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PLR 202242014

Religious, Charitable, etc., Institutions and Community Chest

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

# ISSUES

Whether continues to qualify for exemption as an organization described in the Internal Revenue Code (IRC) Section 501 (c)(3) as a Public Charity?

# FACTS

Organizational History
The was Incorporated on in the State of applied for tax-exempt status by filing Form - Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on . The Internal Revenue Service (IRS) determined on that the organization will be classified as exempt under Section 501 (c)(3) of the Internal Revenue Code effective . as a Public charity under IRC Section 170(b)(1) (A) (vi). The exemption allows donors to deduct contributions to the organization under IRC Section 170.
Operation History
The original name of the organization was
11
"
The organization was created by , the founder. started the first , from his after the completion of degree and upon returning from the stated that converted personal home in into a at the initial stage. As the organization activities increases and additional funding were donated, expanded operations to opening and in As the organization evolved, the was created from the"
". The founder stated that was created to help fund the donations for creating and in further stated that the 11 " built and so far in
Related Entity
The is an extension of " "
The operation and activities of the organization are all being conducted in . On the last form filed by" ", their calendar year was to . Their purpose was to remodel and build additions to existing and and to improve infrastructure in Per Internal Revenue Service records, 11 "was revoked for not filing tax returns for more than years.
Fonn 886-A (1-1994) catalog Number 20810W Page_1_ publlsh.no.irs.gov Department of the Treasury-Internal Revenue Service ---Form 886-A Name of taxpayer During the interview, created from " activities of the organization.
Schedule number or exhibit
EXPLANATIONS OF ITEMS
I Tax Iden ification Number
Year/Period ended
I , founder of the , stated that the was
" in order to handle the financial stated that both and , are the same entity and that the activities of the are currently been conducted in "
"name, is no longer used and per IRS purposes, that organization has been revoked.
Board of Directors
The officers, directors and trustees on the board are:
Name
Financial Report for tax year
Per Form
Revenue
Contributions, Gifts, Grants
Investment Income
Total
Expenses
Grants
Total
Total profit
Officers
President, Treasurer
Director
Director , the reported the following financial information:
$
$ .ffi
$
I catalog Number 20810W publish.no.irs.gov Department of the Treasury-Internal Revenue Service page_..z_ Form 886-A Name of taxpaver Schedule number or exhibit
EXPLANATIONS OF ITEMS
Tax Iden ification Number Year/Period ended
Per the Statement of Revenues & Functional Expenses, the Revenue:
Revenue
Contributions, Gifts, Grants
Investment Income
Total
Expenses
Grants
Other Expenses
Total
Total profit
Perform for tax year information:
Revenue
Contributions, Gifts, Grants
Investment Income
Total
Expenses
Grants
Total
Total profit had the following
Income
$
$
$
$ ,the reported the following financial
$
$
$
$
Department of the Treasury-Internal Revenue Service catalog Number 20810W publish.no.irs.gov Page_L Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Iden ification Number Year/Period ended
Incomplete returns
The filed a Form - Short Form of Organization Exempt from Income Tax return for tax year on . The Form was received by the Internal Revenue Service on . On , the Internal Revenue Service sent the a letter stating that they were returning the Form , Short Form of Organization Exempt from Income Tax because the return filed was incomplete. The organization failed to include all the required information. Also, the letter stated that the total assets or gross receipts are greater than the amount applicable to Form stated that the was planning to prepare a revised Form for tax year with the correct information and return a complete Form to the Internal Revenue Service for processing.
On , the filed a Form return for the tax year with the Internal Revenue Service. The Internal Revenue Service received the Form return on . On , the Internal Revenue Service issued out a letter to the stating that they can't process Form because Schedule A was not prepared.
Current Operations
On the original Form , the organization stated that the would be organized and operated exclusively to further the charitable and educational purposes of the organization.
In the original filed Form
In the amended return, the organization described its mission as return, the organization described its mission as " . In the original filed the primary exempt purpose as "
Form return, the organization described
During the initial interview, stated that the is still operating its exempt purpose but activities are being conducted in provided the revenue agent with pamphlets and booklets describing the building o1 and in and showing the physical locations to visit. also stated that there were no activities in the and that all activities were being conducted in There were no indications on the organization's Form and Form tax returns that the organization is actively engaged in building facilities in another country and fu'rthermore, no financial activities were listed on the return to verify exempt activity. The organization did not provide supporting documentation for expenses incurred. The balance sheet did not reflect any assets that matched the value of and as described by the organization as their main exempt activiti~s. The balance sheet reflects only a total of$ and catalog Number 20810W Page … i._ publish.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of tax0aver Tax Iden ification Number Year/Period ended $ cash and savings balance respectively in and . year end. No value was reported for land, building, or equipment in both years.
During the interview with on regarding sources of income and fundraising, stated that had received some donations, but could not remember how much had contributed on own. Listed below are the names and amounts of the individuals that donated to the Contributor Amount $ Total Contribution Amount $ Listed below is the Contributions: test, to meet public support test:
Substantial Contributor - $
Other Donors
Total Contributions- $
X %=$
Substantial Contributor amount minus % limitation ($ - $ ) = $ Contributions minus amounts over % ($ - $ ) = $
Total for numerator-$
Total for Denominator-$
Public Support Fraction: $
Donated building or percent. had personal property that donated to the " on but did not take a deduction on personal return. From the internet, the property value at that time catalog Number 20810W Page_L publish.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Iden ification Number Year/Period ended was$ stated that wanted to turn the property into a museum, and have it marked as a historical site. Then on , the quit claim the personal property donated by to the Trustee of because the county and could not come to an agreement on the property lines delineation for real estate taxes on a residential property versus exempt property. The value of the property at this time was $ . The value of the property from the time it was donated to the versus being quit claim to the Trustee of was$ . The property value had decreased.
The organization did not list any property owned or any gain or loss from property on the tax return. the also stated that all exempt activities are conducted in were hired to help with the construction of facilities. and that the workers from On , during an interview with POA , stated that explained to that while was employed as a , would receive donations from patients as was about to retire. then put those donations in a box that stored at personal residence. later misplaced the box with money given from patients and later found the box and deposited the money in the Foundation's bank account.

# LAW

IRC section 170(b)(1)(A) In the case of an individual, the deduction provided in subsection (a) shall be limited as provided in the succeeding subparagraphs.
Any charitable contribution to-

(i) a church or a convention or association of churches,

(ii) an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on,

(iii) an organization the principal purpose or functions of which are the providing of medical or hospital care or medical education or medical research, if the organization is a hospital, or if the organization is a medical research organization directly engaged in the continuous active conduct of medical research in conjunction with a hospital, and during the calendar year in which the contribution is made such organization is committed to spend such contributions for such research before January 1 of the fifth calendar year which begins after the date such contribution is made,

(iv) an organization which normally receives a substantial part of its support (exclusive of income received in the exercise or performance by such organization of its charitable, educational, or other purpose or function constituting the basis for its exemption under section 501 (a)) from the United States or any State or political subdivision thereof or from direct or indirect contributions from the general public, and which is organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of a college or catalog Number 20810W Page~ publish.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Iden ification Number Year/Period ended university which is an organization referred to in clause (ii) of this subparagraph and which is an agency or instrumentality of a State or political subdivision thereof, or which is owned or operated by a State or political subdivision thereof or by an agency or instrumentality of one or more States or political subdivisions,

(v) a governmental unit referred to in subsection (c)(1)

(vi) charities that normally receive a substantial part of their support from governmental units and/or from direct or indirect contributions from the general public.
Internal Revenue Service section 501 (c)(3) exempts from federal income tax organizations which are organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
Internal Revenue Service section 507(d)(2)(A) For purposes of paragraph (1 ), the term "substantial contributor" means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the private foundation, if such amount is more than 2 percent of the total contributions and bequests received by the foundation before the close of the taxable year of the foundation in which the contribution or request is received by the foundation from such person.
Internal Revenue Service section 508(b) Except as provided in subsection (c), any organization (including an organization in existence on October 9, 1969) which is described in section 501(c)(3) and which does not notify the Secretary, at such time and in such manner as the Secretary may by regulations prescribe, that it is not a private foundation shall be presumed to be a private foundation.
Internal Revenue Service section 509(a) For purposes of this title, the term "private foundation" means a domestic or foreign organization described in section 501 (c)(3) other than-

(1) an organization described in section 170(b)(1 )(A) (other than in clauses (vii) and (viii));

(2) an organization which- normally receives more than one-third of its support in each taxable year from any combination of-

(i) gifts, grants, contributions, or membership fees, and

(ii) gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business (within the meaning of section 513), not including such receipts from any person, or from any bureau or similar agency of a governmental unit (as described in section 170(c)(1 )), in any taxable year to catalog Number 20810W Page_L publlsh.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxoaver Tax Iden ification Number Year/Period ended the extent such receipts exceed the greater of $5,000 or 1 percent of the organization's support in such taxable year, from persons other than disqualified persons (as defined in section 4946) with respect to the organization, from governmental units described in section 170(c)(1 ), or from organizations described in section 170(b )( 1 )(A) ( other than in clauses (vii) and (viii))
Income Tax Regulations ("Treas. Reg.")
Treas. Reg. Section 1.501(c)(3)-1(d)(i) states that an organization may be exempt as an organization described in 501 (c)(3) if it is organized and operated exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, or prevention of cruelty to children or animals.
Treas. Reg. Section 1.501 (c)(3)-1 (a)(1) of the regulations provides that in order to be exempt as an organization described in section 501 (c)(3) of the Code, the organization must be one that is both organized and operated exclusively for one or more of the purposes specified in that section.
Treas. Reg. Section 1.501 (c)(3)-1 (c)(1) of the regulations provides that an organization will be regarded as "operated exclusively" for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501 (c)(3) Treas. Reg. Section 1.501 (c)(3)-1 (d)(1 )(ii) is an organization is not organized or operated exclusively for one or more of the purposes specified in subdivision (i) of this subparagraph unless it serves a public rather than a private interest. Thus, to meet the requirement of this subdivision, it is necessary for an organization to establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests.
Revenue Ruling 63-252, 1963-2 C.B. 101 Deductibility of contributions by individuals to a charity organized in the United States which thereafter transmits some or all of its funds to a foreign charitable organization.
Revenue Ruling 68-165, 1968-1 C.B. 253 A domestic nonprofit corporation (composed of educational, civic, business, and other groups) that joins with a counterpart group in a country in Latin America to promote student and cultural exchanges and to provide technical and material assistance for self-help projects designed to improve the living conditions of underprivileged people in Latin America may be exempt from Federal income tax under section 501 (c) (3) Revenue Ruling 71-460, 1971-2 C.B. 231 A domestic corporation that conducts a part or all of its charitable activities in a foreign country is not precluded from exemption under section 501 (c) (3) of the Code. catalog Number 20810W Page~ publish.no.its.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxpaver Tax Iden ification Number Year/Period ended Revenue Ruling 72-369 states, in part, that in order for an organization to pass the operational test, the organization's resources must be devoted to purposes that qualify as exclusively charitable.
Revenue Ruling 80-286 An otherwise qualifying organization that was formed to foster the cultural and educational development of children by arranging for and participating in the temporary exchange of children between families of a foreign country and the U.S. qualifies for exemption under section 501 (c) (3) of the Code Christian Manner International Inc. V. Commissioner, 71. T.C. 661, exemption denied because principle activity not verified as in furtherance of exempt purpose. Principle activity not an education purpose activity.
Mysteryboy Inc. v. Comm'r, 2010 Tax Ct., exemption was denied because the corporation was not exempt from tax under section 501 (a) because it was not an organization described in section 501 (c)(3).
TAXPAYER'S POSITION: position has not been provided.
GOVERNMENT'S POSITION:
An organization exempt from federal income taxes as described in IRC section 501 (c)(3) must be organized exclusively for one or more of the following classifications:
• Religious
• Charitable
• Scientific
• Testing for Public Safety
• Literary
• Educational
• Fostering of national or international amateur
• Sports, and
• Prevention of cruelty to animals and children In order to meet the operational test, an organization must show that they engaged primarily in activities which accomplish one or more of such exempt purposes specified in section 501 (c)(3) of the Internal Revenue Code. received exemption to be organized and operated exclusively to further their charitable and educational purposes. has not been conducting any exempt activities as requested in the exempt application during the and tax years. has not provided any evidence that the organization has conducted any other activities that would be exempt under IRC Section 501 (c)(3).
Catalog Number 20810W page__a_ publlsh.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Fonn 886-A
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Iden ification Number Year/Period ended In order to remain a public charity (and not a private foundation), a Section 501 (c)(3) organization must obtain at least 1 /3 of its donated revenue from a fairly broad base of public support. The public support can be from individuals, companies and/or other public charities.
The public support fraction for the shows $ or % for . This is well below the 1/3 required for the organization to qualify as a publicly supported organization under IRC Sections 509(a)(1) and Section 170(b)(1 )(A)(vi). Similarly, a larger percentage of the donations came from in After reviewing and comparing the Foundation's books and records with the returns filed for the periods ending and ; the organization did not provide any convincing evidence that confirmed the organization engaged in any exempt activities such as building of and , as claimed. There was no documentation to show the construction of facilities that was under construction or already built; the cost of materials used to build the facilities and cost for individuals hired to build the facilities. The organization did not provide supporting documentation to prove that the expenses incurred were in fact for legitimate exempt activities. As noted, the balance sheet did not reflect any assets that matched the value of and as described by the organization that they engaged in building and facilities. The balance sheet reflects only a total of$ and $ cash and savings balance respectively in and year end. As such, the did not provide any record to support the fact that they are engaged in any significant exempt charitable activities. stated that individuals in were hired to build facilities. There were no cancelled checks provided, no W2 or Form filed with the IRS that would have suggested that the paid for services rendered or that those payments actually occurred here in United States or The booklet and pamphlets provided with the name on the front, reflected the value of the and in . However, the value of those facilities was not listed on the Foundation's books and records and on returns filed for tax years and stated that all the activities of the were being performed in but there was no evidence on the books and records that such exempt activities were being conducted.
The review of returns for periods ending in and along with the review of previous returns filed by .1...disclosed the organizations did not engage exclusively for charitable exempt purpose.
The and returns did not reflect any evidence that the organization is conducting exempt activities nor that the building or facilities in are being used for education purposes or caring for sick and elderly.
886-A (1-1994) catalog Number 20810W Page-1.Q. publish.no.irs.gov Department of the Treasury-Internal Revenue Service Schedule number or exhibit Form 886-A
EXPLANATIONS OF ITEMS
Name of taxpayer Tax Iden ification Number Year/Period ended Based on Christian Manner International Inc. V. Commissioner, 71. T.C. 661, The doesn't meet the requirements of a 501 (c)(3) because the organization does not have an exempt purpose and did not engage in any exempt activities during the years examined.
Although conducting a part or all of an organization's charitable activities in a foreign country does not preclude exemption under IRC Section 501 (c)(3) per Revenue Ruling 71-460, 1971-2 C.B. 231. However, the organization must have an exempt purpose and must be actively involved in the conduct of the exempt activities for which it received an exempt status either in United States or in a foreign country. There must be adequate records to support the activities conducted either in United States or in a foreign country. In this case, the supporting records were not provided by In order for an organization to pass the operational test, the organization's resources must be devoted to purposes that qualify as exclusively charitable as discussed in Revenue Ruling 72-369 whereas operation failed the operational test because the organization is not engaged primarily in the conduct of exempt activities.
Therefore, the organization is not furthering any exempt purpose under IRC Section 501 (c)(3).

# CONCLUSION

Accordingly, exempt status as an organization described under IRC Section 501 (c)(3) should be revoked, effective because the could not demonstrate that it operated for an exempt purpose. The has not established that it is observing the conditions required for the continuation of exempt status under IRC Section 501 (c)(3).
Form U.S. Corporate Income Tax Return should be filed for the periods ending on and Catalog Number 20810W Page ---11. publish.no.irs.gov Department of the Treasury-Internal Revenue Service

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