to plaintiff "no longer qualif[y] for advanced assurance of the deductibility of contributions" and published a notice of the revocation in the June 14, 1982 Internal Revenue Bulletin. Neither Synanon nor the Service took any action affecting plaintiff's tax status for any year after fiscal 1978.
In this suit, Synanon seeks a declaratory judgment that it is entitled to the same tax exempt status for all years after fiscal 1976 that it enjoyed in that and prior years. Defendant admits that jurisdiction properly lies in this Court to consider plaintiff's request for a declaratory judgment that it was tax exempt for fiscal years 1977 and 1978. However, in this motion defendant contends that the Court lacks subject matter jurisdiction to make a declaration as to plaintiff's status for fiscal years 1979 to the present. Defendant's motion rests upon two bases. It claims that the Court has no jurisdiction over years beyond fiscal 1978 because, contrary to the requirements of § 7428: (1) the Service has not made a "determination" as to those years, and (2) administrative remedies were not exhausted for those years.2a
It appears to the Court that, in this case, these two arguments are really the same. If the plaintiff had received a final determination for all years in question, it would have exhausted its administrative remedies. Conversely, if it had exhausted its administrative remedies, it would have received a final determination.
See also 26 C.F.R. § 601.201(n) (7) (iv) (1982) ("§ 7428(b) (2) of the Code requires that an organization must exhaust its administrative remedies by taking timely, reasonable steps to secure a determination") and (v) (an organization has not exhausted unless it receives a notice of final determination or unless 270 days have passed since a determination was requested.) Regardless, of whether these arguments can be distinguished, the important question in this litigation is whether the Service's final determination for fiscal years 1977 and 1978 provides the basis for plaintiff to sue for a declaration of its status, for those, and all subsequent years, or whether administrative remedies must be exhausted for every year for which a declaratory judgment is sought. The Court concludes that the latter is correct.
THIS COURT LACKS SUBJECT MATTER JURISDICTION OVER PLAINTIFF'S CLAIMS FOR ALL YEARS SUBSEQUENT TO FISCAL 1978 BECAUSE THE PLAINTIFF HAS NOT EXHAUSTED ITS ADMINISTRATIVE REMEDIES FOR THOSE YEARS
Plaintiff contends that it has satisfied the requirements of § 7428. It argues that the determination of non-exempt status issued by the Service, on the basis of the 1977 and 1978 audits, operates as a final and prospective determination that Synanon is not tax exempt. Furthermore, plaintiff argues, defendant itself has treated the determination as final and prospective by informing plaintiff that it would be required to file corporate income tax forms and by publicly announcing that plaintiff had been found non-exempt.
Plaintiff is correct that the Service has now placed it in the category of organizations subject to taxation -- a determination to that effect was made based on two years of audits disclosing that plaintiff should be non-exempt. However, that determination does not serve as a final decision eliminating any requirement for plaintiff to seek further administrative relief. Rather, it shifts to plaintiff the burden of taking further action to restore its exempt status. Each tax year constitutes a separate cause of action. See Commissioner v. Sunnen, 333 U.S. 591, 598, 92 L. Ed. 898, 68 S. Ct. 715 (1948). Therefore, if plaintiff believes that it should be declared exempt for its activities in fiscal years 1979, 1980, etc., it should petition for exempt status for those years.
New Life Tabernacle v. Commissioner, Tax Ct. Mem. Dec. (P-H) P 82,367 at 82-1594 n.16. Until plaintiff so applies, the Service can not make a determination with respect to those years. Absent a determination, there is nothing for the Court to review. Consequently, plaintiff has not exhausted its administrative remedies for years subsequent to 1978 and can not seek a declaratory judgment under § 7428 for those years.
Plaintiff's position appears to be premised upon the notion that Synanon is naturally entitled to exempt status. From this premise flows the conclusion that once that status is revoked, Synanon has been wronged and has a cause of action from that time forward. However, this position is inconsistent with the procedure of the exemption process. In fact, no organization is automatically entitled to exemption under Code § 501(c) (3). Initially, an organization must apply for exempt status under that section. 26 C.F.R. § 601.201(n) (1) (1982); 2 Rabkin & Johnson, Federal Income and Estate Taxation § 208A. If it is determined to qualify as an exempt organization under § 501(c) (3), the organization will be treated as exempt unless and until the Service undertakes to examine its operations and determines that it no longer qualifies. Similarly, if the Service determines that revocation of exempt status is proper, that determination too will stand until it is successfully challenged.
Thus, once exempt status is revoked the onus is upon plaintiff to regain that status. There are several ways to challenge revocation. For the years in which the Service has made a determination that plaintiff is non-exempt, plaintiff may bring an action to be declared exempt. For the years that the Service has not addressed, plaintiff must reapply for exempt status (thus requesting a determination from the Service as to its status for those years) and exhaust all available appeals. If a final adverse determination results, suit is then proper.
Absent suit, the revocation of exemption will, as a matter of administrative practice, remain in effect until plaintiff once again seeks exempt status.
26 C.F.R. § 601.201(m) (1) (1982).
In conclusion, the fact that the Service's last determination was adverse to Synanon does not give it the right to seek declaratory relief for all subsequent years. Rather, Synanon must seek a determination from the Service as to its status for each year for which such relief is requested. Because Synanon has not sought such determinations, it has failed to comply with the jurisdictional provisions of § 7428. Consequently, the Court is unable to grant the relief provided by that section and will dismiss plaintiff's claims for all years subsequent to 1978.
An order consistent with the foregoing will be issued of even date herewith.
For the reasons stated in the Memorandum Opinion in the above captioned matter, issued of even date herewith, it is, by the Court, this 2d day of March, 1983, hereby
ORDERED that Defendant's Motion for Partial Dismissal is granted; and it is further,
ORDERED that the portion of plaintiff's claim relating to years after fiscal 1978 is hereby dismissed.