Non-MSSP accountable care organization denied exemption

Plain-English summary

A tax-exempt health system formed an accountable care organization to integrate employed and independent physicians, measure performance, and negotiate incentive-based agreements with private payers. The organization did not participate in the Medicare Shared Savings Program, did not directly provide medical care, and included many physicians unaffiliated with the system. The IRS concluded that pursuing general health-reform goals outside the federal program did not establish that the organization lessened government burdens. Its substantial activity negotiating payer agreements also primarily benefited private healthcare providers, so the IRS denied section 501(c)(3) status and concluded it could not qualify as a section 509(a)(3) supporting organization.

Ruling snapshot

• Question: Does the non-MSSP accountable care organization qualify under IRC § 501(c)(3) and as a supporting organization under § 509(a)(3)?
• Outcome: Denied
• Key authorities: IRC §§ 501(c)(3), 509(a)(3); Treas. Reg. §§ 1.501(c)(3)-1, 1.509(a)-4; Notice 2011-20

Full text (IRS public release)

Internal Revenue Service                         Department of the Treasury
TEGE Appeals Programs                            CERTIFIED
300 N. Los Angeles Street
Los Angeles, CA 90012

Release Number: 201615022
Release Date: 4/8/2016
Date: January 15, 2016

Redaction legend:
A=
B=
C=

A
B

Taxpayer Identification Number:
C

Person to Contact:
****

Employee ID Number: ****
Tel: (****) Fax: ****

Refer Reply to:
****

In Re: Exempt status

Tax Years: 12/31/****and subsequent
years

UIL Index:
501.03-00

Dear                    :

This is a final adverse determination as to your application for exempt status under
section 501(a) as an organization described under section 501(c)(3) of the Internal
Revenue Code. Our adverse determination was made for the following reasons:

1. You are not operated exclusively for exempt purposes within the meaning of
   Internal Revenue Code § 501(c)(3) and Treasury Regulation § 1.501(c)(3)-1(d).
   You do not engage primarily in activities that accomplish one or more of the
   exempt purposes specified in Internal Revenue Code § 501(c)(3). More than an
   insubstantial part of your activities are in furtherance of a non-exempt purpose.

2. You are not operated primarily for a public purpose as is required by Internal
   Revenue Code § 501(c)(3) and Treasury Regulation § 1.501(c)(3)-1(d)(1)(ii). You
   operate for the benefit of private interests.

In addition, because we have determined that you are not an organization described
under § 501(c)(3), you cannot be classified as a public charity under § 509(a).

Contributions to your organization are not deductible under Code § 170. You are
required to file federal Form 1120 for the year(s) shown above.

If you decide to contest this determination under the declaratory judgment provisions
of Code section 7428, a petition to the United States Tax Court, the United States Court
of Claims, or the district court of the United States for the District of Columbia must be
filed before the 91st (ninety-first) day after the date this determination was mailed to you.
Contact the clerk of the appropriate court for rules for filing petitions for declaratory
judgment. To secure a petition form from the United States Tax Court, write to the
United States Tax Court, 400 Second Street, N.W., Washington, D.C. 20217.

You also have the right to contact the Office of the Taxpayer Advocate. However,
you should first contact the person whose name and telephone number are shown
above since this person can access your tax information and can help you get answers.
You can call 1-877-777-4778, and ask for Taxpayer Advocate assistance.

Taxpayer Advocate assistance cannot be used as a substitute for established
IRS procedures, formal appeals procedures, etc. The Taxpayer Advocate is not able to
reverse legal or technically correct tax determinations, or extend the time fixed by law
that you have to file a petition in the United States Tax Court. The Taxpayer Advocate,
can however, see that a tax matter, that may not have been resolved through normal
channels, gets prompt and proper handling.

We will notify the appropriate State officials of this final adverse determination of
your exempt status, as required by Code section 6104(c).

If you have any questions, please contact the person whose name and telephone
number are shown in the heading of this letter.

Sincerely,

Nan Shimizu
Appeals Team Manager


Department of the Treasury
Internal Revenue Service
1111 Constitution Ave., N.W.
Washington, D.C. 20224

Date: 8/25/2014

UIL Number: 501.03-05

Employee ID number:

Contact person/ ID number:

Contact telephone number:

Contact fax number:

Legend:

Date =
State =
System =

Dear                 :

We considered your application for recognition of exemption from federal income tax under Section 501(a) of
the Internal Revenue Code (the Code or “I.R.C.”). Based on the information provided, we determined that you
don’t qualify for exemption under Section 501(c)(3) of the Code. This letter explains the basis for our
conclusion. Please keep it for your records.

Issues

Whether you are exempt under § 501(c)(3) and classified as a public charity under § 509(a)(3).

Facts

You were incorporated on Date in State as a nonprofit corporation for charitable, scientific or educational
purposes within the meaning of § 501(c)(3) and specifically, “to promote and support, directly or indirectly, the
interests and purposes of [System].” System is a not-for-profit healthcare corporation recognized as tax-exempt
under § 501(c)(3) and classified as a public charity under § 509(a)(1).

You were formed by System in order to serve as the legal and operational vehicle for achieving clinical care
integration, coordination, and accountability among both employed and independent physicians practicing
throughout System affiliated facilities. You have submitted a Form 1023 Application requesting a determination
that you are exempt under § 501(c)(3) and classified as a supporting organization under § 509(a)(3). You

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

indicate that you are an Accountable Care Organization (“ACO”). You do not participate in the Medicare
Shared Savings Program (“MSSP”).

You do not engage in the direct delivery of medical care or provide health services to the general public. Rather,
you indicate that all of your time and resources are dedicated to the furtherance of the “Triple Aim” health care
reform goals established by the Patient Protection and Affordable Care Act (“PPACA”), namely: reducing the
cost of health care for individuals, improving patient access to and the quality of care, and improving population
health and patient experience. Your mission, goals, and activities are focused on the achievement of these Triple
Aim goals.

You have formed a clinically integrated network of health care providers by entering into participation
agreements with those providers who meet your eligibility and performance standards. The network participants
include physicians employed by System and its facilities as well as those from independent practice groups who
are members of the medical staff at System affiliated facilities and those practicing at other non-System
affiliated hospitals and in other healthcare systems. Information included in your application materials indicates
that approximately half of your participating physicians are in independent practices or affiliated with other
hospitals and regional health systems.

You are developing and implementing performance measures to assess the care delivery of participating
providers. You have established data infrastructure for collecting, aggregating and analyzing data, including an
electronically integrated clinical information data warehouse and analysis, a patient satisfaction survey tool, and
clinical network infrastructure necessary for tracking provider performance and sharing clinical data. You have
developed and implemented financial incentives that motivate network providers to achieve improvement, tying
payments to participating providers to their collective success at achieving the Triple Aim goals, as determined
by your performance measures.

According to the terms of your participation agreements, you act as the representative for all participating
providers, including the independent and other non-System affiliated physicians, in the negotiation and
execution of certain agreements with third-party payers. These agreements link rewards and penalties for
participants to their achievement of your performance measures in order to incentivize changes in participant
behavior in furtherance of the Triple Aim goals. You have negotiated two such payor agreements so far on
behalf of your participant practitioners.

Law

I.R.C. § 501(c)(3) provides that an organization may be exempted from tax if it is organized and operated
exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes and no
part of the net earnings inures to the benefit of any private shareholder or individual.

I.R.C. § 509(a)(3) excludes from the definition of the term “private foundation” an organization which:

(A) is organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the
functions of, or to carry out the purposes of one or more specified organizations described in §§ 509(a)(1)
or 509(a)(2);

(B) is operated, supervised, or controlled by or in connection with one or more organizations described in
§ 509(a)(1) or (2); and

(C) is not controlled directly or indirectly by one or more disqualified persons (as defined in § 4946) other

Letter 4036 (Rev. 07-2014)
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than foundation managers and other than one or more organizations described in §§ 509(a)(1) or (2).

Treas. Reg. § 1.501(c)(3)-1(a)(1) provides that in order to be exempt under § 501(c)(3), an organization must
be both organized and operated exclusively for one or more of the exempt purposes specified in that section. If
an organization fails to meet either the organizational test or the operational test, it does not qualify for
exemption.

Treas. Reg. § 1.501(c)(3)-1(c)(1) provides that an organization will be regarded as operated exclusively for one
or more exempt purposes only if it engages primarily in activities which accomplish one or more of such
exempt purposes specified in § 501(c)(3). An organization will not be so regarded if more than an insubstantial
part of its activities is not in furtherance of an exempt purpose.

Treas. Reg. § 1.501(c)(3)-1(c)(2) states that an organization is not operated exclusively for charitable purposes
if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. Courts have
interpreted the term “net earnings” as referring to an “advantage, profit, fruit, privilege, gain [or] interest”
derived from the organization. Harding Hospital v. United States, 505 F.2d 1068, 1072 (6th Cir. 1964); Retired
Teachers Legal Defense Fund v. Commissioner, 78 T.C. 280, 286 (1982).

Treas. Reg. § 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated for an exempt
purpose unless it serves a public rather than a private interest. Even though an organization serves a public
interest, it will not qualify for status under § 501(c)(3) if it also serves a private interest more than incidentally.
Therefore, the organization has 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 interest. The private benefit prohibition of § 501(c)(3) applies to all kinds
of persons and groups, not just to those “insiders” subject to the stricter inurement proscription. Prohibited
private benefit may include an “advantage; profit; fruit; privilege; gain or interest.” Retired Teachers Legal
Defense Fund, supra.

Treas. Reg. § 1.501(c)(3)-1(d)(2) provides that the term “charitable” as used in § 501(c)(3) includes its generally
accepted legal sense and includes such purposes as relief of the poor and distressed or of the underprivileged;
advancement of religion; advancement of education or science; and lessening the burdens of government. The
promotion of health has long been recognized as a charitable purpose. See Restatement (Third) Trusts § 28
(2012); 6 Austin W. Scott and William F. Fratcher, The Law of Trusts §§ 38.1, 38.5 (5th ed. 2013); and
Revenue Ruling 69-545, 1969-2 C.B. 117.

However, not every activity that promotes health supports tax exemption under § 501(c)(3). For example,
selling prescription pharmaceuticals promotes health, but pharmacies cannot qualify for recognition of
exemption under § 501(c)(3) on that basis alone. Federation Pharmacy Services, Inc. v. Commissioner, 72 T.C.
687 (1979), aff’d, 625 F.2d 804 (8th Cir. 1980); see also IHC Health Plans, Inc. v. Commissioner, 325 F.3d
1188, 1197 (10th Cir. 2003) (noting that “engaging in an activity that promotes health, standing alone, offers an
insufficient indicium of an organization’s purpose,” as “[n]umerous for-profit enterprises offer products or
services that promote health”). Furthermore, “an institution for the promotion of health is not a charitable
institution if it is privately owned and is run for the profit of the owners.” Rev. Rul. 98-15.

Treas. Reg. 1.509(a)-4(b)(1) provides that in order to qualify as a supporting organization, an organization must
be both organized and operated exclusively “for the benefit of, to perform the functions of, or to carry out the
purposes of one or more specified publicly supported organizations.” If it fails to meet either the organizational
test or operational test, it cannot qualify as a supporting organization.

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

Treas. Reg. § 1.509(a)-4(e) provides that a supporting organization will be regarded as “operated exclusively to
support one or more specified publicly supported organizations (hereinafter referred to as the “operational test”
only if it engages solely in activates which support or benefit the specified publicly supported organizations.

In Better Business Bureau of Washington, D.C. v. United States, 326 U.S. 279, 283 (1945), the Supreme Court
stated that the presence of a single nonexempt purpose, if substantial in nature, will destroy the exemption
regardless of the number or importance of truly exempt purposes. This case is the basis of § 1.501(c)(3)-1(c)(1),
which provides that an organization will be regarded as “operated exclusively” for one or more exempt purposes
only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in §
501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities are not in
furtherance of an exempt purpose.

In American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), the Tax Court held that an
organization that as its primary activity operated a school to train individuals for careers as political campaign
professionals was not operated exclusively for exempt purposes as described in § 501(c)(3) because the school’s
activities conferred impermissible private benefit. The court defined “private benefit” as “nonincidental benefits
conferred on disinterested persons that serve private interests.”

An organization may provide benefits to private individuals provided those benefits are incidental quantitatively
and qualitatively. To be qualitatively incidental, private benefit must be a necessary concomitant of an activity
that benefits the public at large; in other words, the benefit to the public cannot be achieved without necessarily
benefiting certain private individuals. To be quantitatively incidental, the private benefit must be insubstantial,
measured in the context of the overall public benefit conferred by the activity. To illustrate the quantitatively
incidental concept, compare Rev. Rul. 68-14, 1968-1 C.B. 243, with Rev. Rul. 75-286, 1975-2 C.B. 210.

In Rev. Rul. 68-14, an organization that helped beautify a city was exempt under § 501(c)(3) when it planted
trees in public areas, cooperated with municipal authorities in tree plantings and programs to keep the city clean,
and educated the public in advantages of tree planting.

In Rev. Rul. 75-286, an organization with similar activities did not qualify under § 501(c)(3) where its members
consisted of residents and business operators of a city block and its activities were limited to that block. The
facts in Rev. Rul. 75-286 indicate that the organization was organized and operated for the benefit of private
interests by enhancing the value of members’ property.

For a benefit to be qualitatively incidental, it must be a necessary concomitant of the activity which benefits the
public at large. That is, the benefit to the public cannot be achieved without necessarily benefiting certain
private individuals. For example, in Rev. Rul. 70-186, supra, an organization was formed to preserve a lake as a
public recreational facility and to improve the condition of the water in the lake to enhance its recreational
features. Although the organization clearly benefited the public at large, there necessarily was also significant
benefit to the private individuals who owned lake front property. In this ruling, the IRS determined that the
private benefit was incidental in a qualitative sense, stating:

The benefits to be derived from the organization’s activities flow principally to the
general public through the maintenance and improvement of public recreational
facilities. Any private benefits derived by the lake front property owners do not
lessen the public benefits flowing from the organization’s operations. In fact, it
would be impossible for the organization to accomplish its purposes without
providing benefits to the lake front property owners.

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

Thus, the organization qualified for exemption under § 501(c)(3).

Rev. Rul. 77-69, 1977-1 C.B. 143, describes and agency that was organized and operated pursuant to federal
statute to establish and maintain a system of health planning and resource development aimed at providing
adequate health care for a specified geographic area. It was funded by federal grants and managed by
government officials and members of the public. The organization gathered and analyzed health data,
established health system plans and goals, coordinated activities with professional standards review
organizations, reviewed and approved grant applications for federal funds, and assisted states in reviewing
health services capital expenditures. The organization promoted the health of the residents of the area in which
it functioned, and met the requirements of lessening the burdens of government, and therefore operated for
charitable purposes under § 501(c)(3).

Rev. Rul. 81-276, 1981-2 C.B. 128, describes a professional standards review organization established pursuant
to a federal statute to review health care practitioners’ and institutions’ provision of health care services and
items for which payment is made under Medicare and Medicaid, and determine whether the quality of services
met professionally recognized standards of care. The IRS ruled that by taking on the government's burden of
reviewing the quality of services under Medicare and Medicaid, the organization lessened the burdens of
government within the meaning of § 1.501(c)(3)-1(d)(2). Any benefit to members of the medical profession
from such activities was incidental to the benefit the organization provided in lessening the burdens of
government. Therefore, the organization qualified for exemption under § 501(c)(3).

Rev. Rul. 85-2, 1985-1 C.B. 178, sets forth the criteria for determining whether an organization's activities are
lessening the burdens of government: whether the governmental unit considers the organization's activities to be
its burden; and whether these activities actually lessen the burden of the governmental unit. An activity is a
burden of the government if there is an objective manifestation by the governmental unit that it considers the
activities of the organization to be its burden. The interrelationship between the governmental unit and the
organization may provide evidence that the governmental unit considers the activity to be its burden. Whether
the organization is actually lessening the burdens of government is determined by considering all of the relevant
facts and circumstances.

Rev. Rul. 86-98, 1986-2 C.B. 74, holds that an individual practice association (“IPA”) that provides health
services through written agreements with health maintenance organizations (HMOs) does not qualify for
exemption from federal income tax as a social welfare organization under § 501(c)(4). The IPA’s stated purpose
is to arrange for the delivery of health services through written agreements negotiated with HMOs. Membership
in the IPA is limited to practicing licensed physicians who are members of a specified county medical society.
The IPA’s members generally maintain a private medical practice in addition to performing services for the
IPA. The IPA’s members are required to enter into written service contracts under which they provide services
to the HMO’s patients in accordance with a negotiated compensation arrangement between the HMO and an
IPA. The IPA’s primary activities are to serve as a “bargaining agent” for its members in dealing with HMOs
and to perform the administrative claims services required by the agreements. Members agree to reimbursement
by the IPA according to a fee schedule established by the IPA’s board of directors. The ruling finds that the IPA
is “akin to a billing and collection service, and a collective bargaining representative negotiating on behalf of its
member-physicians with HMOs.” In addition, the IPA does not provide medical services that would not have
been available but for its establishment, or that are available at fees below what is customarily and reasonably
charged by the members in their private practices. The IPA is held to operate in a manner similar to a for-profit
entity, and its primary beneficiaries are its member-physicians, rather than the community as a whole.

The American Recovery and Reinvestment Act of 2009 (“ARRA”), P.L. 111-5, enacted February 17, 2009,
includes the provision of various economic incentives to encourage the use of health information technology.

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

The Conference Report to ARRA (H.Rept. 111-16, 111th Cong. 1st Sess., 2/12/09) includes the following
statement relating to these incentives, at 488-9:

As a result of the incentives and appropriations for health information technology
provided in this bill, it is expected that nonprofit organizations may be formed to
facilitate the electronic use and exchange of health-related information consistent
with standards adopted by HHS, and that such organizations may seek exemption
from income tax as organizations described in IRC sec. 501(c)(3). Consequently, if
a nonprofit organization otherwise organized and operated exclusively for exempt
purposes described in IRC sec. 501(c)(3) engages in activities to facilitate the
electronic use or exchange of health-related information to advance the purposes of
the bill, consistent with standards adopted by HHS, such activities will be
considered activities that substantially further an exempt purpose under IRC sec.
501(c)(3), specifically the purpose of lessening the burdens of government. Private
benefit attributable to cost savings realized from the conduct of such activities will
be viewed as incidental to the accomplishment of the nonprofit organization’s
exempt purpose.

Notice 2011-20, 2011-16 I.R.B. 652 (April 18, 2011), summarizes how the IRS expects existing IRS guidance
may apply to § 501(c)(3) tax-exempt organizations (charitable organizations), such as chartable hospitals,
participating in the Medicare Shared Savings Program through ACOs.

Application of law

As described in Treas. Reg. § 1.501(c)(3)-1(a), in order to qualify for exemption as an organization described in
§ 501(c)(3), an organization must be both organized and operated exclusively for one or more of the purposes
specified in that section. An organization must establish that it operates primarily for activities that accomplish
exempt purposes and that no more than an insubstantial part of its activities do not further an exempt purpose.
The presence of a single substantial nonexempt purpose destroys the exemption regardless of the number or
importance of the exempt purposes. See Better Business Bureau of Washington, D.C. v. United States, 326 U.S.
279, 283 (1945). Exempt charitable purposes include, among others, relief of the poor and distressed and the
lessening of the burdens of government. See § 1.501(c)(3)-1(d)(2).

In order for an activity to further the exempt charitable purpose of lessening the burdens of government, there
must be an objective manifestation that the government considers the activities to be its burden. Rev. Rul. 85-2,
supra. Certain provisions of the PPACA encourage and support ACO and cost sharing arrangements.
Furthermore, as indicated in Notice 2011-20, Congress established the MSSP to be conducted through ACOs in
order to promote quality improvements and cost savings in health care. Therefore, participation in the MSSP by
an ACO will generally further the charitable purpose of lessening the burdens of government within the
meaning of Treas. Reg. §1.501(c)(3)-1(d)(2). In contrast, however, the law does not provide an objective
manifestation that the government considers non-MSSP related ACO activities to be its burden, regardless of
their furtherance of the PPACA’s overall Triple Aim goals.

You are not like the organizations described in Rev. Rul. 77-69, supra, and Rev. Rul. 81-276, supra, because
you are not established pursuant to a statute, managed by government officials, or funded by government grants.
There is no government oversight of your activities similar to that of an ACO participating in the MSSP. You
are not engaged primarily in assisting the Medicare or Medicaid population, which could further the charitable
purpose of relieving the poor and distressed. See Treas. Reg. §1.501(c)(3)-1(d)(2).

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

The promotion of health is also recognized as a charitable purpose; however, not every activity that generally
promotes health furthers charitable purposes under § 501(c)(3). For example, selling prescription
pharmaceuticals promotes health, but pharmacies cannot qualify for recognition of exemption under § 501(c)(3)
on that basis alone. See Federation Pharmacy Services, Inc, supra. The Triple Aim goals of the PPACA that you
have identified, while generally promoting health, are not coextensive with exempt purposes under § 501(c)(3),
and not all activities advancing those goals are necessarily in furtherance of charitable purposes. Therefore, you
have not established that you are operated primarily for exempt purposes under § 501(c)(3).

In addition, it is clear from your application materials that one of your substantial activities is the negotiation of
payer agreements on behalf of your healthcare provider participants, as evidenced by the representative
participation agreement and the payer agreements you provided. Approximately half of your participating
physicians are not employed by System or System hospitals.

Negotiating with private health insurers on behalf of unrelated healthcare providers is not a charitable activity.
See Rev. Rul. 86-98, supra. As the IRS has stated in Notice 2011-20, “negotiating with private health insurers
on behalf of unrelated parties generally is not a charitable activity, regardless of whether the agreement
negotiated is a program aimed at achieving cost savings in health care delivery.” These activities are primarily
beneficial to the non-System affiliated physician, hospital, and other health care provider participants because
you are providing them with specific long and short term planning information that can be used in their business
activities.

Organizations seeking exemption under § 501(c)(3) must be organized and operated exclusively for exempt
purposes pursuant to § 1.501(c)(3)-1(a). An entity that is substantially organized or operated to serve private
rather than public interests cannot be recognized as operating exclusively for exempt purposes.

See § 1.501(c)(3) - 1(d)(1)(ii) and American Campaign Academy, supra. The Tax Court has explained that
prohibited private benefits may include an “advantage, profit, fruit, privilege, gain, or interest.” See American
Campaign Academy at 1065. Your negotiation of payer agreements on behalf of the non-System affiliated
physicians only indirectly benefits the community as a whole. The private benefit to these members is not
qualitatively or quantitatively incidental or insubstantial in comparison to the community benefit produced by
your activities. Your negotiation of payer agreements on behalf of independent healthcare providers and those
employed at other hospitals and healthcare systems, therefore, comprises a substantial part of your activities and
confers an impermissible private benefit to participants who are not affiliated with System.

Although your electronic health records activities may further charitable purposes under § 501(c)(3) (as described
in the Conference Report to ARRA), the fact that you may have some programs that further exempt purposes is
immaterial because, as provided in Better Business Bureau of Washington, D.C., supra, the presence of a
substantial nonexempt purpose destroys the exemption under § 501(c)(3) regardless of the number or importance of
truly exempt purposes.

For similar reasons, even if you were recognized as exempt under § 501(c)(3), you would not be classified as
other than a private foundation under § 509(a)(3). A supporting organization must be organized exclusively for
the benefit of, to perform the functions of, or to carry out the purposes of one or more specified organizations
described in section 509(a)(1) or 509(a)(2). As discussed above, your networking and contracting activities on
behalf of non-System healthcare providers does not exclusively provide a benefit to System. Therefore, you do
not meet the operational test for a supporting organization set out under Treas. Reg. § 1.509(a)-4(e).

Conclusion

Based on the information provided in your Form 1023 and supporting documentation, we conclude that you are
not operated exclusively for purposes described in § 501(c)(3). Accordingly, you do not qualify for exemption
as an organization described in § 501(c)(3). In addition, even if you were determined to be described under
§501(c)(3), you would not be classified not a supporting organization under § 509(a)(3).

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

If you don’t agree

You have a right to file a protest if you don’t agree with our proposed adverse determination. To do so, you
must send us a statement within 30 days of the date of this letter. The statement must include:

• Your name, address, employer identification number (EIN), and a daytime phone
  number

• A copy of this letter highlighting the findings you disagree with

• An explanation of why you disagree, including any supporting documents

• The law or authority, if any, you are relying on

• The signature of an officer, director, trustee, or other official who is authorized to
  sign for the organization, or your authorized representative

• One of the following declarations:

For an officer, director, trustee, or other official who is authorized to sign for the organization:
Under penalties of perjury, I declare that I examined this protest statement,
including accompanying documents, and to the best of my knowledge and belief,
the statement contains all relevant facts and such facts are true, correct, and
complete.

For an authorized representative:
Under penalties of perjury, I declare that I prepared this protest statement,
including accompanying documents, and to the best of my knowledge and belief,
the statement contains all relevant facts and such facts are true, correct, and
complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the
IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if he or she hasn’t
already done so. You can find more information about representation in Publication 947, Practice Before the
IRS and Power of Attorney.

We'll review your protest statement and decide if you provided a basis for us to reconsider our determination.
You also have a right to a conference after you submit your statement. If you want a conference, you must
request it when you file your protest statement.

You can also ask the Office of Appeals to review your application for tax-exempt status. Your right to request
Appeals review is in addition to your right to a conference, as outlined in Revenue Procedure (Rev. Proc.)
2014-4 and Rev. Proc. 2014-9. You must notify us in writing if you want us to forward your case to the
Appeals Office. You can find more information about the process and the role of the Appeals Office in Section
7 of Rev. Proc. 2014-9 and Publication 4227, Overview of the Appeals Process.

If the person representing you in this process is not an officer, director, trustee, or other official who is
authorized to sign for the organization, he or she must file Form 2848, as explained above, and otherwise meet
the requirements in Publication 216, Conference and Practice Requirements.

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W

If you don’t file a protest within 30 days, you can’t seek a declaratory judgment in court at a later date because
the law requires that you use the IRS administrative process first (Section 7428(b)(2) of the Code).

Where to send your protest

Please send your protest statement, any request for consideration by the Office of Appeals, Form 2848, if
needed, and any supporting documents to the applicable address:

US Mail:                                      Street Address (delivery service):

You can also fax your statement and supporting documents to the fax number listed at the top of this letter. If
you fax your statement, please contact the person listed at the top of this letter to confirm that he or she received
it.

If you agree

If you agree with our proposed adverse determination, you don’t need to do anything. If we don’t hear from you
within 30 days, we’ll issue a final adverse determination letter. That letter will provide information on your
income tax filing requirements.

You can find all forms and publications mentioned in this letter on our website at www.irs.gov/formspubs. If
you have questions, you can contact the person listed at the top of this letter.

We sent a copy of this letter to your representative as indicated on your power of attorney.

Sincerely,

Michael Seto
Manager, EO Technical

cc:

Letter 4036 (Rev. 07-2014)
Catalog Number 47630W