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Recent PLRs Highlight: How Not to Run a Charitable Organization



William Byrnes, Tax Advisor

Organizations described in IRC 501(c)(3) and exempt under section 501(a) must be both organized and operated exclusively for exempt purposes. You have failed to produce documents to establish that you are operated exclusively for exempt purposes and that no part of your net earnings inures to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by section 6001 and 6003(a)(1) of the Code and Rev Ruling 59-95, 1959-1 C.B. 627. You did provide information stating that your organization has been inactive and that there have been no operations conducted or planned. As such, you fail to meet the operational requirements for continued exemption under Section 501(c)(3).

PLR 2017-49014

You are not operating exclusively for any charitable purpose, educational purposes, or any other exempt purpose. Our examination reveals that you are not engaged primarily in activities which accomplish charitable, educational or other exempt purpose as required by Treas. Reg. 1.501(c)(3)-1(c)(1). Your activities, including your financial transactions, more than insubstantially furthered non-exempt purposes. Moreover, you failed to establish that you were not operated for the benefit of private interest of your members, president and as required for continued recognition of exemption pursuant to Treas. Reg. 1.501(c)(3)-1(c)(1)(ii). Your income inured to the benefit of private shareholders and individuals.  

PLR 2017-49015

You failed to keep adequate books and records and failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by I.R.C. sections 6001 and 6033(a)(1). Treas. Reg. 1.6033-2(i)(2) and Rev. Rul. 59-95, 1959-1C.B. 627.

Organizations described in IRC 501(c)(3) and exempt under sections 501(a) must be both organized and operated exclusively for exempt purposes. You have failed to produce documents to establish that you are operated exclusively for exempt purposes and that no part of your net earning inures to the benefit of private shareholders or individuals. You failed to respond to repeated reasonable requests to allow the Internal Revenue Service to examine your records regarding your receipts, expenditures, or activities as required by sections 6001 and 6033(a)(1) of the Code and Rev. Rul. 59-95, 1959-1C.B. 627. You did provide information stating that your organization has been inactive and that there have been no operations conducted and planned. As such, you fail to meet the operational requirements for continued exemption under section 501(c)(3).

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William H. Byrnes has achieved authoritative prominence with more than 20 books, treatise chapters and book supplements, 1,000 media articles, and the monthly subscriber Tax Facts Intelligence. Titles include: Lexis® Guide to FATCA Compliance, Foreign Tax and Trade Briefs, Practical Guide to U.S. Transfer Pricing, and Money Laundering, Asset Forfeiture; Recovery, and Compliance (a Global Guide). He is a principal author of the Tax Facts series. He was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, and practiced in Southern Africa, Western Europe, South East Asia, the Indian sub-continent, and the Caribbean. He has been commissioned by a number of governments on tax policy. Obtained the title of tenured law professor in 2005 at St. Thomas in Miami, and in 2008 the level of Associate Dean at Thomas Jefferson. William Byrnes pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school (International Taxation and Financial Services graduate program).