Inactive nonprofit lost exemption after incomplete dissolution

Plain-English summary

A supporting organization told the IRS that it had ended operations, filed a final Form 990-EZ, and distributed its remaining assets to another section 501(c)(3) organization. It relied on a state administrative dissolution and declined to file formal articles of dissolution. The IRS concluded that the administrative action did not end the organization's corporate existence. The organization had conducted no exempt activities during the examined year, had no plans for future activities, and was only winding up and distributing assets. It therefore failed the section 501(c)(3) operational test and had not completed the required termination process. The IRS revoked its exemption effective on a redacted date.

Ruling snapshot

• Question: Did an inactive organization that distributed its assets but did not file articles of dissolution continue to qualify under section 501(c)(3)?
• Outcome: revocation
• Key authorities: IRC §§ 170, 501(c)(3), 503, 509(a)(3), 6043(b), 7428; Treas. Reg. §§ 1.501(c)(3)-1, 1.6043-3; Rev. Rul. 58-617

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service November 6, 2023
IRS Tax Exempt and Government Entities Taxpayer ID number (last 4 digits):

Form:

Tax periods ended:

Release Number: 202405011 Person to contact:
Release Date: 2/2/2024 Name:
UIL Code: 501.03-00 ID number:

Telephone:
Fax:

Last day to file petition with United States
Tax Court:

Tuesday, February 6, 2024
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 ceased operations
and conducting exempt activities under Internal Revenue Code (IRC) Section 501(c)(3). This causes you to fail
the operational test required under IRC Section 501(c)(3). Thus, because you are no longer operating and/or
conducting exempt activities, you do not meet the requirements of IRC Section 501(c)(3) and Treasury
Regulations Section 1.501(c)(3)-1. In addition, you did not submit your articles of dissolution nor did you
formally dissolve with the State, as specified within IRC Section 6043(b) and Treasury Regulations Section
1.6043-3.

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

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 Date:
Internal Revenue Service 9/19/2023
Tax Exempt and Government Entities

IRS Taxpayer ID number:

Form:
Tax periods ended:

Person to contact:
Name:

ID number:
Telephone:
Fax:

Address:

Manager's contact information:
Name:

CERTIFIED MAIL - Return Receipt Requested ID number:
Telephone:

Response due date:
October 4, 2023
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.

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 15 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,
For
Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A

Form 4621-A
Form 6018
Publication 892
Publication 3498

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

Department of the Treasury - Internal Revenue Service Schedule number or exhibit
Form 886-A
(May 2017) Explanation of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended
ISSUES:
Whether continues to qualify as an exempt organization under IRC
Section 501(c)(3).
FACTS:
(" ”) is incorporated under the laws of the State of as a
non-profit corporation on . The foundation was granted exemption under Internal Revenue
Code 501(c)(3) by Form M-0714 dated is classified

as a supporting organization with the meaning of Section 509(a)(3).

The Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year ending
, filed by was selected for examination to ensure that the organization’s activities and
operations were in compliance with IRC Section 501(c)(3). According to Form 990-EZ, primary
exempt purpose is to
in ,

An examination for tax year ending was opened. Initial contact letter 6031 was sent with
Form 4564 Information Document Request, Publication 1, Publication 5295, and Notice 609 on

with a response due date of . The correspondence requested a copy of any
amendments to governing instruments including Articles, Constitution and Bylaws, made to date, meeting
minutes, financial data to reconcile the Form 990-EZ to the organization's books and records.

responded to the initial Form 4564 Information Document Request on . The
spoke to ; and .
indicated that organization has terminated and Form 990-EZ tax year ending was their final
return. gave the phone number for and requested that communicate with
on the termination process of this examination. spoke to . and discussed the

required documentation to be submitted for the organization to properly terminate its exempt status.

sent Form 4564 Information Document Request # on with a response due date

of to ; , via secured email. Form 4564 Information Document
Request # requested the following documentation:

1. According to Form 990-EZ tax return ending and our telephone conversation,
dated , has terminated with final tax return
filed ending transferred its assets to

, Please provide documentation for the transfer of assets to

for example, bank statements, canceled checks and written statement of disposition
of assets.

4

2. Copy of Articles of Dissolution and proof of filing with the state of

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

Department of the Treasury - Internal Revenue Service Schedule number or exhibit
Form 886-A
(May 2017) Explanation of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended
called and spoke to ,on , and inquired about the response
to Form 4564 IDR # . requested more time to gather and submit the required documents.
and agreed to an extension of .
On , called and spoke to stated that needed

more time to obtain the required documentation pertaining to Form 4564 IDR # . An agreed extension was
set for

On ' received an email from ; , that stated the needed to
contact / . stated that . indicated that
would handle providing the required documents in ‘response to Form 4564 IDR # .

On ; called and spoke to . . Discussed F4564-IDR # and the
documents that were requested. . stated that would submit the documents by '
requested F4564-IDR # be sent to email:

On , . emailed a response to F4564-IDR #_ which included the following
documents:

1. Letter from the Secretary of the State of — Administrative Dissolution or Revocation for a
Non-Profit Corporation, dated . (See ).
2. Copy of partial Bylaws of , dated , which

highlighted Article . Dissolution Sections:

Article . Dissolution

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

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

3. Documents on Disposition of Assets, Letter -Summary of Contributions, dated between
to . Letter - Summary of Contributions and copies of checks and transfer wires that
documented distributions totaling $ to , an organization exempt
under IRC 501(c)(3). (See ).

On ; called and spoke to / .
discussed and explained that must file Articles of Dissolution with the State of to properly
terminate its existence. further explained that once the Articles of Dissolution are filed, a complete
copy of the Articles of Dissolution with proof of filing with the state, such as a" "stamp should be
sent to the . stated that needed to inquire about the filing of Articles of Dissolution
and would follow up with by

On ; emailed the following documents:

1. A copy of Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year

ending . See ).

2. Copy of sanitized meeting minutes dated and
. (See and ).
called and spoke to on . explained the requirement to file Articles

of Dissolution with Stato of to properly terminate the organization’s existence. further
explained the difference between termination and revocation stated that would respond
by about Articles of Dissolution. The organization’s former representative declared that the
organization had no operational or financial activities since ; discussed revocation with
the organization’s former representative on and understood the difference between an

organization's voluntary termination of its existence and Internal Revenues Service’s (IRS) proposed
revocation as organization is no longer operating for an exempt purpose.

On sent an email stating that spoke to an employee with the
Secretary of the State office who told that Articles of Dissolution were not filed by , and the State
administratively dissolved or revoked the non-profit corporation of

submitted a copy of the Secretary of the State document — Administrative Dissolution or
Revocation for a Non-Corporation, dated expressed that the employee of
the Secretary of the State office indicated that does not need to file Articles of Dissolution because
the State had administratively dissolved it non-profit corporation. (See ).

Catalog Number 20810W Page 3 www.irs.gov Form 886-A (Rev. 5-2017)

Department of the Treasury - Internal Revenue Service Schedule number or exhibit
Form 886-A
(May 2017) Explanation of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended
The review the Secretary of State website

, there was a section on

that provided the following description of
Administrative Dissolution:

is declining to file an Articles of Dissolution with the Secretary of the State

of to properly terminate its existence and, is accepting State of Administrative
Dissolution or Revocation for a Non-Profit Corporation, dated , as its official Article of
Dissolution.

Based on Form 990-EZ Short Form Return of Organization Exempt from Income Tax for tax year
ending , notated it to be their final return and terminating its exempt status, meeting minutes
dated ; indicating to file final return for the tax year ending ,and
discussion with , the organization had not been in operation since

LAW:

Internal Revenue Code §501(c)(3) 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.

Treasury Regulation Section 1.501(c)(3) 1(a) 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).

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order to be exempt as an organization
described in Section 501(c)(3) of the Code, 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.

Treasury Regulation Section 1.501(c)(3)-1(b)(4) holds that an organization is not organized exclusively for
one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's
assets will be considered dedicated to an exempt purpose, for example, if, upon dissolution, such assets

would, by reason of a provision in the organization's articles or operation of law, be distributed for one or
more exempt purposes.

Treasury Regulation Section 1.501(c)(3)-1(c)(1) 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

Catalog Number 20810W Page 4 www.irs.gov Form 886-A (Rev. 5-2017)

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

or more of such exempt purposes specified in Section 501(c)(3) of the Code. An organization will not be so
regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.

Treasury Regulation Section 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.

Treasury Regulation Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or
operated exclusively for one or more exempt purposes unless it serves a public rather than a private
interest.

Rev. Rul. 58-617, 1958-2 C.B. 260, holds that 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. The
District Director of Internal Revenue for the district in which the organization is located must be advised
immediately of any such changes in order that a determination may be made as to the effect the changes
may have upon the exempt status of the organization. See generally sections 1.501(a)-1 and 1.6033-1 of
the Income Tax Regulations. 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:

Whether continues to qualify as an exempt organization under IRC
Section 501(c)(3).
It is the position of that the organization has terminated its existence through the following actions:

1. filed a final return, Form 990-EZ Short Form Return of Organization Exempt from Income
Tax for tax year ending

2. All the assets of the organization have been distributed to . and copies of
checks.

3. has been administratively dissolved by the State of . They are relying on statements
from an employee of the Secretary of State of that it is not necessary to file Articles of
Dissolution.

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

Department of the Treasury - Internal Revenue Service Schedule number or exhibit
Form 886-A
(May 2017) Explanation of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended
GOVERNMENT'S POSITION:
Whether continues to qualify as an exempt organization under IRC

Section 501(c)(3).

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. During the year under examination, the organization did not conduct any

activities exempt under IRC 501(c)(3). In fact, has been inactive and has
no plans for future activities. The only activities during the year were wrapping up the organization and
distributing the assets. As such, had failed to meet the operational

requirements to continue its exemption status under IRC 501(c)(3).

During the course of this examination, you have informed the IRS that you have terminated the
organization. In IDR # you were informed of the termination procedures which included: (1) filing a final
return; (2) providing documentation of the distribution of the assets; and (3) submitting Articles of
Dissolution with the State of . In response you indicated that your Form 990-EZ for the year ended

was your final return, and you provided documentation that your final assets were distributed
to another organization exempt under IRC 501(c)(3). You did not submit the Articles of Dissolution because
your position is that it is not required. Since you have not filed Articles of Dissolution with the State of

, your corporate existence has not been terminated. According to the State of
Administrative dissolution does not mean that your corporation has ceased its existence. Thus,
has failed to properly terminate its existence

CONCLUSION:

Based on the information provided, the organization had not conducted any activities since it ceased
operations during the year ended . In addition, you did not properly terminate your
organization’s existence described in Section 501(c)(3) of the Code.

Based on the foregoing reasons, does not qualify for exemption from
Federal income tax under Section 501(c)(3) of the Internal Revenue Code and its tax-exempt status should
be revoked.

Accordingly, the organization’s exempt status is revoked effective

Catalog Number 20810W Page 6 www.irs.gov Form 886-A (Rev. 5-2017)