Charity status revoked after failure to provide audit records

Plain-English summary

The IRS revoked an organization's section 501(c)(3) status after it failed to respond to repeated audit letters and telephone calls. The organization did not provide records of its receipts, expenditures, or activities, so the IRS could not verify that it remained organized and operated exclusively for exempt purposes. Citing sections 6001 and 6033 and Revenue Ruling 59-95, the IRS concluded that the organization had not established continued compliance with the conditions for tax exemption. The revocation was effective as of a date redacted from the public release.

Ruling snapshot

• Question: Did the organization continue to qualify under section 501(c)(3) when it did not respond to an audit or produce supporting records?
• Outcome: Revoked for failure to establish exempt operations and satisfy recordkeeping and reporting requirements
• Key authorities: IRC §§ 501(c)(3), 6001, and 6033; Treas. Reg. §§ 1.501(c)(3)-1, 1.6001-1, and 1.6033-1; Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

Date:
July 12, 2023

Taxpayer ID number (last 4 digits):

Form:

Release Number: 202340018
Release Date: 10/6/2023
UIL Code: 501.03-60

Tax periods ended:

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

Last day to file petition with United States Tax Court:
October 10, 2023

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 did not produce
documents to establish that you are organized and operated exclusively for exempt purposes within the meaning
of IRC Section 501(c)(3), and that no part of your net earnings inure to the benefit of private shareholders or
individuals. You failed to 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 Revenue Ruling 59-95, 1959-1 C.B. 627. As such, you failed to meet the requirements of IRC
Section 501(c)(3) and Treasury Regulations Section 1.501(c)(3)-1(a), in that you have not established that you
were organized and operated exclusively for exempt purposes and that no part of your earnings inured to the
benefit of private shareholders or individuals.

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.

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

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.

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

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,

Lynn 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
Internal Revenue Service
Tax Exempt and Government Entities

Date:
02/09/2023

Taxpayer ID number:

Form:

Tax periods ended:

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

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

Response due date:
March 11, 2023

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.

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.

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

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

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,

Sarah Secrist
For Lynn A Brinkley Acting Director,
Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018
Form 4621-A
Publication 892
Publication 3498-A

Letter 3618 (Rev. 8-2019)
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

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 to substantiate that the organization is
meeting the organizational and operational tests?

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 amatuer 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 Form 990-EZ for the tax year          .

The Form 1023-EZ application list the phone number of          for the
          of          .

Per the State          web-site, it lists the organization in good standing, copy
attached from state web-site.

* Correspondence for the audit was as follows:

    * Letter 6031 (Rev. 11-2021), Initial Exam Appointment, with attachments, was
    mailed to the organization on          , with a response date of
             . This letter was not returned by the          as being
    undeliverable.

    * Letter 6031 (Rev. 9-2022), Initial Exam Appointment, with attachments, was
    mailed to the organization on          , with a response date of
             . This letter was not returned by the          as being
    undeliverable.

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
Name of Taxpayer Year/Period Ended

* Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance
  Area, with attachments, was mailed certified to the
             on          , with a response date of
             , Article Number          . Per the
  (          ) tracking, this was returned on          at
             as unclaimed/max hold time expired. This letter was received
  back at the Internal Revenue Service on          .

* Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance
  Area, with attachments, was mailed certified to the          ,
  President, per Form 1023-EZ application, on          , with a
  response date of          . Article Number
             . Per          tracking this was unclaimed/max hold time expired and
  returned to the Internal Revenue Service on          at
             . This letter was received back at the Internal Revenue Service on
             .

* Letter 3844-A (Rev. 10-2021), Follow-Up - Exempt Organizations Compliance
  Area, with attachments, was mailed to the          , Vice President, on
             , with a response date of          . This letter
  was not return by the          as being undeliverable.

* Letter 5077-B (Rev. 1-2017), TE/GE IDR Delinquency Notice, was mailed to
  the          , on          , with a
  response date of          . This letter was not return by the
             as being undeliverable.

* Telephone contact for the audit was as follows:

    *          , Tax Compliance Officer (TCO) called the phone number
    listed on the Form 1023-EZ application for the President of
             there was no answer and the voicemail box had not been set up. No message
    was left.

    *          , through 990-EZ research we located a different phone
    number for the vice president of          , I received a voicemail box
    with the vice president’s name. Message was left requesting that they call
    back concerning the organization.

    *          , called the phone number listed on the Form 990-EZ for the
    Vice President of          and spoke to          TCO identified
    their self by giving their name and badge number.          verified the

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
Name of Taxpayer Year/Period Ended

address for the record and stated that it belonged to his          . He stated
that he would reach out to his          and have them reach out to use
regarding the Initial Contact Letter 6031.

*          , tried calling          , got voicemail left message to
  have          call us back.

*          , tried calling          , got voicemail left message
  giving name, and identification number, and phone number. I asked
             to return my phone call.

*          , in external research a new number was located for
  president of          , also tried          both numbers rang but
  there was no option to leave a voicemail. TCO also called the vice president
  at          , left voicemail to have vice president call us back.

*          , tried number for president of          , also tried
             both numbers rang but there was no option to leave a voicemail.
  TCO also called the vice president at          , left voicemail to have
  vice president call us back.

*          , in external research a new number was located for
  President of          , also tried          both numbers rang but
  there was no option to leave a voicemail. TCO also called the vice president
  at          , left voicemail to have vice president call us back.

*          , tried to call vice president at          , voicemail was
  not left.

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
511 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
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,

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

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended

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.

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

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

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended

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.

Using the rationale that was developed in Revenue Ruling 59-95, the Organization’s

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

Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended

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-