Under Section 501(c)(3) of the tax code, an organization can be exempt from federal income tax if it’s operated exclusively for charitable, religious, scientific or other qualified purposes. In one case, a coffee shop/restaurant was operated as a tax-exempt organization. It was granted a tax exemption to provide training and employment opportunities for certain individuals. The IRS toured the facility and found it was “not operated for exempt purposes” but “in a commercial manner.” It wasn’t primarily engaged in activities related to its exempt purpose. Therefore, the IRS issued a final adverse determination revoking the organization’s tax-exempt status. (PLR 202321005)
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