Exempt status revoked after years of inactivity

Plain-English summary

A section 501(c)(3) public charity had been dormant and out of operation for several years. Its current and prior Forms 990-EZ reported no income, expenses, assets, or liabilities for the periods described in the examination report. The IRS concluded that the organization could not demonstrate that it operated for one or more exempt purposes and therefore failed the operational test. The IRS revoked its tax-exempt status and stated that contributions would no longer be deductible under section 170. The final letter explains that the organization could seek declaratory review in one of three federal courts within 90 days.

Ruling snapshot

• Question: Should the organization's section 501(c)(3) status be revoked because it had no operations or financial activity for several years?
• Outcome: Revoked
• Key authorities: IRC §§ 501(a), 501(c)(3), 170, and 7428; Treas. Reg. § 1.501(c)(3)-1

Full text (IRS public release)

Department of the Treasury Internal Date:
Revenue Service 08/17/2023

IRS Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):

Form:

Release Number: 202346029 Tax periods ended:
Release Date: 11/17/2023
UIL Code: 501.03-00

Person to contact:
Name:

ID number:
Telephone:
Fax:

Last day to file petition with United States
Tax Court: 11/16/2023

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: Organization fails the

operational test because you could not demonstrate that you operated for one or more exempt purposes as
required by IRC Section 501(c)(3).

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

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:

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

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
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 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.

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

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 Date:
Internal Revenue Service 5/26/2023
Taxpayer ID number:
IRS Tax Exempt and Government Entities

Form:
Tax periods ended:

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

Manager’s contact information:
Name:
ID number:

Telephone.
Response due date:

June 26, 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.

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.

Letter 3618 (Rev. 8-2019)
Catalog Number 3480SF

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.

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).

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

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

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

Sincerely,

Lynn A. Brinkley
Director, Exempt Organizations Examinations

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

Form 886-A Department of the Treasury — Internal Revenue Service Schedule number
or exhibit
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
ISSUES:

1. Whether , (taxpayer) is subject to revocation due to inactivity.
FACTS:

; is recognized as exempt under Internal Revenue Code section 501(c)(3) with
public charity status 170(b)(1)(A)(ii), and with the effective date of exemption being '
. The taxpayer’s location is ; ; .

The taxpayer was subject to an examination for the year ending : . During the
call with the Chief Financial Officer (CFO), it was determined that the organization is currently not
in operation and has not been for several years. The taxpayer's Form 990-EZ reflected $
for income, expenses, assets, and liabilities. Additionally, prior years ( and ) Forms
990-EZ reflect $ for income, expenses, assets, and liabilities.

Below are some parts of a written statement obtained by :

. was initially supposed to serve as a through which

could and their . But due to operational efficiencies of
operating the through ; ;

was left dormant with instead offered and operated through


“Accordingly, the information submitted on the Form 990-EZ for [illegible]
reflected $ for income, expenses, and assets is accurate and reflects the dormant status of
’s activities and operations during the tax year at issue.”

LAW:

Section 1.501(c)(3)-1 of the Code 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.

Section 1.501(c)(3)-1(c)(1) of the Code states 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). An organization
will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an
exempt purpose.

Catalog Number 20810W Page 1 www.irs.gov Form 886-A (Rev. 5-2017)

Form 886-A Department of the Treasury — Internal Revenue Service Schedule number or exhibit
(May 2017) Explanations of Items

Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended

TAXPAYER’S POSITION
' has stated that they are currently not in operation and have been for several

years.
GOVERNMENT’S POSITION
It is the Service’s position to propose revocation to : due to the lack of

operations and financial activity. The taxpayer does not meet the operational test under Section
1.501(c)(3)-1(c)(1) of the Code.

CONCLUSION

, does not meet the operational test under Section 1.501(c)(3)-1(c)(1) of the
Code. Therefore, organization does not qualify for exemption under 501(c)(3) and its tax exempt
status should be revoked effective , .

Catalog Number 20810W Page 2 www.irs.gov Form 886-A (Rev. 5-2017)