IRS revokes 501(c)(3) status of a charity that ran a private poker club, for gaming as its primary activity and inurement to its director

Plain-English summary

The IRS revoked the tax-exempt charity status of an organization whose main
activity was running a private, members-only poker club (daily poker tournaments,
casino nights) that operated seven days a week and paid out large cash prizes. The
group had been recognized under section 501(c)(3) on the theory that gaming
proceeds would support other children's charities. On audit, the IRS concluded on
two independent grounds that it no longer qualified. First, it fails the operational
test: gaming is a recreational activity and a business, not inherently charitable,
and running the poker club was a substantial (indeed primary) non-exempt purpose,
so donating some profits to charity does not save it (the IRS cited Piety, Inc. and
section 502, the "feeder organization" rule). Second, its earnings improperly
benefited a private individual (inurement): the Executive Director used the
organization's bank accounts and assets to pay personal credit-card charges,
including airfare for family, and to fund his own for-profit businesses. No amount
of inurement is allowed for a 501(c)(3). The result is a final adverse
determination revoking exemption retroactively, meaning contributions are no longer
deductible under section 170 and the organization must file income tax returns and
pay tax for the years at issue. The document packages the Appeals Office final
letter (Letter 1371), the earlier proposed-revocation letter (Letter 3618), and the
examiner's audit report (Form 886-A).

Ruling snapshot

• Question: Should a 501(c)(3) organization that primarily operates a private poker club and whose director diverts funds to himself keep its exempt status?
• Outcome: Revocation (final adverse determination; exemption revoked retroactively)
• Key authorities: IRC §§ 501(c)(3), 502, 170; Treas. Reg. § 1.501(c)(3)-1(a)(1), (c)(1), (c)(2), (d), (e)(1); Better Business Bureau v. United States, 326 U.S. 279; Piety, Inc. v. Commissioner, 82 T.C. 193; Rev. Rul. 71-447

Full text (IRS public release)

Department of the Treasury                                    Date: JUL 09 2025
Internal Revenue Service
IRS Independent Office of Appeals                             Form:

                                                              Tax periods ended:

                                                              Person to contact:

                                                              Name:

                                                              Employee ID Number:
Release Number: 202540018                                     Phone:
Release Date: 10/3/2025                                        Hours:

UIL Code: 501.03-00, 501.33-00, 508.01-01

Uniform issue list (UIL):
501.03-00, 501.33-00, 508.01-01

Certified Mail
Dear

Why you are receiving this letter
This is a final adverse 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).

We've revoked the favorable determination letter to you dated ---------- and you're no longer exempt
under IRC Section 501(a) effective ----------.

We made the determination for the following reasons:

You have not demonstrated that you are organized and operated exclusively for an exempt purpose as described
in I.R.C. § 501(c)(3).

You do not meet the operational test under Treas. Reg. § 1.501(c)(3)-1(c)(1) because your private poker club
activities constitute more than an insubstantial part of your activities and do not further an exempt purpose.
Further, pursuant to I.R.C. § 502, the fact that some of the profits from your primary activity of operating a
private poker club, which constitutes carrying on a trade or business for profit, are allegedly payable to one or
more organizations exempt from taxation under I.R.C. § 501, is not a ground for exemption.

Moreover, under Treas. Reg. § 1.501(c)(3)-1(c)(2), an organization is not operated exclusively for one or more
exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals.
Payments to or on behalf of your Executive Director constitute impermissible inurement.

Contributions to your organization are not deductible under IRC Section 170.

What you need to know
After removing identifying information, this letter and the previously sent proposed adverse determination letter
will be made available for public inspection under IRC Section 6110.

In a separate mailing to you, we provided Letter 437, Notice of Intention to Disclose. Please review Letter 437
and the attached documents that show our proposed deletions.

What if you disagree
If you disagree with our proposed deletions, follow the instructions in Letter 437.

Letter 1371 (Rev. 8-2024)
Catalog Number 40663R

If you decide to contest this determination, you can file an action for declaratory judgment under the provisions
of IRC Section 7428 in either:

United States Tax Court        U.S. Court of Federal Claims      U.S. District Court for the
400 Second Street, NW          717 Madison Place, NW             District of Columbia
Washington, DC 20217           Washington, DC 20439              333 Constitution Avenue, NW
ustaxcourt.gov                 uscfc.uscourts.gov                Washington, DC 20001
                                                                 ded.uscourts.gov
Or eFile by visiting:
ustaxcourt.gov/dawson.html

* You must file a petition or complaint within 90 days from the date we mailed this determination letter to you.

* Be sure to include a copy of this letter, any attachments and the applicable filing fee with the
petition or complaint.

You can download a fillable petition or complaint form and get information about filing at each court's website
listed above.

Note: We won't delay processing income tax returns and assessing any taxes due even if you file a petition for
declaratory judgment under IRC Section 7428.

What you need to do in the future
Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax
returns and pay tax, where applicable.

Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676).

Taxpayer rights and sources for assistance

The Internal Revenue Code (IRC) gives taxpayers specific rights. The Taxpayer Bill of Rights groups these into
10 fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and
following these rights. For additional information about your taxpayer rights, please see the enclosed Publication 1,
Your Rights as a Taxpayer, or visit IRS.gov/taxpayer-bill-of-rights.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and
protects taxpayers' rights. TAS can offer you help if your tax problem is causing a financial difficulty, you've
tried but been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure
isn't working as it should. If you qualify for TAS assistance, which is always free, TAS will do everything
possible to help you. To learn more, visit TaxpayerAdvocate.IRS.gov or call 877-777-4778.

TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process. TAS
cannot reverse a legally correct tax determination, or extend the time fixed by law to file a petition in a United
States Court.

Tax professionals who are independent from the IRS may be able to help you.

State bar associations, state or local societies of accountants or enrolled agents, or other nonprofit tax
professional organizations may also be able to provide referrals.

Letter 1371 (Rev. 8-2024)
Catalog Number 40683R

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

Enclosures:
Publication 1

cc:

Sincerely,

Michael Faulkender
Acting Commissioner
By
Appeals Team Manager

Letter 1371 (Rev. 8-2024)
Catalog Number 40683R

Department of the Treasury                                    Date: July 20, 2023
Internal Revenue Service                                      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:

                                                              August 19, 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 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.

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

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

Sincerely,

For: 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
(May 2017)         Explanations of Items
Name of taxpayer         Tax Identification Number (last 4 digits)    Year/Period ended

ISSUES:

1. Whether ----------'s primary activity of operating a private poker club [does not]
further their exempt purpose of Charitable, and if they failed the required operational test to
qualify as an IRC 501(c)(3) organization for years under examination and therefore subject
to Revocation.

2. Whether the payments made to the Executive Director credit card and the Executive
Director's for-profit businesses from the exempt organizations bank accounts qualify as
inurement, therefor the organization is serving a private interest vs a public interest and the
operational test is not satisfied, ---------- is subject to revocation?

FACTS:
The organization (hereinafter, ----------) is exempt from taxation
under IRC § 501(c)(3), with a foundation classification 170(b)(1)(A)(vi). The relevant facts apply.

---------- received tax exempt status effective ----------. The articles of incorporation were
filed with the State ---------- on ----------.

The purpose for which this Corporation is organized ---------- exclusively for charitable, religious and scientific purposes, including, for such purposes, the
making of distributions to organizations that qualify as exempt organizations described under
section 501(c)(3) of the IRC. The 1023 application stated the activities of ---------- will be fundraising
and enterprise activities for the purpose of generating revenue in order to directly support and
enrich other charitable organizations with a focus on children through gaming (raffles, golf
tournaments, Fireworks sales, Poker Tournaments and food & toy drives).

The ---------- Secretary of State Charities Division sent in a referral stating
Directors/Officers/Persons are using income/assets for personal gain, organization is [illegible] in
commercial, for-profit business activities. The ---------- was operating an illegal poker room in
---------- that was paying out cash for winnings, which is [in] violation [of] law. The executive director of
---------- was transferring the exempt organizations funds to ----------.

The ---------- was selected for field examination for year ending
----------. During the exit conference of the field examination on
---------- [it was expanded] to subsequent years for year ending ---------- and year ending ----------.

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

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

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

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

Initial Interview with ---------- with Executive Director ----------

on ----------

Question- Give a brief history of the organization
Answer- Started ---------- years ago as bargain promotions, started in ---------- to provide
good paying jobs and shed a good light on poker, had raffle licenses and was having poker
and casino nights all over the state. In ---------- the organization opened up its own
poker room for its membership. ---------- money to for profit business, wellness
center and under water ---------- In ----------.

Question- Do you have a written mission statement that spells out your exempt purpose?
Answer- Teach other charities and individuals how to make money.

Question- Does the organization document their board meetings?
Answer- No documentation of board meetings.

Question- Does control of the organization rest in a single or a select few individuals?
Answer- Single

Question- What are the primary activities of the organization which accomplish its
purpose?
Answer- Charity tournaments open to nonmembers and all other poker events were just for
members who had signed contracts.

Question- What type of gaming did the organization conduct?
Answer- Poker (live game room & sit in Go), Casino nights (craps, roulette, blackjack)

Question- Who was the gaming manager and gaming employees?
Answer- Had a general manager, security, dealers, had four floor managers, chip runners and
had someone working in the cage. All workers were paid.

Question- What were the procedures for prize payouts?
Answer- Tournaments paid winners by check.

Question- Were there any restrictions (if any) on who may purchase and participate?
Answer- yes, 21 years age and a member, private club.

Question- Was there a maximum size of the prizes for the winners.
Answer- 4k on daily games and weeklong tournaments 30k.

Question- How many days a year does the gaming facility operate?
Answer- seven days a week normally.

Question- What are the hours of operation?
Answer- 2 pm to midnight during week and weekend 2 pm to 1 or 2 am.

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

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

Membership application provided during field examination on ----------

Below are images of the membership application, the full application will be Exhibit one at end of
this report.

    private club
    social charity club for people with like interest in Poker
    its commitment to being the best poker league in the State
    its commitment to creating a team and community of players who build relationships, win
    prizes and having fun.
    Different memberships and the different benefits certain members get.

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

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

Catalog Number 20810W       Form 886-A (Rev. 5-2017)

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

Below are images of some ---------- paid by the organization for ----------, ending ----------

Credit Card transaction

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

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

Below are images of some of ---------- Credit Card transactions
for year ending ----------

Catalog Number 20810W       Form 886-A (Rev. 5-2017)

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

LAW:

Treas. Reg. 1.501(c)(3)-1(a)(1): IRC 501(c)(3) requires an organization to be both "organized" and
"operated" exclusively for one or more IRC 501(c)(3) purposes. If the organization fails either the
organizational test or the operational test, it isn't exempt.

Section 1.501(c)(3)-1(a) of the Income Tax Regulations (Treas. Reg.) provides that in order to be
exempt as an organization described in IRC § 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.

Treas. Reg. § 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 or more of such exempt purposes specified in IRC § 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.

Treas. Reg. § 1.501(c)(3)-1(c)(2) provides that the operational test is not satisfied where any part
of the organization's earnings inure to the benefit of private shareholders or individuals, and where
the organization serves a private rather than a public interest.

The operational test focuses on the purpose and not on the nature of the activity. A substantial
non-exempt purpose will disqualify an organization from tax exemption despite the number or the
importance of its exempt purposes. Better Business Bureau v. United States; 326 U.S. 279 (1945).

Treas. Reg. 1.501(c)(3)-1(d)(2) provides that the term "charitable" is used in IRC 501(c)(3) in its
generally accepted legal sense. To emphasize that this does not mean simply relief of poverty, the
regulation lists the following examples of purposes which are charitable in the legal sense:

1. Relief of the poor and distressed or of the underprivileged,
2. Advancement of religion; advancement of education or science,
3. Erection or maintenance of public buildings, monuments or works,
4. Lessening the burdens of government and
5. Promotion of social welfare by organizations designed to accomplish any of the above
purposes or
    * to lessen neighborhood tensions,
    * to eliminate prejudice and discrimination,
    * to defend human and civil rights secured by law or
    * to combat community deterioration and juvenile delinquency.

Treas. Reg. 1.501(c)(3)-1(d)(1)(ii): To operate exclusively for exempt purposes, an organization
must serve a public rather than a private interest. Consequently, an organization that operates for
the benefit of private interests such as the creator or the creator's family does not operate
exclusively for exempt purposes.

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

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

Treas. Reg. Section 1.501(c)(3)-1(e)(1) provides that an organization may meet the requirements
of Section 501(c)(3) even though it operates a trade or business as a substantial part of its
activities, unless its primary purpose is carrying on of a trade or business that does not further
charitable purposes.

All charitable trusts (and by implication all charitable organizations, regardless of form) are subject
to the requirement their purposes not be illegal or contrary to public policy. Rev. Rul. 71-447,
1971-2 C.B. 230.

Piety, Inc., 82 T.C. 193 An organization whose sole activity is the operation of bingo games that
intends to contribute its profits to exempt organizations may not qualify for exemption on the
ground that it will donate its profits to exempt organization.

Variety Club Tent No. 6 Charities, Inc., T.C. Memo. 1997-575 The organization conducted bingo in
which inurement was present. The organization "operated in a manner materially different from
that originally represented." The organization was revoked retroactively.

B.S.W. Group, Inc. v. Commissioner, 70 T.C. 352 (1978).

If an activity serves a substantial nonexempt purpose, however, the organization does not qualify
for exemption even if the activity also furthers an exempt purpose. See Schoger Foundation v.
Commissioner, 76 T.C. 380 (1981).

Est. of Hawaii v. Commissioner, 71 T.C. 1067 (1979) where the court found that the organization
was set up to subsidize for-profit corporations.

Catalog Number 20810W       Page 9       www.irs.gov       Form 886-A (Rev. 5-2017)

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

GOVERNMENT'S POSITION
Issue 1:

Whether ----------'s primary activity of operating a private poker club [does not]
further their exempt purpose of Charitable, and if they failed the required operational test to
qualify as an IRC 501(c)(3) organization for years under examination and therefore subject
to Revocation.

Per Section 1.501(c)(3)-1(a) of the Income Tax Regulations (Treas. Reg.) provides that in order to
be exempt as an organization described in IRC § 501(c)(3), an organization must be both
organized and operated exclusively for one or more of the purposes specified in such section,
Religious, Charitable, Scientific, Testing for public safety, Literary, Educational, Fostering national
or international amateur sports competition and prevention of cruelty to children or animals. If an
organization fails to meet either the organizational test or the operational test, it is not exempt.
---------- organization as stated in the membership application is a private social club for people with
interest in poker and is committed to being the best poker league in the state. ---------- main
purpose of Poker and being a private social club don't meet the regulations of being operated
exclusively for purposes of a 501(c)(3) organization.
---------- main activity was conducting gaming (daily poker tournaments). Per the initial interview the
poker club was open normally 7 days a week from 2pm to midnight and the primary activity of
---------- that accomplish its purpose was stated to be Charity tournaments open to the public and all
other poker tournaments were for its members. A common misconception is that gaming is a
"charitable" activity. There is nothing inherently charitable about gaming. It is a recreational activity
and a business. Although a charity may use the proceeds from gaming to pay expenses
associated with its charitable programs, gaming itself does not further any charitable purpose.
Thus, gaming cannot be a more than an insubstantial purpose of a 501(c)(3) organization. Treas.
Reg. Section 1.501(c)(3)-1(e)(1) states that an organization may meet the requirements of
Section 501(c)(3) even though it operates a trade or business as a substantial part of its activities
unless its primary purpose is carrying on of a trade or business that does not further charitable
purposes. Per the initial interview and ---------- the ---------- gave donations that were not
documented to a local softball team and encouraged others to donate via ---------- peoples ----------
page. The organization charitable activities were insubstantial to its ---------- [primary activity of
gaming] holding Poker tournaments which don't further any charitable purpose. ---------- is very
similar to Piety, Inc. 82 T.C. 193 this organization whose sole activity was the operation of bingo
games that intended to contribute its profits to exempt organizations did not qualify for exemption
on the ground that it will donate its profits to exempt organizations. ---------- primary activity of
operating a private poker club (gaming) doesn't further any exempt purpose of an 501(c)(3)
organization and therefore it failed the required operational test and its exemption as a 501(c)(3)
should be revoked.

Catalog Number 20810W       Page 10       www.irs.gov       Form 886-A (Rev. 5-2017)

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

Issue 2:

Whether the payments made to the Executive Director credit card and the Executive
Director's for-profit businesses from the exempt organizations bank accounts qualify as
inurement, therefor the organization is serving a private interest vs a public interest and
the operational test is not satisfied, the ---------- is subject to
revocation?

During the initial interview conducted with the Executive Director on
----------, while providing a brief history of the organization stated giving money to for
profit business, wellness center and under water scuba academy in ----------. During the review of
the personal credit card statements of the Executive Director and the bank statements of ----------
reflected payments to the Credit card for personal expenses of the Executive director. The
personal expenses included multiple airplanes tickets to ----------
which included tickets for his
family and the CFO that was stated on the 1023 application ----------. Multiple personal
---------- were paid by the organization for the private benefit of the Executive Director.

Per Treas. Reg. § 1.501(c)(3)-1(c)(2) provides that the operational test is not satisfied
where any part of the organization's earnings inure to the benefit of private shareholders or
individuals, and where the organization serves a private rather than a public interest. During the
initial interview ---------- stated the control of the organization rest in a single person.

All these transactions qualify as inurement, based on ---------- position with ----------. As a
501(c)(3) organization no amount of inurement is allowed. Based on these transactions the
operational test is not satisfied, ---------- is serving a private benefit vs a public benefit and is subject
to revocation of its exempt status.

TAXPAYER POSITION:

During the initial interview the Executive director stated that "gaming (poker Tournaments) was on
the 1023 application for exemption, and it was approved."

During the Exit conference the Executive director stated, "that the Travel and hotel stays were for
people in need and considered donations of being charitable."

Catalog Number 20810W       Page 11       www.irs.gov       Form 886-A (Rev. 5-2017)

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

CONCLUSION:
Issue 1:

Whether ----------'s primary activity of operating a private poker club [does not]
further their exempt purpose [of] Charitable, and if they failed the required operational test to
qualify as an IRC 501(c)(3) organization for years under examination and therefore subject
to Revocation.

Per Treas. Reg. 1.501(c)(3)-1(a)(1): IRC 501(c)(3) requires an organization to be both "organized"
and "operated" exclusively for one or more IRC 501(c)(3) purposes. If the organization fails either
the organizational test or the operational test, it isn't exempt. Any 501(c)(3) organization whose
primary activity is gaming doesn't further its exempt purpose.
---------- primary activity of operating a private poker club (gaming) doesn't further any exempt purpose of
an 501(c)(3) organization and therefore it failed the required operational test and its exemption as
a 501(c)(3) should be revoked.

Issue 2:

Whether the payments made to the Executive Director credit card and the Executive
Director's for-profit businesses from the exempt organizations bank accounts qualify as
inurement, therefor the organization is serving a private interest vs a public interest and
the operational test is not satisfied, the ---------- is subject to
revocation?

Per Treas. Reg. § 1.501(c)(3)-1(c)(2) provides that the operational test is not satisfied where any
part of the organization's earnings inure to the benefit of private shareholders or individuals. No
amount of inurement is allowed with a 501(c)(3) organization. The Executive Director of ----------
used the organizations assets to pay his ---------- expenses on ---------- credit
card and also used ---------- assets to fund his for-profit businesses in ----------. Therefore, ----------
was serving a private interest vs a public interest and no longer satisfied the
operational test and is subject to revocation of Exempt status.

Note:
If ---------- agrees with report, please sign ---------- and return to Agent.

---------- Tax Returns will be due for years under examination if revocation is upheld.

Catalog Number 20810W       Page 12       www.irs.gov       Form 886-A (Rev. 5-2017)

EXHIBIT ONE

[Exhibit images redacted / not reproducible from scan]