Inactive alternative-fuel coalition lost charity status

Plain-English summary

An organization was formed to reduce petroleum consumption by promoting alternative-fuel vehicles and related programs. It had been recognized under § 501(c)(3), but its representative reported that it had no operational or financial activity and had been trying to dissolve for several years. The representative agreed with the proposed revocation. The IRS concluded that an inactive organization no longer met the operational test for exemption. It revoked the organization's status effective December 31 of the redacted year and required Form 1120 filings thereafter.

Ruling snapshot

• Question: Could the organization remain exempt under § 501(c)(3) after years with no operations or activities?
• Outcome: Revocation. The IRS found that the inactive organization failed the operational test.
• Key authorities: IRC §§ 170, 501(a), 501(c)(3), 503, and 7428; Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 58-617

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR. Obvious scan misreads were corrected, and unreadable signature text is marked [illegible]. Wording is otherwise verbatim.

DEPARTMENT OF THE TREASURY
Internal Revenue Service
TE/GE EO Examinations
1100 Commerce Street MC 4920 DAL
Dallas, TX 75242

TAX EXEMPT AND OCT 18 2018

GOVERNMENT ENTITIES Date:
DIVISION

Person to Contact:

Number: 201907010 Identification Number:

Release Date: 2/15/2019 Telephone Number:
In Reply Refer to:

LAST DATE FOR FILING A PETITION WITH
THE TAX COURT:

UIL: 501.03-00

CERTIFIED MAIL - Return Receipt Requested

Dear

This is a final adverse determination regarding your exempt status under section 501(c)(3) of
the Internal Revenue Code (IRC). Our favorable determination letter to you dated
September 10, 20XX, is hereby revoked and you are no longer exempt under section 501(a),
as an organization described in section 501(c)(3) of the IRC, effective December 31, 20XX.

Our adverse determination was made for the following reasons:

You have not established that you are operated exclusively for an exempt
purpose or that you have been engaged primarily in activities that accomplish
one or more exempt purposes as required by Treas. Reg. section 1.501(c)(3)-
1(c)(1).

Contributions to your organization are no longer deductible under section 170 of the Code.

You are required to file Federal income tax returns on Form 1120. These returns should be
filed with the appropriate Service Center for the year ending December 31, 20XX and for all
years thereafter.

Processing of income tax returns and assessment of any taxes due will not be delayed should
a petition for declaratory judgment be filed under section 7428 of the Internal Revenue

Code.

If you decide to contest this determination in court, you must initiate a suit for declaratory
judgment in the United States Tax Court, the United States Court of Federal Claims or the
District Court of the United States for the District of Columbia before the 91st day after the
date this determination was mailed to you. Contact the clerk of the appropriate court for the
rules for initiating suits for declaratory judgement. You may write to the courts at the
following addresses:


United States Tax Court
400 Second Street, NW
Washington, DC 20217

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005

U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can
help protect your taxpayer rights. We can offer you help if your tax problem is causing a
hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you
qualify for our assistance, which is always free, we will do everything possible to help you.
Visit taxpayeradvocate.irs.gov or call 1-877-777-4778.

We will notify the appropriate State Officials of this action, as required by section 6104(c) of
the Internal Revenue Code.

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

Sincerely yours,

[illegible]

Maria Hooke
Director, Exempt Organizations Examinations
Enclosures:
Publication 892


Date: JUN 05 2018

Department of the Treasury
Internal Revenue Service
IRS Tax Exempt and Government Entities Taxpayer Identification Number:

Exempt Organizations Examinations
Form:

Tax Year(s) Ended:
Person to Contact:

Employee ID:
Telephone:

Fax:
Manager's Contact Information:

Employee ID:
Telephone:
Response Due Date:

CERTIFIED MAIL — Return Receipt Requested

Dear

Why you're receiving this letter
We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we
propose to revoke your tax-exempt status as an organization described in Internal Revenue

Code (IRC) Section 501(C)3.

If you agree
If you haven’t already, please sign the enclosed Form 6018, Consent to Proposed Action, and

return it to the contact person shown at the top of this letter. We'll issue a final adverse letter
determining that you aren't an organization described in IRC Section 501(C)3 for the periods

above.

After we issue the final adverse determination letter, we'll announce that your organization is no
longer eligible to receive tax deductible contributions under IRC Section 170.

If you disagree

1. Request a meeting or telephone conference with the manager shown at the top of this

letter.

2. Send any information you want us to consider.

3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or
send additional information as stated in 1 and 2, above, you'll still be able to file a protest
with IRS Appeals Office after the meeting or after we consider the information.

The IRS Appeals Office is independent of the Exempt Organizations division and
resolves most disputes informally. If you file a protest, the auditing agent may ask you to

sign a consent to extend the period of limitations for assessing tax. This is to allow the

Letter 3618 (Rev. 9-2017)
Catalog Number 34809F


IRS Appeals Office enough time to consider your case. For your protest to be valid, it
must contain certain specific information, including a statement of the facts, applicable
law, and arguments in support of your position. For specific information needed for a
valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-

Exempt Status.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process,
generally doesn’t apply now that we've issued this letter.

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt
Government Entities) if you feel the issue hasn't been addressed in published precedent

or has been treated inconsistently by the IRS.

If you're considering requesting technical advice, contact the person shown at the top of
this letter. If you disagree with the technical advice decision, you will be able to appeal
to the IRS Appeals Office, as explained above. A decision made in a technical advice
memorandum, however, generally is final and binding on Appeals.

If we don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll
issue a final adverse determination letter.

Contacting the Taxpayer Advocate Office is a taxpayer right

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can
help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a
hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you
qualify for TAS assistance, which is always free, TAS will do everything possible to help you.
Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

For additional information ;
You can get any of the forms and publications mentioned in this letter by visiting our website at

www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).

If you have questions, you can contact the person shown at the top of this letter.

[illegible]

for Maria Hooke

Director, Exempt Organizations
Examinations

Enclosures:
Form 886-A
Form 6018

2
Letter 3618 (Rev. 9-2017)
Catalog Number 34809F


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
ISSUE:
Whether , continues to qualify for exemption as

an organization described in the Internal Revenue Code (IRC) Section 501(c)(3)
because of no operation or activity since December 31, 20XX which includes
subsequent year of the examination.

FACTS:

was incorporated under the laws of the State of
as a non-profit corporation on April 6, 20XX for the purpose of the
following:

The purpose of this corporation is to advance the nation's economic, environmental,
and energy security by supporting local decisions to reduce petroleum consumption.

The (hereafter referred to as "the
Coalition”) was designated by the U.S. Department of Energy in 20XX to accelerate
the use of vehicles powered by alternative fuels as a means to reduce dependence
on imported oil, improve regional air quality, and promote economic development.
The scope of the Coalition's work has expanded since its inception to include the
promotion of other vehicle-related measures which support these purposes. The
Coalition is a voluntary collaboration of public and private stakeholders dedicated to:
increasing the use of alternative fuel vehicles and expanding the fueling
infrastructure necessary to support these vehicles; promoting other vehicle-related
programs that result in decreased petroleum consumption and reduced emissions;
serving its members by providing research and technical assistance, providing
access to grant funds, seeking incentives, and identifying partnership opportunities;
providing opportunities for collaboration among members and regional partners;
leveraging resources of knowledge, time and funding; and setting the example
through the leadership of its members and partners.

On September 10, 20XX, was recognized to be
exempt from federal income tax as an organization described in IRC Section
501(c)(3).

During telephone discussion on February 2, 20XX, the organization’s representative
stated the organization had been trying to dissolve since 20XX.

LAW:

IRC § 501(c)(3) exempts from federal income tax organizations which are organized

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -1-


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or

Explanation of Items Exhibit
Year/Period Ended

Name of Taxpayer

and operated exclusively for religious, charitable, scientific, testing for public safety,
literary, or educational purposes, or to foster national or international amateur sports
competition (but only if no part of its activities involve the provision of athletic facilities
or equipment), or for the prevention of cruelty to children or animals, no part of the
net earnings 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 (except as otherwise provided in subsection (h)),
and which does not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or in opposition to)
any candidate for public office.

Tax Reg. § 1.501(c)(3)-1(d)(i) states that an organization may be exempt as an
organization described in 501(c)(3) if it is organized and operated exclusively for one
or more of the following purposes: religious, charitable, scientific, testing for public
safety, literary, educational, or prevention of cruelty to children or animals.

Tax Reg. § 1.501(c)(3)-1(a)(1) of the regulations provides that in order to be exempt
as an organization described in section 501(c)(3) 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.

Tax Reg. § 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will be
regarded as “operated exclusively” for one or more exempt purposes only if it
engages primarily in activities which accomplish one or more of such exempt
purposes specified in section 501(c)(3)

Revenue Ruling 58-617, 1958-2 CB 260, (Jan. 01, 1958) Rulings and determinations
letters granting exemption from federal income tax to an organization described in
section 501(a) of the Internal Revenue Code of 1954, to which contributions are
deductible by donors in computing their taxable income in the manner and to the extent
provided by section 170 of the Code, are effective only so long as there are no material
changes in the character of the organization, the purposes for which it was organized,
or its methods of operation. Failure to comply with this requirement may result in
serious consequences to the organization for the reason that the ruling or determination
letter holding the organization exempt may be revoked retroactively to the date of the
changes affecting its exempt status, depending upon the circumstances involved, and
subject to the limitations on retroactivity of revocation found in section 503 of the Code.

TAXPAYER’S POSITION:

The organization’s representative declared that the organization has no operational
or financial activities. Agent discussed revocation with the organization's

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -2-


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or

Explanation of Items Exhibit
Year/Period Ended

Name of Taxpayer

representative on February 2, 20XX and he agreed to the proposed revocation as
organization is no longer operating for an exempt purpose.

GOVERNMENT'S POSITION AND CONCLUSION:

As demonstrated in Rev. Rul. 58-617, an organization’s exempt status will remain in
effect only so long as there are no material changes in the character of the
organization, the purposes for which it was organized, or its methods of operation. In
the case of ABC, Inc. the organization has been inactive for several years and there
have been no activities conducted. As such,

fails to meet the operational requirements to continue its exemption status under IRC
501(c)(3). Therefore, the effective revocation date will be December 31, 20XX.

If you agree to this conclusion please sign the attached Forms.

If you disagree please submit a statement of your position.

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -3-