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PLR 202317024

Religious, Charitable, etc., Institutions and Community Chest

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

# Issues

Schedule number or exhibit
Year/Period ended
Whether the organization , which qualified for exemption from Federal income tax under Section 501 ( c)(3) of the Internal Revenue Code, should be revoked due to failing to fully respond and produce records to substantiate that the organization is meeting the organizational and operational tests?
Facts applied for tax-exempt status by filing the Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code, on , and was granted tax-exempt status as a 501(c)(3) on , with an effective date of An organization exempt under 501(c)(3) needs to be organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes and to foster national and amatuer sports competition.
Form 1023-EZ shows the organization is a corporation incorporated in the State of on . The organization attested on Form 1023-EZ, part 11, box 2 that they have the organizing document necessary for their organizational structure.
Section 501(c)(3) requires that an organizing document must limit your purposes to one or more exempt purposes within section 501(c)(3). The organization attested that their organizing document contains this limitation.
The organization attested that their organizing document contains the dissolution provision required under section 501(c)(3) or that they did not need an express dissolution provision in your organizing document because they rely on the operation of state law in the state in which you are formed for your dissolution provision.
The State of does require a dissolution provision.
The organization was selected for audit to ensure that the activities and operations align with their approved exempt status.
The organization responded to the first Information Document Request (IDR) issued on . The response was received by the Internal Revenue Service on and included the following documents:
• Copy of Bylaws
• Organizational Documents for Catalog Number 20810W Page _1 _ www.irs.gov Fonn 886-A (Rev. 5-2017)
Form886-A
(May 2017)
Name of taxpayer
• Meeting Minutes for
• Bank Statements for
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number (last 4 digits) , through , through Schedule number or exhibit Year/Period ended The organization did provide a copy of Bylaws, but it did not include an appropriate purpose and dissolution clause for a Section 501(c)(3) organization, and they were not signed.
Articles of Incorporation were provided for an organization named . No documentation was provided to show that they filed a name change with the Secretary of State and were accepted under the new name and employer identification number of The Secretary of State showed that did file Articles of Incorporation and Articles of Amendment. The Secretary of State does not provide copies of filed documents.
The meeting minutes were reviewed and some activities were identified. Activities identified in the meeting minutes were:
• and Camp
• Car Wash
• Bake Sale
• Annual Banquet
• Raffle
The meeting minutes did not satisfy the operational test. There was not enough information or details provided about the activities to determine if the activities support the exempt purpose of the organization.
Credits, debits, and assets from the bank statements did not reconcile with the Form . Discrepancies could not be identified. Cash withdrawals and expenses were identified that were not reported on Form . Cash deposits were made on the bank statements and did not reconcile with revenue reported on Form Based on the information provided in the bank statements, it could not be determined the sources of income and expenses were related to the exempt purpose of the organization and could not rule out private benefit, therefore did not pass the operational test.
A 2nd IDR was issued on , with a response due date of The second IDR requested additional information to verify the organization passes the Organizational Test and Operational Test as required for a 501(c)(3) organization. Items requested in the 2nd IDR include:
Form 886-A Department of the Treasury - Internal Revenue Service
Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Schedule number or exhibit Year/Period ended
• Organizational documents for filed with the Secretary of State.
• Additional information about the gun raffle.
• Details regarding activities identified in the meeting minutes.
• A copy of the Registration Form.
• Additional information was requested to verify and review income, expenses, and assets.
A 3rd IDR was issued on , with a response due date of . The 3rd IDR listed documents that were received in the response and reiterated documents/information requested on the 2nd IDR that still were needed. The Administrative Record was also shared with the organization at this time.
The organization failed to fully respond to the Internal Revenue Service attempts to obtain information to perform an audit of Form for the tax year ending The organization has not filed a Form series return for the tax year ending The Form 1023-EZ application lists the phone number of for the treasurer of As of , per the State of exists, copy attached from state website. website, it lists the organizations status as
• Correspondence for the audit was as follows: o Letter 6031 (Rev. 11-2020) with attachments, was mailed to the organization on , with a response date of . This letter was not return by the post office as being undeliverable. o Letter 3844-A (12-2015) with attachments, was mailed certified to the organization on , with a response date of , Article Number . Per the United States Postal Service (USPS) tracking, this was returned on as BOX CLOSED, UNABLE TO FORWARD, RETURN TO SENDER. This letter was received back at the Internal Revenue Service on o Letter 3844-A (12-2015), with attachments, was mailed certified to the organization, per Form 1023-EZ application, on , with a response date of . Article Number . Per USPS tracking this was RETURNED TO SENDER, UNABLE TO FORWARD and returned to the Internal Revenue Service. This letter was received back at the Internal Revenue Service on Form886-A Department of the Treasury - Internal Revenue Service
Explanations of Items
Name of taxpayer Tax Identification Number (last 4 digits) Schedule number or exhibit Year/Period ended o Letter 3844-A (12-2015), with attachments, was mailed to the President, per Form 1023-EZ application, on , with a response date of . Article Number . This letter was delivered on Green Card Receipt was received back at the Internal Revenue Service on o Letter 3844-A (12-2015), with attachments, was mailed to the Vice President, per Form 1023-EZ application, on , with a response date of Article Number . This letter was delivered on . Green Card Receipt was received back at the Internal Revenue Service on o Letter 3844-A (12-2015), with attachments, was mailed to the organization, per on , with a response date of . This letter was not return by the post office as being undeliverable. o Letter 3844-A (12-2015), with attachments, was mailed to the President, per phone conversation with President on , with a response date of . This letter was not return by the post office as being undeliverable. o Letter 3844-A (12-2015), with attachments, was also emailed via secure zip to on , with a response date of o Letter 5077-B (1-2017), TE/GE /DR Delinquency Notice, was mailed to the President, on , with a response date of . Article Number . This letter was delivered on . Green Card Receipt was received back at the Internal Revenue Service on o The Organization mailed in a response, and it was received by the Internal Revenue Service on o Letter 3844-B (11-2015), and second Information Document Request, was mailed to the President on , with a response date of Article Number . This letter still currently shows In Transit, and no Green Card Receipt was received back at the Internal Revenue Service. o Letter 3844-A (10-2021), and second Information Document Request, was mailed to the President on , with a response due date of Article Number . This letter was delivered on . Green Card Receipt was received back at the Internal Revenue Service on
Form886-A
Name of taxpayer
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number (last 4 digits) Schedule number or exhibit Year/Period ended o Letter 5077-B (1-2017), TE/GE /DR Delinquency Notice, third Information Document Request, and Administrative File was mailed to the President, on with a response date of . Article Number
4935. Letter was picked up by individual at the Post Office on Green Card Receipt currently has not been received back at the Internal Revenue Service.
The Administrative File included:
• Form 1023EZ, Streamlined Application of Recognition of Exemption Under Section
/RC 501(c)(3) of the Internal Revenue Code
• Letter 947, 501(c)(3) Exemption with Definitive Ruling of Public Charity Status
• Form
• Telephone contact for the audit was as follows: o , Tax Compliance Officer (TCO) called the phone number listed on Form 1023-EZ application and Form for the Treasurer of and received VMS. Left a message for an officer of the organization to return phone call. o , Tax Compliance Officer {TCO) called the phone number listed on Form 1023-EZ application and the Form for the Treasurer of and received voice mail (VMS).
Left a message for an officer of the organization to return phone call. o , returned phone call. She is no longer the Treasurer but provided phone number for the new treasurer, o , Tax Compliance Officer (TCO) called at and received VMS. Left a message for an officer of the organization to return phone call. o , Tax Compliance Officer (TCO) researched Accurint for phone numbers for President listed on Form 1023-EZ. Called and and received VMS. Left a message for officer of the organization to return phone call. No other numbers were successful. o , TCO received a call from . She received a letter at address. Letter was returned to sender and TCO verified this was not a good address for the organization.
Form886-A Department of the Treasury - Internal Revenue Service
Explanations of Items
Schedule number or exhibit
Name of taxpayer Tax Identification Number (last 4 digits) Year/Period ended o , TCO called at and received VMS. Left a message for an officer of the organization to return phone call. o , TCO called President listed on Form 1023-EZ at and and and received VMS for both numbers. Left a message for an officer of the organization to return phone call. o , TCO called at and received VMS. Left a message for an officer of the organization to return phone call. o , TCO received a call from . Letter was received at address. He is not associated with the organization. Verified incorrect address for organization. o , TCO attempted to call President listed on Form 1023-EZ and received VMS. Left a message for an officer of the organization to return phone call. o , TCO located phone number for . TCO called and left a message with the receptionist to have an officer of the organization to return phone call. o , TCO spoke with , Secretary at . A letter was received at the school for the organization, but she stated that they are not associated with the organization. Provided number for President of the organization, ( ). , TCO called ( ). TCO verified current President of the organization. President provided new address for the organization and verbally agreed to have L3844-A sent via email. TCO provided password to open secure zip file that included L3844-A, Information Document Request (IDR}, and attachments. o , TCO called President and left Message on voice mail. o , TCO called President and left Message on voice mail. o , TCO called President and left Message on voice mail. o , TCO called President and Treasurer and left message that second IDR is being mailed on o , TCO called President and Treasurer and left messages on voice mail.
0 , TCO called President and Treasurer and left messages on voice
Form886-A
Name of taxpayer mail.
0 mail.
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number (last 4 digits) Schedule number or exhibit Year/Period ended , TCO called President and Treasurer and left messages on voice o , TCO called President and Treasurer and left message that Form 886-A will be mailed in within the next few weeks. Please return call.

# Law

Internal Revenue Code (IRC) §501(c)(3) of the Code provides that an organization organized and operated exclusively for charitable or educational purposes is exempt from Federal income tax, provided no part of its net earnings inures to the benefit of any private shareholder or individual.
IRC §511 of the Internal Revenue Code imposes a tax at corporate rates under section 11 on the unrelated business taxable income of certain tax-exempt organizations.
IRC §6001 of the Code provides that every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.
Whenever in the judgment of the Secretary it is necessary, he may require any person, by notice served upon such person or by regulations, to make such returns, render such statements, or keep such records, as the Secretary deems sufficient to show whether or not such person is liable for tax under this title.
IRC §6033(a)(1} of the Code provides, except as provided in section 6033(a}(2}, every organization exempt from tax under section 501 (a} shall file an annual return, stating specifically the items of gross income, receipts and disbursements, and such other information for the purposes of carrying out the internal revenue laws as the Secretary may by forms or regulations prescribe, and keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.
Treasury Regulations (Regulation) 1.501(c)(3)-1 In order to be exempt under §501 (c}(3} the organization must be both organized and operated exclusively for one or more of the purposes specified in the section. (religious, charitable, scientific, testing for public safety, literary or educational}.
Regulation §1.501 (c)(3)-1 (a)(1) of the regulations states that in order to be exempt as an organization described in section 501(c}(3}, an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.
Form886-A
Name of taxpayer
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number (last 4 digits) Schedule number or exhibit Year/Period ended Regulation §1.501(c)(3)-1(c)(1) of the regulations provides that an organization will not be regarded as "operated exclusively" for one or more exempt purposes described in section 501(c)(3) of the Code if more than an insubstantial part of its activities is not in furtherance of a 501(c)(3) purpose. Accordingly, the organization does not qualify for exemption under section 501 (c)(3) of the Code.
Regulation §1.6001-1(c) of the Code provides that such permanent books and records as are required by paragraph (a) of this section with respect to the tax imposed by section 511 on unrelated business income of certain exempt organizations, every organization exempt from tax under section 501 (a) shall keep such permanent books of account or records, including inventories, as are sufficient to show specifically the items of gross income, receipts and disbursements. Such organizations shall also keep such books and records as are required to substantiate the information required by section 6033. See section 6033 and§§ 1.6033-1 through 1.6033-3.
Regulation §1.6001-1(e) of the Code provides that the books or records required by this section shall be kept at all time available for inspection by authorized internal revenue officers or employees, and shall be retained as long as the contents thereof may be material in the administration of any internal revenue law.
Regulation §1.6033-1 (h)(2) of the regulations provides that every organization which has established its right to exemption from tax, whether or not it is required to file an annual return of information, shall submit such additional information as may be required by the district director for the purpose of enabling him to inquire further into its exempt status and to administer the provisions of subchapter F (section 501 and the following), chapter 1 of the Code and section 6033.
Regulation §1.6033-2(a)(1) of the Regulations provides, in part, that, except for certain exceptions not here applicable, every organization exempt from taxation under section 501 (a) shall file an annual information return specifically setting forth its items of gross income, gross receipts and disbursements, and such other information as may be prescribed in the instructions issued with respect to the return.
Regulation §1.6033-2(i)(2) of the Regulations provides, in part, that every organization which is exempt from tax, whether or not it is required to file an annual information return, shall submit such additional information as may be required by the Internal Revenue Service for the purpose of inquiring into its exempt status and administering the provisions of subchapter F, chapter 1 of subtitle A of the Code, section 6033, and chapter 42 of subtitle D of the Code.
Regulation §1.61-1 of the regulations provides that Gross income means all income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash.
Form886-A
Name of taxpayer
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number {last 4 digits) Schedule number or exhibit Year/Period ended
Rev. Ru/. 59-95, 1959-1 C.B. 627, concerns an exempt organization that was requested to produce a financial statement and statement of its operations for a certain year. However, its records were so incomplete that the organization was unable to furnish such statements. The Service held that the failure or inability to file the required information return or otherwise to comply with the provisions of section 6033 of the Code and the regulations which implement it, may result in the termination of the exempt status of an organization previously held exempt, on the grounds that the organization has not established that it is observing the conditions required for the continuation of exempt status.
Organization's Position
Taxpayer's position is unknown at this time.
Government's Position
Based on the above facts, the organization did not fully respond to substantiate that they are organized and operated exclusively for one or more of the purposes specified in IRC Section 501 (c)(3). If an organization fails to meet either the organizational test or the operational test, it is not exempt.
Articles of Incorporation that were submitted were for a different organization and employer identification number. The bylaws that were also submitted with the organizations name on it did not contain an appropriate purpose and dissolution clause and it was not signed. Therefore, they are not meeting the organizational test.
In reviewing the minutes some activities were identified in which additional information and clarification was requested. In reviewing the bank statements additional information and clarification was requested to identify discrepancies and verify transactions. No additional responses were received and we were unable to contact someone through phone contacts to gain a better understanding of their activities and financial transactions. Therefore, we were unable to determine if their activities were primarily for one or more exempt purposes as specified in IRC Section 501(c)(3) and unable to rule out any private benefit. At this time, we are unable to determine if they meet the operational test.
In accordance with the above-cited provisions of the Code and regulations under sections 6001 and 6033, organizations recognized as exempt from federal income tax must meet certain reporting requirements. These requirements relate to the filing of a complete and accurate annual information (and other required federal tax forms) and the retention of records sufficient to determine whether such entity is operated for the purposes for which it was granted taxexempt status and to determine its liability for any unrelated business income tax.
Section 1.6033-1 (h)(2) of the regulations specifically state that exempt organizations shall Catalog Number 20810W Page _9_ www.irs.gov Form 886-A {Rev. 5-2017)
Form886-A
Name of taxpayer
Department of the Treasury - Internal Revenue Service
Explanations of Items
Tax Identification Number {last 4 digits) Schedule number or exhibit Year/Period ended submit additional information for the purpose on enabling the Internal Revenue Service to inquire further into its exempt status.
Using the rationale that was developed in Revenue Ruling 59-95, the Organization's failure to provide requested information should result in the termination of exempt status.

# Conclusion

Based on the foregoing reasons, the organization does not qualify for exemption under section 501(c)(3) and its tax-exempt status should be revoked.
It is the IRS's position that the organization failed to establish that it meets the reporting requirements under IRC §§ 6001 and 6033 to be recognized as exempt from federal income tax under IRC § 501(c)(3). Furthermore, the organization has not established that it is observing the conditions required for the continuation of its exempt status or that it is organized and operated exclusively for an exempt purpose. Accordingly, the organization's exempt status is revoked effective Catalog Number 20810W Page _JQ_ www.irs.gov

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