IRS revokes a charity's 501(c)(3) status after it sold its assets but never formally dissolved

Plain-English summary

The IRS revoked an organization's recognition as a tax-exempt charity under section 501(c)(3). The group had wound down its affairs: it sold all of its property, collected the sale proceeds in monthly installments, and distributed the money to four other 501(c)(3) organizations. It stopped doing any exempt activity and received no further contributions or grants. The problem was that it never completed the steps needed to formally terminate a charity: it did not file a final return, did not submit a written statement of how it disposed of its assets, did not file a dissolution document with its state, and was slow to close its bank accounts. Because the organization had effectively ceased to exist but had not properly dissolved, and did not respond to the document requests needed to terminate it, the IRS concluded it no longer met the requirements of 501(c)(3) and revoked its exempt status. The revocation is retroactive, contributions are no longer deductible under section 170, and the agency may notify state officials under section 6104(c). The taxpayer's position was that the organization no longer existed.

Ruling snapshot

• Question: Can a charity that sold its assets and gave the proceeds to other charities keep its 501(c)(3) status when it never filed the paperwork to formally dissolve?
• Outcome: revocation (final adverse determination; exemption revoked, contributions no longer deductible)
• Key authorities: IRC § 501(c)(3); IRC § 6104(c) (notice to state officials); IRC §§ 170, 7428

Full text (IRS public release)

Transcriber's note: this is a scanned adverse-determination package, comprising a Letter 6337 final revocation letter, a Letter 3618 proposed-revocation letter, and a Form 886-A audit report (older "Rev. January 1994" format, titled "Explanations of Items / Revocation"). The repeating Form 886-A header/footer furniture has been removed and each report page replaced with a bracketed [Page N] marker; the cover letters keep their own Letter footers. The Form 886-A quotes the text of IRC 6104(c) at length. Names, dates, dollar amounts, and organization names were redacted throughout and appear as blanks; wording is reproduced as scanned, with obvious OCR misreads corrected.

Department of the Treasury Date: May 11, 2021
Internal Revenue Service
IRS
Tax Exempt and Government Entities

Number: 202230009
Release Date: 7/29/2022

Taxpayer ID number:
Form:
Tax periods ended:

Person to contact:
Name:
ID number:
Telephone:
Fax:

UIL: 501.03-00
CERTIFIED MAIL - RETURN RECEIPT REQUESTED

Dear

Why we are sending you this letter
This is a final determination that you don’t qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3), effective

. Your determination letter dated , is revoked.

Our adverse determination as to your exempt status was made for the following reasons: Organizations
described in IRC Section 501(c)(3) and exempt under IRC Section 501(a) must be both organized and operated
exclusively for exempt purposes. You have not demonstrated that you are both organized and operated
exclusively for charitable, educational, or other exempt purposes within the meaning of IRC Section 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.

Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax
returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov.

Contributions to your organization are no longer deductible under IRC Section 170.

What you must do if you disagree with this determination
If you want to contest our final determination, you have 90 days from the date this determination letter was

mailed to you to file a petition or complaint in one of the three federal courts listed below.

How to file your action for declaratory judgment

If you decide to contest this determination, you may file an action for declaratory judgment under the provisions
of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court
of Federal Claims or 3) the United States District Court for the District of Columbia.

Letter 6337 (12-2020)

Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for
declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on
Tax-Exempt Status. You may write to the courts at the following addresses:

United States Tax Court U.S. Court of Federal Claims U.S. District Court for the District of Columbia
400 Second Street, NW 717 Madison Place, NW 333 Constitution Ave., N.W.
Washington, DC 20217 Washington, DC 20439 Washington, DC 20001

Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for
declaratory judgment under IRC Section 7428.

We’ ll notify the appropriate state officials (as permitted by law) of our determination that you aren’t an
organization described in IRC Section 501(c)(3).

Information about the IRS Taxpayer Advocate Service

The IRS office whose phone number appears at the top of the notice can best address and access your tax
information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate
Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't
working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects
taxpayer rights. Contact your local Taxpayer Advocate Office at:

Internal Revenue Service
Taxpayer Advocate Office

Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights,
go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use
the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to
file an action for declaratory judgment.

Where you can find more information
Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for

more comprehensive information:
Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676).

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

Letter 6337 (12-2026)

If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best
time to call, and a copy of this letter.

Keep the original letter for your records.

Sincerely,

Sean E. O'Reilly
Director, Exempt Organizations Examinations

Enclosures:

Publication 1

Publication 594
Publication 892

ce.

Letter 6337 (12-2020)

Internal Revenue Service 12/06/2019

Tax Exempt and Government Entities [illegible]

Form:

Tax periods ended:

Person to contact:
Name:
ID number:
Telephone:
Fax:
Manager's contact information:
Name:
Telephone:
Response due date:

CERTIFIED MAIL — Return Receipt Requested

Dear

Why you’re receiving this letter

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.

If you disagree

i.
2.
3,

Request a meeting or telephone conference with the manager shown at the top of this letter.
Send any information you want us to consider.

File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional
information as stated in | 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 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.

. 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.

Letter 3618 (Rev. 8-2019)

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.

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.

Sincerely,
Digitally signed by Ulviya N. Mamedova

Ulviya N. Mamedova

Maria Hooke

Director, Exempt Organizations Examinations
Enclosures:
Form 886-A
Form 6018
Pub 892
Pub 3498

Letter 3618 (Rev. 8-2019)

ISSUE:

revocation as an Internal Revenue Code (IRC) 501(c)(3) organization.
FACTS:

sold all property to on . They
started the distribution of the funds to the following four IRC 501(c)(3) organizations starting :
; a ; and the
last distribution to

During the period between and , they did not receive any contribution, grants,
gifts, or any other funds related to their tax-exempt purpose. They only received the scheduled payments from the
sale of the property, which included receiving twenty-four monthly payments from sale from

to

Taxpayers were not aware they needed to file articles of dissolution with the State of , Which is also required
by the IRS, in order to terminate the organization as an IRC 501(c)(3) organization. They did substantiate they did try
to close bank account on but did not successfully close account until (per oral
testimony from ). The closing of all bank accounts is required to terminate
organization. They were also required to file final form —, submit a written statement of disposition of assets, and
submit a dissolution document. All documents required to terminate the organization were requested, per Information
Document Requests #3-5 dated . They failed to submit information requested to terminate
organization.

They are no longer operating as tax exempt IRC 501(c)(3) organization and have substantiated they sold all assets and
distributed funds to qualified IRC 501(c)(3) organizations.

LAW:

IRC 501(c)(3) exempts from Federal income tax: 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 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 (i)), 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.

IRC 6104 Publicity of information required from certain exempt organizations and certain trusts.
(c) Publication to State officials

(1) General rule for charitable organizations In the case of any organization which is described in section 501(c)(3)
and exempt from taxation under section 501(a), or has applied under section 508(a) for recognition as an organization
described in section 501(c)(3), the Secretary at such times and in such manner as he may by regulations prescribe
shall—

[Page 1]

(A) notify the appropriate State officer of a refusal to recognize such organization as an organization described in
section 501(c)(3), or of the operation of such organization in a manner which does not meet, or no longer
meets, the requirements of its exemption,

(B) notify the appropriate State officer of the mailing of a notice of deficiency of tax imposed under section 507

or chapter 41 or 42, and

(C) at the request of such appropriate State officer, make available for inspection and copying such returns, filed
statements, records, reports, and other information, relating to a determination under subparagraph (A) or (B)
as are relevant to any determination under State law.

(2) Disclosure of proposed actions related to charitable organizations

(A) Specific notifications in the case of an organization to which paragraph (1) applies, the Secretary may disclose
to the appropriate State officer—

(i) a notice of proposed refusal to recognize such organization as an organization described in section 501(c)(3)
or a notice of proposed revocation of such organization’s recognition as an organization exempt from taxation,

(ii) the issuance of a letter of proposed deficiency of tax imposed under section 507 or chapter 41 or 42, and

(iii) the names, addresses, and taxpayer identification numbers of organizations which have applied for
recognition as organizations described in section 501(c)(3).

(B) Additional disclosures

Returns and return information of organizations with respect to which information is disclosed under
subparagraph (A) may be made available for inspection by or disclosed to an appropriate State officer.

(C) Procedures for disclosure Information may be inspected or disclosed under subparagraph (A) or (B) only—
(i) upon written request by an appropriate State officer, and

(ii)for the purpose of, and only to the extent necessary in, the administration of State laws regulating such
organizations.

Such information may only be inspected by or disclosed to a person other than the appropriate State officer if
such person is an officer or employee of the State and is designated by the appropriate State officer to receive
the returns or return information under this paragraph on behalf of the appropriate State officer.

(D) Disclosures other than by request

The Secretary may make available for inspection or disclose returns and return information of an organization
to which paragraph (1) applies to an appropriate State officer of any State if the Secretary determines that such

[Page 2]

returns or return information may constitute evidence of noncompliance under the laws within the jurisdiction
of the appropriate State officer.

TAXPAYER'S POSITION;

Organization does not exist, they sold property on , and distributed the money from the sale of
property to the above four IRC 501(c)(3) organizations.

GOVERNMENT'S POSITION:

no longer exist as an IRC 501(c)(3) organization. They did not properly dissolve
organization, per Internal Revenue Service. Taxpayer did not file final form — , submit a written statement of
disposition of assets, or submit a dissolution document, when they sold all assets on , and
distributed assets to qualified IRC 501(c)(3) organizations These actions would have terminated the organization.

They do not qualify to terminate organization, because they did not file final form —_, submit a written statement of
disposition of assets, or submit a dissolution document; when they sold all assets on , and
distributed assets to qualified IRC 501(c)(3) organizations. These items are required to terminate organizations as tax
exempt organization.

They are no longer operating as tax exempt IRC 501(c)(3) organization and have substantiated they sold all assets and
distributed assets/funds to qualified IRC 501(c)(3) organizations.

CONCLUSION:

does not qualify as an IRC 501(c)(3) organization, because they no longer exist.
They do not meet the requirements of IRC 501(c)(3) tax exempt organization. They meet the definition of
organization requiring revocation of their IRC 501(c)(3) tax exempt status.

[Page 3]