Charity loses exemption for unproven activities, poor records, and private benefit concerns

Plain-English summary

The IRS revoked a charity's § 501(c)(3) status after it failed to substantiate that its activities primarily served exempt purposes. The organization had one officer and director, provided only vague descriptions of its work, and did not supply evidence supporting the activities described during the examination. It failed to provide complete bank and third-party payment records or respond to repeated information requests. Available records showed apartment rent, restaurant, travel, taxi, entertainment, and other withdrawals without identifying the recipients or explaining an exempt purpose, so the organization did not establish that its earnings avoided private inurement. It also failed to maintain adequate books and repeatedly failed to file required annual returns. The IRS therefore revoked exemption and said contributions were no longer deductible.

Ruling snapshot

• Question: Did the organization continue to qualify under § 501(c)(3) despite inadequate records, missing returns, unsupported activities, and unexplained financial transactions?
• Outcome: Revocation.
• Key authorities: IRC §§ 501(a), 501(c)(3), 6033(a); Treas. Reg. §§ 1.501(c)(3)-1, 1.6033-1(h)(2); Rev. Rul. 59-95.

Full text (IRS public release)

~ Internal
Department of the Treasury Date:
f~ Revenue Service January 28, 2025

                                                                             ..-

lRS -. . •u • Government Entities Taxpayer ID number (last 4 digits}:

                                                                             Form:
     Release Number: 202517020
     Release Date: 4/25/2025

                                                                                       contact:
                                                                              Nam
                                                                              IDn
      Uil Code: 501.03-00                                                     Tele
                                                                              Fax:
                                                                             Last day to file petition with United States
                                                                             Tax Court:
                                                                              April 28. 2025

CERTIFIED ~LUL - Return Receipt Requested
Dear

Wby we are sending you this letter
This is a final determination that you don ·r qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 50l(a) as an organization described in IRC Section 50Hc)(3 ). effective
. Your detenuination letter dated . is revoked.
Our adverse detenuination as to yl'lur exempt stat1.1s was made for the follO\ving reasons: Our adverse
detennination as to your exempt status was made for the following reasons: You have not <lemonstrated that
you operated exclusiYely for exempt purposes \Vithin the meaning of Internal Revenue Code section 50 l (c )( 3 ).
You did not maintain adequate books and records of your finances and actiYities. You also did not respond to
om requests. for additional information about your finances and activities necessary to complete the
examination. In addition. there were bank transactions which inured to the benefit of your principal officer.
Consequently. you were unable to shO\v that no part of your net earnings inured to the benefit of a private
shareholder ,..1r individual. l\foreover. you operated for :1 private interest rather than a public interest. Treasury
Regulation section l.501( c)(3)-l(d)(l )(ii) pro\·ides that an organization is not operated exdusi..-ely for exempt
purposes unless it serves a public rather than a private interest.
Organizations that are not exempt under IRC Section 50 l generally are required to file federal income tax returns
and pay tax. where applicable. For funher instructions. forms and infom1ation please Yisit IRS.gov.
Contributions to your organization are no longer deductible under IRC Section 170.
\Vhat you must do if you disagree witb thi~ <letermination
If you want to contest our final detennination. you have 90 days from the date this determination letter was
mailed to you to file a petition 0r complaint in one of the three federal com1s listed belo\v.
How to file your action for declaratory judgment
If you decide to contest this detennination. you can file an action for declarato1y judgment under the proYisions
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 Com1 for the District of Columbia

                                                                                            Letter 6337 (Rev. 3-2024)
                                                                                            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 50l(c)(3).
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 if 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. Visit TaxpayerAdvocate.IRS.gov/contact-us or call 877-777-4778 (TTY /TDD 800-829-4059)
to find the location and phone number of your local advocate. Learn more about T AS and your rights under the
Taxpayer Bill of Rights at TaxpayerAdvocate.IRS.gov. Do not send your Tax Court petition to TAS. Use the
Tax Court address provided earlier in the letter. Contacting TAS does not extend the time to file a petition.
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. 3-2024)
                                                                                       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,
bu,: StidtU-
Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

                                                                                 Letter 6337 (Rev. 3-2024)
                                                                                 Catalog Number 74808E
                                                                                    Date:
                                                                                     03;19/2024



                                                                                    -
                                                                                    Taxpayer ID number:

                                                                                    Form:
                                                                                    11111
                                                                                    Tax periods ended:



                                                                                     N
                                                                                     ID
                                                                                    Te

CERTIF'IED :'\L\IL- Return Receipt Rec1ue..,ted

                                                                                   Response due date:
                                                                                    04, 18/2024

Dear
\Vby you're 1·eceiYing thi-. letter
\'e enck•sed a C('PY of our audit re1wn. f 1:,1111 886-A. Explanation r,fltems. explaiuing that we pn:1p,:i~e to ren-ike
y1.mr tax-exempt stan1::. a-. an c1rl!anizatkin de.;;cribed in Internal Ren:nue C,xle i IRC I Secti<1n 50 l I c H3 1.

If yon agree
If you haven· t already. plea::,e ~ign the endllsed F\:,rm 60 l S. C on-.ent t,::i Pn:,p(\sed Acti1::in. and remrn it to the
contact penon ,;;,ho,Yn at the top ,:,f thi;_. letter. \'e'll b-.ue a final adYerse hml:f detennining thar Yl'H aren't an
0rganizMic111 described in IRC Sect1 ..~n 50 He H3 for the peric•ds above.

Afrer we issue the final ach·erse determinnti,Jn letter. we ·n a1111ounce thar yciur ,:irganizati.:111 is 11.:1 k,nger eligible
to re...:eiYe tax dedm.:tible c..-mtribut1011s under IRC 5ectic1n 170.
If you clhagree
L Requ6t a meeting or releph,.1ne conference with the manager -,hl1\11 at the top of thi-,; lt>tter.

2. Send any infr1nnation you want 1i:-, to consider.

3. File a protest vvith the IRS Appeah Office. If you request a meeting with the manager or send additional
   information as stated in 1 and .2. abon:. ~\.111·11 still be able to file a protest with IRS Appeals Office after
   the meeting or ati:er we con.;,ider the information.
   The IRS Appeab Office is independent of the Exempt Organizations diYi:-.ion and resolves most disputes
   infonnally. If yc,u file a prC>test. the auditing agent may ask yon to sign a consent w extend the period of
   limitations fi:ir assessing: tax. This is to allow the IRS Appeals Office enough time to consider your case.
   For your protest to be Ya lid. it llllbt contain certain specific infonnation. including a statement of the
   facts. applicable law. and argument::, in :S.uppol1 \.-,f your position. For specific information needed for a
   valid prote,;,t. refer to Publication 892. How to Appeal an IRS Detemunation on Tax-Exempt Status.
   Fast Trad-: }>fodiation ffT:\1) referred to in PublicatiL,n 3-1-98. The Examination Process. generally doesn't
   apply UQ\Y that we ·ve issued rhi::. letter.
                                                                                                Letter 3618 (Rev. 3-2024)
                                                                                                Catalog Number 341309F

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. T AS 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,

                                                      Navi Mishra
                                                      Acting Group Manager
                                                      Exempt Organizations Examinations

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

                                                                                       Letter 3618 {Rev. 3-2024)
                                                                                       Catalog Number 34809F
                                                                                                   Schedule number
                              Department of the Treasury - Internal Revenue Service                or exhibit
  Form 886-A
   (May 2017)                     Explanations of Items

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

ISSUE:

Issue #1

Whether                                   's exempt status under Internal Revenue Code (IRC)
Section (Sec.) 501 (c)(3) should be revoked for failing to demonstrate that it operates primarily
for an exempt purpose and that no part of its net earnings inures to the benefit of an individual.

Issue #2

Whether                                     's exempt status under IRC Sec. 501 (c)(3) should be
revoked for the additional reasons that it failed to maintain adequate records and file an annual
return as required by IRC Sec. 6033(a).

FACTS:

                                's (Organization) Articles of Incorporation were filed in the
State of           on                    . The Articles of Incorporation state that the
Organization is organized and operated for charitable, scientific, and educational purposes
within the meaning of Section 501 (c)(3) of the Internal Revenue Code of 1986 ...

The Organization filed Form 1023-EZ, Streamlined Application for Recognition of Exemption
Under Section 501 (c)(3) of the Internal Revenue Code, on                        . The Form
1023-EZ reported that the organization's mission or most significant activities are, "


                  ." The Organization's application for exemption was approved and the
effective date of exemption was

The Organization has a single officer and director,                                          . During an interview
with             , he described the Organization's activities as follows:

Catalog Number 20810W Page 1 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

The Organization's website states,"
                                                      " Per the website, there is a $
registration fee to use this service. The website also contains information about a charity
                                  , and other projects that the Organization has worked on. The
website states that the Organization's activities further three tax-exempt purposes: scientific,
education, and/or charitable.

The Organization provided board of director meeting minutes for meetings held on
        , and               . The meeting minutes document the Organization filing its Articles
of Incorporation and Form 1023-EZ but do not mention any current or planned activities. There
is no mention of other officers or directors.

During the examination of the Organization's Form 990-N, for the tax periods ended
           and                   , the Organization failed to provide bank statements for
                 through                   for a checking account located at              . Per
the Organization, it also had bank accounts at
The Organization did not provide bank statements for these accounts. The Organization
provided its         summary for               , through                    . The
summary indicated the Organization received $                in deposits and made $           in
withdrawals from its         account. The           document did not show where the payments
received came from or where the withdrawals were sent to.

For the tax period ended                          , the                        statements show the following
sources of deposits:

                     Source of Deposit                                            Amount
                     Wire Transfer -                                               $:
                                                                                 r--
                     Deoosits                                                    ~
                                                                                   $
                              Credit -                                             $
                                                                                 ,-..-
                            Payments.                                             $
                             Payments                                             $
                           Payments                                               $
                    !Other Various Deposits                                       $
                     Total                                                        $'

For the tax period ended                          , the                        statements show the following
expenditures:

Catalog Number 20810W Page 2 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

Information Document Requests were issued on                     , and                , requesting
the missing bank statements, financial statements from third-party processor accounts, and
details about the Organization's activities. The Organization failed to respond to both
information document requests. The table below shows a list of the information requested
about the Organization's activities and when it was requested:

Catalog Number 20810W Page 3 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

          Reauest Date I                         Information Reauested




The Organization filed Form 990-N, Electronic Notice (e-Postcard), for the tax period ended
                  , on                   . To date, this is the    Form 990 series return that
has been filed by the Organization.

In          , the Organization sent a statement that explained that it had hired professionals to
complete the Organization's financial statements and file the appropriate IRS forms, however,
during Covid-19 the tasks were not completed. It further stated that effort was underway to
bring the Organization into compliance for each tax year beginning         to present.
the Forms 990, for the tax periods ended
     , have not been filed.

Catalog Number 20810W Page 4 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

Internal Revenue Code

IRC Sec. 501 (c)(3) provides for the recognition of exemption of organizations that are
organized and operated exclusively for religious, charitable, or other purposes as specified in
the statute. No part of the net earnings may inure to the benefit of any private shareholder or
individual.

IRC Sec. 6033(a)(1) establishes that, except as provided in paragraph 3, every organization
exempt from tax under IRC Sec. 501 (a) shall file an annual return, stating specifically the terms
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 form 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 (Treas. Reg.)

Treas. Reg. 1.501 (c)(3)-1 (a)(1) states that in order to be exempt as an organization described
in IRC Sec. 501 (c)(3), an organization must be both organized and operated exclusively for
one or more of the purposes described in IRC Sec. 501 (c)(3).

Treas. Reg. 1.501 (c)(3)-1 (c) states that an organization will be regarded as operated
exclusively for one or more exempt purposes only if it engages in activities which accomplish
one or more of such exempt purposes specified in IRC Sec. 501 (c)(3). An organization will not
be so regarded if more than an insubstantial amount of its activities is not in furtherance of an
exempt purpose. An organization is not operated exclusively for one or more exempt purposes
if its net earnings inure in whole or part to the benefit of private shareholders or individuals.

Treas. Reg. 1.6033-1 (h)(2) 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 purposes
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 IRC Sec. 6033.

Revenue Ruling (Rev. Rul.)

Rev. Rul. 59-95, 1959-1 CB 627 provides that a failure to file required information return or
comply with the provision of IRC Sec. 6033 and the regulations which implement it, may result
in the termination of the exempt status of an organization previously held exempt, because the
organization has not established that it is observing the conditions required for the continuation
of an exempt status.

Catalog Number 20810W Page 5 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

TAXPAYER'S POSITION:

 Issue #1

Whether                                     's exempt status under IRC Sec. 501 (c)(3) should be
revoked for failing to demonstrate that it operates primarily for an exempt purpose and that no
part of its net earnings inures to the benefit of an individual.

The taxpayer's position is unknown at this time.

Issue #2

Whether                                     's exempt status under IRC Sec. 501 (c)(3) should be
revoked for the additional reasons that it failed to maintain adequate records and file an annual
return as required by IRC Sec. 6033(a).

The taxpayer's position is unknown at this time.

GOVERNMENT'S POSITION:

Issue #1

Whether                                     's exempt status under IRC Sec. 501 (c)(3) should be
revoked for failing to demonstrate that it operates primarily for an exempt purpose and that no
part of its net earnings inures to the benefit of an individual.

It is the Government's position that the Organization does not qualify as an organization
described in IRC Sec. 501 (c)(3) because it has not demonstrated that it is operated exclusively
for an exempt purpose or that no part of its net earnings inures to the benefit of an individual.

Under Treas. Reg. 1.501 (c)(3)-1 (a)(1 ), an organization must be both organized and operated
exclusively for purposes described in IRC Sec. 501 (c)(3) in order to be exempt as an
organization described in IRC Sec. 501 (c)(3). If an organization fails to meet either the
organizational test or operational test, it is not exempt. The operational test, Treas. Reg.
1.501 (c)(3)-1 (c), is specifically related to the purposes and activities of an organization. An
organization will only be regarded as operated exclusively for one or more exempt purposes if
it engages primarily in activities which accomplish one or more exempt purposes under IRC
Sec. 501 (c)(3).

The Organization presented           vague ideas about its activities on its Form 1023-EZ and
website. During an interview,                            provided a list of activities conducted by

Catalog Number 20810W Page 6 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

the Organization that may have furthered IRC Sec. 501 (c)(3). However, the Organization did
not respond to requests to provide substantiation that the activities were conducted.

The Organization does not meet the operational test under IRC Sec. 501 (c)(3) because it has
failed to establish that it is operating exclusively for charitable purposes.

IRC Sec. 501 (c)(3) describes, in part, that an organization exempt from tax is organized and
operated exclusively for charitable purposes if... no part of the net earnings inures to the
benefit of any private shareholder or individual.

The Organization did not respond to requests for the complete books and records for the
period under examination. There were bank accounts and other financial accounts that the
Organization did not provide statements for. The bank statements that were provided show
several withdrawals, rent payments for an apartment, expenditures for restaurants, travel
expenses, taxis, and entertainment tickets. The Organization did not provide who received the
funds or how the expenditures furthered an exempt purpose. The financial transactions of the
Organization did not show that the Organization's activities furthered an exempt purpose. The
Organization has not demonstrated that no part of its net earnings inures to the benefit of any
private shareholder or individual.

The Organization has not submitted sufficient information establishing it is operated exclusively
for IRC Sec. 501 (c)(3) purposes. The Organization has failed to demonstrate that no part of its
net earnings inures to the benefit of any private shareholder or individual.

Issue #2

Whether                                     's exempt status under IRC Sec. 501 (c)(3) should be
revoked for the additional reasons that it failed to maintain adequate records and file an annual
return as required by IRC Sec. 6033(a).

It is the Government's position that the Organization's exempt status under IRC Sec. 501 (c)(3)
should be revoked for the additional reasons that it failed to maintain adequate records and file
an annual return as required by IRC Sec. 6033(a).

IRC Sec. 6033(a)(1) states in part that, "Except as provided in paragraph (3), every
organization exempt from tax under IRC Sec. 501 (a) shall file an annual return ... ". The
Organization does not meet any of the exclusions provided for in paragraph 3 of IRC Sec.
6033.

Revenue Ruling 59-95, 1959-1 CB 627 held that failure or inability to file the required
information return or otherwise to comply with the provision of IRC Sec. 6033 may result in the
termination of the exempt status of an organization previously held exempt.

Catalog Number 20810W Page 7 www.irs.gov Form 886-A (Rev. 5-2017)
Schedule number
Department of the Treasury - Internal Revenue Service or exhibit
Form 886-A
(May 2017) Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended

The Organization received exemption under IRC Sec. 501 (c)(3) with an effective date of
exemption of                     . The Organization had a Form 990 series return due for the
tax periods ended on                                      ,                  , and
     . To date, the Organization has      filed a      Form 990-N, for the tax period ended


Revenue Ruling 59-95 and Treas. Reg. 1.6033-1 (h)(2) requires every organization which is
exempt from tax to submit additional information upon request by the Internal Revenue
Service.

The Service has requested the Organization to provide information for the purposes of
inquiring into its exempt status. The requested information was material in determining whether
the organization continues to qualify for exempt status under IRC Sec. 501 (c)(3) and whether
its net earnings inured to any private individual. The Organization failed to provide the
requested information and its director/officer explained that the Organization's books and
records were not adequately maintained.

The Organization's exempt status should be revoked for the additional reasons that it failed to
maintain adequate records and has repeatedly failed to file an annual return.

CONCLUSION:

The Organization's tax-exempt status under IRC Sec. 501 (c)(3) should be revoked because
the Organization has not responded to repeated requests for information about the
Organization's activities and financial records. By not providing the requested information, the
Organization has failed to demonstrate that it is conducting activities that further an exempt
purpose and that its net earnings are not inuring to the benefit of an individual. Additionally, the
Organization has failed to file a Form 990, for the tax periods ended
        , and

The Organization has failed to demonstrate that it meets the requirements to qualify as exempt
from federal income tax under IRC Sec. 501 (c)(3). Therefore, its exempt status under IRC Sec.
501 (c)(3) will be revoked effective                  . The Organization should file Forms
1120, U.S. Corporation Income Tax Return, for      tax years beginning on or after

Catalog Number 20810W Page 8 www.irs.gov Form 886-A (Rev. 5-2017)