Trust lost exemption after failing to provide examination records

Plain-English summary

A trust recognized as a Section 501(c)(3) non-functionally integrated supporting organization was selected for examination. The IRS repeatedly requested records through an appointment letter, extensions, a delinquency notice, and a pre-summons letter, but the trust supplied no documents and did not otherwise respond. Without the requested records, the IRS could not determine whether the trust continued to operate exclusively for exempt purposes, avoided private benefit and inurement, and retained its supporting-organization classification. Citing Sections 6001 and 6033 and Revenue Ruling 59-95, the IRS revoked the trust's exemption because it failed to establish continued compliance with the conditions for Section 501(c)(3) status.

Ruling snapshot

• Question: Did the trust establish that it continued to qualify under Section 501(c)(3) when it failed to provide examination records?
• Outcome: revocation
• Key authorities: IRC §§ 501(c)(3), 6001, 6033(a); Treas. Reg. §§ 1.6001-1(c), 1.6033-2(i)(2); Rev. Rul. 59-95

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service January 10, 2024
Tax Exempt and Government Entities

Taxpayer ID number (last 4 digits):

Form:

Release Number: 202414010 Tax periods ended:

Release Date: 4/5/2024

UIL Code: 501.03-00 Person to contact:
ID number:
Telephone:

Fax:

Last day to file petition with United States
Tax Court:

Wednesday, April 9, 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 are in violation of
Sections 6001 and 6033(a) of the Code because no records were provided after the IRS’s repeated attempts to
contact the Trust. Failure to comply with Section 6033 of the Code and the applicable regulations 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 an exempt
status. See Rev. Rul. 59-95. Here, the Trust’s failure to respond to the IRS’s repeated, reasonable requests for
information in connection with the examination constitutes a failure on the part of the Trust to demonstrate
continued compliance with the requirements in Section 501(c)(3) of the Code.

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.

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.

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

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.

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.

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

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,

| A
yl

Lynn A. Brinkley

Director, Exempt Organizations Examinations
Enclosures:
Publication 1
Publication 594

Publication 892

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

Date:
3) Department of the Treasury . September 1, 2023

iViy | Internal Revenue Service Taxpayer ID number:
IRS Tax Exempt and Government Entities
“ Exempt Organizations Examinations

Form:
Tax periods ended:

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

Manager’s contact information:
Name:
ID number:

Telephone:
Response due date:
October 2, 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 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 34809F

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).

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

Sincerely,

Digitally signed by Laura J.

Laura J. Chambers chambers
Date: 2023.08.30 10:24:40 -05'00'

for Lynn A. Brinkley

Director, Exempt Organizations

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

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

Form 886-A Department of the Treasury — Internal Revenue Service Schedule number or
(May 2017) Explanations of Items “
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
ISSUE
Whether (the ) continues to qualify for
exemption under Section 501(c)(3) of the Internal Revenue Code?
FACTS
Overview
The was created by a will from which directs ,
' and ; , (the ), to establish a
for payments to ( ) located at
. On , the filed Form 1023 with the
Internal Revenue Service (IRS) requesting exemption as a non-functionally integrated supporting
organization under Sections 501(c)(3) and 509(a)(3) of the Code. The activity of the is
to make distributions to . The assets of the are invested and net income
is distributed by the to . On , the IRS issued a letter granting
the ’s application for exemption submitted on Form 1023. The Form 990 for tax year
ending , Was selected for examination and was assigned to an on
. The did not cooperate with the examination by providing the requested

records as required under Sections 6001 and 6033(a) of the Code.

Form 1023
The submitted Form 1023 requesting exemption on . The was
created in based on the of created on , with
updates to the will on , and
In the will states, “

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
(May 2017) Explanations of Items “nm
Name of taxpayer Tax Identification Number (last 4 digits). | Year/Period ended
consists of property, or the proceeds therefrom, part of the
. The does not allow for any other forms of income to be
generated by the . The has no by-laws or any similar code of regulations.
Form 1023 stated that as of , the had the following assets & liabilities:
Assets Book Value
Consolidated fund-- $
common stock
Consolidated fund-- $
fixed income
Total Assets $
Total Liabilities $
When Form 1023 was filed, the had no plan to engage in any fund-raising activities or any
business enterprise, other than the management of its assets by its
is the of the . was not and is not controlled, directly or indirectly,
by , the , or by of family or entities owned by
them, or by the . is compensated in accordance with its standard fee
schedule.
Determination Letter
On , the IRS issued a letter granting the ’s application for exemption
submitted on Form 1023. In such letter, the IRS determined that the was a tax-exempt

organization described in Section 501(c)(3) of the Code, as well as a supporting organization
described in Section 509(a)(3) of the Code.

Form 990EZ

The Form 990EZ for tax year ending , shows the checked the box
Section 501(c)(3) of the Code as its exempt status.

Section 509(a)(3) Status

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

. Department of the Treasury — Internal Revenue Service Schedule number or
Form 886-A . exhibit
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) | Year/Period ended
The initial focus of the examination of the ’s Form 990 for the tax year ending

, was the issue of foundation status under Section 509 of the Code; in particular, continued
classification as an organization described in Section 509(a)(3) of the Code. However, this report
does not address the foundation classification issue because of the ’s failure to respond to
any of the requests for documentation.

Examination Procedure

* Precontact analysis of the Form 990-EZ return was started and completed on .
The appointment letter and Information Document Request (IDR) number was mailed on the

same date. received no response from the by the due date

* On prepared and mailed Letter 5798 giving the a
extension to provide the requested records. The did not respond to the
extension letter.
* The instructed the to issue a
IDR extension on . The prepared and mailed the
extension letter on . The letter was sent via certified mail addressed to the
name listed on the Form 990-EZ. The did not respond to the extension
letter.

* On ; received a returned card showing letter was received by
the . called the using telephone number listed on Form 990EZ and
spoke to a at . The receptionist did not have authority over or
connection with the . The receptionist provided the with a mail stop number
where records requests can be sent.

* On prepared Letter 5077-D, delinquency notice, stating next step is
to summons records if records not received by due date . mailed
Letter 5077-D to the at the mail stop number provided during the

phone call. Examiner did not receive any of the records requested by the due date stated in
Letter 5077-D.

* On prepared Letter 5077-A (pre summons) and email to for
signature and mailing. The Letter 5077-A was mailed to the on , with
a stated due date of
* As of the date of this report, the has not provided any of the documents requested by
or otherwise responded to written requests for documents.

* Held all appropriate meetings per the Internal Revenue Manual 4.75.10.

LAW

Code Section 501(c)(3) - 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

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

Form 886-A Department of the Treasury — Intemal Revenue Service Schedule number or

(May 2017) Explanations of Items oxnipl

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

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 (h)), and which does not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or in opposition to) any candidate
for public office.

Code Section 4947(1) - Charitable trusts.- For purposes of part II of subchapter F of chapter 1
(other than section 508(a), (b), and (c)) and for purposes of this chapter, a trust which is not
exempt from taxation under section 501(a), all of the unexpired interests in which are devoted to
one or more of the purposes described in section 170(c)(2)(B), and for which a deduction was
allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522 (or the corresponding
provisions of prior law), shall be treated as an organization described in section 501(c)(3).

Code Section 6001 provides that every person liable for any tax imposed by Title 26, 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, render such statements, or
keep such records, as the Secretary deems sufficient to show whether or not such person is liable
for tax under Title 26.

Code Section 6033(a)(1) provides, except as provided in section 6033(a)(3) , every organization
exempt from taxation 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 purpose of
carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and
shall 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 Section 1.6001-1(c) Exempt organizations. In addition to 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.

Treasury Regulations Section 1.6033-2(i)(2) Every organization which is exempt from tax, whether
or not it is required to file an annual information return, shall submit such additional information as
may be required by the Internal Revenue Service for the purpose of inquiring into its exempt
status and administering the provisions of Subchapter F (section 501 and following), Chapter 1 of
Subtitle A of the Code, section 6033, and Chapter 42 of Subtitle D of the Code. See section 6001

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

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

and § 1.6001-1 with respect to the authority of the district directors or directors of service centers
to require such additional information and with respect to the books of account or records to be
kept by such

In Revenue Ruling 59-95, 1959-1 C.B. 627, an exempt organization 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.

The court in Church of Spiritual Technology v. United States, 26 Cl. Ct. 713, 729-730 (1992), aff'd
w/o opinion, 991 F.2d 812 (Fed. Cir.), cert. denied, 510 U.S. 870, (1993), stated that the applicant

bears the burden of showing it is entitled to exemption.

In Harding Hospital, Inc. v. United States, 505 F.2d 1068, 1071 (6th Cir. 1974), the court stated
that tax exemptions "must be strictly construed, with any doubts to be resolved in favor of the
taxing entity."

TAXPAYER POSITION

The taxpayer's position is unknown at this time.

GOVERNMENT POSITION

The Government determines that the is in violation of Sections 6001 and 6033(a) of the
Code for not providing the requested records needed to complete the examination of Form 990EZ

for tax year ending . After written requests, the did not provide
records or try to contact the examination to discuss the document requests.

Failure to comply with Section 6033 of the Code and the applicable regulations may result in the

termination of the exempt status of an organization held exempt, on the grounds that
the organization has not established that it is observing the conditions required for the continuation
of an exempt status. See Rev. Rul. 59-95. Specifically, the has failed to produce

documents, records, or other information to establish that it operated exclusively for one or more
exempt purposes set forth in section 501(c)(3), was not operated for the benefit of private
interests, or that a part of its net earnings did not inure to the benefit of private individuals.
Therefore, the has not established that it is observing the conditions required for the
continuation of tax-exempt status under Section 501(c)(3) of the Code.

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

Form 886-A Department of the Treasury — Internal Revenue Service Schedule number or

(May 2017) Explanations of Items exhibit

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

Accordingly, revocation is warranted.
Conclusion

The is in violation of Sections 6001 and 6033(a) of the Code because no records were
provided after the IRS’s repeated attempts to contact the . Failure to comply with Section
6033 of the Code and the applicable regulations 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 an exempt status.
See Rev. Rul. 59-95. Here, the ’s failure to respond to the IRS’s repeated, reasonable
requests for information in connection with the examination constitutes a failure on the part of the

to demonstrate continued compliance with the requirements in Section 501(c)(3) of the
Code.

Accordingly, it is proposed that the 's exempt status be revoked effective .
Should this revocation be upheld, Form 1041, U.S. Income Tax, should be filed for the tax
year ending , and the tax years thereafter.

If you agree, please sign the attached Forms.

If you disagree, please submit a statement of your position and explanation.

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