Partnertax.ai Start free trial

PLR 202238011

Religious, Charitable, etc., Institutions and Community Chest

Official textIRS Written Determinations (PLR · TAM · CCA)irs.gov19 subsections
Summarize

# Issues

(1) Does the
C' ') qualify for exempt status under Internal Revenue Code (fRC) § 501(c)(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?
{3} If the doesn't qualify for exempt status, what is the tax effect of the revocation?

# Facts

( 1 ) i$ a located in recognized on as exempt under IRC § 501 (c){3) as further descrtbed under IRC §s 170(b)(1 )(A)(Vl) and 509(a)(1) or 509(a)(2).
On another determination tatter was issued wherein the was further described under IRC §s 170(b){1)(A)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form , Application for Recognition of Exemption, was received by the IRS on , The Form was analyzed. The current directors and officers were:
In Part fl, Activities and Operational Information. several parts referred to an attached statement. The attached s1atement states:
The r~e
') will assemble, collect and display signmcant , primarily and . It is anticipated that the wm be acquired by the Primarily through gifts in kind to the . ft is also anticipated that the will receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over members and is heavity trafficked by the public. It is estimated that each several of individuals will see, enjoy and be educated by the The will conduct ;;hows or on an almost basis displaying Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited, It is anticipated that such Form 886-A{Rev.4-611) Department of the Treasury • lnu:mat Rewm.1c Scrncc Form886A
Name of Taxpayer
Dt.-pilfflYlcl\t of the Ti:.:asucy • lllkmal Revt't'lt.te Sct\ice Ex la.nation of Items Ycat/Pctiod Boded shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form
• Part n. Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA will solicit contributions primarily from the members of the which-as indicated-has over members:
The· Form . Part If. Item 5 asks "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of lnter1ocking directorates or other factors?" The marked ~ " to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the . a not..for-profit corparauon qualified under IRC § 501(c}{7), by virtue of the fact that directors of the are appointed, and subject to removal, by the Board of Governors of the
• and the director, who is a nonvoting ex officio director. is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of IRC § 501(c){3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the member of the corporation is the . a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a • Short Form Return of Organization Exempt From Income Tax, for the fiscal year ended , For the year ende, , the flied a , Electronic Notice f e-oostcerd) for Tax-Exempt Organizations Not Required to File Form or Form , on The has valued at approximately$ (see Attachment One). According to instructions for Form , Return of Organization Exempt From Income Tax, the Form must be filed if the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Fonn886A Dqurtmcat of die 't'rea1'-!u; , lntemol Rcvc:mi;; $e,viQ;
Ex la.nation of Items
Name of Taxpayer
Sdtedule No. ot
Year/Period Ended
The audit report dated is corrected by this audit report. The attachments referenced to In the audit report dated are unchanged (and so are still valid as a part of this report) but are not included with this report.

# Issues

( 1) Does the (" ') qualify for exempt status under Internal Revenue Code (IRC) § 501(c)(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?
(3} If the doesn't qualify for exempt status, what is the tax effect of the revocatton'I

# Facts

{1 ) is a located in recognized on as exempt under IRC § 501(c)(3) as further described under IRC §s 170(b)(1)(A)(vi) and 509(a)(1) or 509(a)(2).
On another determination letter was issued wherein the was further described under IRC §s 170(b){1)(A)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form , Application for Recognition of Exemption, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part II, Activities and Operational Information, several parts referred to an attached statement. The attached statement states:
The rttie ') will assemble, collect and display siQrntlcant pnmar11y and . It is anticipated that the will be acquired by the primarily through gifts in kind to the . !t is also anticipated that the wifl receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over members and is heavily trafficked by the public. It is estimated 1hat each several of individuals will see, enjoy and be educated by the The will conduct shows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited. It is anticipated that such Departmcm of the Treasury• Internal Revenue Service Form886A Dt.-p.:trtmCllt of the TtC11$Uty • h,wrmd ~'flue Service
Name ofTaxpaycr
Y cat/Petiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form . Part If, Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA Nill sollcit contributions primarily from the members of the . which-as indicated-has over members:
The· Form , Part II, Item 5 asks "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The rnarked ~ " to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the , a not..for-profit corooranon qualified under IRC § 501(c)(7), by virtue of the fact tnat directors of the are appointed, and subject to removal, by the Board of Governors of the , and the director, who is a nonvoting ex officio director. is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of JRC § 501(c){3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the member of the corporation is the • a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a • Short Form Return of Organization Exempt From Income Tax, for the fiscal year ended , For the year ende, • the filed a • Electronic Notice f e-oostcard} for Tax-Exempt Organizations Not Requlred to File Form or Form , on The has valued at approximately$ (see Attachment One). According to instructions for Form . Return of Organization Exempt From Income Tax, the Form 11ust be filed if the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Form 886-A(Rcv.◄-Ci8) Department of the Trea$ury • fotcrru1I Kc,•em.1e Servic1:
Fonn886A Dcf!4rttrtml of the Ttt•a$1.uy • lntm:u.1 R,'>-'CllUe Scmce
Ex ta nation of Items
Name of Taxpayer
Or (CFO) and :Prior CFO) were asked questions that pertained to the The summary ot those questions i$ given below:
• The accounting department take$ care of the books and records of the and all subsidiary organizations.
• As with all subsidiary organizations. the members. Not all of the boa,d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The owns aoou· pieces of . Once is donated to the , the retains ownersh,p.
• The used to give tours, but that hasn't been done for or years.
• isn't sure if the pubric knows the exists, but the public can ask for a tour and U'!e public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities.· On request: . the IRS examiner asked for the folowing in an information document
• Minutes of meetings - for the fiscal years ended and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by and includes a
Consolidating Statement of Financial Position that cateQories for , and but does not include a cateaorv for the ( J or for the ' , Because there is no cateoorv for the the statement of financial position tor the cannot oe denved.
Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position {for #3 above).
• If there are any estimated costs (such as overhead allocationsi. olease orovide an explanation of the basis used to allocate exoenses to the
• I have reviewed thE Form , Application for Recognition of Exemption. According to lhe Form , the stated that each several of individuals $Ge, enjoy and are educated by the and almost basis displaying of loaned . Please provide suhi:;tantinti<)n thnt non-members attended events in the building for the year ended that includes--but is not limited to#-what those events were, how many attended, the purposes of the events. and if these individuals were guests of a member or members.
• In order to be exempt under IRC § 501(c){3), the organization must provide more benefit to the general public then to members and guests.
Please orov1de cooies of the substantiation that demonstrates that the is carrying out charltable actiVities described in IRC For:n 886A Dq.a,tm:m vf d;e 'ltcill'.lln1 ,, l1>1et1ltl lh,·ert\,;; ~~ Name of T axpaycr
Year/Period Bnded
The audit report dated is corrected by this audit report. The attachments referenced to in the audit report dated are unchanged (and so are still valid as a part of this report) but are not incl'.Jded with this report.

# Issues

(1) Does the {" ") qualify for exempt status under Internal Revenue Code (fRC) § 501(c)(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?

(3) If the doesn't quafify for exempt status, what is the tax effect of the revocation?

# Facts

(1 ) i~ a located in recognized on as exempt under IRC § 501(c){3) as further described under IRC §s 170(b)(1 )(A}(vi) and 509(aX1 ~ or 509(a)(2).
On another determination letter was issued wherein the was further described under IRC §s 170(b)(1XA)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form • Application for Recognition of Exemption, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part fl, Activities and Operational Information, several parts referred to an attached statement. The attached s1atement sta1es:
The ("the ') will assemble, coilect and display sign1t1cant pnman1v and . It is anticipated that the will be acquired by 1he .:>rimarilv through gifts in kind to the . tt is also anticioated that the will receive cash donations. which will be used by the acquire The will be housed and displayed at the The has over members and is heavily trafficked by the public. It is estimated that each several of individuals will see. enjoy and be educated by the The will conduct ;hows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited. It is anticipated that such Form 886-AcRcv .4,-(J!I) Dcpartme1u of the Tn:asury - hrn::rnal Jk,-cnuc Service Form,886A l)t.'!>ilrttncnt of the T,c:1$\uy • lllt~m•I lu.-vt'flUC Smite
Name of Taxpayer
R~hibit
Ycat/P<itiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form , Part If, Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA Nill solicit contributions primarily from the membars of the . which-as indicated-has over members:
The· Form , Part H, Item 5 asks "Does the organization control or is it controlled by another organizationr and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked " " to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the , a not-for-profit corporation quaIified under IRC § 501{c){7). by virtue of the fact mat directors of the are appointed, and subject to removal, by the Board of Governors of the
• and the director, who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of !RC§ 501(c){3) for the purpose of assembling, collecting and displaying significant
• ln Article #6, the member of the corporation is the , a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors. and the directors and their successors shall be elected by the Board of Governors of the The last filed a . Short Form Return of Organization Exempt From Income Tax, for the fiscal year ended For the year ende, , the filed a , Electronic Notice le-oostcard) for Tax-Exempt Organizations Not Required to File Form or Form , on The has valued at approximately$ (see Attachment One). According to instructions for Form , Return of Organization Exempt From Income Tax, ihe Form 11ust be filed if the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Form 886-A.(Rcv.4-68)
Fo1m886A lk1")mrmt M the Trel$uty • lnttnul R~'VCJ111e ktviee Ex lanation oflten1s &hedule No. or Exhjbit Name of Taxpayer Year/Period Endt'd Or (CFO) and '.Prior CFO) were asked questions that pertained to the . The summary ot those questions is given below:
• The accounting department takoo care of the books and records of thG and all subsidiary organizations.
• As with all subsidiary organilations, the members. Not all of the boa:-d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The owns abou· pieces 01 , Once is donated to the , the retains ownership.
• The used to give tours, but that hasn't been done 1or or years.
• isn't sure if the pubfic knows the exists, but the public can ask for a tour and U'le public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities.· On request: . the IRS examiner asked for the following in an Information document
• Minutes of meetings - for the fiscal years ended and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by and includes a
Consolidating Statement or Financial Position that cateQories for and but does not include a cateoorv for the ( } or for the ' . Because there is no cateoorv for the the statement of financial position for the C8MOt be derived.
Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
• If there are any estimated costs (such as overhead allocationsl. olease oroVide an explanation of the basis used to allocate exoAnses to the
• I have reviewed th( Form , App!icaUon for Recognition of Exemption. According to the Form , the stated that each several of individuals see. enjoy and are educated by the and almost basis displaying of loaned , Please provide sub~tantintinn thnt non-members attended events in the building for the year ended that includes--but is not limited to*-what those events were, how many attended, the purposes of the events, and if these individuals were guests of a member or members.
• In order to be exempt uncer !RC§ 501{c)(3), the orqanizaUon must provide more benefit to the general public then to members and guests.
Please orovide cooies of the substantiation that demonstrates that the is carrying out charitable actiVlties described in IRC Form 886A IJepartmcot of the Tr~'7,y • lnwuw Rc,·enue Sen·ii:e Ex lanation of Ite1ns Name of'f axpayer Year/Period Ended On the asked for an extension of time to · On the asl<ea tor an extension of time to . On the IRS examiner asked for information in another Information Document Request and included a draft Form 886~A, Explanation of Items. The did not provide any response to the information document requests.
Or the l3618 (Rev. 9-2017) was sent as the 30-day letter. This is the wrong 30-day letter. The correct letter should be L3618 {Rev. 8-2019). The responded to the L3618 (Rev. 9-2017) with additional information and an incomplete appeal request (see Attachment 2).
The cover letter for attachment 2 provides a good summary of the position and legal arguments. Attachment 2 provides the following asserted activities:
• The was formed to assemble, collect, and display significant primarily and
• is of the foundations of civilized society; its presence helps to attract people who are interested in
• The instituted displays in the lobby of the
{the " "} in which the displays from local who, absent the activities of the , may not have a forum to present their work
• There is an at our location in ( ) which hosts displays
• The displays in the lobbies of the is accessible to the public
• The (recoqnized as a 501(c)(3) organization) has represented that the building located at which the majority of the available to the general public, and allows
• The had a presentation on the
·and•
• It is estimated that each educated by the
" several , , {in is displayed) is a component ot the . This tour makes the without a forum to present their entitled~ of individuals will see, enjoy and be
• A substantial number of nonmembers of the (as well as events held by civic organizations} have access to and I or visited the clubhouse and therefore have access to the
• The attracts gifts of that would otherwise leave the area because their value is less than ihe would accept
• The efforts was in need of repair and the engaged in restoration
• The is agreeable to instituting public educational tours of its going forward, in addition to the
• The 1isagrees with the IRS position that the building's access is limited to members of the Although members of the may have easy access to the buildinQ, the precedino information provides substantial evidence of public access to the held by the Ponn 886-A(Rcv.4-68) Dcparunent of the Treasury - lotemal R(:Venuc Service
Fom1886A
Name of Taxpayer
Dtvaromnt of the Tr~':iSl.ll'}' • lntemal Rc~'~"!luc Service Ex lanation of I terns Sched1.tle No. or
Ycat/Pcriod Ended
• The presence of building security does not mean that members of the public do not have access to and opportunity to view the ; it reflects the reality of security restrictions in all buildings today Attachment 2 included below:
Minutes. The date and summary of these minutes is given
• There is still to be restored-
• Discussion on this restoration centered on whether to make the investment based on the current value v the after-restoration value
• were moved to the and
• The will take place
• will run the
• The will subsid1ze the
• During 'v1onth. oiving will be within the chits and promotional material and events that occur in
• description tags will start to appear alongside the
• vVill be replaced that will soon be restored from the pool at
• Discussion about developing new and shifting our focus from displays to displays and how we go about it
• President spoke to the to promote the for the
• Governor spoke about a catalog to document the , and putting placards on all to identify it
• General Manager suggested a subcommittee be established to oversee the movement and proper placement of the
• It is the goal of the Generaf Manaoer. , to continue to move the assets of the classified as over to the
• President spoke about standards tor accepting donations
• Discussion about having involved in by having an event surrounding and involving children Dcpartmern of the 'f reiumry - Internal Revenue Service Form886A Dcp11tlmen! of the 1'r<;<~ - !nte,n~l Revemtc Scr,;;c,-, Ex Janatiotl oflte1ns
Name ofTaxJ>ayer
Attachment 2 includes a balance sheet for the year ended information:
Assets
Cash
Accounts Receivable
Objects
Liabilities
Accounts Payable
Equity
Retained Earnings
Profit (Loss)
Total Equity
Year Year
Scl1edufo No. or
Year/Pcrio<l Ended with the following
This attachment includes a summary of the the type of donated. a description of the donated to the . The summary gives , the and the value when donated I transferred to the . The also purchased a . Below is a summary of the value of these acth,,ut:t..
Donated
Transferred
Purchased
Tota!
This attachment also includes an allocation of costs from the to the . The has employee-the director of the . The time the director spent attending to meetings, events and activities accounted for % of the director's time, and so Yo of the director's salary, payroll taxes and medical insurance costs were allocated to the Included in attachment 2 was a listing of the events and meetings of various organizations at the facilities that the attended, In total, there were meetings with iuests.
No documentation was provided from the that gives the policies and procedures pertaining to the activities. The listing of registered individuals for associated activities were not provided by the . No substantiation of public participation in activities or public use of assets was provided.
Ponn 886-Aotcv 4·611)
Dcparum.:nt of the Treasury• lnterttal Rcvctiue Service
Form886A
Name of Taxpayer
Law: fk1mfttnc11t of the r n·ru.t1l)' • lnwmal Rvw:11111;• &:rvi<·c E lanation of Items
Year/Period Bn<Jcd
Tax exemption is a matter of legislative grace, and the organization seeking exemption must show that it comes squarely within the terms of the law conferring the benefi1 sought (Florida Hospital Trust Fund v Commissioner, 103 T.C. 140, 153, 1994, aff'd 71 F. 3d 808 {11u, Circuit 1996).
Organizations organized substantially for pleasure, recreation, and other non-profitable purposes, or to support such purposes. are exempt under IRC §501(c)(7). The exemption of social clubs is based on the logic of allowing members to pool their funds for recreational purposes. rather than for a compelling public benefit. Congress granted exemption so that these membership pools would not be taxed twice (at the member level and at the organizational level) (see Portland Golf Club v C.I.R. 497 U.S. 154, 110 S. Ct. 2780 (1990}).
Exempt function income means the gross income paid by members of the organization (that includes the members. their dependents and their guests} goods, facilities or services in furtherance of the purposes constituting the basis for exemption of the organization {IRC §512(a)(3)(B)). The term "unrelated business taxable income" refers to gross income derived from any trade or business unrelated to the purposes for which the organiZation is exempt (IRC § 512(a)(1)). With regards to unrelated business taxable income, there are special rules appficable to organizations described in IRC §501(c)(7) (IRC § 512(a)(3}(A}).
Rev. Proc. 71•17, 1971-1 C.B. 683, sets forth guidelines for determining the effect gross receipts derived from use of a social dub*s facilities by the general public have on the ciub's exemption from federal income tax under IRC § 501(c}(7). The procedure defines the term "general public,· as persons other than members of a club or their dependents or guests.
Exemption is provided for organizations that are organized and operated exclusively for charitable, religious and educational purposes with no part of the net earnings inuring to the benefit of any private shareholder or individual (fRC § 501(c)(3)}.An organization is operated exclusively for one or more exempt purposes only if engages primarily in activities which accomplish one or more 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 (Tax Reg,§ 1.501(c)(3)-1(c)(1)).
An organization may be exempt as an organization described in !RC§ 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 (Tax Reg.§ 1.501(c){3H(d)(1Xi}. The term "charitable" as used in IRC § 501(c)(3) is used in its generally accepted legal sense (Tax Reg. §1.501(c)(3}-1(d)(2)).
An organization is not organized and operated exclusively for one or more of these purposes unless it serves a public rather than a private interest (Tax Reg. § 1.501(c)(3}-1(d}( 1 )(ii). An organization is not dedicated to one or more exempt purposes if its assets are not dedicated to an exempt purpose (Tax Reg. § 1.501(c)(3)-1{b)(4)).
The purposes toward which an organization directs its activities, and not the nature of the activities themselves, determine whether the organization meets the operational test (B.S.W.
Hq,artment of the Treasury - Internal llcvenue Se~icc
Form 886A l:ktf;:;;;;:;_ i,f the Trt•UUfj" - lnicmil R.\'VCHUC $<!'\ice Ex lanadon oflten1s Name of Taxpayer Year/Period Ended Or (CFO) and prior CFO) were asked questions that pertained to the . The summary ot those questions is given below:
• The accounting department takes c:aro of the books and records of the and all subsidiary organizations.
• As with all subsidiary organizations, the members. Not all of ihe boa:d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The :iwns abou· pieces of Once is donated to the , the retains ownersh,p.
• The used to give tours, but that hasn't been done for or years.
• isn't sure if the public knows the exists, but the public can ask for a tour and the public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities., On request: . the IRS examiner asked for the folowing in an information document
• Minutes of meetings - for the fiscal years ended and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by , and includes a
Consolidating Statement of Financial Position that categories for and but does no{ include a cateoorv for the ( ) or for the ' . Because there is no cateoorv for the the statement of financial position for the caMot be oenved.
Please provide a statement of financial position for the fiscal year ended for the
• A copy that I can retain of the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
• If there are any estimated costs (such as overhead allocationst olease oroVide an explanation of 1he basis used to allocate exoenses to the
• I have reviewed th, Form , Application for Recognition of Exemption. According to the Form , the sta1ed that each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned . Please provide s11b~tanti:1tit)n ths:it non-members attended events in the building for the year ended that includes--but is not limited to*-what those events were, how many attended, the purposes of the events, and if these individuals were guests or a member or members.
• In order to be exempt under !RC§ 501{c)(3), the orqanizauon must provide more benefit to the general public then to members and guests.
Please orovide cooies of the substantiation that demon..,;trates that the is carrying out charitable actMties described in IRC Form886A D~1>artme11t uf the '!';c:i;;;-t}' • lnwmal l{,:vcnu<' &,...,ire Name of Taxpayer Year/Period Ended On thE asked for an extension of time to · On lhe asked tor an extension of time to On the IRS examiner asked for information in another Information Document Request and included a draft Form 886-A, Explanation of Items. The did not provide any response to the information document requests.
Or the l3618 (Rev. 9-2017) was sent as the 30-day letter. This is the wrong 30-day letter. The correct letter should be L3618 {Rev. 8-2019). The responded to the L3618 (Rev. 9-2017} with additional information and an incomplete appeal request (see Attachment 2).
The cover letter for attachment 2 provides a good summary of the position and legal arguments. Attachment 2 provides the following asserted activities:
• The was formed to assemble, collect, and display significant primarily and
• is of the foundations of civilized society; its presence helps to attract people who are interested in
• The instituted displays in the lobby of the
{the " ') in which thE :lisplays from local who, absent the activities of the , may not have a forum lo present their work
• There is an at our location in ( ) which hosts displays
• The displays in the lobbies of the is accessible to the public
• The (recOQnized as a 501(c)(3) organization) has represented that the building located at which the majority of the available to the general public, and allows
• The had a presentation on the
"and" , (in is displayed) is a component ot the . This tour makes the without a forum to present their entitled~
• It is estimated that each vear several of individuals will see, enjoy and be educated by the
• A substantial number of nonmembers of the (as well as events held by civic organizations) have access to and I or visited the clubhouse and therefore have access to the
• The attracts gifts of that would otherwise leave the area because their value is less than the would accept
• The was in need of repair and the engaged In restoration efforts
• The is agreeable to instltuting public educational tours of its going forward. in addillon to the
• The :lisaorees with the IRS position that the building's access is limited to members of the . Although members of the may have easy access to the buildino. the precedino information provides substantial evidence of public access to the held by the Form 886-A(Rcv.4-68) Or:p.ir1mcr11 of the Trcll.liuty - l11terual R.~enuc: Scrvic._, Form 886A D<1)art1ntnt of the T~'"1UI)' • lntemlll Rcn:nuc ScrlllCc Explanation of I terns
Name of Taxpayer
Schedt.tle No. or
Ycat/Period Ended
• The presence of building security does not mean that members of. the public do not have access to and opportunity to view the ; it reflects the reality of security restrictions in all buildings today Attachment 2 included below:
Minutes. The date and summary of these minutes is given
• There is still to be restored-
•
Discussion on this restoration centered on whether to make the investment based on the current value v the after-restoration value
• Nere moved to the and
• The will take place
• will run the
• The Nill subsidize the
• During
\fonth, giving wilf be within the chits and promotional material and events that occur in
• description tags will start to appear alongside the
• Nill be replaced that will soon be restored from the pool at
• Discussion about developing new and shifting our focus from displays to displays and how we go about it
• President spoke to the to promote the for the
• Governor spoke about a catalog to document the , and putting placards on all to identify it
• General Manager suggested a subcommittee be established to oversee the movement and proper placement of the
• It is the goal of the General Manaaer. . to continue to move the assets of the classified as over to the
• President spoke about standards tor accepting donations
• Discussion about having nvolved in by having an event surrounding and involving children Department of the T rct111tuy - Internal Revenue Service Form 886A Dep11rtm<:n! nfth<' Trc;a~tny · lntrmJl R.-,·e,1,w, &,Nie<· Ex Janation oflteins
Name ofTaxJ>aver
Attachment 2 includes a balance sheet for the year ended information:
Assets
Cash
Accounts Receivable
Objects
Liabilities
Accounts Payable
Equity
Retained Earnings
Profit (Loss)
Total Equity
Year Year
Year/Period Ended with the following
This attachment includes a summary of the the type of donated. a description of the donated to the . The summary gives , the • and the value when donated / transferred to the . The also purchased a . Below is a summary of the value of these aciiv,m:::t..
Donated
Transferred
Purchased
Total
This attachment also includes an allocation of costs from the to the . The has employee-the director of the . The time the director spent attending to meetings, events and activities accounted for ¾, of the director's time. and so % of the director's salary, payroll taxes and medical Insurance costs were allocated to the Included in attachment 2 was a listing of the events and meetrngs of various organizations at the facilities that the attended. In total, there were meetings with ~uests.
No documentation was provided from the that gives the policies and procedures pertaining to the activities. The listing ot registered individuals for associated activities were not provided by the . No substantiation of public participation in activities or public use of assets was provided.
Dcparummt 1,fthc Treasury• hitcmal H.evemie Scrvk-e
Pornt 886A
Name of Taxpayer
De,>:• rtmc.n of the 'l'mli,uty lmcmal Re,·enuc Setvice
Ex lanation of ltctns
Sd1edule No. ot
Year/Petiod Ended
The audit report dated is corrected by this audit report The attachments referenced to In the audit report dated are unchanged (and so are still valid as a part of this report) but are not included with this report.

# Issues

(1) Does the (" ") qualify for exempt status under Internal Revenue Code (IRC) § 501(c)(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?
(3} If the doesn't qualify for exempt status, what is the tax effect of the revocation?

# Facts

(1 ) is a located in recognized on as exempt under IRC § 501(c)(3) as further described under IRC §s 170(b)(1 )(AXvi) and 509(a)(1) or 509(a)(2).
On another determination letter was issued wherein the was further described under IRC §s 170(b)(1)(A)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form , Application tor Recognition of Exemption, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part 11, Activities and Operational Information, several parts referred to an attached statement. The aUached s1atement states:
The ("the ') will assemble, collect and display sigrnt1cant , pnman1y and . It is anticipated that the will be acquired by the primarily through gifts in kind to the . It is also anticipated that the Nill receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over heavily trafficked by the public. It is estimated that each several individuals will see, enjoy and be educated by the members and is of The will conduct ;hows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited. U is anticipated that such Form 886-Ao<cv.4-68) Dcparrmcm of the Treasury• Imcmal Revenue Service Form 886A Dt.'J)M'ltnCl\t of the Ti:,:11$ury • l11N:"mii Revt-nuc Sm-ic;e Explanation of Items Name of Taxpayer Y cat/Pctiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form , Part If. Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA Nill solicit contributions primarily from the members of the , which-as indicated-has over members.
The Form , Part II, rtem 5 asl<s "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked " " to questions and referenced an attached statement In the attached statement, the states:
The is controlled by the , a not..for-profit corporation quaIified under !RC§ 501{c)(7), by virtue of the fact mat directors of the are appointed, and subject to removal, by the Board of Governors of the and the director, who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of !RC§ 501(c){3) for the purpose of assembling. collecting and displaying significant
• In Article #6, the member of the corporaUon is the . a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a
• Short Form Return of Organization Exempt From
Income Tax, for the fiscal year ended , For the year Emde, • the filed a , Electronic Notice fe-oostcerd) for Tax-Exempt Organizations Not Required to File Form or Form , on The has valued at approximately $ (see Attachment One;. According to instructions for Form , Return of Organization Exempt From Income Tax, the Form 11ust be filed ir the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Form 886-i\{Rcv.4-68)
Fmm886A lk1l411t1Tllt (>f the Tn•:uury, lntttrul K~,vc;1ue ik:rvice Ex lanation of I ten1s Name of Taxpayer Year/Period Ended Or (CFO) end :Prior CFO) were asked questions that pertained to the . The summary of those questions is given below:
• The accounting department takes care of the books and records of thG and all subsidiary organizations.
• As with all subsidiary organii::ations, the members. Not afl of the boa-d members are based on knowledge and ability so that the directors with an expertise in the irena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The owns abou· pieces 01 , Once is donated to the , the retains ownershp.
• The used to give tours, but that hasn't been done for or years,
• sn't sure if the public knows the exists, but the public can ask for a tour and the public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities.· On request: , the IRS examiner asked for the fonow!ng in an information document
• Minutes of meetings - for the fiscal years ondod and
• The Chart of Accounts fer the fiscal years ended
• The audit report prepared by , and incfucles a
Consolidating Statement of Financial Position that cat~ories ror , and but does not include a cateoorv for the ( } or for the I . Because there is no cateaorv for the the statement of financial position for the cannot oe oenved, Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
• If there are any estimated costs (such as overhead allocations}. olease orovide an explanation of the basis tised to allocate exoenses to the
• I have reviewed th~ Form , Application for Recognition of Exemption. According to the Form . the stated that each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned . Please provide s11hstantLnti<m that non-members attended events in the building for the year ended that includes-~but ls not limited to~-what those events were, how many attended, the purposes of the events. and if these individuals were guests of a member or members,
• In order to be exempt unoer !RC§ 501(c)(3}, the orqantzation must provide more benefit to the general public then to members and guests.
Please orov1de cooies of 1he substantiation that demonstrates that the is carrying out charitable actiVities described in IRC
____ ,_.
Form 886-A(Rcv.4,(;8)
Department of the Treasury• lmcntal Revenue Sccrvkc
Foi:m886A Dep.,rtmcm of the 'f~&o,, lmenllll Re~•.:m~ Scsvice
Name of Taxpayer
Schedule No. ot
Year/Petiod Ended
The audit report dated is corrected by this audit report The attachments referenced to in the audit report dated are unchanged (and so are still valid as a part of this report) but are not included with this report.

# Issues

(1) Does the (" ') qualify for exempt status under Internal Revenue Code (IRC) § 501(c}(3)?

(2) If the doesn't qualify for exempt siatus, when is the effective date of revocation?

(3) If the doesn't qualify for exempt status, What is the tax effect of the revocation?

# Facts

(: ) is a located in ·ecognized on as exempt under IRC § 501(c)(3) as further described under IRC §s 170(b}(1 }(A)(vi) and 509{a)(1) or 509{a)(2).
On another determination letter was issued wherein the was further described under IRC §s 170(b)(1)(A)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form . Application for Recognition of Exempt;on, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part 11, Activities and Operational Information. several parts referred to an attached statement. The attached statement states:
The ("the ') will assemble, collect and display sigrnttcant . pnmaruy and . It is anticipated that the will be acquired by the primarily through gifts in kind to the . It is also anticipated that the Nill receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over heavily trafficked by lhe public. It is estimated that each several individuals will see, enjoy and be educated by the members and is of The will conduct 5hows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited. It is anticipated that such Department of the Treasury• Imernal Revenue Service Form 886A l);,p;u1:mcnt of the T;casury - h,km2I Revt'flUC &"tvic;e
Name of Taxpayer
Year/Period Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other oublic charities, such as, for example, the and the The Form , Part II. Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA Nill solicit contributions primarily from the memb$rs of the . which-as indicated-has over members:
The Form , Part II. Item 5 asks "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked "· '' to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the , a not..for-profit corporauon qua1ified under !RC§ 501(c}(7). by virtue of the fact tnat directors of the are appointed, and subject to removal, by the Board of Governors of the , and the director, who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated an
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of !RC§ 501(c){3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the sole member of the corporation is the • a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a , Short Form Return of Organization Ex(!)mpt From Income Tax, for the fiscal year ended , For the year encle, • the filed a Electronic Notice fe-oostcard) for Tax-Exempt Organizations Not Required to File Form or Form , on The 1as valued at approximately ~ (see Attachment One}. According to instructions for Forrr , Return of Organization Exempt From Income Tax, the Form 11ust be filed if the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Form 886-A.(R1.·vA-68)
Pomi886A D!!}l.1f!m~m of 1he 'f'reatu1;· - lmexnRI Ri'.!,·cm..: Sesvice
Name of Taxpayer
Sd1edule No. ot
Year/Petiod Ended
The audit report dated is corrected by this audit report. The attachments referenced to in the audit report dated are unchanged {and so are still valid as a part of this report) but are not included with this report.

# Issues

( 1) Does the (" ') qualify for exempt status under Internal Revenue Code (IRC) § 501(c}(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation'?
(3} If the doesn't qualify for exempt status, what is the tax effect of the revocation?

# Facts

C ) is a located in recognized on as exempt under IRC § 501(c){3) as further described under IRC §s 170(b}(1)(A)(vi) and 509(a)(1) or 509(aX2).
On another determination letter was issued wherein the was further described under IRC §s 170(b)(1)(A){vi) and 509(a)(1) as an organization that receives support from the general public.
The Form , Application for Recognition of Exemption, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part II, Activities and Operational Information, several parts referred to an attached statement. The a1tached statement states:
The (''the ') will assemble, collect and display sign1t1cant pnmaruy and It is anticipated that the will be acquired by the primarily through gifts in kind to the . It is also anticipated that the Nill receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over heavily trafficked by the public. It is estimated that each several individuals will see, enjoy and be educated by the members and is of The will conduct ;hows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Sales of exhibited works will be prohibited. It is anticipated that such Form 886-.A{Rcv.4-68) Department of the Treasury • Imernal R1."Wnuc Service Form 886A l){.'J)llf!mcl\t of the T.:cas1.uy • lowmal ltcwnuc &_,•rvice Explanation of ltetns
Name of Taxpayer
Kshibit
Ycat/Pctiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other oub!ic charities, such as, for example, 1he and the The Form , Part II. Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional Th.:i Nill solicit contributions primarily from the members of the . which-as indicated-has over members.
The Form , Part II. Item 5 asks "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked " " to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the , a not-for-profit coroorauon quaIified under IRC § 501(c){7), by virtue of the fact mat directors of the are appointed, and sublect to removal, by the Board of Governors of the , and the director, who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of lRC § 501(c)(3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the member of the corporation is the . a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a , Short Form Return of Organization Exempt From Income Tax, for the fiscal year ended . For the year ende, the filed a . Electronic Notice fe-oostcard) for Tax-Exempt Organizations Not Required to File Form or Form . on The has valued at approximately ~ (see Attachment One), According to instructions for Forrr • Return of Organization Exempt From Income Tax, the Form 11usl be filed if the organization has either gross receipts equal to or greater than$ or total assets greater than$ at the end of the year, ---~---··-·---··--·---.---
Porm 886-Ac:RcvA-68)
Foim 886A Pcp~ntn:nt. i,f the Trt'UUfj' • lmtrm.l R.:viu111e Ss:rvice Ex: lanation of Items Sd1eduJe No, or Name of Taxpayer Ye.at/Period Ended Or (CFO) and :Prior CFO) were asked questions that pertained to the The summary ot those quesUons i$ given below:
• The accounting department takes care of the books and records of the and all $ubsidiary organizations.
• As with all subsidiary organitations, the members. Not all of the boa·d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The owns abou· pieces of Once is donated to the , the retains ownersh,p.
• The used to give tours, but that hasn't been done for or years.
• isn't sure if the public knows the exists, but the public can ask for a tour and tfle public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities.· On request: . the IRS examiner asked for the foffowing in an Information document • Minutes of meetings - for the fiscal years endod and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by , arid incfudes a
Consolidating Statement of Financial Position that c;ategories for . and out does nol include a cateoorv for the ( ) or for the
• . Because there is no cateoorv for the the statement of financial position for the cannot oe denved, Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
•
If there are any estimated costs (such as overhead allocations). olease orovlde an explanation of the basis used to allocate exoenses to the
• I have reviewed th~ Form , Application for Recognition of Exemption. According to 1he Form , the stated tha1 each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned Please provide suh~t:mtLntion th:1t non-members attended events in the building for the year ended that includes-~but is not limited to-~what those events were, how many attended, the purposes of 1he events, and if these individuals were guests of a member or members.
•
In order to be exempt uncer IRC § 501{c){3). the organization must provide more benefit to the general public then to members and guests.
Please orovrde cooies of 111e substantiation that demonstrates that the is carrying out charitable actiVities described in IRC . ..
Form 886-A(Re,, . .:.~}
Department of tbe Trc.asury • lmenud Revcnu,: Servkc
Form886A n~1mrtm;Ul i,f tb, T-t1m; !.>«:.nwl lh,·nl\"-' :,c,''V,C(;
Name of T axpaycr
Sd1edule No. or
Year/Period Ended
The audit report dated is corrected by this audit report. The attachments referenced to in the audit report dated are unchanged (and so are still valid as a part of this report) but are not incl1ded with this report.

# Issues

(1) Does the (" ·) qualify for exempt status under Internal Revenue Code (fRC) § 5O1(c}(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?
(3} If the :1oosn't qualify for exempt status, what is the tax effect of the revocation?

# Facts

(1 1 is a located in recognized on as exempt under IRC § 501(c)(3) as further described under IRC §s 170(b)(1 )(A}(v1) and 509(a)(1) or 509(a)(2).
On another determination letter was issued wherein the was further described under IRC §s 17O(b)(1)(A)(vi) and 509(a)(1) as an organization that receives support from the general public.
The Form . Application for Recognition of Exemption, was received by the IRS on , The Form .vas analyzed. The current directors and officers were:
In Part 11, Activities and Operational Information. several parts referred to an attached statement. The aUached statement states:
The
("the ') will assemble, collect and display signmcam pnmar11y and . It is anticipated that the will be acquired by the primarily through gifts in kind to the . rt /s also anticipated that the will receive cash donations, which will be used by the to acquire The will be housed and displayed at the The has over heavily trafficked by the public. It is estimated that each several individuals will see, enjoy and be educated by the members and is of The will conduct ;hows or on an almost basis displaying loaned Such shows and exhibits will be educational and noncommerciaL Sales of exhibited works will be prohibited. It is anticipated that such r>epar1mca1 of the Tn:a1mry • Imc.-nal Rc~'Cnuc: Scrvic<' i)t-p!lrtmCllt of the Ti:ca.sury • lnttmal Rcvt'f!UC S.."'tvice
Explanation of Itetns
____ _..__ ____ _
Name of Taxpayer
Rxh1bit
Y cat/Pctiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form , Part If. Items 2 and 3 of the attached summaries stated:
The sources of support will be contributions of , contributions of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA Nill solicit contributions primarily from the memb$rs of the , which-as indicated-has over members:
The Form , Part II. ftem 5 asks "Does the organization control or is it controlled by another organization?" and "Is the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked " " to questions and referenced an attached statement. In the attached statement, the states:
The is controlled by the , a not.for-profit corporauon quaIified under !RC§ 501(c){7), by virtue of the fact tnat directors of the are appointed, and subject to removal, by the Board of Governors of the and the director, who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The Nas incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of IRC § 501(c)(3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the member of the corporation is the • a not-for-profit corporation. The affairs of the corporation shall be managed by the Board of Directors, and the directors and their successors shall be elected by the Board of Governors of the The last filed a , Short Form Return of Organization Ex~mpt From Income Tax. for the fiscal year ended , For the year ende, , the filed a , Electronic Notice fe-oostcard) for Tax-Exempt Organizations Not Required to File Form or Form , on The has valued at approximately i (see Attachment One). Accordmi:;i to instructions for Form , Return of Organization Exempt From Income
Tax. the Form 11ust be filed if the organization has either gross receipts equal to or greater than $ )r total assets greater than $ at the end of the year.
--- ··--···-·-···········-·-··•··---~---
Form 886-A(Ri;v.4-GS)
Dcparlmen( ofthc Trcasory • fotcrm1I Re\'cnuc Service ))cp<1rtm-ntoi tile Treas,uy • lnrem&l Rvvcrn.1c S.:rvicc Ex lanation ofltcn1s 1 S<:hedule No. or Name of Taxpayer Ye.at/Period Ended Or (CFO) and '.Prior CFO) were asked questions that pertained to the . The summary ot those questions is given below:
• The accounting department takes care of tho books and records of the and all subsidiary organizations.
• As with all subsidiary organiz:ations, the members. Not an of the boa:d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The :iwns abou· pieces of . Once is donated to the , the retains ownership.
• The used to give tours, but that hasn't been done for or years.
• isn't sure if the public knows the exists, but the public can ask for a tour and the public would then be given a tour.
•
Neither the prior or the current CFO knew of any substantiation of activities.· On request: . the IRS examiner asked for the following in an information document
• Minutes of meetings - for the fiscal years ended and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by , and incfudes a
Consolidating Statement of Financial Position that cat~ories for , and but does no( include a cateaorv for the ( ) or for the I , Because there is no oateoorv for the the statement of financial position for the cannot oe denved, Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
• If there are any estimated costs (such as overhead allocationst olease orovide an explanation of the basis used to allocate exoenses to the
• I have reviewed thE Form , Application for Recognition of Exemption. According to the Form , the sta1ed that each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned Please provide substantintion thAt non-members attended events in the building for the year ended that includes--but is not limited to•-what those events were, how many attended, the purposes of the events, and if these individuals were guests or a member or members.
• In order to be exempt uncer IRC § 501(c)(3), the orqanization must provide more benefit to the general public then to members and guests.
Please orov1de cooies of the substantiation that demonstrates that the is carrying out charitable activities described in IRC -·--~· ~,, Porm 886-A(R1:v.4-®) Department ofd1<: Trcuury- Internal Revenue Scl"l'kc Form886A n~1>•t1mem <,( the 'fr~;;;;~. • I nt.:m:i.l R,:,,·,mw Service Ex lanation oflteins Name of Taxpayer Year/Period Ended On thE asked for an extension of time to On the asked tor an extension of time to . On the IRS examiner asked for information in another Information Document Request and included a draft Form 886-A, Explanation of Items. The did not provide any response to the information document requests.
Or the l3618 (Rev. 9-2017) was sent as the 30-day letter. This is the wrong 30-day letter. The correct letter should be L3618 (Rev. 8-2019). The responded to the L3618 (Rev. 9-2017} with additional information and an incomplete appeal request (see Attachment 2).
The cover letter for attachment 2 provides a good summary of the position and legal arguments. Attachment 2 provides the following asserted activities:
• The was formed to assemble, collect, and display significant orimarily and
• is of the foundations of civilized society; its presence helps to attract people who are interested in
• The instituted displays in the lobby of the
(the " ") in which thE displays from local who, absent the activities of the may not have a forum to present their work
• There is an at our location in ( ) which hosts displays
• The displays in the lobbies of the is accessible to the public
• The
(recoqnized as a 501(c)(3) organization} has represented that the building located at which the majority of the available to the general public, and allows
• The had a presentation on the
"and• , , (in is displayed} is a component ot the
This tour makes the without a forum to present their
~ntitled d
• It is estimated that each vear several of individuals will see. enjoy and be educated by the
• A substantial number of nonmembers of the (as wen as events held by civic organizations} have access to and I or visited the clubhouse and therefore have access to the
• The attracts gifts of that would otherwise leave the area because their value is less than the would accept
• The Nas in need of repair and the engaged in restoration efforts
• The is agreeable to instituting public educational tours of its ;,oing forward, in addition to the
• The :Hsagrees with the IRS position that the building's access is limited to members of the . Although members of the may have easy access to the buildina. the precedino information provides substantial evidence of public access to the held by the Jlonn 886-A(Rc,•.4•68) Dt>p.ir1mcnt of the Trc1u,ury - lllternnl R<:Yennc Servke Form 886A rx,..a.ruru:nt of the Tr<c:u:ury - Internal RcwnU<c Service
Name of Taxpayer
Year/Period Ended
• The presence of building security does not mean that members of. the public do not have access to and opportunity to view the ; it reflects the reality of security restrictions in all buildings today Attachment 2 included below:
Minutes. The date and summary of these minutes is given
• There is still to be restored-
• Discussion on this restoration centered on whether to make the investment based on the current value v the after-restoration value
• were moved to the and
• The will take place
• will run the
• The will subsidize the
• During \fonth, qiving will be within the chits and promotional material and events that occur in
• description tags will start to appear alongside the
• will be replaced that will soon be restored from the poof at
• Discussion about developing new and shifting our focus from displays to displays and how we go about it
• President spoke to the to promote the for the
• Governor spoke about a catalog to document the , and putting placards on all to identify it
• General Manager suggested a subcommittee be established to oversee the movement and proper placement of the
• It is the goal of the General Ma11:::inAr , to continue to move the assets of the classified as over to the
• President spoke about stanaards tor accepting donations
• Discussion about having involved in by having an :went surrounding and involving children Department of the 'frcmmry • Internal Revenue Service rorm886A Dep11rtm<:nl nf thr 1'r.-asllr)' · ln1..-md R.-vem1e S.:rvict:
Ex Janatio11 of I te1ns
Name ofTruq>ayer
Attachment 2 includes a balance sheet for the year ended information:
Assets
Cash
Accounts Receivable
Objects
Liabilities
Accounts Payabl€
Equity
Retained Earnings
Profit (Loss)
Total Equity
Year Year
Year/Period Ended with the following
This attachment includes a summary of the the type of donated. a description of the donated to the . The summary gives . the , and the value when donated I transferred to the . The also purchased a Below is a summary of the value of these aciiv,m:a,.
Donated
Transferred
Purchased
Total
This attachment also includes an allocation of costs from the to the The has employee-the director of the . The time the director spent attending to meetings, events and activities accounted for % of the director's time, and so % of the director's salary, payroll taxes and medical insurance costs were allocated to the Included in attachment 2 was a listing of the events and meetings of various organizations at the facilities that the attended. In total, there were meetings with ;}uests.
No documentation was provided from the that gives the policies and procedures pertaining to the activities. The listing of registered individuals for associated activities were not provided by the . No substantiation of public participation in activities or public use of assets was provided.
Dcpammmt of the Trca!!ury • l»tcrrtal Hcvc11uc Service Name of Taxpaver Law: fx-1inrtnwnl of the 'l'«•a,vry ', lnwmal Rcve111.>,' Service E lanation of Items Schedule No. 01·
Year/Period EmJed
Tax exemption is a matter of legislative grace, and the organization seeking exemption must show that it comes squarely within the terms of the law conferring the benefit sought (Florida Hospital Trust Fund v Commissioner, 103 T.C. 140, 153, 1994, aff'd 71 F. 3d 808 (11lll Circuit 1996).
Organizations organized substantially for pleasure, recreation, and other non-profitable purposes, or to support such purposes, are exempt under IRC §501(c)(7). The exemption of social clubs is based on the logic of allowing members to pool their funds for recreational purposes. rather than for a compelling public benefit. Congress granted exemption so that these membership pools would not be taxed twice (at the member level and at the organizational level) (see Portland Golf Club v C.I.R 497 U.S. 154, 110 S. Ct. 2780 (1990)).
Exempt function income means the gross income paid by members of the organization (that includes the members. their dependents and their guests} goods, facilities or services in furtherance of the purposes constituting the basis for exemption of the organization (lRC §512(a)(3)(B)). The term "unrelated business taxable income" refers to gross income derived from any trade or business unrelated to the purposes for which the organization is exempt (IRC § 512(a)(1)). With regards to unrelated business taxable income, there are special rules applicable to organizations described in !RC §501(cX7) (IRC § 512{a)(3)(A)).
Rev. Proc. 71-17, 1971-1 C.B. 683, sets forth guidelines for determining the effect gross receipts derived from use of a social dub's facilities by the general public have on the club's exemption from federal income tax under IRC § 501{c}(7). The procedure defines the term "general public,· as persons other than members of a club or their dependents or guests.
Exemption is provided for organizations that are organized and operated exclusively for charitable, religious and educational purposes with no part of the net earnings inuring to the benefit of any private shareholder or individual (IRC § 501(c)(3)}.An organization is operated exclusively for one or more exempt purposes only if engages primarily in activities which accomplish one or more 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 (Tax Reg,§ 1.501(c)(3)·1(c)(1)).
An organization may be exempt as an organization described in IRC § 501(c)(3} if tt 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 (Tax Reg.§ 1.501(c)(3)·1(d)(1)(i). The term "charitable" as used in IRC § 501(c)(3) is used in its generally accepted legal sense (Tax Reg. §1.501(c)(3}-1{d)(2)).
An organization is not organized and operated exclusively for one or more of these purposes unless it serves a public rather than a private interest (Tax Reg.§ 1.501(c)(3}-1(d)(1){li). An organization is nof dedicated to one or more exempt purposes if its assets are not dedicated to an exempt purpose (Tax Reg.§ 1.501(c)(3)-1(b){4)).
The purposes toward which an organization directs its activities, and not the nature of the activities themselves, determine whether the organization meets the operational test (B.S.W. l)cpartmcnt of the Treasury - lntemal Revenue Service Fmm886A l D<:p~n,n:m. ~i the Tr,·asury - lntemll K..-vcnuc &;,vice Explanation of Itcn1s 1 Schedule No. or Name of Taxpayer Ye.at/Period Ended Or (CFO) and :Prior CFO) ware asked questions that pertained to the . The summary ot those questions is given below:
• The aooounting department tokos care of the books ond rocords of the and all subsidiary organizations.
• As with all subsidiary organiz::ations, the members. Not afl of the boa·d members are based on knowledge and ability so that the directms with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The Jwns abou· pieces o1 . Once is donated to the , the retains ownersh,p.
• The used to give tours, but that hasn't been done for or years.
• isn't sure if the pubfic knows the exists, but the public can ask for a tour and the public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities. · On requAst: , the IRS examiner asked for the following in an information document
• Minutes of meetings - for the fiscal years endod and
• The Chart of Accounts fer the fiscal years ended
• The audit report prepared by , and includes a
Consolidating Statement of Financial Position that categories fm , and but does not include a cateaorv for the ( ) or for the ' . Because there is no cateaorv for the the statement of financial position for the cannot oe derived.
Please provide a statement of financial position for the fiscal year ended for the • A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to the Statements of Financial Position (for #3 above).
• If there are any estimated costs (such as overhead allocationsl. olease orovide an explanation of the basis tised to allocat~ P.rnenses to the
• I have reviewed thE Form , Application for Recognition of Exemption. According to !he Form , the stated tha1 each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned , Please provide e.11hc:tl'.lntintinn thQt non-members attended events in the building for the year ended that includes-~but is not limited to-~what those events were, how many attended, the purposes of the events, and if these individuals were guests or a member or members.
• In order to be exempt uncer IRC § 501{c)(3), the orqan1zation must provide more benefit to the general public then to members and ouests.
PIAtiSA nrov1oe r.oniPr::: of 1hP substantiation that demonstrates that me is carrying out charitable activities described in IRC ·---····· Form 886-A(Ri:v ... ~J Ocpartmcnt of the Treasury• !menial Revenue Service I Dcpattl:lCU! of the 1'r~rr • fotcrnru Rcv<'f'I\W Service Schedule No. or
Name of Taxpayer
Explanation _o_f_I_te_,.i_n_s ____
… ,Ex_l_lib..,..i_t ____
_
Year/Period Ended
On the asked for an extension of time to · On the 3Sked for an extension of time to . On the (RS examiner asked for information in another Information Document Request and included a draft Form 886-A, Explanation of Items. The did not provide any response to the information document requests.
Or the L3618 (Rev, 9-2017) was sent as the 30-day letter. This is the wrong 3o-day letter. The correct fetter should be L3618 (Rev. 6-2019). The responded to lhe l3618 (Rev. 9-2017) with additional information and an incomplete appeal request (see Attachment 2).
The cover letter for attachment 2 provides a good summary of the position and legal arguments. Attachment i prcv,e1es the foUoWing asserted actMtles:
• The was formed to assemble, collect, and display significant primarily and
• is of the foundations of civWzed society; its presence helps to attract people who are interested in
• The instituted displays in the lobby of the
(the" ff) in which tru displays from local who, absent the activities of the may not have a forum to present their work
• There is an at our location in ( ) which hosts displays
• The displays in tho lobbies of the is accessible to the public
• The (recc~mized as a 501(<:)(3) organization) has represented that the building located at which the majority of the available to the general pubic, and allows
• The had a presentation on the
'and"
• It is estimated th::lt ARr.h educated by the
• , (in is displayed) is a component ot the . This tour makes the without a forum to present their sntitled • of individuals will see, enjoy and be
• A substantial number of nonmembers of !he
(as well as events held by civic organizations} h1:we access lo and I or visited the clubhouse and therefore have ar.cess to the
• The attracts gifts of that would otherwise leave the area booause their value is less than 1he would accept
• The efforts was in need of repair and the engaged in restoration
• The is agreeable to instituting public educ-.ational tours of its going f orwara. in addiHon to the
• The :l1sagrees with the IRS position that the building's access is limited to members of the Although members of the may have easy access to the buildino, the precedinq information provides substantial evidence of public access to the held by the Department of the Treasury • hncrttaJ Revenue St:tvice Form 886A D,·parum·nt <>f the Tt~asury • lllteroal Rc~1:nuc Scrvic<:
Explanation of I terns
Name ofTaxuaver
Year/Period Ended
• The presence of building security does not mean that members of. the public do not have access to and opportunity to view the ; it reflects the reality of security restrictions in all buildings today Attachment 2 included below:
Minutes, The date and summary of these minutes is given
• There is still to be restored-
• Discussion on this restoration centered on whether to make the investment based on the current value v the after-restoration value
• were moved to the and
• The will take place
• will run the
• The will subsidize the
• During \fonth, giving will be within the chits and promotional material and events that occur in
• description tags will start to appear alongside the
• will be replaced that will soon be restored from the pool at
• Discussion about developing new and shifting our focus from displays to displays and how we go about it
• President spoke to the to promote the for the
• Governor spoke about a catalog to document the , and putting placards on all to identify it
• General Manager suggested a subcommittee be established to oversee the movement and proper placement of the
• It is the goal of the General Manaaer. , to continue to move the assets of the classified as over to the
• President spoke about standards tor accepting donations
• Discussion about having involved in by having an event surrounding and involving children Form 886A Oepnrlrncn! of !ht- 1'r~alury - !n1e,nol RN·emre Sa•l;<:!;
Ex Janatfon of ltetns
Name ofTaxJ>ayer
Attachment 2 includes a balance sheet for the year ended information:
Assets
Cash
Accounts Receivable
Objects
Liabilities
Accounts Payable
Equity
Retained Earnings
Profit (Loss)
Total Equity
Year Year
Year/Period Ended with the following
This attachment includes a summary of the the type of donated. a description of the donated to the . The summary gives . the , and the value when donated I transferred to the . The also purchased a . Below is a summary of the value of these activwt;t>.
Donated
Transferred
Purchased
Total
This attachment also includes an allocation of costs from the to the The has employee-the director of the . The time the director spent attending to meetings, events and activities accounted for ¾ of the director's time, and so ¼ or the director's salary, payroll taxes and medical insurance costs were allocated to the Included in attachment 2 was a listing of the events and meetrngs of various organizations at the racilities that the attended. In total. there were meetings with Juests.
No documentation was provided from the that gives the policies and procedures pertaining to the activities. The listing of registered individuals for associated activities were not provided by the . No substantiation of public participation in activities or public use of assets was provided.
Department of the T.rc:J11ury • lntcmal Jh:vc11uc Scn•icc Fom1.886A Oepmm~m of du: 'l'tcll$lll)' , hnm10I Rn,:n,,.; !:icfvi<:c
Name of Taxpayer
Schedule No. ot
Year/Petiod Ended
The audit report dated is corrected by this audit report. The attachments referenced to in the audit report dated are unchanged {and so are still valid as a part of this report) but are not included with this report.

# Issues

(1) Does the (" ') qualify for exempt status under Internal Revenue Code (IRC) § 501(c}(3)?

(2) If the doesn't qualify for exempt status, when is the effective date of revocation?

(3) If the doesn't qualify for exempt status, what is the tax effect of the revocation?

# Facts

(, ) is a located in recognized on as exempt under IRC § 501(c){3) as further described under IRC §s 170{b}(1}(A)(vi) and 509(a)(1) or 509{a}(2).
On another determination letter was issued wherein the was further described under IRC §s 170(b)(1)(A)(vi) and 509(a){1) as an organization that receives support from the general public.
The Form , Application for Recognition of Exempt;on, was received by the IRS on . The Form was analyzed. The current directors and officers were:
In Part 11, Activities and Operational Information. several parts referred to an attached statement. The a1tached statement states:
The ("the ') will assemble, collect and display sign1t1cant pnman1y and . It is anticipated that the will be acquired by the orimarilv through gifts in kind to the . It is also anticioated that the will receive cash donations, which will be used by the to acquire The wiU be housed and displayed at the The has over heavily trafficked by the public. It is estimated that each several individuals will see, enjoy and be educated by the members and is of The will conduct 5hows or ::in an almost basis displaying loaned Such shows and exhibits will be educational and noncommercial. Safes of exhibited works will be prohibited. It is anticipated that such Form 886-.A{Rev,4-66) nepMtmcnt of the Trc,umry • lmcmaJ Rl.>venu..: Service Form 886A t){..-pitrtmcnt of the 'l.-.::a.iiury • lowmul Rev,111\IC Ser.ice Ex lanation of Itetns
Name of Taxpayer
Hxhihit
Y c.-ar/Pctiod Ended shows and exhibits will sometimes demonstrate the history or method of a particular form. In addition, from time to time parts of the will be loaned to other public charities, such as, for example, the and the The Form , Part II. Items 2 and 3 of the attached summaries stated:
The sources of support wm be contributions of , contribuUons of cash, and a small amount of interest and dividend income from the investment of the cash contributions pending acquisition of additional ThA will solicit contributions primarilv from the members of the . which-as indicated-has over members.
The Form Part H, Item 5 asl<s "Does the organization control or is it controlled by another organization?" and ~,s the organization the outgrowth of (or successor to) another organization, or does it have a special relationship with another organization by reason of interlocking directorates or other factors?" The marked " " to questions and referenced an attached statement. ln the attached statement, the states:
The is controlled by the , a
1ot~for-profit corporauon qua1ified under !RC§ 501(c){7), by virtue of the fact mat directors of the are appointed, and subject to removal, by the Board of Governors of the and the director. who is a nonvoting ex officio director, is the from-time-to-time President of the The Articles of Incorporation attached to the Form was analyzed:
• The was incorporated on
• In article #5 the corporation is organized and operated exclusively for charitable and educational purposes within the meaning of !RC§ 501(c)(3) for the purpose of assembling, collecting and displaying significant
• In Article #6, the member of the corporation is the , a not~for~profit corporation. The affairs of the corporation shall be managed by the Board of Directors. and the directors and their successors shall be elected by the Board of Governors of the The last filed a , Short Form Return of Organization Fxempt From Income Tax, for the fiscal year ended For the year ende, , the filed a , Electronic Notice flHJo,<::tcard) for Tax-Exempt Organizations Not Required to Fife Form or Form , on The has valued at approximately$ (see Attachment One). According 10 instructions for Forrr Return of Organization Exempt From Income Tax, the Form 11\JSl be filed if the organization has either gross receipts equal to or greater than $ or total assets greater than $ at the end of the year.
Form 886-A(R-.>v.4•68)
Dc1,ar1mcnt of the 1'«:'l'ISOI)' · lmcmi1I Rc"enue Service Form 886A lk·fnrt1r,.n1 :,I the Tn•rut.1ry • lntcnul R;.,,1:rn.ie S.:tvice Explanation oflten1s 1 Schedule No. or Exh1bit Name of Taxpayer Year/Period Ended Or (CFO) and '.Prior CFO) were asked questions that pertained to the The summary ot those questions is given below:
• The accounting department takes caro of the books snd rocords of th<a and all subsidiary organizations.
• As with all subsidiary organiz:ations, the members. Not afl of the boa·d members are based on knowledge and ability so that the directors with an expertise in the arena.
Board of Directors appoints the board members. The directors are appointed can properly operate under
• The owns abou· pieces of . Once is donated to the , the retains ownersh,p.
• The used to give lours, but that. hasn't been done for or years.
• isn't Sl1re if the public knows the exists, but the public can ask for a tour and the public would then be given a tour.
• Neither the prior or the current CFO knew of any substantiation of activities.· On reqLJest: . the IRS examiner asked for the following in an information document
• Minutes of meetings - for the fiscal years ended and
• The Chart of Accounts for the fiscal years ended
• The audit report prepared by and inctudes a
Consolidating Statement of Financial Position that Gatooories for and but does not include a cateoorv for the ( ) or for the
• . Because there is no cateaorv for the the statement of financial position for the cannot oe aenved.
Please provide a statement of financial position for the fiscal year ended for the
• A copy that I can retain or the account summaries and accounting worksheet used that connects the books and records to 1he Statements of Financial Position (for #3 above).
•
If there are any estimated costs (such as overhead allocations). olease orovide an explanation of the basis used to allocate exoensas to the
• I have reviewed th( Form , Application for Recognition of Exemption. According to the Form , the stated that each several of individuals see, enjoy and are educated by the and almost basis displaying of loaned . Please provide suhst:mtintion th::1t non-members attended events in the building for the year ended that includes--bJt is not limited to~~what those events were, how many attended, the purposes of the events. and if these individuals were guests of a member or members.
• In order to be exempt uncer IRC § 501(c)(3). the oroanlzation must provide more benefit to the general public then to members and guests.
Please orov1de cooies of the substantiation that demonstrates that the is carrying out charitable actiVtties described in IRC ---·---" """-·"'".""~~•·"---
Form 886-A(Rev.4,(j.8)
D~1••ttuicnt of the ·r~:.;Nll:Y · lnteuw Rc,·cnue s.: … •ice Name of'f axpayer Year/Period Ended On thE asked for an extension of time to · On the ask.ea tor an extension of time to . On the IRS examiner asked for information in another Information Uocument Request and included a draft Form 886-A. Explanation of Items. The did not provide any response to the information document requests.
Or the L3618 (Rev. 9-2017) was sent as the 30-day letter. This is the wrong 30-day letter. The correct letter should be L3618 (Rev. 8-2019). The responded to the L3618 (Rev. 9-2017) with additional information and an incomplete appeal request (see Attachment 2).
The cover letter for attachment 2 provides a good summary of the position and legal arguments. Attachment 2 provides the following asserted activities:
• The was formed to assemble, collect, and display significant primarily and
• is of the foundations of civilized society; its presence helps to attract people who are interested in
• The instituted displays in the lobby of the
(the "
") in which the displays from local who, absent the activities of the , may not have a forum to oresent their work
• There is an at our location in ( ) which hosts displays
• The :tisolavs in the lobbies of the is accessible to the public
• The (recoc:nized as a 501(c)(3) organization) has represented that the building located at which the majority of the available to the general public, and allows
• The had a presentation on the
"and" " , (in s displayed) is a component ot the . This tour makes the without a forum to present their entitled"
• It is estimated that each several of individuals will see, enjoy and be educated by the
• A substantial number of nonmembers of the (as well as events held by civic organizations) have access to and I or visited the clubhouse and therefore have access to the
• The attracts gifts of that would otherwise leave the area because their value is less than 1he would accept
• The was in need of repair and the engaged In restoration efforts
• The is agreeable to instituting public educational tours of its going forward, in addilion to the
• The ::lisaarees with the IRS position that the building's access is limited to members of the . Although members of the may have easy access to the buildinu. the precedina information provides substantial evidence of public access to the held by the Form 886-A(Rcv.4-GS) O~pamnent ofdu: Treasury - lmcmal R(;vcnuc Scrvkc DcpJlftlm;nt ,_,r the Tr~asury • ln\'1:l:rnll Rc~',llUC Scr"'lCc Explanation of I terns
Name of Taxpayer
Year/Period Ended
• The presence of building security does not mean that members of. the public do not have access to and opportunity to view the it reflects the reality of security restrictions in all buildings today Attachment 2 included below:
Minutes. The date and summary of these minutes is given
• There is still to be restored-
• Discussion on this restoration centered on whether to make the investment based on the current value v the after-restoration value
• were moved to the and
• The will take place
• will run the
• The will subsidize the
• During
~onth, giving will be within the chits and promotional material and events that occur in
• description tags will start to appear alongside the
• Nill be replaced that will soon be restored from the pool at
• Discussion about developing new and shifting our focus from displays to displays and how we go about it
• President spoke to the to promote the for the
• Governor spoke about a catalog to document the , and putting placards on all to identify it
• General Manager suggested a subcommittee be established to oversee the movement and proper placement of the
• It is the goal of the General Manaoer. . to continue to move the assets of the classified as Jver to the
• President spoke about standards tor accepting donations
• Discussion about having involved in by having an event surrounding and involving children Dcp1trtmcm of the Treasury - Internal Revenue Sctvk:c Form 886A Dcpnrlmcn! of the 'l'r.-.rniry • lntem•l Re,•e,m<: Sttvia:
Ex Janation of Itetns
Name of Taxpayer
Attachment 2 includes a balance sheet for the year ended information:
Assets
Cash
Accounts Receivable
Objects
Liabilities
Accounts Payable
Equity
Retained Earnings
Profit (Loss)
Total Equity
Year Year
Year/Period Ended with the following
This attachment includes a summary of the the type of donated. a description of the donated to the . The summary gives the and the value when donated / transferred to the . The also purchased a . Below is a summary of the value of these aciiv1u1,:;::..
Donated
Transferred
Purchased
Total
This attachment also includes an allocation of costs from the to the . The has employee-the director of the . The time the director spent attending to meetings, events and activities accounted for ¼ of the director's time, and so ¼ of the director's salary, payroll taxes and medical insurance costs were allocated to the Included in attachment 2 was a listing of the events and meetings of various organizations at the facilities that the attended. In total. there were meetings with ;}Uests.
No documentation was provided from the that gives the policies and procedures pertaining to the 3Ctivities. The listing of registered individuals for associated activities were not provided by the , No substantiation of public participation in activities or public use of assets was provided.
Ponn 886-A,R~ 4,1,s)
Dcpammmt of the Tn:usury • lntcrrtal Revenue Service
Form886A
Name of Taxoaver

# Law

D"1m,tmcm -0f1he Tteisuty lrmmal R,:.,'\'erlll<' Service Schedule No. 01·
Year/Period En4cd
Tax exemption is a matter of legislative grace, and the organization seeking exemption must show that it comes squarely within the terms of the law conferring the benefit sought (Florida Hospital Trust Fund v Commissioner, 103 T.C. 140, 153, 1994, aff'd 71 F. 3d 808 (11m Circuit 1996).
Organizations organized substantially for pleasure, recreation, and other non-profitable purposes, orto support such purposes. are exempt under !RC §501(c)(7). The exemption of social clubs is based on the logic of allowing members to pool their funds for recreational purposes, rather than for a compelling public benefit. Congress granted exemption so that these membership pools would not be taxed twice (at the member level and at the organizational level) (see Portland Golf Club v C. I.R. 497 U.S. 154. 110 S. Ct. 2780 (1990)).
Exempt function income means the gross income paid by members of the organization (that includes the members, their dependents and their guests) goods, facilities or services in furtherance of the purposes constituting the basis for exemption of the organization (IRC §512(a)(3)(B)). The term "unrelated business taxable income" refers to gross Income derived from any trade or business unrelated to the purposes for which the organiZation is exempt (IRC § 512(a)(1)). With regards to unrelated business taxable income, there are special rules applicable to organizations described in !RC §501(cX7) (IRC § 512(a)(3}(A}).
Rev. Proc. 71-17, 1971-1 C.B. 683, sets forth guidelines for determining the effect gross receipts derived from use of a social dub's facilities by the general public have on the club's exemption from federal income tax under IRC § 501(c}(7). The procedure defines the term "general public," as persons other than members of a club or their dependents or guests.
Exemption is provided for organizations that are organized and operated exclusively for charitable, religious and educational purposes with no part of the net earnings inuring to the benefit of any private shareholder or individual (IRC § 501(c)(3)).An organization is operated exclusively for one or more exempt purposes only if engages primarily in activities which accomplish one or more 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 (Tax Reg.§ 1.501(c){3}·1{c)(1)).
An organization may be exempt as an organization described in !RC§ 501(c)(3) if it is organized and operated exclusively for one or more of the foUowing purposes: Religious, Charitable, Scientific, Testing for Public Safety, Literary, Educational or prevention of cruelty to children or animals (Tax Reg.§ 1.501(c)(3)·1(d)(1)(i}. The term "charitable" as used in IRC § 501(c)(3) is used in its generally accepted legal sense (Tax Reg. §1.501(c)(3)-1{d)(2)).
An organization is not organized and operated exclusively for one or more of these purposes unless it serves a public rather than a private interest {Tax Reg.§ 1.501(c)(3)-1(d)(1)(ii). An organization is not dedicated to one or more exempt purposes if its assets are not dedicated to an exempt purpose (Tax Reg. § 1.501(c)(3)-1(b)(4)).
The purposes toward which an organization directs lls activities, and not the nature of the activities themselves, determine whether the organization meets the operational test (B.S.W.
Name ofTaxr>aver
Law: n,,,nrtmtmoftlw Tr(•~~ry· lrmmul Rew:mi,;• S.:rvic.e E lanation of Items
Year/Period Ended
Tax exemption is a matter of legislative grace, and the organization seeking exemption must show tha1 it comes squarely within the terms of the law conferring the benefit sought (Florida Hospital Trust Fund v Commissioner, 103 T.C. 140, 153, 1994, aff'd 71 F. 3d 808 (11 111 Circuit 1996).
Organizations organized substantially for pleasure, recreation, and other non-profitable purposes, orto support such purposes. are exempt under IRC §501(c)(7). The exemption of social clubs is based on the logic of allowing members to pool their funds for recreational purposes. rather than for a compelling public benefit. Congress granted exemption so that these membership pools would not be taxed twice (at the member level and at the organizational level) {see Portland Golf Club v C.I.R 497 U.S. 154, 110 S. Ct. 2780 (1990)).
Exempt function income means 1he gross income paid by members of the organization (that includes the members. their dependents and their guests} goods, facilities or services in furtherance of the purposes constituting the basis for exemption of the organization (IRC §512(a)(3)(B)). The term "unrelated business taxable income" refers to gross income derived from any trade or business unrelated to the purposes for which the organization is exempt (IRC § 512(a)(1)). With regards to unrelated business taxable income, there are special rules applicable to organizations described in IRC §501(c)(7) (IRC § 512{a)(3)(A)).
Rev. Proc. 71-17, 1971-1 C.B. 683, sets forth guidelines for determining the effect gross receipts derived from use of a social dub's facilities by the general public have on the club's exemption from federal income tax under IRC § 501(c}(7). The procedure defines the term "general public," as persons other than members of a club or their dependents or guests.
Exemption is provided for organizations that are organized and operated exclusively for charitable, religious and educational purposes with no part of the net earnings inuring to the benefit of any private shareholder or individual (IRC § 501(c)(3)).An organization is operated exclusively for one or more exempt purposes only if engages primarily in activities which accomplish one or more 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 (Tax Reg.§ 1.501(c)(3)·1(c)(1)).
An organization may be exempt as an organization described in lRC § 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 {Tax Reg.§ 1.501(c)(3)·1(d){1)(i). The term "charitable" as used in IRC § 501(c)(3) is used in its generally accepted legal sense (Tax Reg. §1.501(c)(3}-1{d)(2)).
An organization is not organized and operated exclusively for one or more of these purposes unless it serves a public rather than a private interest (Tax Reg.§ 1.501(c)(3)-1(d)(1)(ii). An organization is not dedicated to one or more exempt purposes if its assets are not dedicated to an exempt purpose (Tax Reg.§ 1.501(c){3)-1(b)(4)).
The purposes toward which an organization directs its activities, and not the nature of the activities themselves, determine whether the organization meets the operational test (B.S.W.
Department of the Treasury• lritemal ltC\'Cnuc Se,vicc.,
Fonn886A
Name of Taxpayer
0..-pattmenl of the l'!'elWW)' • lntmm lkveuoc Service
Year/Period Ended
Group Inc v Commissioner, 70 T.C. 352, 356-357 (1978)). An organization is required to keep records, substantiate its activities and file returns as required by the Secretary (IRC §§ 6001 and 6033; Tax Regulation §1.6033~2(iX2)).
Impermissible benefit to private interests encompasses not only benefits to insiders but also benefits that an organization may confer on unrelated or even disinterested persons (i.e., outsiders) (American Campaign Academy v Commissioner. 92. T.C. 1053. 1068-1069; see also Capital Gymnastics Booster Club Inc. v Commissioner T.C. Memo 2013-193, 2013). In American Campaign Academy, the private interests were republican entities and candidates.
The organization was operated for a substantial non-exempt purpose because its net earnings inured to the benefit of tts members. Net earnings include more than net profits and may inure to the benefit of private persons other than in the distribution of dividends (Unitary Mission Church v Commissioner. 74.T.C. 507. 512-513 (1980); Canada v Commissioner (82 T.C. No. 73, 82 T.C. 973). .
An organization which is exempt from taxation under § 501 (a) and is not required to file annually an information return shall immediately notify in writing the district director for the internal revenue district in which its principal office is located of any changes in its character, operations, or purpose for which it was originally created (Tax Regulation §1.6033-2(i)(1 )).
A non-exempt entity that substantially benefits from the aotMties of the exempt organization and exerts considerable control over the exempt organization and how the exempt organization carries out its activities means the exempt organization ts being used as an instrument to further the private benefit of the non-exempt and does not qualify as tax exempt (Est. of Hawaii v Commissioner 71 T.C. 1067 (1979)). A tax-exempt organization and 090-exempt entity were controlled by the same persons. and their activities were so interrelated as io be functionally inseparable, then the benefit to the non-exempt was not incidental (P.L.L Scholarship v Commissioner, 82 T.C. 196 (1984)).
Separately incorporated entities must qualify for exemption on their own merits. The exception is where an organization's activity is an Integral part of an exempt affiliates' activities. In this case, the organization may derive its exemption from that of its affiliate {Geisinger Health Plan v C.I.R.. 30 F. 3d 494. 498 (1994)).
The presence of a single non-exempt purpose, if substantial in nature, will destroy the exemption regardless of the number or importance of truly exempt purposes (Better Business Bureau of Washington D.C. Inc. v United States, 326 U.S. 279, 283 (1945)).
With regards to taxability, Internal Revenue Code§ 61 states, unless otherwise provided, all income is taxable. lRC § 102 states that as a general rule gross taxable income does not include the value of property acquired by gift, bequest. devise or inheritance (see Synanon Church v Commissioner, T.C. Memo 1989-270).
Government Position:
The and its is housed in the same buildinQ as the The controls access to, and use of, the building. By appointing the board members, the
Fonn886A
Name ofTaxpaytt
Depatlmctlto(thc 'f~ • lnoomal Rll,'Cf!Ut, ~ lanation of Items Bxrubit Yeat/Pttiod Ended controls the organization. Because exemption is a matter of legislative grace. the needed to substantiate that it Is operating to carry out charitable activities (Florida Hospital Trust fund v Commissioner (IBfD), IRC §§ 501(c)(3), 6001, 6033; Tax Reg.§§ 1.501(c)(3)-1(c)(1), 1.501(cX3}-1{dX1)(i) and 1.501(c){3)-1(d)(2)).
Exemption is provided for organizations that are organized and operated exoJusively for charitable, religious and educational purposes with no part of the net eamlngs inuring to the benefit of any private shareholder or individual (IRC § 501 (c)(3)). Being organized to carry out a charitable purpose is just the first requirement The second requirement is that the organization operate exclusively for a charitable purp05e. Substantiation that the organization is carrying out charitable purposes is required (IRC §§ 6001 and 6033).
The represented fn Its Form , that It annually had members and that of people from the general public came through to view the housed in the building.
The has made assertions about what its actMtles are without providing any substantlatlOn that those activities actually operate as claimed. The is to keep books and records that substantiated its assertion that it is e>eempt under IRC §501{c)(3) and properly file required returns (IRC §§ 6001 and 6033). The has not provided substantiation of its claimed operational activities. Assertions. no matter how often repeated, is not substantiation.
Substantiation such as policies and procedures. documentation that the policies and procedures are in operation. documents that substantiate where the aciMty (or activities) occurred, who was in attendance (via attendance logs) and relationship these attending individuals have with the wourd have assisted In establishing the operations.
The facts already show that in order to attend related activities, the person had to register to attend. The has not provided these attendance documents. That members of the general public could have attended '1ese activities is not the same thing as substantiation that members of the public actuaffy did attend the activity. This is not the only barrier the would have to address.
A lour of the building demonstrates that access to the building is limited to members of the their dependenls and their guests. Because the did not substantiate that members of the general public were allowed access to-or actually made use of or toured-the building. then the only conclusbn that can be reached based on the substantiation in the possession of the fRS e><amlner is that there Is no public use of the building and no public viewing or use of the >r activttles.
The other concfusion is that the viewng and use of the is limited to the members, and their dependents and guests. The members, their dependents and guests are not members of the general public (Rev. Proc. 71-17 (IBID)).
Because of the lack of substantiation. operationafly, the from the operations of the . VVhile the could not be distinguished has provided legal Fom1886A Department of the l'misury • lulcmw Ra'(!tltl<! Sctva
Name of Taxpayer
Year/Period Ended arguments based on the asserted operational activities, no legal analysis could be performed until af1er the operational activities were substantiated as actually occurring.
The financial and operational activities are so inter-related to the financial and operational activities that they are functionally inseparable from th& . For this reason, the benefit to the is not incidental (P.L.L Scholarship v Commissioner (IBID)). Because of they are so inter-related, the activities the carries out are deemed to be in support of-and part of- the activities. As such, the is considered to be an instrument of the that provides private benefit to the and the members thereof (see Est of Hawaii v Commissioner (IBID)).
The is organized and operated for the pleasure, recreation and other non-profitable purposes of its members. and their dependents and guests (IRC § 501( c)(7), Portland Golf Club (IBID)). The exempt function Income of the ls by definition the gross income paid by members of the their dependents and guests for goods, facilities or services in furtherance of the purposes for which it was granted exempt status (IRC § 512(a)(3XB)).
Organizations like the were granted exempt status so that the member's pooled recreational funds wouldn't be taxed twice (Portland Golf Club (IBID)). The principle activities of organizations like the are focused on the recreation of the members, their dependents and guests. The mere fact that the is exempt from business income tax doesn't mean that the principle activities and operations are charitable activities described in IRC §501(c)(3).
Because the is carrying out activities that support the • th& operational activities and purposes of the are not charitable activities with a charitable purpose (Tax Reg.
§§ 1.501(c)(3)-1(d)(1)(i), 1.501(c)(3)-1(dX2) and 1.501(c)(3)-1(d)(1)(il); B.S.W. Group Inc. v Commissioner (IBID)).
These operational activities serve the private interests of th& as well as the members, dependents and guests thereof far more than the interests of the general public. For this reason, the is not operating exclusively for one or more charitable purposes (Tax Regulation § 1.501(cX3)-1(d)(1)(ii)).
By supporting the private interests of the members, dependents and guests, the operations provide private benefit and lnurement to the members, dependents and guests (American Campaign Academy v Commissioner (IBID), Capital Gymnastics Booster Club v Commissioner (IBID), Unitary Mission Church v Commissioner (IBID), Canada v Commissioner (IBID)).
For the reasons already given above, the assets of the are dedicated to the and the members, dependents and guests thereof and are not dedicated to charitable purposes.
For this reason, the doesn't qualify for exempt status under IRC §501(c)(3) (Tax
Reg. § 1.501(c)(3)-1(b){4)).
Because the assets of, and the activities of, the are for the benefit of the and the members and guests thereof, the does not qualify for exempt status under IRC § 501(c)(3) (Tax Reg.§§ 1.501(c)(3)-1(d){1), 1.501(c)(3)-1(b)(4); see also B.S.W. Group Inc. v Form 886-A(l«v.4-611) Department of tlac TrcMury - Internal Rc-vcnue 8'.'TI'ice Form886A DcpatUMnt of the 'I'reamry. lntt:mal lt<!''Clltie Service E lanation of Items Name of Taxpayer f:\Xhibit
Year/Period Ended
Commissioner (IBID), Est of Hawaii v Commissioner (IBID). American campaign Academy v Commissioner (IBID), Better Business Bureau of Washington D.C. v United States (IBID)).
Taxpayer Position:
See Attachment 2. As summarized in the facts section, the has made several assertions about the activities of the and the public use of assets. The also makes an extensive legal argument about why Its claimed operational activities are charitable activities.

# Conclusion

For the reasons already given in the Government Position, because the legal amument is based on unsubstantiated assertions of activities, no extensive analysis of the legal argument needs to be made. Simply put. because there are no substantiated operational activities the legal arguments do not apply to the facts of this case.
For the reasons already given, the primary position is that the exempt status of the should be revoked effective the first day of the year under examination:
Because the gross income is derived from gifts and beauests. the does not have any, taxable gross revenue that would require the to file a Form • U.S.
Corporation Income Tax Return (see IRC §§ 61 and 102; and Synanon Church v Commissioner (IBID)). For that reason, no Form is being solicited by the IRS due to this proposed revocation and no taxes associated therewith will be imposed.
Because charitable assets are dedicated to charitable purposes, the net assets of the organization wiD need to be transferred to another organization described under IRC § 501(c)(3) (Tax Reg.§ 1.501(c)(3)-1(b)(4)), and In subsequent time periods the organization will need to file Form 1120.
Fom1 886-AcRcv.4-68)
Depannu:m of the Trcaawy • Imernal Jb:venuc Service

Source: view the official PDF

The source document contains 52 figures (charts or worksheet graphics) not reproduced in this text version. See the official PDF above.

Report a problem

What's wrong?

Sent anonymously with this page's citation. No personal information is collected.
Nearby sections (25 sections)
  1. plr-202239003 · Tax On Generation Skipping Transfers
  2. plr-202239002 · Normalization Rules
  3. plr-202239001 · Special Rules for Capital Gains Invested in Opportunity…
  4. plr-202238020 · Extension of Time for Making Certain Elections
  5. plr-202238019 · Extension of Time for Making Certain Elections
  6. plr-202238018 · Religious, Charitable, etc., Institutions and Community…
  7. plr-202238017 · Religious, Charitable, etc., Institutions and Community…
  8. plr-202238016 · Social Clubs
  9. plr-202238015 · Social Clubs
  10. plr-202238014 · Religious, Charitable, etc., Institutions and Community…
  11. plr-202238013 · Social Clubs
  12. plr-202238012 · Social Clubs
  13. plr-202238011 · Religious, Charitable, etc., Institutions and Community…
  14. plr-202238010 · Organizational and Operational Tests
  15. plr-202238009 · Inadvertent Terminations
  16. plr-202238008 · Extension of Time for Making Certain Elections
  17. plr-202238007 · Election by Individuals to be Subject to Tax at…
  18. plr-202238006 · Election by Individuals to be Subject to Tax at…
  19. plr-202238005 · Reg. 301.7701-3 Classification of Certain Business…
  20. plr-202238004 · Reg. 301.7701-3 Classification of Certain Business…
  21. plr-202238003 · Reg. 301.7701-3 Classification of Certain Business…
  22. plr-202238002 · Inadvertent Terminations
  23. plr-202238001 · Section 2010(c)(5)(A); Portability Election (as…
  24. plr-202237019 · Organizational and Operational Tests
  25. plr-202237018 · Social Clubs
Full table of contents →