xx catainna numbhar ona4nal dann nithlinh nn ion ane deovartment of the treasurv-internal revenue service schedule nurnber or exhibit - rev january form 886-a explanations of items tax identification_number year perlod ended name of taxpayer org on october 20xx based on the information that org provided in its application_for exemption and on the assumption that org would operate in the manner represented in its application org was recognized as a tax-exempt_organization under sec_501 of the internal_revenue_code june 20xx ein form_990 return of organization exempt from income_tax irs records show that org had not filed a return from the date of inception until after it had been notified of a pending examination of its books_and_records on may 20xx subsequent to the notification a return was filed with the rs ogden service_center for a tax period ending june 20xx the signature on the form_990 stated dir-2 president and was dated july 20xx a copy of the filed return was provided to the internal revenue_agent agent in response to idr dated december 20xx during on-site examination it was revealed that the organization operated on a fiscal_year and that the organization would be filing its first form_990 in 20xx vice-president vice president had indicated that org had not filed because there was no income and no activity in prior years the form_990 reported no officers directors compensation within part v-a of the org reported the officers directors names titles hours worked and compensation as follows name title average hours worked compensation president director president dir-2 president director dir-5 vice-president director dir-9 vice-president director secretary dir-6 dir-3 dir-7 director dir-8 secretary director secretary director director director dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure org states its activities of exempt_purpose s as follows org provides biblical scriptural principles for faithful stewardship decisions for daily living offering stewardship education counseling and money management tools for financial freedom org reported its program service revenue as deriving from education counseling at dollar_figure org reported on schedule b of form_990 schedule of contributors as follows name of contributor contribution amount farm rrb-a 141-10xx1 catalan numbhar onq4mal dann nidhlich na ire nee department of the treasury-internal revenue service schedule number or exhibit farm 0x name of taxpayer june 20xx tax identification_number year period ended org ein explanations of items dollar_figure dollar_figure co-1 co-2 co-3 dollar_figure co-4 co-5 co-6 co-7 dollar_figure dollar_figure dollar_figure dollar_figure org indicated that co-5 was related to vice president vice president was the vice-president in 20xx and is currently the management representative of org org also reported the following information on its form_990 return e e e e e other employee_benefits line were reported at dollar_figure part v-b of form_990 former officer director receiving compensation was left blank - part vi of form_990 question 90b reported nine employees employed at org part vi of form_990 question 91a reported that org’s books_and_records are located at address city state part ill of form_990 statements about activities question sec_2a-2e was marked no with respect to engaging in the following acts with any substantial contributors trustees directors officers creators key employees or members of their families or with any taxable organization with which any such person is affiliated as an officer director trustee majority owner or principal beneficiary n w r k a sale exchange or leasing of property lending of money or other extension of credit furnishing of goods services or facilities payment of compensation transfer of any part of its income or assets during the examination it was disclosed that vice president has an ownership_interest in the address facility org pays approximately dollar_figure per month in rental fees this is contrary to what was reported on form_990 e part ill of form_990 statements about activities question 3d was marked no with respect to providing credit counseling debt management credit repair or debt negotiation services nenartmant af the traasuirv-intarnal ravanie sarvice - ane boe sacan me os wae schedule number form 886-a rev january 19xxx explanations of items or exhibit name of taxpayer june 20xx yeariperiod ended tax identification_number org ein org’s activities org was notified by the internal_revenue_service irs on may 20xx of a pending examination of its books_and_records initially the examination was scheduled for the 20xx calendar_year in accordance with irs records and org’s form_1023 application declaration indicating operations on a calendar_year basis during the initial examination visitation the agent met with vice president vice president of org in 20xx at the organization's facility located at address city state during the initial interview it was disclosed that the organization operated on a fiscal_year ended july on october 20xx org was issued information_document_request idr advising of a modification to the examination period to the fiscal_year ended july 20xx the correspondence also requested additional information with respect to org's credit counseling activities and its books_and_records the agent received taxpayer response to idr on november 20xx on november 20xx the agent reviewed irs internal records and discovered org filed form_990 directly with irs service campus on november 20xx the retum filed with irs service campus shows a fiscal_year ending june 20xx on december 20xx org was issued idr advising of a modification to the examination period to the fiscal_year ended june 20xx idr was also issued to request a copy of the form_990 for the tax period ended june 20xx as the return has not yet been fully processed by the irs service campus during the initial interview dir-10 stated that org’s primary focus was to educate people on what the bible has to say about financial management he stated that org uses the following and the holy bible new king james version books dir-10 states that org teaches financial stewardship based on the bible- there are about verses in the bible about wealth and finances dir-10 also stated that org’s other activities included ordering and interpreting credit reports for clients teaching money management teaching how to establish budgets including handing out statistical averaging worksheets marriage counseling employment counseling and financial hardship counseling org's operations are delivered through in-person and telephone counseling sessions by during the agent's initial visitation the agent observed several of org's sessions with its clients sessions observed were with ra-1 with additional observations done of ra-2 as well as vice president ra-1 indicated that he was the primary counselor for the organization he indicated that when clients were backed up dir-10 or ra-2 would step in to take waiting clients department of the treasury-internal revenue service form 886-a 1-19xx catalog number 20810w pane publish no irs aov schedule number or exhibit form 886-a rev january 19xx explanations of items tax identification_number year period ended name of taxpayer org june 20xx ein all observed sessions with clients took place at the audit site the exception of follow up calls all sessions were in person with as observed in all cases potential clients come in to the org office and are met by the receptionist who gives clients the application form exhibit c clients are requested to fill out this form in the org waiting room once completed org complete the official use only section which summarized income expenditures disposable income and a proposed dmp amount pick up the completed forms review the information and as observed at this point the _-_ brings the applicant into the office discusses the application form and presents the proposed dmp amount if clients agree the discuss the next steps in the dmp process and turn the client over to the office clerical staff for the collection of the initial dmp fee and to process the paperwork necessary to set up a dmp will as observed the application paperwork for clients who do not sign up for dmps are placed into a drop file for possible future follow-up several of these follow-up calls were also observed ifa client later decides to obtain org services the file is then pulled and a client account is created on the computer system the clerical staff would then establish the client account using an assigned and then log in the payment ra-1 said that when he conducts the follow-up calls he would first pull the most recent months file from the drop file for those clients that cannot be reached dir-11 would file back the application in the drop file in the month that he took it from and will follow-up later for those clients that he can reach dir-11 would then move the file to the current month if he cannot reach a client then he would send a note with his business card dir-11 stated that he conducts follow-up calls when there is no face-to-face counseling session at no point during observed contacts did related to the figures in the dmp calculation at no point during observed contacts did discuss methods to reduce household expenditures or attempts to increase household_income discuss budgeting and or finance except as it _ at no point during observed contacts did such as social service organizations or housing assistance organizations during sessions observed with ra-1 and ra-2 no references whatsoever was made to any biblical principles as referred to in org’s form_1023 application and return offer or make referrals to other organizations ' during the sessions observed org’s employees took notes on a data collection sheet which captured the income debts and assets of the individuals client application form on the back of the client application form is the creditor information sheet this sheet allows the potential client to form 886-a 4-19xx catalan numbhor ona4mar ba- ethlinty an ten mane denartment of the treasurv-internal ravana sarviee schedule number or exhidit explanations of items name of taxpayer tax identification_number year period ended form 886-a rev january 19xx org june 20xx list the creditors and all needed information to sign them up fora dmp the agent observed organization’s employees completing the entries on the sheet then attempting to enroll potential clients in a debt management plan dmp in which the client agrees to enter into a monthly payment plan whereby org collects one monthly payment that is distributed to the creditors of the client org calculates the monthly payment required to pay off the creditors included in the plan typically with plans paying off in three to five years org maintains an active creditor list to record names addresses telephone numbers and other information about creditors org adds a monthly processing fee of approximately dollar_figure or dollar_figure to the monthly client payments currently the monthly fee increased from dollar_figure to dollar_figure it was noted that the sheet did not contain educational content ein org's form_1023 application states that fees will be waived for hardship no instances of waivers being applied was observed by the agent records of waivers were requested from the organization during the examination to date taxpayer only provided an unsupported statement that clients did not pay the fees when org receives the client's first payment and the creditor information is entered into the system a proposal is sent to the creditor for the first time proposals are delivered by regular mail fax or electronically through co-8 client information needed for creditor proposals are the following client's net_income total monthly income client's living_expenses client's scheduled payment-proposed monthly payment less org’s fee of creditors on dmp-total debt payments less org’s fee home start date of disbursement the proposal asks the creditor to do the following accept a regular monthly payment amount adjust the payment_date eliminate fees lower or eliminate interest re-age accounts contribute a fair share ‘contribution of refrain from reporting a client as delinquent to the credit bureaus and provide updated information regarding the creditor's account once the client completes the enrollment process the client would submit a monthly payment to org and org disburses this payment to the client's various creditors its noted that org becomes one of the client's creditors as the client's are unable to pay org’s monthly service charges see exhibit e for samples of client proposals a review of the authorization and release form stated the following with respect to the monthly service charge to pay org a membership fee of dollar_figure or dollar_figure for collection accounts the membership is included in my scheduled payment and may be reduced or waived for hardship form 886-a 1-19xx department of the treasury-internal revenue service catalog number 20810w _publish noirs aov page schedule number or exhibit tax identification_number year period ended name of taxpayer form 886-a rev january 19xx org explanations of items ein june 20xx the authorization and release form gives org the ability to contact and get information from creditors in negotiating a repayment or dmp on behalf of org’s clients does not contain any educational content it was also noted that org described the service charged to its clients as a membership fee and that the fee was for collection accounts’ its noted that the form during observations the agent also observed several debt settlement sessions all observed debt settlement sessions were conducted by ra-2 in debt settlement sessions clients presented org with a list of debts for settlement offers were made by org to creditors to settle accounts in full for less than the amount due in debt settlements org charged a fee of ten percent of the negotiated debt to the client according to the settlement authorization and release form the settlement minimum fee charged is dollar_figure a contingency fee is charged of of any settlement savings calculated as follows the total balance owed less the settlement amount of the difference or amount saved org will contact client creditors when required information and minimum fee is received see exhibit f for a sampled copy org charged separate fees for credit reports pulled in conjunction with its services counseling observation the agent noted that the credit reports were used to determine if the client had any other debts how best to pay off the outstanding unsecured debt if the creditor would accept the payment proposal etc the credit report fees are as follows during the e e individual dollar_figure joint dollar_figure in the poa’s protest letter the poa disputed certain facts concerning org’s sessions with its clients in the protest the poa stated that the agent’s observations vastly contrasted dir-10’s description of org’s sessions with its clients the poa submitted an affidavit from vice president upon review of vice president's affidavit it was noted that vice president's description of his counseling sessions lacked detail no specifics as to who the client was and what was counseled vice president offered only general descriptions of his counseling activities affidavit vice president did not mention that he was also a manager's representative and a previous officer of org dir-10 did not mention that he completed the backside of the double- sided worksheet as indicated above during the agent's client observations the client told the agent that they heard about org through advertisements relatives from previous clients of co- etc at no point did the client say that they were referred to org by the co-9 mental health or drug treatment program at no point during observed contacts did counselors make referrals to the support services as indicated in vice president's affidavit in the consequently on january 20xx the agent issued a letter attaching the agent's transcribed notes describing the client sessions observed during the june 20xx on-site visitation to the office of org please see exhibit d for detailed descriptions of org’s sessions with its clients including corresponding support documents form 886-a 1-19xx department of the treasurv-internal ravanue service cataloa number 90r19w nuthlich nn len nas dana schedule number or exhibit form 886-a rev january 19xx explanations of items tax identification_number year period ended name of taxpayer org june 20xx ein on october 20xx the agent issued correspondence idr to org requesting for client documentation in org’s debt management program org responded to idr on november 20xx in the response org stated the following e o org assumed big_number active dmp clients participants from co-6 co-6 in july of 20xx org had big_number participants at the end of its fiscal_year as of june 20xx big_number participants were educated and not enrolled in dmp for the period under examination org does not document clients referred to a dmp program by other organization sec_407 clients did not pay any portion of the requested fee for monthly services board_of directors officers of org during the examination it was disclosed that vice president was a former officer director of co-6 vice president stated that org took over co-6 including all of its employees additional research of co-6 revealed that the organization’s exemption under sec_501 of the internal_revenue_code was revoked by the irs in february 20xx it was also discovered that vice president has an ownership_interest in the address facility this was contrary to what was reported on the organization’s form_1023 and for all of the outreach classes ra-3 and ra-4 stated that vice president per telephone conversations with secretary on february 20xx and with president on february 20xx it was stated that vice president managed and controlled the operation of org he is the primary came to them to discuss the possibility of opening an in house ministry within the church of co-1 the operation would include education counseling assisting individuals with financial difficulties etc this would be accomplished by conducting classes on budgeting spiritual counseling etc the plan was to sublease a facility at the church to conduct those activities ra-4 stated that the plan was never written out it was just a verbal discussion with vice president ra-4 stated that he is the associate pastor and officer director of co-1 ra-3 stated that he is the senior pastor of co-1 ra-4’s recollection was that org applied for tax-exempt status sometime in 20xx or 20xx ra-4 and ra-3 stated that the idea was abandoned soon after due to advice from their lawyer ra-4 stated that he and ra-3 resigned from org sometime in june 20xx on the advice of their lawyer ra-4 stated that he and ra-3 were not involved in the day-to-day operation of org ra- stated that he and ra-3 had never been at the org facility and had no knowledge of org’s current activities the only time they met vice president was during church service-once a week ra-4 stated that he and ra-3 had not spoken to vice president for a while the agent spoke with secretary on march 20xx with respect to a co-1 church donation of dollar_figure ra-4 stated that vice president donated to the church in the amount of dollar_figure about three or four farm rra-a 11-10xy catalan mumbar aneamar nie a eet aa te wee denariment of the treasurv-intarnal revanue caruica schedule nurnber or exhibit form 886-a rev january 19xx explanations of items year period ended tax identification_number name of taxpayer ein org months prior to the discussion on setting up classes on budgeting when he and ra-3 resigned from org the church returned the money with interest back to vice president because the church wanted to be disassociated from org ra-4 also stated that the other officers listed on the return were also members of the co-1 church this included dir-3 dir-2 and dir-9 they were not sure about the other officers listed ra-3 stated that dir-9 was also a member of the church and that he would not have knowledge of org's activities he was not involved in the day-to-day activities of org and has never been in org’s facility or attended any of org’s meetings june 20xx president and secretary provided copies of their resignation letters to org as shown below ina letter of december 20xx to org president resigned from being a board member and officer of org effective december 20xx ina letter of october 20xx to org president resigned from being a board member and officer of org effective october 20xx ina letter of december 20xx to org secretary resigned from being an officer and director of org effective december 20xx ina letter of october 20xx to org secretary resigned from being an officer and director of org effective november 20xx the meeting minutes of the board_of directors held on november 20xx shows that the directors who were present were president and secretary the minutes indicated that vice president was also present and described his role as an employee and manager of org the meeting minutes further reported that vice president was voted in as the director and president of org during the initial interview vice president stated that he was a board member of co-6 which he resigned in 20xx and then became an employee of co-6 serving in that capacity from sometime in 20xx to december 20xx during the initial interview vice president stated that dir-2 was the president of org from january 20xx to april 20xx until he was absent due to illness vice president stated that he has never been to the office and was not a counselor of org vice president said that he and ra-2 were left to manage the operations of org the agent had a telephone conversation with dir-2 on april 20xx with respect to dir-2’s role in org’s operation dir-2 stated that he was the president of org only as a figurehead with no actual interactions with org’s activities or personnel dir-2 said that he did not sign the form_990 tax_return for the period ending june 20xx dir-2 stated that he has never been at nanartmant of the treasurv-intarnal ravenna service caen qqr_a saves pratatnn ohta annas na schedule number or exhibit form 886-a rev january 19xx name of taxpayer tax identification_number yeariperiod ended explanations of items org org’s facility and has never been involved in the daily operations of org dir-2 has no knowledge of org’s current activities june 20xx ein dir-2 went on to say that he met vice president at the co-1 church where he was a member vice president recruited him at church to form a nonprofit organization that would provide for drug treatments open a halfway house christian training classes etc the only meetings with vice president were at the church or when dir-10 wanted documents to be signed ra-2 would bring him the documents to sign at church dir-2 said that he has been on workmen's_compensation due to injury from the job for a while he was told by dir-10 that his name would be on the paperwork as a figurehead only and that there would be no liability against him dir-2 stated he has never attended any of org’s meetings during the initial interview vice president stated that ra-1 ra-2 and he are the primary counselors the counselor in training is dir-5 it was noted that dir-5 is the vice-president director and employee of org vice president and ra-2 are the managers of org according to org’s general ledger the following officers managers are compensated for their - services vice president ra-2 dir-5 and dir-6 this is contrary to what was reported on form_990 in idr the irs asked org to provide a brief biographical summary for each officer and board member listed on the form_990 and to include specific details regarding their prior training education and work experience in the credit or financial counseling industries org responded as follows e e president is the senior pastor of co-1 of a member church and also established a k- grade school of co-10 dir-9 is from the department of education state of state in counseling and career development secretary is the associate pastor of co-1 and is an accountant and financial counselor dir-2 has an aa na ats co-9 counselor dir-5 credit counseling systems operation dir-6 credit counseling customer service assistant bookkeeper dir-3 pharmacist dir-7 paralegal bankruptcy wills trust probate business family law dir-8 phd international business finance outreach educational classes during the on-site examination vice president stated that org conducts some outreach classes vice president presented a sign in sheet showing eight people in attendance the agent reviewed the sign in sheet and noted that the sheet did not show where the class was held and form r8-a 4-10xy deoartment of the treasurv-internal ravaniie sarvica catalan abembar 9noamal mecbtink mm ton mee ma schedule number or exhibit form 886-a rev january 19xx explanations of items year'period ended tax identification_number name of taxpayer org how the class was promoted the sheet did not include details such as length of time of each event the number of participants any fees charged samples of forms letters and agreements used etc there was no other information shown on the sheet when the agent inquired vice no other information was provided president said thatthe class was atthe ein june 20xx vice president did not provide supporting documents for the above attendee during the on-site examination the agent subsequently issued an idr to ask for the information the information was received by the agent on november 20xx upon review the agent noticed that the sign in sheets still did not indicate where the classes were held and how the classes were promoted the agent noticed that some of the sign in sheets looked like the same sign in sheet a prospective client would use to sign in to the org facility the agent also noticed that the same client name appeared more than once on the sign in sheets see exhibit h in the examination_report the agent mentioned that vice president submitted some copies of documents titled client action plan for review the heading on the right top comer shows the street address and telephone number of org as address city state tel the logo of org shown as follows org logo non-profit organization the heading street address and telephone number are the same as co-6 and co-15 the examination_report also mentioned that org submitted the state of state _for review in the examination_report the agent co mentioned the following regarding - the stateofstate and contracts to company's that offer substance abuse treatments to individuals and families the state offers individualized self-directed recovery for individuals with substance state web site abuse disorders client served include substance abusing adults that need treatment adults currently in treatment for substance abuse and those discharged from substance abuse treatment within the last years assessment and recovery support services it is a fee-for-service program and does not pay for substance abuse treatment offers vouchers to individuals to pay for community-based services according to the state of _ offers grants is part of the pr hn ek ok bb tone eins beeb mwer el pra en ese on f-- schedule number or exhibit im e86-a name of taxpayer explanations of items tax identification_number yearperlod ended ein org org applied to be one of the recovery support service providers the memorandum of understanding mou shows an agreement with org to deliver recovery support services to clients for housing support and spiritual support services the mou agreement was signed by vice president as management representative dated june 20xx the signature line for authorization was left blank it was noted that the mou agreement ended by saying it is understood that this mou is contingent upon the awarding of an cooperative agreement award from the u s department of health and human services center for substance abuse treatment in support of in state june 20xx org's application reported the following information dir-5 was listed as the vice-president of org org was incorporated in july 20xx org was established in 20xx the number of staff in the organization current number of board members president of org was dir-2 located at address city state contact person regarding recovery support program director was vice president org described its organization as process approval was vice president a non-profit organization founded by a religious congregation or religiously-motivated incorporators and board members that clearly states in its name incorporation or mission statement that it is a religiously motivated institution org described its eligibility requirements to participate in the program as follows org are offered to families and individuals regardless of age race religion creed sex social position or financial status e org listed the credentials of staff members as follows o ra-2 certified counselor vice president ae in idr the irs inquired as to org’s roll with respect to the housing support and spiritual support programs with org responded as follows org provides biblical spiritual principles for faithful stewardship decisions for daily living with everything that god has entrusted based on the clear understanding that god is the owner of everything with joyous contentment with what god has provided and the ability to respond to god’s call to service denartment of the treasurv-internal revaniue sarvica earm rrr a 14_40vv ratalan alomar 9n04ma eink oa tan wees ne oan schedule number or exhibit form explanations of items name of taxpayer org tax identification_number ein year period ended june 20xx with respect to spiritual support offers a variety of recovery support services that incorporate faith and specific religious beliefs and convictions in the recovery process they are designed to assist the client in developing their own spiritually as an integral part of recovery and the understanding from psalm with respect to housing support assists the client in planning budgeting searching for attaining and keeping long-term clean safe and appropriate housing explaining timothy services may include a wide range of that assist the client in improving their housing circumstance including but not limited to skill building assisting the clients in the physical move managing logistics and inspecting prospective locations and suitability at no point during the on-site examination including the client-observations did org use the educational materials as stated in its form_1023 such as ' spend days with god in bible study and prayer and experience financial freedom _ _1 to engage in financial management programs credit counseling programs course workbook debt management programs etc at no point during the on-site examination including the client observations did org use the educational materials as stated in the initial interview with dir-10 in the protest the poa also submitted a copy of org’s counseling manual stating that vice president would follow the manual when conducting his counseling sessions it was noted that this was the same counseling manual used by co-6 when it argued its case against the irs the manuals used by org were also used by co-6 org’s web site org has a web site at website and website copies of the web site are included as exhibit the organization’s web site at website is reviewed below the opening page of the web site contains the home page with links ts to the following main menu items titled ' ye a - ca the home page provides a brief description about org per the page the introductory paragraph states the following department of the treasurv-internal revenue service farm rakr a f4_sovy ratalnn abimbar 2ne4mal ne dsthabe ma fon mine naw m4 schedule number or exhdit form 886-a rev january 19xx name of taxpayer org explanations of items tax identification_number ein voarperiod ended june 20xx below the description appears to be an advertising window that states org would help clients with budget education and planning provide a credit report lower interest and fees reduce monthly payments and free counseling the location address shown on the home page is address city state the mailing address shown is address city state telephone in the about us page org described its services as follows at org our goal is to help you determine a road map with a specific path for you to follow on your journey to personal freedom we will help you achieve your goals and support you every step of the way by providing you nothing but the truth honestly sincerely and confidentially we offer you the highest degree of professionalism and strive to improve our quality and level of education and services and will be there for you the solutions page links to different web pages of org services department of the treasurv-internal reventia service form 886-a 1-19xx catalog number 20810w pane publish no irs enw schedule number or exhibit form 886-a rev january 19xx name of taxpayer org explanations of items tax identification_number ein year period ended june 20xx department of the treasury-internal revenue service carn rrrla anvvn patatan abamtias anoamat mann ae mecbhah naan lon mee schedule number or exhidit a form rev january 19xx i explanations of items name of taxpayer june 20xx tax identification_number year period ended org ein e7 e e - department of the treasury-internal revenue service form 886-a 1-19xx catalan niurher 9nr 4a euthlioh nn ire news denn schedule number or exhibit yearlperiod ended tax identification_number explanations of items ein form 886-a rev january 19xx name of taxpayer org june 20xx in the debt repayment page potential clients are encouraged to call org's office and explain their situations appointments would be scheduled to go over the client's financial condition the potential client completes the application form and mails or faxes the information to org in the why does it work section org described its activity as ra nedee nent nf tha tennaiins inéacnal dascamsen gandan schedule number or exhibit fom 886-a explanations of items name of taxpayer org tax identification_number ein yearfperiod ended june 20xx oe both the debtor person who owes and the creditor the person owed benefit win win org offers counseling on budget and financial planning with emphasis on re- establishing credit org can pull a comprehensive credit report our professionals can provide detailed analysis to help resolve and reestablish your credit org will he p you save money the downloadable application form was viewed and it showed the following information org’s address address city state org's mailing address address city state org's telephone the application described org as an accredited non-profit community service_organization open monday - friday am to pm the application form asked for the applicant's personal information income monthly living_expenses and secured debts in the official use box it shows the proposed dmp amounts in the how it works page org described the benefits of credit counseling as org describes how its program works as follows the applicant sends in an agreed monthly payment to org n then org deposits those funds in a_trust fund bank account in which payments to creditors come out of the account org keeps records of all deposits and payments and any correspondence a fee of dollar_figure to dollar_figure per month is charged to cover stationary postage correspondence documentation monitoring and handling of other expenses the charge depends on the creditors the fee can be waived for hardship o p org’s authorization and release form indicates the following by signing the form the applicant is allowing org to negotiate a repayment or debt management program dmp payments are directly disbursed through org charge a monthly service fee of dollar_figure or dollar_figure org’s fundings are from voluntary donations and contributions from creditors who participate in dmp’s department of the treasury-internal revenue service form 886-a 1-19xx catalina number dona nuthtich na ire anw schedule number or exhibit rew january form 886-a explanations of items name of taxpayer tax identification_number org in the facts page the title in bold states facts about state org’ org went on to describe itself as a community service_organization designed to help people it's purpose to help people with paying off their debt educate consumers in stewardship and money management the facts page also reports that the source of org's funding comes from tax deductible contributions and donations business firms banks retail merchant credit unions and the community additionally the facts page states that org services are provided to families and individuals regardless of age race creed sex social position or financial status june 20xx year period ended ein in the links page org shows links fo co-11 focus on the family and co-12 the doctrinal statement page lists what appears to be bible scriptures and biblical passages advertisements org advertised its services through referrals tv radio and yellow pages the yellow page ads were in the telephone books and online during the client observations org’s potential clients told the agent that they heard of org services through referrals from friends relatives prior clients of co-6 service tv radio etc in idr the irs asked org to provide advertising material with respect to internet advertising org responded by saying that they do not utilize internet advertising in org’s protest letter the poa acknowledged that there was some intemet advertising but did not provide copies of the advertisements research of the internet found internet advertising by org at yellowpages com there was an ad for co-6 attached to the link was an ad for both org and co-6 research via an internet research engine yielded an ad for co-6 with links to org contrary to the poa’s claim an analysis of the internet ads shows org’s services as primarily in debt consolidations debt settlement credit report reestablishment see exhibit g org’s radio advertisements org submitted scripts for a paid radio advertisement for the period xx - xx and xx - xx the advertisement states that org will ‘pull your credit reports evaluate your credit history and even talk to your creditors on your behalf say goodbye to the stress caused by collection phone calls threats and anxiety the advertisement also claimed that org would talk fo creditors and stop the calls and even have lowered credit card interest rates and monthly payments see also exhibit g org s operational manual is called the certificate of registration from was issued to org on august _ the nanartmant of the treasurv-internal ravenue service - mae bios smn a mm mee an - schedule number or exhibit year period ended tax identification_number explanations of items form 886-a rev january 19xx name of taxpayer org 20xx with an expiration date of august 20xx the certificate of registration also showed an original registration date of september 20xx the stated purpose of org was reported as ein june 20xx manual states that org’s counseling programs are free of charge to their _ which relates to debt-management and credit the manual was written to conform to counseling services provided to consumers to help minimize their economic stress the manual states that org’s goal is to relieve unwarranted financial burdens on wage earners and their dependents and to decrease the economic losses to individuals creditors and the community by providing biblical principals for faithful decisions for daily living the a monthly membership fee is consumers the debt management service has no start-up fee charged but not to exceed dollar_figure and is waived for hardship the manual goes on to describe that org relies on grants individuals creditor and community contributions to cover its operating_expenses and educational programs org has certified counselors to counsel clients via telephone or face-to-face meetings once clients complete the enrollment process the client would submit a monthly payment to org and org disburses this payment to the client's various - manual also states that org maintained industry standards to qualify for creditors the membership with the se oe internet research did not show a membership at the show paid membership dues to org s financial records did not manual defines supplier as the creditors to whom payments are disbursed and its the also states that org counselors definition of customer is that of the client or consumer are not paid based on the results of the counseling process no commissions provided and are paid on an hourly or salaried basis org’s quality objective is considered met if the following occurs a growth rate of new clients per month for the 20xx fiscal_year maintain operating_expenses within of 20xx seek educational grant funding fair share contributions at of funds distributed quality service survey response rate at or greater with or more answering in the satisfaction range minimize number of customer complaints e manual org's management team includes the executive director director according to the of operations and management representative the management team is in charge of org’s operation the board_of directors is responsible to ensure that org achieves its quality objectives rdenartment of the treasurv-internal revenue service schedule number or exhibit explanations of items form name of taxpayer org org maintains an active creditor list to record names addresses telephone numbers and other information about creditors the steps displays a flowchart showing org’s operational june 20xx tax identification_number year period ended ein n w r a o n o s client inquires about org appointment scheduled counseling session debt management initiated entered into org database data verification payment entered into database creditor payments programmed creditor payments and proposal sent the reported org's 20xx officers directors as president president director vice president vice president director management representative dir-9 vice president director secretary secretary _-- e e e counselors the document was authorized for issue by vice president management representative july the following are procedures for accepting 20xx according to org’s client enrollment into the debt consolidation program oe e the purpose is to ensure that org supports community education regarding credit and money management showed the following references org counselors will provide the following certification programs or applicable experience planning education - counselor certification through the through the _ and - co-11 records kept by the director of operations daily receipts report bank deposit receipts annual financial audit with respect to internal communication the management team will conduct an employee meeting monthly or as necessary an agenda for the meeting will be maintained by the 3a lae nanartmant of tha traasuirv-intarnal revenue sarvica schedule number or exhibit form 886-a rev january 19xx name of taxpayer june 20xx tax identification_number year period ended org ein explanations of items management team representative to document the topics discussed and employees will sign a roster to certify their attendance at the meetings the management team may also review staff responsibilities staff authority and accountability updates to procedures the management representative is responsible for ensuring that management reviews are conducted effectively the management representative is responsible for o o o o o o advising the management team about the frequency of management reviews making necessary arrangements for holding the meetings preparing and circulating before the meeting any necessary documents and information acting as secretary to the management review meetings including recording the proceedings ensuring that any corrective preventive or other actions are implemented reporting to the management team when these actions have been successfully completed the management representative director of operations and the executive director will attend the management review meetings one of the agenda of the meeting is nerformance in meeting goals targets and trend analysis fair share the management representative and individual department supervisors are responsible for the overall training of employees all new employees will meet with the management representative of org on their first day to review the employee handbook to complete the forms mentioned above to review safety requirements to review confidentiality issues and to receive a general overview of the services provided by org receipt of client forms o o o the management team is responsible for the accurate client enrollment all pertinent information is completed on the application form the authorization and release is signed by the applicant and co-applicant as necessary upon receipt of the first payment the applicant is entered into the database and becomes an active client review of client forms o upon activation the appropriate org staff member verifies the accuracy of the creditor name and account numbers any necessary corrections are made at that department of the treasury-internal revenue service farm rrb-a catainn ahimber 9nr40 pano nithlich na ire anu schedule number or exhibit form 886-a rev january 19xx name of taxpayer explanations of items tax identification_number year period ended org ein june 20xx time once approved or corrected the staff member inputs in data in the org system a client may cancel his her agreement with org provided the request is made in writing upon receipt of the written cancellation org confirms the cancellation in writing with the client and notifies the client's creditors org may also cancel an agreement due to a failure to pay or for other reasons org notifies the clientin writing of this cancellation and also notifies the client's creditors in writing e purchases the executive director will authorize purchases or will authorize other staff to make purchases from vendors those purchases will be reviewed for accuracy and the products services purchased will be verified the manual described org’s counseling process as follows potential client would initially fill out an application detailing all of their contact information and a listing of creditors that they would like to include in the counseling program upon receipt of the application a counselor contacts the client to review the application and determine whether the client can benefit from the program each client is faxed org's service agreement which details the allocation of up front fees each debt management plan is created in the org system along with the agreements sent to each client work instructions manual the work instructions contained the following information e with respect to payments to creditors on behalf of org clients o payments include electronic payments checks issued from the org trust account regularly scheduled payment or one-time payments made in special circumstances o have two regularly scheduled disbursement dates to creditors cycle a client payments received between the and the of the following month will be sent to creditors on the of the month cycle b client payments received between the and the of each month will be sent to creditors on the of the month o payment format form 886-a 1-19xx cataloa number 20810w pane _ubblish no irs cov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items year period ended tax identification_number name of taxpayer org ein june 20xx payments sent to creditors primarily via electronic transfer rps and check from the org trust account the check payment will contain payments for ail clients of that given creditor from whom org has received payments in that given cycle o proposals the creditor proposals are created using the org database software program when the first payment of a client is processed each creditor is sent a proposal electronic proposals are posted to a computer file that is electronically transmitted to co-13 for processing co-13 then forwards the electronic proposals to the various creditors o all records of client payments are maintained for years _ employee manual org’s employee manual revised july 20xx the employee manual was prepared and maintained in accordance to iso 20xx the employee manual indicates under the title compensation--performance evaluation that each year the manager evaluates the employee performance the president sets guidelines for salary increases with each department manager the company paid benefits include worker compensation_unemployment compensation insurance medical insurance dental insurance as well as paying for tuition for continuing education the bsi management systems assessment report dated august 20xx listed the name and position of org’s personnel position management representative systems operation name vice president ra-5 ra-6 admin client relations ra-7 systems operation ra-8 ra-2 ra-9 ra-1 admin customer service operations dept management rep administration counselor the manual also shows org’s education and training requirements exhibit the exhibits indicated the following e the how can org help you exhibit states the following department of the treasury-internal revenue service caem rre_a 40vv catalan niumbhar 9naamal nuhlich nn ire new dona qr schedule number or exhibit rev january 19xx form 886-a explanations of items tax identification_number year period ended name of taxpayer org ein june 20xx org offers a repayment plan with your creditors mastercard visa department stores medical and professional bills banks etc accepting a win win proposal waive late and or service charges and occasionally even reduce or waive interest charges in almost all cases your creditors will help you by e the how does this program work exhibit states the following org receives the mutually agreed upon amount of payment from you each month your payment is deposited into a local trust fund bank account and payments are made out to each creditor org keeps a complete accounting record and documentation of all you deposits and payments as well as any correspondence on your behalf the charge to handle the expense of accounting stationary postage correspondence documentation and monitoring on your behalf is dollar_figure to dollar_figure per month depending on your creditors and waved for hardship definition education and training programs and activities are designed to assist the client in obtaining necessary skills to be a successful and productive member of the community and offers skill building topics including but not limited to money management personal growth responsible decision making and vocational training it is also meant to provide the client with tools that promote a healthy lifestyle and strengthen family work and social environments scope of services education and training programs and activities include a broad variety of unique perspectives and approaches and shail be designed to support the client's treatment and recovery each education and training provider shall submit a brief outline or description of the proposed program or activity multiple programs and activities from the same individual or organization are acceptable in idr the irs asked for a list of the management team org responded by saying that the management team consists of the director of operations-ra-2 and management representative-- vice president books_and_records org’s sources of revenue are derived from credit counseling fees the credit counseling fees include initial payments to set potential clients up on dmps the monthly service charge fair share payments from creditors credit report fees org labeled these fees as education counseling’ and as public support and grants on its form_990 return the following shows org’s financial records with respect to revenues and expenses revenues taken from profit loss statement credit report fee dmp fees-client share dollar_figure dollar_figure earm rrbaa 440xy catalina numhar 2nrimw pana ar nuhlich no irs naw department of the treasury-internal revenue service schedule number or exhidit form 886-a rev january 19xx explanations of items org name of taxpayer dollar_figure creditor donations-fair share corporate business grants dollar_figure individual business contributions dollar_figure june 20xx tax identification_number year period ended ein a review of org’s financial records indicated that the funds received from creditors were identified as grants payments were received from credit card companies that were attributable to debt_management_plan_services according to org's financial records org also received its funding from client donations fair share payments were labeled as client or creditor donations or grants org submitted copies of correspondence from the co-14 grant program as indicated below e e e letter dated 20xx addressed to org c o vice president address city street the letter states that org received a grant from co-14 for dollar_figure for the first quarter of 20xx letter dated 20xx addressed to org c o vice president address city street the letter states that org received a grant from co-14 for dollar_figure for the second quarter of 20xx letter dated 20xx addressed to org c o vice president address city street the letter states that org received a grant from co-14 for dollar_figure for the third quarter of 20xx the term fair share refers to a payment made by the credit card companies who are receiving payments from their debtors via the dmps set up by the organization the amount_paid is determined by each separate creditor in advance credit card companies generally will only make fair share payments to organizations recognized as exempt under sec_501 of the code it was noted that org does not receive any contributions from the general_public people who are not in org’s dmp activities org receives no donations from community groups churches labor unions or any other groups or private citizens based on the information provided org does not have a fundraising program org's profit and loss statement and balance_sheet shows that after org’s takeover of co-6 service org’s income increased dramatically org’s trust fund account jumped from statement period xx - xx of dollar_figure to dollar_figure on statement period xx - xx this was about the same time co-6 was in process of losing its tax-exempt status it was also noted that org does not report funds received from their clients held in trust to pay creditors as income on the form_990 its noted that org has no title or ownership in those funds because org as a service provider is required to send those funds to creditors according to org’s financial records the trust funds account total deposits were approximately dollar_figure from statement period june 20xx to june 20xx this information is noted here for department of the treasury-internal revenue service form 886-a 1-19xx -_ cataloo number 10w oublish no irs ao pana schedule number or exhibit explanations of items form 886-a rev january 19xx name of taxpayer org informational purposes the total deposits in the trust funds account show substantial dmp activities the agent further noted there was no indication that the deposits were from co-6 dmp clients the transaction was described as org’s transaction tax identification_number june 20xx year period ended ein expenses taken from profit loss statement org's primary expenses are other salaries and wages other employee_benefits payroll_taxes telephone occupancy and advertising expenses the primary expenses are other salaries wages other employee_benefits payroll_taxes telephone occupancy advertising h a a p a h p r h_r p see exhibit k for sample list of client dmp fees related_organizations org's operation is related to co-6 and co-15 org’s operations were established in the same period in which the previous non-profit entity co-6 was being revoked by the irs in february 20xx the poa’s protest letter is silent with respect to org’s relationships with co-6 and co-15 co-15 during the examination it was discovered that co-15 was using org to answer telephone calls for the organization it was also discovered that co-15 was also claiming to be co-6 both organizations were revoked by the irs for conducting non-exempt activities ra-10 was the officer counselor of co-15 ra-10 is the father of vice president the officers and board members of co-15 are the same board members in co-6 according to ra-10 the board members were just listed for show with no actual authority it was noted that the content of co-15 web site mirrors that of org and co-6 co-6 i revenue service enrm rrrwa 14-10yy department of the treasury-in catalnn numhar n24 nublish no irs aov pana r schedule number or exhibit form 886-a rev january 19xx name of taxpayer org tax identification_number june 20xx year period ended ein explanations of items it was noted that the content of co-6 web site mirrors that of org and co-15 according to the state secretary of state web site co-6 service is a domestic nonprofit corporation incorporated on november 19xx the corporate status is shown as active the stated purpose of the organization is reported as comprehensive credit counseling education establishing voluntary debt repayment programs’ the mailing address is address city state the registered agent's name and address is ra-10 address city state the officers listed are title officers name ra-10 president ra-11 vice-president ra-12 secretary ra-13 treasurer during the initial interview vice president stated that he was a board member of co-6 which he resigned in 20xx and then became an employee of co-6 serving in that capacity from sometime in 20xx to december 20xx co-6 web site address is website a copy of the home page was printed and shown as exhibit a see also exhibit j according to exhibit a the opening page of the web site contained the introduction heading co-6 service below the heading the statement welcome to co-15 was displayed after the introduction heading the following statement was displayed co-15 co-15 is a non-profit community service offering our consumer advocates are here to help ice form 886-a 1-19xx department of the treasury-internal revenue catalog number 20810w page publish no irs gov servi schedule number or exhibit form 886-a rev january 19xx explanations of items year period ended tax identification_number name of taxpayer org on the same page the web site showed the address and telephone number for contact information as follows ein june 20xx address city state tel phone fax fax toll free phone the co-6 service form_990 retum for tax period ending december 20xx_shows the following information the initial return box was checked address shown as address city state telephone web site address website e primary revenues contributions gifts grants dollar_figure interest dividends from securities dollar_figure dollar_figure total part vii of the form_990 described the revenues of dollar_figure deriving from debt management program e primary expenditures compensation of officers directors other compensation salaries wages of employees employee_benefits payroll_taxes occupancy advertising dues subscription p h a h a a h a a p a h p e e part ill of the form_990 statement of program service accomplishments states the exempt_purpose of co-6 as providing confidential personal stewardship counseling education debt management programs and negotiating with creditors in eliminating debt part viil of the form_990 relationship of activities to the accomplishment of exempt purposes states the exempt_purpose as providing confidential personal stewardship a counseling education debt management programs and negotiating with creditors in eliminating debt e part iv of form_990 balance_sheet reported end of year balance in the amount of dollar_figure department of the treasury-internal revenue service fae aqra save pratalan abimbar inoamal nuhlish na ire news mann an schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer june 20xx tax identification_number year period ended org ein e part v-a of form_990 listed current officers directors and key employees title executive director average hours worked dollar_figure compensation name vice president ra-10 president dollar_figure e e line 91a of form_990 reported that the books are in the care of ra-14 located at address city state telephone the return was signed by ra-10 president dated march 20xx org’s books_and_records also show evidence of activities commingled with co-6 for example a review of cancelled check and invoice from co-16 shows that the invoice was addressed to co-6 with contact person of vice president the invoice shows the expense was for radio advertisement on co-17 from september 20xx to october 20xx the expenditure of dollar_figure was written out from co-6 operating checking account and was signed by vice president a review of cancelled check paid to co-18 was written from co-6 operating checking account and was signed by vice president for dollar_figure the bill was addressed to co-6 and was for finance insurance ra-13 for the period july 20xx - october 20xx ra-13 was listed as one of co-6 officers directors a review of check for dollar_figure co-19 was paid from co-6 operating checking account and was signed by vice president the invoice was addressed to co-6 attn dir-9 at address city state the person covered was dir-5 and ra-10 a review of check for dollar_figure co-20 invoice was billed to dir-9 wife of vice president co-6 for service period of xx to xx the source document stated the charges were for client credit checks see exhibit l the reported dollar_figure in transactions as notes loans receivable with co-6 for e e e cancelled check dated xx xx dollar_figure cancelled check dated xx dollar_figure cancelled check dated xx xx dollar_figure a review of the advertising payments shows that payments were made to co-21 for co-6 at the location of address in 20xx and 20xx there were no meeting minutes regarding the acceptance of co-6 takeover with respect to org in fact the org officers president secretary and dir-2 was not even aware that this activity was going on they have never been at the facility and had not attended any of the board meetings of the treacurv-internal ravaniue sarviea - mma bie sana pe mee nenartmant - schedule number or exhibit form 886-a rev january 19xx explanations of items year period ended tax identification_number name of taxpayer org ein june 20xx it was noted that org continues to describe in its flyers web site and advertisements that co-6 is still a non-profit entity when it is not this is misleading because after the revocation of co-6 the organization became a for profit entity mirrors that of org and co-15 it was also noted that the content of co-6 web site attached as exhibit o details the courts decisions to revoke co-6 in co-6 service vs commissioner of intemal revenue service the court ruled to dismiss the case for failure to state a claim upon which relief can be granted on november 20xx the office of appeals issued a final adverse determination_letter to co-6 service revoking the organization's tax-exempt status effective january 20xx the final adverse determination_letter states in part our adverse determination was made for the following reason s you are not operated exclusively for charitable educational or other exempt purposes you did not engage primarily in activities which accomplish one or more exempt purposes specified in sec_501 more than an insubstantial part of your activities were in furtherance of a non-exempt purpose and you were operated for the purpose of serving a private benefit rather than public interests it was further noted that in 20xx and 20xx vice president operated co-6 and was compensated for his work other related_organizations additional extensive research revealed ra-10 and vice president's association with co-22 the state secretary of state web site shows that the corporation is a domestic profit corporation incorporated december 19xx the corporation was rated as active and in good standing the description of its purpose was real_estate sales and development the mailing address shown was address city state tel the registered agent's name was ra-10 the officers listed are officers name ra-10 vice president dir-9 title president vice-president secretary treasury it was subsequently disclosed in org’s response to idr that vice presidenthas an ownership_interest in the facility located at address which org occupies and paid rent of dollar_figure per month from january 20xx to june 20xx totaling dollar_figure research of address revealed that this facility address is shared with a pair of limited_liability companies according to the state secretary of state web site a search of address resulted in co-23 and co-24 both llc’s show an active status the co-23 entity shows that it is a domestic limited_liability_company llc managed by a manager the llc was registered and incorporated on july 20xx at the address of address gare rraraa catalan numhar 2nrimw pana ad nubtich na ire aw department of the treasury-internal revenue service schedule number or exhibit explanations of items form 886-a rev january 19xx name of taxpayer org city state the registered agent's name is ra-15 who is also a member manager of the llc the registered agent’s address is the same as the registration mailing address tax idendification number june 20xx yeariperiod ended ein in idr the irs asked for financial documentation of a payment of dollar_figure paid to co-23 on january 20xx from org’s operating account for rental expenses org responded on march 20xx by submitting a copy of cancelled check a review of the check revealed that the facility address was the same as org’s facility the check was signed by vice president see exhibit n law sec_501 of the internal_revenue_code establishes standards that a credit counseling _ organization must satisfy for exemption under sec_501 or sec_501 as follows the organization provides credit_counseling_services tailored to the specific needs and circumstances of consumers the organization makes no loans to debtors and does not negotiate the making of loans on behalf of debtors the organization provides services for the purpose of improving a consumer's credit record credit history or credit rating only to the extent that such services are incidental to providing credit_counseling_services and the organization does not charge any separately_stated fee for services for the purpose of improving any consumer's credit record credit history or credit rating the organization does not refuse to provide credit_counseling_services to a consumer due to the inability of the consumer to pay the ineligibility of the consumer for debt management plan enrollment or the unwillingness of the consumer to enroll in a debt management plan the organization establishes and implements a fee policy which requires that any fees charged to a consumer for services are reasonable allows for the waiver of fees if the consumer is unable to pay and except to the extent allowed by state law prohibits charging any fee based in whole or in part on a percentage of the consumer's debt the consumer's payments to be made pursuant to a debt management plan or the projected or actual savings to the consumer resulting from enrolling in a debt management plan atall times the organization has a board_of directors or other governing body which is controlled by persons who represent the broad interests of the public such as public officials acting in their capacities as such persons having special knowledge or expertise in credit or financial education and community leaders not more than percent of the voting power of which is vested in persons who are employed by the organization or who wil benefit financially directly or indirectly from the organization’s activities and not more than percent of the voting power of which is vested in persons who are employed by the organization or who will benefit financially directly or indirectly from the organization’s activities department of the treasury-internal revenue service enarm rrr-a 4-10yy cpatotan muimhar 2nq4ma dana ad nuhtioh an ire anu schedule number or exhibit form 886-a rev january 19xx explanations of items tax idertificaton number _ name of taxpayer org the organization does not own more than percent of the total combined voting power of any corporation the profits interest of any partnership which is in the trade_or_business of lending money repairing credit or providing debt_management_plan_services payments processing or similar services and the organization receives no amount for providing referrals to others for debt management plan june 20xx yearlperiod ended ein services and pays no amount to others for obtaining referrals of consumers sec_501 also sets additional requirements for sec_501 with respect to credit counseling service as their primary activity e cannot solicit contributions from consumers during the initial counseling process or while consumer is receiving services from organization for existing organizations the amount of revenues an organization may receive from its customers’ creditors which is attributable to dmp services is limited to percent in 20xx and percent in 20xx sets restrictions on who may serve on the governing board_of a credit_counseling_organization a majority at least percent of the board members must represent the broad interests of the public this includes public officials community leaders and persons having special knowledge or expertise in credit or financial education no more than percent of the board may be employees of the organization creditors or those who will benefit financially in any other way the credit counseling provision of the pension_protection_act of 20xx defines credit_counseling_services as credit_counseling_services are the provision of educational information to the general_public on budgeting personal finance financial literacy saving and spending practices and the sound use of consumer credit the assisting of individuals and families with financial problems by providing them with counseling or any combination of such activities the provision defines debt_management_plan_services as debt_management_plan_services are services related to the repayment consolidation or restructuring of a consumer's debt and includes the negotiation with creditors of lower interest rates the waiver or reduction of fees and the marketing and processing of debt management plans sec_501 of the code describes certain organizations_exempt_from_taxation under sec_501 of the code and reads as follows corporations and any community chest fund or foundation organized and operated exclusively for religious charitable scientific testing for public safety literary or educational_purposes or for the prevention of cruelty to children or animals no part of the ei of the treasury-internal revenue service rotation tte annan department cor bia ann mice an tan nee non ae schedule number or exhibit coen b86 axx tax identification_number explanations of items name of taxpayer org ein year period ended june 20xx net earings of which inures to the benefit of any private_shareholder_or_individual no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation and which does not participate in or intervene in including the publishing or distributing of statements any political campaign on behalf of any candidate for public_office - 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 of the code the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section if an organization fails to meet either the organizational or operational_test it is not exempt sec_1_501_c_3_-1 of the regulations provides that an organization will not be regarded as operated exclusively for exempt purposes if more than an insubstantial part of its activities is not in thus to qualify for exemption the organization must show that furtherance of exempt purposes it was at all times operated exclusively for religious purposes ie that it engaged primarily in activities which accomplished that exempt_purpose the organization will not qualify for exemption if a nonexempt activity is more than an insubstantial part of its activities or if an activity of the organization has more than an insubstantial nonexempt 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 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 the advancement of education and the promotion of social welfare by organizations designed to combat juvenile delinquency sec_1 c -1 d of the regulations defines the term educational as including the instruction or training of the individual for the purpose of improving or developing his capabilities or the instruction of the public on subjects useful to the individual and beneficial to the community in revrul_69_441 1969_2_cb_115 the service found that a nonprofit organization formed to help reduce personal bankruptcy by informing the public on personal money management and aiding low-income individuals and families with financial problems was exempt under sec_501 of the code its board_of directors 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 - department of the treasury-internal revenue service miskat aan ten nee peasnt- ate anes ta sarnan o08 a mee ar schedule number or exhibn form 886-a year period ended tax identification_number name of taxpayer ein org individuals and families who have financial problems by providing them with individual counseling and if necessary by establishing budget plans under the budget plan the debtor voluntarily made fixed payments to the organization holding the funds in a_trust account and disbursing the funds on a partial payment basis to the 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 june 20xx 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_65_299 1965_2_cb_165 states in part that a nonprofit organization formed to advise counsel and assist individuals in solving their financial difficulties and to help reduce the incidence of personal bankruptcy was exempt under sec_501 of the code it also state that individuals with financial problems are not part of a charitable_class revrul_78_50 1978_1_cb_155 jan states in part that a nonprofit organization that processes consumer complaints conceming products and services provided by business establishments meets with the parties involved to encourage resolution of the problem recommends a fair solution and if the proposed solution is not accepted informs the parties about appropriate judicial or administrative bodies that may be used to resolve the disputes qualifies for exemption under sec_501 of the code revrul_66_220 1996_2_cb_209 jan states the term educational is defined in the income_tax regulations applicable to sec_501 of the code as the instruction of the public on subjects useful to the individual and beneficial to the community an example of an educational_organization described in the regulations is one whose activities include public discussions forums lectures panels and other similar programs broadcast on radio and television with a full and fair exposition of the pertinent facts in revrul_77_377 1977_2_cb_192 concerns a nonprofit organization that arranges and conducts winter-time ocean cruises during which activities to further religious and educational_purposes are provided in additional to extensive social and recreational activities this organization is not operated exclusively for exempt purposes under sec_501 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 ei qqr_a anver department of the treasury-internal revenue service patalan ahumbar anoimal nuhlieh nn ire an bann ag schedule number or exhidit form 886-a rev january 10xx explanations of items year period ended tax identification_number name of taxpayer org practices and the sound use of consumer credit qualified for exemption from income_tax because its activities were charitable and educational ein june 20xx the consumer credit counseling service which has been recognized as exempt under sec_501 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 dmp approximately percent of a professional counselor’s time was applied to the dmp activity as opposed to an educational activity moreover the agencies charged a nominal fee of up to dollar_figure per month for the dmp 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 amount of their revenue was from counseling fees 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 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 in the service ruled that each of the agencies 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 court also concluded that the limited debt management services were an integral part of the agencies’ counseling function and thus were charitable and educational undertakings but stated further that 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 - o08 ais saan iene ee nanan we ttek we ten nae department of the treasury-internal revenue service schedule number or exhibit rev january x form 886-a year period ended explanations of items tax identification_number name of taxpayer ein org 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 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 june 20xx first the agency's operation made substantial profits and there was a substantial easter house v united_states 846_f2d_78 fed cir affg cl_ct the court found an organization that operated an adoption agency was not exempt under sec_501 of the code because a substantial purpose of the 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 and of themselves constitute an exempt_purpose the court also agreed with the irs’ determination that the agency operated in a manner not distinguishable from a commercial adoption agency because it lacked the traditional attributes of a charity 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 single life member had near total control of the operations of the agency and fifth the agency functioned by means of a paid staff of to persons with no volunteer help in addition to furthering a substantial non-exempt purpose the court ruled that the taxpayer failed to show that no part of its earnings inured to the benefit of any private individual or shareholder as defined by sec_1_501_c_3_-1 and sec_1_501_a_-1 of the regulations the court found the organization provided a source of credit ie loans to companies in which the private shareholder was either employed or owned the fact that the loans were made showed that the companies controlled by the private shareholders had a source of loan credit in the organization and the ability to use the organization's assets for their personal benefit in 950_f2d_365 a nonprofit organization which operated restaurants and health food stores in accordance with the doctrines of the seventh-day adventist church the court found that living faith conducted its operations with a substantial commercial purpose and therefore does not qualify as a tax-exempt_organization in 76_tc_380 a not-for-profit corporation operated a lodge located in the mountains of colorado and promoted the facility as a lodge for of the treasury-internal revenue service_department eaten on tee eee an _ mmm ee ae rar boe cee schedule number or exhibit form 886-a rev january 19xx explanations of items ein name of taxpayer tax identification_number org christian families the lodge offered various recreational activities it also offered religious activities--operated without a set program-including daily devotions and scripture reading after breakfast sunday moming worship for guests requesting the service and discussion seminars christian song sessions and share sessions conducted by staff members attendance at both although the lodge conducted only the recreational and religious activities was strictly optional minimal advertising a brochure--which referenced recreational activities and accommodations as while the court recognized that specific well as religion-was provided to potential guests mandatory religious activities are not necessarily required to obtain exempt status it added june 20xx year period ended t here must be something more than christian families it is difficult to see how that experience differs if it does from the same experience one can have at any quiet inn or lodge located in the beautiful mountains of colorado the fact that christ haven lodge is promoted as a lodge for sec_501 of the code provides for the exemption from federal_income_tax of organizations that are organized and operated exclusively for religious charitable or educational_purposes this statute has been construed as requiring all the resources of the organization to be applied to the pursuit of one or more of the exempt purposes therein specified the presence of a single nonexempt purpose if substantial in nature will preclude exemption 326_us_279 in 322_us_78 state in part that although the government may question the sincerity of a claimant's religious belief the truth or veracity of that belief is not questionable in puritan church of america v commissioner 10_tcm_485 affirmed per curiam 209_f2d_306 d c cir cert_denied 350_us_810 the court found that the organization's purpose was to carry on the founder's personal feud with a local newspaper the court did not examine the validity or sincerity of the beliefs held however it found that the actual activities of the organization had no relation to the observance of the religious beliefs of its members therefore the court held that the organization was not exempt in 70_tc_352 state in part that the focus of the issues should be toward which an organization's activities are directed and not the nature of the activities in 78_tc_921 and 77_tc_189 affd 692_f2d_432 cir state in part the operational_test examines the actual purpose for the organization's activities and not the nature of the activities or the organization's statement of purpose in credit counseling centers v s portland a 2d s c me 20xx the supreme court of maine denied state tax exemption to a credit counseling agency that provided significant form 886-a 1-49xx __cataloa number 20810w pace _bublish no irs gov department of the treasury-internal revenue service schedute number or exhidit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org 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 credit card companies commonly make payments to credit counseling june 20xx yearfperiod ended ein in solution plus inc v commissioner t c memo 20xx-21 the tax_court has held that a credit_counseling_organization solutions plus is not exempt under sec_501 the court held that the organization's purposes are not educational because its activities are primarily structured to market determine eligibility for and enroll individuals in dmps its purposes are not to inform consumers about understanding the cause of and devising personal solutions to consumers' financial problems or to consider the particular knowledge of individual callers about managing their personal finances the court held that the organization's purposes are not charitable because its potential customers are not members of a charitable_class that are benefited in a ‘non-select manner because they will be turned away unless they meet the criteria of the participating creditors the court also held that the solutions plus would operate for the private interests of its founder and participating creditors the court stated that the facts in credit_counseling_services of alabama stand in stark contrast because the sale of dmps is the primary reason for solution plus's existence and its charitable and educational_purposes are at best minimal rev_proc 20xx-52 with respect to revocation or modification of a determination states in part the revocation or modification of a determination_letter or ruling recognizing exemption may be retroactive if the organization omitted or misstated a material fact operated in a manner materially different from that originally represented or in the case of organizations to which sec_503 of the code applies engaged in a prohibited_transaction with the purpose of diverting corpus or income of the organization from its exempt_purpose and such transaction involved a substantial part of the corpus or income of such organization see also rev_proc 20xx-9 and 20xx-9 the credit repair organizations act croa’ u s c section et sea 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 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 form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasury-internal revenue service schedule number or exhibit year period ended tax identification_number explanations of items form 886-a rev january 19xx name of taxpayer org ein june 20xx 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 c f_r section b iii b c f_r sec_64 c prohibits businesses from cold-calling consumers who have put their phone numbers on the national do-not-call registry which is maintained by the federal trade commission ftc nonprofit_organizations are not subject_to this rule this registry was created by rules promulgated by the ftc and the federal communications commission taxpayer's position org does not agree with the proposed revocation as indicated in correspondence dated august 20xx and in the protest letter requesting review by appeals dated august 20xx a revision of october 20xx bare bones’ protest letter in correspondence dated august 20xx org states that their primary activities are community education and counseling assistance programs org contends that their debt management plan credit_counseling_services are incidental to org's total scope of principal functions org's letter of august 20xx also states that the contributors listed on the form_990 return did not consist of creditors that org serviced but rather funds received from grants that were used for educational_purposes and not based upon administration of a dmp or in exchange for services’ on october 20xx org’s power_of_attorney poa poa submitted a bare bones protest in the letter poa states that he submitted a bare bones protest letter so that he could meet letter the 30-day timeframe in the summary statement of facts section the poa affirms that he was unable to gather adequate facts in the limited time available to timely respond to the irs '30 day letter’ am in the process of obtaining relevant factual information and supporting documents to adequately address the very broad issue at hand with ample time prior to the appellate conference yet to be scheduled intend to provide the irs appeals officer with supplemental memorandum containing the necessary factual information and supporting documents concerning this very broad issue upon request the poa submitted a subsequent appeals protest in a 20xx letter dated august form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasury-internal revenue service schedule number or exhidit form 886-a rev january 19xx explanations of items year perlod ended tax identification_number name of taxpayer org ein june 20xx in the protest the poa states that org’s activities were substantially providing credit_counseling_services the types of credit_counseling_services provided by org were the following e provides credit_counseling_services to financially distressed individuals and families without limiting such services to the poor conducts its counseling program to improve debtors’ understanding of their financial problems and improve their ability to address those problems the poa states that org settled info a more limited range of activities than originally envisioned’ the poa states that the org’s credit_counseling_services developed into a substantial activity but it should qualify as an sec_501 tax exempt_organization because its counseling services methodology shows it furthers ‘educational’ purposes’ states that org did not agree with the proposed revocation based on the following the poa primary reasons of the state-of state to deliver recovery support services to clients for housing support and the poa states that org provides various services to the community the poa claimed that the org entered into an agreement with the spiritual support services org also provided credit_counseling_services to the general_public the poa agreed that org activities were substantially consisting of credit counseling but that org's credit counseling service served an educational purpose rather than commercial-‘sellers of debt management plans the poa cited cca 20xx20xx1 pincite as a factor in determining whether the organization's activities primarily furthered an educational purpose stating that the organization’s methodology should be used to determine if org is conducting credit counseling activities the new additional statutory requirements applicable to credit counseling organizations under sec_501 is not applicable to the audited tax_return for the fiscal_year ended june 20xx sec_501 provisions apply to org beginning on july 20xx but org was already complying with these new additional statutory requirements even during the period of the audited tax_return for the fiscal_year ended june 20xx for more detail please see the poa’s appeal protest letter dated august 20xx government's position based on the facts of the examination the government's position is that org is not operated exclusively for purposes within the scope of sec_501 and as a result org does not qualify for exemption under sec_501 of the internal_revenue_code form 886-a 1-19xx cataloa number 20810w pane publish no irs gov department of the treasury-internal revenue service schedule number or exhibit rev january 19xx form 886-a explanations of items name of taxpayer org june 20xx tax identification_number year period ended ein org's operation is in a manner that is materially different from that represented in its application_for exemption in fact org’s activities are nothing more than the continuation of the activities of co-6 service an organization no longer tax exempt under sec_501 of the internal_revenue_code in org’s statements of activities org indicated that of its efforts would be spent educating people of the truth found in the bible and providing those applicable tools to the burdened underprivileged and distressed however aside from some biblical references strewn into the organizations web site and documentation org is nothing more than an organization in the business of selling debt management plans and debt negotiation plans org's operations do not include the biblical scriptural principles for faithful stewardship decision for daily living touted in its exemption application org’s actual operation is not limited to the poor and distressed or underprivileged individuals org did not set a financial test or income limit for those who may engage in org’s services therefore org is not operating to further a charitable purpose in the sense of providing relief to the poor or distressed in the poa’s protest letter poa questioned why the above statement affected org poa states that the fact as stated above may in fact be accurate such facts are not determinative on the issue of whether an organization qualifies for tax exemption under sec_501 in response the facts as shown above are evidence that org’s actual operation was not as stated in its tax- exempt application and a factor toward disfavoring exemption org's actual operation was not spent of the time on educating people of the truth found in the bible nor was it primarily toward providing those applicable tools to the burdened underprivileged and distressed org makes it services available to the general_public thus org cannot claim that its activities benefit a charitable_class see revrul_69_441 1969_2_cb_115 and revrul_65_299 c b individuals with financial problems are not a charitable_class ruling or statute specifically has recognized members of the general_public with financial problems as a charitable_class in addition no case the examination of org’s operation revealed that the organization was not operating as represented in its application rev_proc 20xx-9 20xx-9 and 20xx-52 the poa also confirmed that org was not limiting its services to the poor it provides credit_counseling_services to financially distressed individuals and families without limiting such services to the poor’ thus contradicting its own statements the poa went on to say as org became operational in 20xx it focused its counseling and educational_services on financial housing substance abuse recovery support services and related matters even this statement is inaccurate based upon the observed and documented activities of the organization form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx name of taxpayer tax identification_number yearperiod ended explanations of items june 20xx ein org in its application org cited several biblical scriptures and stated that bible scholars were to provide org services during the examination of org activities books_and_records and counseling observations it was determined that org counselors were not biblical scholars and did not provide biblically based or any other counseling services rather it was determined that the counselors of org were the same counselors of co-6 a nonprofit organization that was revoked previously for the same impermissible activities aside from a few scattered quotes by dir-10 org did not provide the biblical based teaching nor did it use the co-11 materials as the poa contends further the poa confirmed that the organization's primary activities were that of credit_counseling_services org s manuals and the so report issued to the organization also confirm that org's actual operation was not religious in nature but instead was simply the sale of debt management and debt settlement services lack of public involvement was cited as a factor for denying exemption in easter house v united_states supra org has shown none of the public involvement that characterizes public_charities its purported public board members have stated that they were only figureheads and marginally involved with org prior to their resignation additionally although the poa claims otherwise org's operation is similar to the organization described in b s w group supra in which the court cited jack of solicitation and sole support from fees as factors disfavoring exemption org is almost solely supported by receipts from debt management and debt settlement agreements amounts classified as grants and contributions by the organization are simply re-labeled fair share fees and in one case the return of a contribution from an organization wishing to disassociate itself with org org receives no support from the general_public and has no fundraising program to solicit such contributions org receives all of its revenue from fees from setting up and processing client’s dmps debt settlement plans and fair share payments from creditors the dmps org offers are sold to anyone who has unsecured debt is willing to pay and is willing to purchase orgs services since the sale of dmps to the general_public is the primary purpose of org we cannot conclude that org is operating for charitable purposes in org's application_for exemption form_1023 org represented that its purpose was as follows department of the treasury-internal revenue service caen rrra 14_40vy catalan maumhar onr40a nuhlich na ire new deno ka schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer org org responded no to part ill of form_990 statements about activities question 3d with respect to providing credit counseling debt management credit repair or debt negotiation services june 20xx tax identification_number year period ended ein the examination revealed that org’s actual activity was not as originally presented saying one’s purpose is exclusively religious does not necessarily make it so living faith inc v commissioner f 2d org’s religious activities are an incidental portion of their activities org’s actual activities are credit counseling and operating a debt management program dmp revocation of a determination_letter may be retroactive if the organization operated in a manner materially different from that originally represented rev_proc 20xx-9 20xx-9 and 20xx-52 sec_601_201 rev_proc 20xx-4 sec_501 of the internal_revenue_code sets forth the following requirements with respect to credit counseling organizations e e credit counseling organizations cannot solicit contributions from consumers during the initial counseling process or while consumer is receiving services from organization for existing organizations the amount of revenues an organization may receive from its customers’ creditors which is attributable to dmp services is limited to percent in 20xx and percent in 20xx sec_501 also sets the following restrictions on who may serve on the governing board_of a credit_counseling_organization a majority at least percent of the board members must represent the broad interests of the public this includes public officials community leaders and persons having special knowledge or expertise in credit or financial education no more than percent of the board may be employees of the organization creditors or those who will benefit financially in any other way org does not have a board_of directors or a governing body that is controlled by persons who represent a broad interest of the public such as public officials acting in their capacities such as persons having special knowledge or expertise in credit or financial education and community leaders furthermore org's actual operation does not follow its bylaws org’s bylaws state that the board_of directors oversees the operation of org and that the only officer required to be a director is the president the bylaws also state that there can be more than one vice-president one secretary and one treasurer according to the return there were more than one each of presidents secretaries and treasurers org’s bylaws also dictate that the board_of directors elects the officers since the officers and directors are essentially the same individuals they are electing themselves to office form 886-a 1-19xx catalog number 20810w page__55 _publish no irs gov department of the treasury internal_revenue_service schedule number or exhibit form 886-a - rev january 19xx explanations of items year period ended tax identification_number name of taxpayer org the officers directors listed on org's application_for exemption were not necessarily counselors of org ein june 20xx the form_990 return reported no income for its officers directors however in actual practice some of the officers directors were compensated the officers directors that were compensated were employees of org moreover it was revealed that the officers directors that were not employees of org were not involved in the day-to-day activities of org the officers directors that were not employees of org had no knowledge of org’s activities with respect to credit counseling and dmp program or they were just figureheads with no actual official power the person running org’s operation and administrative affairs is vice president according to org - operating manual the salaries of the managers are set by the managers the officers directors of org did not represent a broad interest of the public as required by sec_501 which was enacted by the pension_protection_act of 20xx in the poa's protest letter the poa states that the above statement does not make sense to him and that it did not support the government's position org states that there is no prohibition under sec_501 against an employee being a member of the board_of directors or an officer of the tax exempt_corporation the poa also states in his protest that org disagreed with the examining agent statement regarding the org directors and officers who were not employees org’s rebuttal states it is a rare situation where a non-employee director is involved in an organization’s day-to-day activities public official and to simultaneously be involved in the day-to-day activities of the organization generally only an employee would be involved in the day-to-day activities of an organization org also argued that the requirement for the board_of directors to represent a broad interest of the public for credit counseling organizations did not apply to org in the tax_year under audit in fact it would be a contradiction to require a director to be a the agent does not disagree that sec_501 did not apply to org with respect to the requirement of having a broad board that represents the public's interest in the year under exam however sec_501 q is in addition to the requirements of sec_501 that were previously applicable to the organization consequently the lack of a broad board or third party involvement is another factor disfavoring exemption as the organization's lack of an independent board is evidence of a non-charitable operation credit counseling centers of oklahoma inc v united_states u s t c d d c further it should be noted that after the effective date of sec_501 org continued with its same board structure as in previous years the state secretary of state web site listed the officers of org as follows with an effective date of july 20xx name title _effective date dir-2 dir-5 president director vice-president director july 20xx duly 20xx form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasury-internal revenue service schedule number or exhibit rev janvary 19xx 886-a explanations of items org name of taxpayer dir-6 dir-7 dir-3 dir-8 secretary director director director director july 20xx july 20xx july 20xx july 20xx june 20xx tax identification_number year period ended ein as indicated in this report the org officers directors and employees are one and the same for example vice president's position org's board does not consist of independent members in org is that of an officer counselor and management representative vice president has an ownership_interest in the address llc that org pays rent to vice president was also an officer and employee of co-6 service and co-22 who also operate the same facility at address it was discovered that ra-1 the primary counselor was once director and counselor of co-6 service during the period under exam ra-7 was an officer systems operation and counselor in training dir-6 was an officer director assistant bookkeeper and administrative support ra-7 also took care of co-6 books ra-2 was the operation manager and a counselor ra-7 dir-6 ra-2 and vice president were also employees of co-6 the previously revoked organization it was determined that vice president controlled and managed org as was stated by one of the board members the board were simply figureheads and all actual and perceived authority rests with dir-10 ‘vice president sets his own compensation and writes all checks he can also hire fire give pay raises and annual appraisals to org employees consequently vice president is an insider who has a financial interest in org the other officer employees are also benefiting financially from the activities of the organization the other board members officers were listed in name only and had no actual authority the enactment of sec_501 further stresses the need for credit counseling organizations to address the broad interests of the public by requiring credit counseling organizations to have a broad board_of directors to oversee the organization's operations as indicated in this report org’s bylaws state that there is a board_of directors and that the board_of directors manages org the bylaws also state that org shall have officers consisting of the president vice- president treasurer and secretary the org bylaws also state that they have a written conflict of interest policy which org does not follow org bylaws do not state that an individual can be both director and officer org bylaws do not state that the management representatives or the operation supervisor would be managing the operations of org the bylaws state that the only individual that can hold an officer and director position was the president of org as shown in this report the president of org dir-2 was never involved in the day-to-day activities of org dir-2 never attended org’s board or general meetings was never at the facility and was not even aware that the organization was conducting credit counseling activities or merged with co-6 the poa’s protest letter affirms this fact when he states the following i service form 886-a 1-19xx of the treasury-internal revenue department _cataloa number 20810w _bublish no irs qov servi pane schedule number or exhiot form 886-a rev january 19xx name of taxpayer org tax idendfication number ein yeariperlod ended june 20xx explanations of items org’s initial plans to move to church property did not materialize because its initial leadership group ie dir-2 dir-1 and dir-4 left the organization but org remained determined to offer counseling and educational_services in a biblically based manner’ research shows that dir-1 was employed with co-6 in 20xx and 20xx year additionally org's 20xx the _ members present at org report confirmed that dir-1 was still employed with org in report also shows that there were no officers board as indicated by dir-2 on april 20xx although it bore his name he did not sign the form_990 retum for fiscal_year ended june 20xx in addition the examination of org records found that the same activities were the same in prior and subsequent years the review of org’s 20xx form_990 shows the same individual as officers and board members with the board members contributing no activities to the organization as indicated below officer board members _ title average hours worked dir-6 dir-3 dir-8 dir-7 vice president ra-2 - director director director mgm rep op sup _-sodjirector in the protest letter the poa states that currently org has three directors and they are e e dir-3 dir-8 ra-16 it was noted that dir-3 and dir-8 were previously listed as org’s board and it was determined that they had no authority in org’s operation and were directors in name only that the description of their qualifications was inconsistent with org’s application_for exemption and in previous correspondence with the irs it was also noted ra-16 appears to be a new board member the poa states that ra-16 was not employed or received compensation from org’s activities however it was noted that ra-16 signed the perjury statement using the title corporate secretary an officer of org it appears that ra-16 is an officer and director of org ft is not clear whether she was also an employee and was actually compensated accordingly the lack of public control is evidence of non-exempt purpose ternal r service form 886-a 1-19xx department of the treasury-in catalog number 20810w publish no irs aov pane evenue org name of taxpayer tax identification_number explanations of items schedule number or exhibit rev january 18xx form 886-a and a factor disfavoring exemption as the purpose of org is to serve a private interest rather than a public interest org also argued that fhe drama created by the ‘revelation’ that org directors and officers who were not employees ‘ were not involved in the day-to-day activities of org’ may imply some sort of wrongdoing but in fact is a rare situation where a non-employee director is involved in an n response in addition to what was stated above a review organization’s day-to-day activities’ of org’s books_and_records specifically the general ledger as of august 20xx shows that payments were made to non-employees ie ra-10 under the following accounts june 20xx yeariperiod ended ein credit report fee income of dollar_figure client share dmp fees of dollar_figure fair share creditor donations of dollar_figure settlement fees of dollar_figure the general ledger also showed payments of insurance to non-employees totaling dollar_figure the attached exhibit l shows a sampling of the insurance expense paid to non-employees like easter house org functions by means of a paid staff with no volunteer help org has nine workers who provide support and client services the majority of the workers were prior employees of co-6 an exclusively paid staff is characteristic of a commercial corporation rather than a charitable non-profit organization org's operation is unlike the organization described in revrul_69_441 supra in which the organization's board_of directors is comprised of representatives from religious organizations civic groups labor unions business groups and educational institutions the primary contrikutors listed on the form_990 return consisted mainly of creditors that org serviced the contribution of dollar_figure was not actually a contribution from co-1 it was a return of a donation back to org by co-1 the contribution of dollar_figure was by the mother of vice president ra- this was also evidence of org’s activities that are for a non-exempt purpose thus another factor for disfavoring exemption sec_4 c -4 c of the regulations explains that an organization will be regarded as operating exclusively for exempt purposes only if one or more of the exempt purposes specified in sec_501 of the code it engages primarily in activities that accomplish org responded to the irs determination specialist's questions regarding org’s activity of providing biblical principles for faithful stewardship decisions’ by stating that it will accomplish advocating biblically based answers and solutions for daily living how we view god will determine how we live org went on to say of the total time and effort will be devoted to advocating biblically based answers and solutions for daily living the fact page of org’s web form 886-a 1-19xx cataloa number 20810w pane _ ublish no irs gov department of the treasury-internal revenue service schedule nurnber or exhidit form 886-a rev january 19xx ‘ year period ended tax identification_number name of taxpayer explanations of items june 20xx ein org site reported that the source of org’s funding came from tax deductible contributions and donations business firms banks retail merchant credit unions and the community on the contrary during the examination of org’s books_and_records it was revealed that org’s actual activity is to provide credit counseling and debt management programs to its clients the lists of contributors on the form_990 return were income from the credit card companies to whom org clients owe money the grants received from co-25 and others were characterized as donor contributions on the form_990 and as business grants on the organization's profit and loss statement org’s books_and_records show fair share payments received from the credit card companies the grants received are in return for services by org the transaction is not a grant for list of creditors that org serviced as well as but a fee for service arrangement see exhibit m sampled copies of org’s client contributions credit counseling is not an inherently exempt_purpose under sec_501 but can be conducted in a manner that furthers nonexempt purposes nothing in org’s articles of incorporation bylaws or other materials restricted org to conduct credit counseling activities in a manner that would exclusively further charitable educational or other exempt purposes org claimed to have conducted seminar or out reach programs during the examination period org stated that it had no activities from inception to 20xx however a review of org books_and_records shows otherwise the copies org provided of the materials used in the seminar did not demonstrate that the seminar had any educational value the documents submitted for seminars do not show an in-depth educational content directed to the particular needs of the client or to dedicate the time necessary to address the financial problems faced by a particular client the consultation format of the documents appears to be designed to expedite the enrollment of clients in dmps see exhibit h the services that org provides to individuals are entirely devoted to the business of marketing the benefits of org’s debt management plans the majority of the time of all of org’s counselors is spent in marketing dmps with no time spent on public education or on meaningful personal counseling org has not demonstrated that the services org provided are educational in the sense recognized by law a review of org’s activities discloses no institutional support for education the presentation and web site material was inadequate to provide financial education and any outreach seminars done were to primarily market org’s dmp program see exhibit org’s web site is primarily used to inform potential clients about the organization’s dmp and to contact org regarding its dmp the services that org provides to individuals are entirely devoted to marketing the benefits of org’s debt management plans when a counselor is enrolling a potential client in a dmp or reviewing budget information the counseling session lasts about minutes or less to gather the form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasuryinternal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer tax identification_number org necessary information from a client once a counselor has made the determination that the dmp would be beneficial according to org’s manual the goal of org was to increase its fair share funds in response to org's letter of august 20xx and august 20xx the examining agent is attaching exhibit d which describes the client sessions observed during the june - observations the way that org’s counselors interview clients shows that org is offering counseling as a way to enroll individuals in debt management plans june 20xx year period ended ein ‘ org's follow-up calls to clients who initially did not sign up for a dmp were to determine whether they were interested in purchasing a dmp are neither counseling nor educational you have not demonstrated that you speak with individuals in any systematic or substantive way about any subject other than dmps and their potential eligibility the conversations serve as merely part of your efforts to sell dmps org's authorization and release form shows that org’s funding is from creditors who participate in the dmp program see exhibit for copies of the release form like solution plus inc v commissioner t c memo 20xx-21 org did not have any meaningful educational program or materials for providing to people who contacted the organization and its financial education seminars constituted an insignificant part of the organization's overall activities in solution plus inc v commissioner the court held that the organization's purposes were not educational because its activities are primarily structured to market determine eligibility for and enroll individuals in dmps the court also held that its purposes are not to inform consumers about understanding the cause of and devising personal solutions to consumers’ financial problems or to consider the particular knowledge of individual callers about managing their personal finances the tax_court further held that the organization would operate for the private interests of its founder because the founder and spouse were the only directors the founder was the only officer and employee and his compensation was based in part on the organization’s dmp sales activity levels the organization was a family-controlled business that he personally would run for financial gain using his past professional experience marketing dmps and managing a dmp call center based on the amount of time that org counselors spend with each client and the type of information discussed with clients its clear that org’s intent is to market dmps to the general_public thus we cannot conclude that org convey any meaningful information or skills instruction to the individuals org claim to counsel or to the public at large in the poa’s protest letter the poa contends that org counselors conduct their client interviews to ascertain their client's financial information and to address their financial problems the poa also claimed that the counselors used information obtained from the client interviews to discuss the advantages and disadvantages of each options with their clients and make recommendations on options that are best suited to meet their client’s needs goals and circumstances’ t was noted that the poa did not argue the process by which org enters clients into their monthly payment plan or the completion of the back-side of the double-sided worksheet the poa also farm 886-a 1-19xx cataloa number 20810w pace a1 -_bublish no irs gov department of the treasuryinternal revenue service schedule number or exhibit form 886-a rev january 19xx explanations of items name of taxpayer did not provide supporting documentation showing the completion of the worksheets by potential or existing clients tax ldendification number yeariperiod ended june 20xx org ein as indicated in the attached exhibits and as stated in org’s manual org's counseling sessions were nothing more than to solicit clients to enroll in their dmp the educational aspects were and are an incidental part of org’s credit counseling activities on several occasions during the examination the examining agent requested supporting documents to show org educational activities what org finally provided as indicated in the mou and the client action forms both of the fact section of this report were copies of the information items submitted did not clearly show their educational_purposes the other material - that was provided by the organization was the sign in sheets the sign-in sheets only showed individual signatures the majority of the sign-in sheets were the organization's visitor sign-in sheets to the org facility not to a seminar see exhibit h as indicated in the fact section of this report org’s primary income was derived from dmp activities org’s operating manuals authorization and release form and their web site under website affirms that their activities substantially consisted and continue to consist of dmps moreover org’s related_organization co-6 activities primarily consisted and continue to consist of dmps org reported as its program service revenues the following income source credit report fee dmp fees-client share creditor donations-fair share as indicated in the fact section of this report org charges a fee to pull potential client's credit reports and a separate fee for debt negotiations org also received income from credit card companies that they serve labeled as grants and contributions as indicated below dollar_figure dollar_figure dollar_figure dollar_figure corporate business grants individual business contributions dollar_figure during the review of grant contracts and supporting documents it was discovered that the grants were actually payments received from the credit card companies that were attributable to their dmps it was also discovered that the fair share payments were characterized as creditor donations or individual business contributions the poa did not address this fact in his protest letter consequently org is offering a private benefit to the credit card companies an impermissible activity under sec_501 see also_solution plus inc v commissioner t c memo 20xx-21 form 886-a 1-19xx catalog number 20810w page __publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 18xx explanations of items org tax ideniification number name of taxpayer org’s letter of august 20xx also state that the contributors listed on the form_990 return did not consist of creditors that org serviced but rather funds received from grants that were used for educational_purposes and not based upon administration of a dmp or in exchange for services on the contrary as indicated in the fact section of this report and in the above statement org did provide service to those creditors and review of the grant contract affirms that position accordingly org’s primary support was derived from dmps yoarlpariod ended june 20xx ein in the how does this program work ’ section of org’s employee manual it described the education and training requirements of org as follows the description of how org’s program works does not entail biblical scriptures or the referral to other agencies such as welfare food stamps drug treatment as claimed in the protest letter or in org's correspondence dated august 20xx further in the how can org help you section of the employee manual the exhibit describes org's repayment plan which reaffirms that org's primary activities are that of dmps the educational aspect of org was the education of clients with respect to its dmps and its debt settlement services org manuals primarily describe the organization's dmp and debt settlement services the educational aspect was not described or was minimally described org manual shows that vice president was the management representative of org since its inception discussions with previous officers of org also confirmed that org was established and operated by vice president in 20xx vice president was the vice-president of org it was also revealed that during the same time vice president was also operating the co-6 as mentioned previously the employees officers and board members of org hold multiple positions in org because of the role vice president ra-7 and ra-2 play in org their affidavits would be considered a conflict of interest the same applies to empioyees of org if affidavits were received for review by the examining agent the employees of org have a financial benefit in org vice president would have a greater financial interest because he established and operated the organization the poa contends that the percentage of dmp revenues attributable to org are as follows fye _ xx dmpitotal revenues dollar_figure dollar_figure percentage form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasuryinternal revenue service schedule number or exhibit form rev january 19xx 886-a explanations of items name of taxpayer org xx xx june 20xx tax identification_number dollar_figure dollar_figure dollar_figuredollar_figure year period ended ein the examining agent agrees with the poa with respect to sec_501 not applying to org in the fiscal_year under exam fiscal_year ended june 20xx however the percentage of debt management plan conducted by org reaffirms that the organization's primary activities were that of dmp and little or no educational activities the poa did not account for the grant monies that were attributable to dmps as reported in a separate report and as indicated in the facts section of this report the dollar_figure derived from co-25 were actually fair share payments as indicated in a separate report the creditor donations-fair share should be dollar_figure instead of dollar_figure a review of the org financial records shows that org characterized some fair share payments as creditor donations or contributions dollar_figure contributed from co-3 was determined to be fair share payments and not grant money the agent noticed that org characterized the fair share payments as creditor donations’ the agent also noticed that the business contributions and corporate and business grants line items were also fair share income but labeled as public grants or support additionally a review of org’s financial records deposit detail shows that the total settlement fee was dollar_figure instead of the reported dollar_figure as indicated in a separate report a review of org's financial records deposit detail report shows that the total dmp fees were dollar_figure rather than the reported general ledger amount of dollar_figure supporting documents determined that the individual contributions were not contributions from the general_public but rather contributions from the clients they serve see exhibit m furthermore a review of org's financial records and other with respect to the direct public support individual business contributions of dollar_figure a review of the itemized deposits in the general ledger shows amounts at dollar_figure dollar_figure and dollar_figure a review of financial records source documents and oral testimony revealed that the reported dollar_figure was a return of funds from co- church to org the co-1 church declined org’s donation to their church effectively this amount was not income to org the dollar_figure was from an immediate_family member vice president's mother and dollar_figure was claimed to be furniture and equipment from co-6 since co-6 service is an extension of org this would not be an actual contribution accordingly the individual business contributions were actually dollar_figure the following table shows the per examination results of org revenues revenues per per audit direct public support direct public grant-corporate business grants dollar_figure dollar_figure form 886-a 1-19xx catalog number 20810w page publishno irs gov department of the treasury-internal revenue service schedule number or exhibit fiom 886-a name of taxpayer org individual business contributions june 20xx tax identification_number year period ended explanations of items ein dollar_figure program service revenue credit report fee returned check fee dmp fees--client share creditor donations--fair share settlement fees dollar_figure a a a a a total revenue dollar_figure dollar_figure as a result of the above analysis the portion of revenues attributable to debt_management_plan_services are as follows for fiscal_year ended june 20xx fye _dmp itotal revenues percentage xx dollar_figure - the examining agent noticed that org also reported fair share payments as contributions org will split the recording of income as either fair share or contributions from businesses actually they are all fair share payments the following shows an example of this a review of schedule b-schedule of contributors from form_990 reported the following contributors co-1 dollar_figure co-2 co-3 dollar_figure co-4 co-5 co-6 co-7 n w r a d q n c dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure an analysis of the above contributors revealed the following information e the contribution from co-6 co-6 was reported as furniture fixtures and equipment org reported that it was received on june 20xx it was noted that this date coincides with the ending fiscal_year of org co-6 transaction journal as of june 20xx shows that dollar_figure was donated to org for materials_and_supplies this contradicted other information that the donation was for furniture and equipment j service form 886-a 1-19xx catalog number 20810w page_65 _publish no irs gov -internal revenue department of the treasury ue schedule number or exhibit form 886-a rev january 19xx name of taxpayer org explanations of items june 20xx tax identification_number yearfperlod ended ein _ itwas noted based on review of org manuals and other documents submitted by org and co-6 ie w-2 information advertising initial interview that co-6 was operating as org or vice versa even before 20xx year the co-6 name was used more often in advertising because the co-6 was more of an established name in the community before jts revocation in february 20xx by the irs ' for example during the initial interview with the employees of org it was revealed that the majority of the employees worked for org since 20xx but the financial records do not show that org paid their wages rather the employee’s wages were shown in the co-6 records an interview with ra-9 customer service representative revealed that she worked for org from 20xx - 20xx year ra-17 customer service representative stated that she has worked at the facility for three years ra-7 stated that he has been working for org for three years he started in 20xx as a clerk and is now a counselor in training ra-7 stated that he received w-2s in 20xx 20xx and 20xx year during the initial interview vice president stated that the above employees started at org in january 20xx dir-10 also mentioned that he was an employee of co-6 from 20xx year to december 20xx e e e e the contribution from co-1 of dollar_figure was not actually a contribution the dollar_figure was org's own money which was reported on the form_990 as contribution from the public vice president contributed dollar_figure to co-1 church co-1 declined the contribution and reimbursed vice in org’s deposit detail report for the month president for the same amount plus interest of november 20xx the amount was described as unrestricted rather than contribution as in other financial records areview of the deposit slips of dollar_figure a donation to org by co-5 revealed that the check was deposited to the org account on june 20xx the examining agent was informed by org that ra-14 was related to vice president-his mother there was no record of the contribution from co-7 and ledger and other financial records in org’s general were creditors that org serviced the co-2 co-25 co-4 co-7 and amounts reported as contributions were actually creditor fair share payments and not grant money contributions activities conducted with related_organizations org states that they do not advertise on the internet however evidence shows that org advertised through the internet and advertised in conjunction with co-6 service org offers dmps to those who respond to its advertisements org makes known its services primarily form 886-a 1-19xx catalog number 20810w page_66 _publish no irs gov department of the treasuryinternal revenue service schedute number or exhibit rov january 19xx form 886-a explanations of items name of taxpayer through the co-6 service operation and in the form of advertising and marketing letter the poa agreed that org advertises on the radio and on its web sites in the protest june 20xx tax identification_number yearlperiod ended org ein the information provided indicated that org performs all of the activities of co-6 service the employees counselors of org were primarily from co-6 service the office and equipment were also from co-6 service org’s books_and_records and form_990 reported dollar_figure as a contribution from co-6 service vice president was an officer director and employee of co-6 service and was also an officer director and employee of org vice president is the son of ra-10 who was the president of co-6 service and now the president of co-15 vice president signs checks for both org and co-6 review of org records also show evidence that vice president's wife dir-9 was still involved in co-6 service business and now org this was contrary to a news report by the state-advertiser where ra-10 was interviewed and disclosed that dir-9 was no longer in the business see exhibit j as indicated in the fact section of the report the co-6 web site shows the same type of services that are being offered at org for example _ lowering consumer interest rates fees and monthly payments stop collection calls harassment pay off debts in the fastest time period possible settle accounts for as low as debt consolidation org is also using the same operating manuals as co-6 service it was also noted that org and co-6 lists the same goals and missions examination of org books_and_records show evidence of funds commingled with co-6 where org funds were used to pay for co-6 expenses examination of org books_and_records show that payments were made to pay for non- employees health benefits namely ra-10 additionally unexplained loans were made to co-6 in the amount of dollar_figure furthermore as indicated in the fact section of this report vice president dir-9 and ra-10 also operate a for profit organization called co-22 co-22 is located at the same address as org facility the purpose of co-22 is real_estate sales and development’ both vice president and ra-10 have a license in real_estate brokers vice president has acknowledged to having an ownership_interest in the facility that org occupies located at address the facility is owned and managed by a limited_liability_company that is related to vice president ra-15 and dir-9 accordingly private benefit exists in the operation of org with respect to its related_organizations org was established to confer a private benefit to a for-profit business co-6 and co-22 form 886-a 1-19xx catalog number 20810w page_ _publish no irs gov department of the treasury-internal revenue service schedule number or exhidit form 886-a rew january 19xx explanations of items ein name of taxpayer tax identification_number org moreover it was noted that the commercial activities of co-6 service resulted in a revocation of its tax-exempt status since org is a spin-off or an extension of co-6 org’s tax-exempt status should be revoked as well even if org is providing education org’s dmp activities represent a substantial operation the private benefit org provides to the controlled person s are substantial and establishes that org serve a substantial non-exempt purpose thus failing the operational_test of furthering a substantial non-exempt purpose and conducting impermissible private benefits june 20xx yeariperiod ended to meet the requirements of sec_501 an organization must be both organized and operated exclusively for charitable purposes the term charitable includes relief of the poor and distressed sec_1_501_c_3_-1 educational organizations are also classified as charitable the term educational includes a instruction or training of the individual for the purpose of improving or developing his capabilities and instruction of the public on subject useful to the individual and beneficial to the community sec_1_501_c_3_-1 an organization is not organized or operated exclusively for an exempt_purpose unless it serves a public rather than a private interest sec_1_501_c_3_-1 states that an organization 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’ the existence of a substantial non-exempt purpose regardless of the number or importance of exempt purposes will cause failure of the operational_test 326_us_279 conclusion in order to qualify for exemption under sec_501 an organization must be both organized and operated to achieve a purpose that is described under that code section org has failed to demonstrate that it is operated in accordance with internal_revenue_code sec_501 and the regulations governing qualification for tax exemption under the code org has failed to demonstrate that it is operated in accordance with sec_501 of the intemal revenue code accordingly the tax-exempt status of org as an organization described in c of the code should be revoked based upon the review of org’s actual and proposed activities in light of the applicable law we find that org is not organized or operated for exempt purposes org’s principal activity is the marketing of debt management plans and credit negotiations this activity does not achieve charitable or educational_purposes but is merely a commercial service org is required to file income_tax returns on form_1120 for all years beginning after june 20xx form 886-a 1-19xx catalog number 20810w page _publish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx org explanations of items june 20xx tax identification_number yeariperiod ended name of taxpayer ein whether org should be liable for unrelated_business_income_tax alternative issue whether org should be assessed delinquent penalties for fiscal_year ended june 20xx since the officer signature was determined to be invalid and thus an incomplete retum facts the facts concerning the organizing document and the financial activities of org are described above law sec_511 - of the code imposes a tax on the unrelated_business_income of tax-exempt organizations the tax applies to income from a trade_or_business regularly carried on by the organization for the production_of_income and the conduct of which is not substantially related to the organization's performance of its exempt functions sec_6652 charges a penalty for late or incomplete form_990 return the penalty is dollar_figure a day for each day the return is late or incomplete if gross annual receipts are equal to or less than dollar_figure the penalty may not be more than dollar_figure or of gross annual receipts whichever is less government’s position as set forth above it is the government's primary position that the tax-exempt status of org should be revoked alternatively org should be assessed unrelated_business_income_tax on income related to their debt_management_plan_services as calculated below org should also be assessed a delinquency penalty for failure_to_file form_990 for fiscal_year ended june 20xx under sec_6652 per oral testimony of the president the return did not bear their valid signature the penalty is dollar_figure a day for each day the return is late or incomplete if gross annual receipts are equal to or less than dollar_figure the penalty may not be more than dollar_figure or of gross annual receipts whichever is less conclusion alternative issue unrelated_business_income_tax calculations revenues per per audit form 886-a 1-19xx of the treasury-internal revenue service catalog number 20810w department _publish no irs gov page_69 schedule number or exhibit form 886-a rev january 19xx explanations of items year period ended tax identification_number name of taxpayer org direct public support direct public grant-corporate business grants individual business contributions h p ein dollar_figure june 20xx program service revenue credit report fee returned check fee dmp fees--client share creditor donations-fair share settlement fees total revenue expenses salaries wages other employee_benefits payroll_taxes accounting fees supplies telephone postage and shipping occupancy printing and publication conferences conventions meet other expenses advertising bank service charge books subscriptions references business fees credit report expense insurance non-employee related membership dues-organization other costs outside contract services program expense total expenses dollar_figure a a a a dollar_figure dollar_figure per per audit h h a a h a a a p a a a p p o f n o form 886-a 1-19xx catalog number 20810w - page_70 _pubilish no irs gov department of the treasury-internal revenue service schedule number or exhibit form 886-a rev january 19xx year period ended - tax identification_number name of taxpayer explanations of items org _ accordingly org corrected taxable_income is dollar_figure the corrected tax_liability is dollar_figure plus interest of dollar_figure ein june 20xx computed to 20xx the total amount due is dollar_figure alternative issue delinquency penalty assessment the penalty for late or incomplete retum for fiscal_year ending june 20xx is dollar_figure form 886-a 1-19xx department of the treasury-internal revenue service catalog number 20810w - page_71 _publish no irs gov