Exemption revoked after organization failed to produce audit records

Plain-English summary

The IRS revoked an organization's section 501(c)(3) exemption because it did not provide records requested during an examination. The IRS sent examination correspondence to several addresses and individuals and made repeated telephone attempts, but it did not receive the information needed to conduct the audit. Without the records, the organization did not establish that it continued to operate exclusively for exempt purposes, avoided private inurement, and met its reporting obligations. The IRS relied on sections 6001 and 6033, their regulations, and Revenue Ruling 59-95, which recognizes that failure to provide required information can support termination of exempt status. The revocation's effective date was redacted, and the IRS stated that Form 1120 should be filed for later periods.

Ruling snapshot

• Question: Should the organization's exemption be revoked because it failed to respond and produce records for an IRS examination?
• Outcome: Revoked
• Key authorities: IRC §§ 501(c)(3), 6001, and 6033(a)(1); Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, and 1.6033-1(h)(2); Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 2/24/2023

Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):
Release Number: 202323010 Tax periods ended:

Release Date: 6/9/2023

Person to contact:
UIL Code: 501.03-00 Name:

ID number:
Telephone:( )
Fax:(  )

Last day to file petition with United States
Tax Court:

5/25/2023

Form:

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:

You failed to adequately respond to repeated reasonable requests to allow the Internal Revenue Service to
examine your records regarding your receipts, expenditures, or activities, as required by IRC Sections 6001 and
6033(a)(1) and the regulations thereunder. As such, you failed to meet the requirements of IRC Section 501(c)
(3) in that you have not established that you were organized and operated exclusively for exempt purposes
within the meaning of that section and that no part of your earnings inured to the benefit of any private
shareholder or individual.

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 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 can file an action for declaratory judgment under the provisions
of Section 7428 of the Code in either:

• The United States Tax Court,
• The United States Court of Federal Claims, or
• The United States District Court for the District of Columbia

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E

You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this
determination letter to you. You can download a fillable petition or complaint form and get information about
filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one
of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee
with the petition or complaint.

You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available
on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to
do so. You may also file your petition at the address below:

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

The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain
instructions about how to file your completed complaint electronically. You may also file your complaint at one of
the addresses below:

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20439
uscfc.uscourts.gov

US District Court for the District of Columbia
333 Constitution Avenue, NW

Washington, DC 20001

dcd.uscourts.gov

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:

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.

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E

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 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.

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.

You may fax your documents to the fax number shown above, using either a fax machine or online fax service.
Protect yourself when sending digital data by understanding the fax service's privacy and security policies.

Keep the original letter for your records.

Sincerely,
lyn Prine
ra A. Brinkley
Director, Exempt Organizations Examinations
Enclosures:
Publication 1
Publication 594
Publication 892

Letter 6337 (Rev. 8-2022)
Catalog Number 74808E


Department of the Treasury Date:
Internal Revenue Service August 5, 2022
IRS Tax Exempt and Government Entities Taxpayer ID number:

Form:

Tax periods ended:
Person to contact:
Name:
ID number:
Telephone . os

Fax :
Address:

Manager's contact information:
Name:
ID number:
Telephone:

Response due date:
September 6, 2022

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 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.

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F

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.

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,
Ys
for Lynn A. Brinkley
Acting Director, Exempt Organizations Examinations

Enclosures:

Form 886-A

Form 6018

Form 4621-A

Publications 892 & 3498-A

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
Date of Notice: ;
Issues:
Whether ( ), which qualified for

exemption from Federal income tax under Section 501(c)(3) of the Internal Revenue Code,
should be revoked due to its failure to respond and produce records?

Facts:

applied for tax-exempt status by filing the Form
1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of
the Internal Revenue Code, on , , and was granted tax-exempt status as a
501(c)(3) on , with an effective date of

An organization exempt under 501(c)(3) needs to be organized and operated exclusively
for religious, charitable, scientific, testing for public safety, literary or educational purposes
and to foster national and amateur sports competition.

The organization was selected for audit to ensure that the activities and operations align
with their approved exempt status.

The organization failed to respond to the Internal Revenue Service attempts to obtain

information to perform an audit of for the tax year ,
The Form 1023-EZ application list the phone number of -~ - for the
; , Of .

Per the State of Hawaii website, it lists the organization as active and in good standing,

copy attached from state website. The State of website indicates Articles of
Incorporation were filed on , however they were not available for
viewing.

• Correspondence for the audit was as follows:

o Letter 6031 (Rev. ) with attachments, was mailed to the organization
on , , with a response date of , . Certified
letter number: . This letter was returned by the

post office as being undeliverable on ,

o Letters 6031 (Rev. ) with attachments, were mailed to three different
addresses located for the organization since the initial letter 6031 was
returned as undeliverable. Letter 2A went to the new address on IDRS, letter

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


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

Name of Taxpayer Year/Period Ended

2B went to the location address of the organization and letter 2C went to the

address from the most currently filed . The letters were sent on
, , with a response date of , . Letter 6031 2B
was returned as undeliverable on , . Letters 2A and 2C did

not come back as undeliverable.

o Letters 6031 #3A & #3B with Form 4564, Pubs 1 & 3498-A and Notice 609

was sent to the ( . .) at her home address, tracking number
and a board member at her home address as

well, tracking number: . The . . received her
letter on , , and the board member received hers on ,

o Letter 3844-A (Rev. ) with attachments, was mailed certified to the
Organization’s address found on IDRS and the .. address again ;

, with a response date of , , Article Numbers
and , respectively. Per the

United States Postal Service (USPS) tracking, both letters were refused and
returned to the Service Center on ; , and , ,
respectively.

o Letter 5077-B (Rev. ) with the initial form 4564, Copy of the

organization’s Form 1023-EZ, Letter 947, and
were mailed certified to the Organization’s address found on IDRS and the
address again , , with a response date of ;
Article Numbers . and
, respectively. Per the United States Postal Service (USPS) tracking, the
letter for the IDRS address was undeliverable received in Service
Center on ' . The letter to the . . was unclaimed and returned
to the Service Center on ,

• Telephone contact for the audit was as follows:

o , , Tax Compliance Officer (TCO) called the phone number
listed on the Form 1023-EZ application and for the of
the organization,( ) - for the initial contact. The person that
answered said he did not receive any letter from the IRS and refused to talk
to me.

o        , I attempted to call the again and had to leave a voice
message. Through external research I located a phone number for other

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

Form 886-A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
. The & , phone number
was - . I was unable to even get a phone connection with this
number. I located the phone number of -  - . TCO
attempted to contact the . . at this number, received a voice mail service

that indicated the mailbox was full. TCO was unable to leave a message. I
researched some more and found a cell number for the . ., - . I
contacted her and she verified she was the of the
organization. She asked where I had sent the letter to in order to reach the
organizations. She said she thought the IDRS address should be right. She
said she would contact other of the organization and would get back
to me.

o , , I called the . ., - + , and had to leave a voice
message that their response for our letter was past-due.

o , , I again tried calling the . ., - oe , again and had to
leave another voice message that their response was past due.

o        , , I received a phone message through my manager that the
and called and left her phone number ( -_~ - ). I
called her back and she indicated she had nothing to do with this organization
anymore and it was her half-brother that put together the organization. I
explained if no one responded to us we would have to revoke their
organization’s exempt status.

o        ; , I called the . . again and had to leave a voice message to
call me back and to respond to our letter sent to her. I also called the
number again and it went straight to voicemail but no message
system is set up for me to leave a message to him.

Law:

Internal Revenue Code (IRC) §501(c)(3) of the Code provides that an organization
organized and operated exclusively for charitable or educational purposes is exempt from
Federal income tax, provided no part of its net earnings inures to the benefit of any private
shareholder or individual.

IRC §511 of the Internal Revenue Code imposes a tax at corporate rates under section 11
on the unrelated business taxable income of certain tax-exempt organizations.

IRC §6001 of the Code provides that every person liable for any tax imposed by this title,
or for the collection thereof, shall keep such records, render such statements, make such
returns, and comply with such rules and regulations as the Secretary may from time to

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

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

Name of Taxpayer Year/Period Ended

time prescribe. Whenever in the judgment of the Secretary it is necessary, he may require
any person, by notice served upon such person or by regulations, to make such returns,
render such statements, or keep such records, as the Secretary deems sufficient to show
whether or not such person is liable for tax under this title.

IRC §6033(a)(1) of the Code provides, except as provided in section 6033(a)(2), every
organization exempt from tax under section 501(a) shall file an annual return, stating
specifically the items of gross income, receipts and disbursements, and such other
information for the purposes of carrying out the internal revenue laws as the Secretary may
by forms or regulations prescribe, and keep such records, render under oath such
statements, make such other returns, and comply with such rules and regulations as the
Secretary may from time to time prescribe.

Treasury Regulations (Regulation) 1.501(c)(3)-1 In order to be exempt under
§501(c)(3) the organization must be both organized and operated exclusively for one or
more of the purposes specified in the section. (religious, charitable, scientific, testing for
public safety, literary or educational).

Regulation §1.501(c)(3)-1(a)(1) of the regulations states that in order to be exempt as an
organization described in section 501(c)(3), an organization must be both organized and
operated exclusively for one or more of the purposes specified in such section. If an
organization fails to meet either the organizational test or the operational test, it is not
exempt.

Regulation 1.501(c)(3)-1(c)(1) of the regulations provides that an organization will not be
regarded as "operated exclusively" for one or more exempt purposes described in section
501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance
of a 501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under
section 501(c)(3) of the Code.

Regulation §1.6001-1(c) of the Code provides that such permanent books and records as
are required by paragraph (a) of this section with respect to the tax imposed by section
511 on unrelated business income of certain exempt organizations, every organization
exempt from tax under section 501(a) shall keep such permanent books of account or

records, including inventories, as are sufficient to show specifically the items of gross
income, receipts and disbursements. Such organizations shall also keep such books and
records as are required to substantiate the information required by section 6033. See
section 6033 and §§ 1.6033-1 through 1.6033-3.

Regulation §1.6001-1(e) of the Code provides that the books or records required by this
section shall be kept at all time available for inspection by authorized internal revenue
officers or employees, and shall be retained as long as the contents thereof may be
material in the administration of any internal revenue law.

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

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

Name of Taxpayer Year/Period Ended

Regulation §1.6033-1(h)(2) of the regulations provides that every organization which has
established its right to exemption from tax, whether or not it is required to file an annual
return of information, shall submit such additional information as may be required by the
district director for the purpose of enabling him to inquire further into its exempt status and
to administer the provisions of subchapter F (section 501 and the following), chapter 1 of
the Code and section 6033.

Regulation §1.61-1 of the regulations provides that Gross income means all income from
whatever source derived, unless excluded by law. Gross income includes income realized
in any form, whether in money, property, or services. Income may be realized, therefore, in
the form of services, meals, accommodations, stock, or other property, as well as in cash.

Rev. Rul. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to
produce a financial statement and statement of its operations for a certain year. However,
its records were so incomplete that the organization was unable to furnish such
statements. The Service held that the failure or inability to file the required information
return or otherwise to comply with the provisions of section 6033 of the Code and the
regulations which implement it, may result in the termination of the exempt status of an
organization previously held exempt, on the grounds that the organization has not
established that it is observing the conditions required for the continuation of exempt
status.

Organization’s Position
Taxpayer's position is unknown at this time.
Government's Position

Based on the above facts, the organization did not respond to verify that they are
organized and operated exclusively for one or more of the purposes specified in IRC
Section 501(c)(3). If an organization fails to meet either the organizational test or the
operational test, it is not exempt.

In accordance with the above-cited provisions of the Code and regulations under
sections 6001 and 6033, organizations recognized as exempt from federal income tax
must meet certain reporting requirements. These requirements relate to the filing of a
complete and accurate annual information (and other required federal tax forms) and
the retention of records sufficient to determine whether such entity is operated for the
purposes for which it was granted tax-exempt status and to determine its liability for any
unrelated business income tax.

Section 1.6033-1(h)(2) of the regulations specifically state that exempt organizations
shall submit additional information for the purpose on enabling the Internal Revenue
Service to inquire further into its exempt status.

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -5-

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

Name of Taxpayer Year/Period Ended

Using the rationale that was developed in Revenue Ruling 59-95, the Organization’s
failure to provide requested information should result in the termination of exempt
status.

Conclusion:

Based on the foregoing reasons, the organization does not qualify for exemption under
section 501(c)(3) and its tax-exempt status should be revoked.

It is the IRS's position that the organization failed to establish that it meets the reporting
requirements under IRC §§ 6001 and 6033 to be recognized as exempt from federal
income tax under IRC § 501(c)(3). Furthermore, the organization has not established
that it is observing the conditions required for the continuation of its exempt status or
that it is organized and operated exclusively for an exempt purpose. Accordingly, the
organization's exempt status is revoked effective ;

Form 1120, U.S. Corporation Income Tax Return, should be filed for the tax periods
after ,

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -6-