                  T.C. Memo. 2005-293



                UNITED STATES TAX COURT



  NATIONAL PARALEGAL INST. COALITION, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 22543-04X.            Filed December 22, 2005.



     P, a nonprofit corporation, filed two successive
applications with R for a determination of tax exempt
status, Form 1023, Application for Recognition of
Exemption under Section 501(c)(3) and Form 1024,
Application for Recognition of Exemption under Section
501(a). P seeks declaratory relief as to its
qualification for exemption based upon R’s failure to
make a determination.

     Held: P failed to exhaust its administrative
remedies, a jurisdictional prerequisite to declaratory
proceedings in the Tax Court relating to the status of
an organization under sec. 501(c)(3), I.R.C., as
required by sec. 7428, I.R.C. Therefore, jurisdiction
of this Court is not available.
                                -2-


     Arthur Carson (an officer), for petitioner.

     Helen F. Rogers, for respondent.



                        MEMORANDUM OPINION

     NIMS, Judge:   Petitioner brought an action for a declaratory

judgment pursuant to section 7428 and Rule 211 on the ground that

respondent had failed to determine whether petitioner qualifies

as an organization exempt from taxation under section 501(a),

(c)(3) and (4).   Unless otherwise indicated, all Rule references

are to the Tax Court Rules of Practice and Procedure, and all

section references are to the Internal Revenue Code.   This case

is before us on respondent’s motion to dismiss for lack of

jurisdiction on the ground that petitioner did not exhaust its

administrative remedies pursuant to section 7428(b)(2).

     This case is submitted for decision on a comprehensive

stipulation of facts, which is incorporated herein by this

reference.

                            Background

     Petitioner, National Paralegal Inst. Coalition, was

organized as a nonprofit corporation in Texas on March 29, 2001.

On January 11, 2002, it submitted a Form 1023, Application for

Recognition of Exemption Under Section 501(c)(3)(petitioner’s
                                -3-

Form 1023 and Form 1024, referred to infra, are hereinafter

referred to individually as well as collectively as the

application).

     Respondent, by letter dated April 19, 2002 (the April 19,

2002, letter), informed petitioner that its Form 1023 did not

contain sufficient information to enable a determination of

qualification for exemption under section 501(c)(3).   Respondent

requested that petitioner augment certain application disclosures

to provide more comprehensive details concerning its activities,

membership, and any compensation arrangements to which it may be

subject.   The April 19, 2002, letter also stated that, based upon

preliminary review, petitioner’s statutory exemption status

appeared more akin to organizations qualifying under section

501(c)(4) or (6) than to those under section 501(c)(3).   As a

result, respondent advised that petitioner would be permitted to

submit a Form 1024, Application for Recognition of Exemption

Under Section 501(a), for concurrent consideration with

petitioner’s Form 1023.

     On May 31, 2002, having received no response to the April

19, 2002, letter, respondent notified petitioner that its

application was no longer under consideration.   Petitioner was

granted an additional 90 days to submit a new Form 1023 for

resumption of administrative review at no additional charge.
                                -4-

     Petitioner, in a letter dated June 18, 2002, supplemented

its Form 1023 disclosure to conform to the information requests

contained in the April 19, 2002, letter.   Petitioner, by that

same correspondence, notified respondent of its intention to

submit a Form 1024 for joint processing with petitioner’s Form

1023.   Petitioner submitted the Form 1024 on July 8, 2002.

     On September 27, 2002, respondent sent petitioner a letter

(the September 27, 2002, letter) containing 31 enumerated items

outlining various insufficiencies and disparities regarding

petitioner’s Form 1023 and Form 1024.   The identified

inadequacies concerned, among other things, certain provisions in

petitioner’s articles of incorporation as well as representations

in the application concerning petitioner’s fundraising activities

and sources of financial support, the composition of its

membership and the nature of its operations.   The September 27,

2002, letter also stated that, if respondent were to determine

that petitioner otherwise qualified as an organization described

in section 501(c)(3), the extensive organizational control

petitioner’s chairman apparently possessed would render it a

private foundation.   The September 27, 2002, letter expressly

imposed a 30-day deadline for petitioner to respond.

     On November 18, 2002, respondent sent a letter to petitioner

noting that the response deadline to the September 27, 2002,

letter had lapsed with no communication having been received, and
                                -5-

that respondent would defer any action on the application until

November 28, 2002.   On December 9, 2002, following the expiration

of the extended deadline, petitioner requested by letter an

additional 10-day period to respond.    On December 18, 2002, in

presumably intersecting mailings, both respondent and petitioner

sent each other letters of even date:    respondent notified

petitioner that its application was administratively closed,

although the application review would be reopened without an

additional user fee if the requested information enumerated in

the September 27, 2002, letter was submitted within 90 days.

Petitioner’s correspondence provided additional information

correlating to the itemized requests in the September 27, 2002,

letter.

     On December 31, 2002, respondent sent petitioner a letter

(the disputed letter) containing a litany of particular

insufficiencies outstanding in petitioner’s application, which

included, among other things, conflicts inherent in its

governance structure denoting private foundation status and

petitioner’s failure to adopt related prophylactic provisions in

its organic documents, as well as information about petitioner’s

fundraising activities, membership details, and operations.    The

shortcomings listed in the disputed letter reflect respondent’s

review and assimilation of petitioner’s responses to the

September 27, 2002, letter included in its letter of December 18,
                                 -6-

2002.   Petitioner was provided a 30-day response period, at the

expiration of which its application would be administratively

closed and a new user fee would be charged to resume processing.

Petitioner denies that it received the disputed letter.

     On August 31, 2004, petitioner sent a letter of protest to

respondent (the August 31, 2004, letter) concerning the status of

its application and requesting Appeals Office consideration.      In

the August 31, 2004, letter, petitioner supplied additional

information corresponding in substance to, and following the

sequence and arrangement of, the enumerated inadequacies detailed

in the disputed letter.    The August 31, 2004, letter does not

expressly reference the disputed letter, nor does it contain

identical numbering, but its particular content and organization

reflect the fact that it was intended as a response to the

disputed letter.    For example, item 21 of the disputed letter

requires that petitioner provide a copy of a presentation

entitled:   “Alleviating Recidivism Among Prisoners:   China and

Texas.”   In comparison, item 19 of the August 31, 2004, letter

states:   “the Presentation is called: ‘Alleviating Recidivism

among Prisoners’, where China as well as Texas Exploits its

Prisoner’s Labor.    (The question was presented wrong in the

request for additional information.)”

     Following correspondence from petitioner dated October 4,

2004, regarding the status of its preceding administrative
                                  -7-

protest, respondent informed petitioner by letter on November 10,

2004, that its application had been closed because the August 31,

2004, letter exceeded the specified deadline.

                              Discussion

     Jurisdiction, vested in this Court to provide declaratory

relief with respect to the qualification of an organization as an

exempt organization described in either section 501(c)(3) or

section 170(c)(2), is circumscribed to those instances in which

we have determined that the organization has exhausted its

administrative remedies.     Sec. 7428(b)(2); see Am. New Covenant

Church v. Commissioner, 74 T.C. 293, 300 (1980); B.H.W.

Anesthesia Found. v. Commissioner, 72 T.C. 681, 682 n.2 (1979).

     The exhaustion of administrative remedies obligation set

forth in section 7428(b)(2) is predicated on the filing of a

“substantially completed” application within the meaning of

section 601.201(n)(7)(i), Statement of Procedural Rules, and “the

timely submission of all additional information requested to

perfect” such application.     Sec. 601.201(n)(7)(iv)(a) and (b),

Statement of Procedural Rules.    (This requirement is also borne

out in the legislative history of section 7428.    See H. Rept. 94-

658, at 267-268 (1975), 1976-3 C.B. (Vol. 2) 695, 979-980; S.

Rept. 94-938, at 590 (1976), 1976-3 C.B. (Vol. 3) 49, 628.)    As

delineated, a substantially completed application entails, among

other things, the submission of a proposed budget, current
                                 -8-

balance sheet, statement of proposed activities, and description

of anticipated receipts and contemplated expenditures.      Sec.

601.201(n)(7)(i), Statement of Procedural Rules; see also Rev.

Proc. 90-27, 1990-1 C.B. 514.    Additionally, other procedural

regulations mandate that an organization “fully describe the

activities in which it expects to engage, including the

standards, criteria, procedures, or other means adopted or

planned for carrying out the activities; the anticipated sources

of receipts; and the nature of contemplated expenditures.”      Sec.

601.201(n)(1)(ii), Statement of Procedural Rules.

     The facts stipulated support a conclusion that petitioner

has not exhausted its administrative remedies, and therefore,

jurisdiction is not available.    As elaborated on below,

petitioner’s belated responses to respondent’s inquiries in the

course of processing its application evince petitioner’s failure

to “[complete] the normal progression through administrative

channels,” B.H.W. Anesthesia Found. v. Commissioner, supra, at

682 n.2, or to “demonstrate that progress * * * [was] severely

hampered due to causes beyond its control,” Prince Corp. v.

Commissioner, 67 T.C. 318, 328 (1976) (finding failure to exhaust

administrative remedies in the context of section 7476(b)(3), the

counterpart to section 7428(b)(2) in the area of retirement

plans).
                                -9-

     Petitioner’s failure to submit a substantially completed

application in conformance with respondent’s regulatory

prescriptions precluded a determination with regard to its

qualification for exempt status.    Respondent’s abiding requests

for additional information, particularly the April 19, 2002,

letter, September 27, 2002, letter, and the disputed letter, were

sufficiently timely.   Petitioner’s dilatory responses in

accommodating respondent’s requests constituted a failure to

proceed with due diligence.   Petitioner responded to the April

19, 2002, letter on June 18, 2002, only after an exhortative

notice from respondent was sent on May 31, 2002.    Petitioner’s

belated response to the September 27, 2002, letter, on December

18, 2002, occurred well after the lapse of respondent’s imposed

and extended deadline for maintaining the application under

active consideration of November 28, 2002.     Finally, petitioner’s

deferment in responding to the disputed letter for more than 18

months caused its application to languish and occasioned

respondent’s decision to ultimately cease consideration of the

matter.

     Petitioner contends that it complied with all requests for

additional information, and that respondent discontinued the

correspondence following petitioner’s submission of requested

information on December 18, 2002.     Inherent in the August 31,
                                -10-

2004, letter, however, is an implicit, if not overt,

acknowledgment of petitioner’s receipt of the disputed letter,

belying its contention to the contrary.

     Our finding presuming delivery of the disputed letter is

based on an extension of the knowledge principle, which underlies

rule 901(b)(4) of the Federal Rules of Evidence and the related

so-called reply letter doctrine, to this circumstance.   See

generally John W. Strong et al., McCormick on Evidence, sec. 225

(5th ed. 1999).   Rule 901(b)(4) of the Federal Rules of Evidence

provides for the authentication of a written document if its

substance, content, or other distinctive characteristics,

analyzed in conjunction with other circumstantial evidence, is

indicative of authorship.   One application of such general method

of authentication is the reply letter doctrine, which was relied

on in Winel v. United States, 365 F.2d 646, 648 (8th Cir. 1966),

in holding:   “It has long been recognized that one of the

principal situations where the authenticity of a letter is

provable by circumstantial evidence * * * is where it can be

shown that the letter was sent in reply to a previous

communication.    * * * In the instant case the inherent nature of

the communication makes it absolutely certain that it is a reply

communication.”    See also United States v. Henry, 164 F.3d 1304,

1309 (10th Cir. 1999); Purer & Co. v. Aktiebolaget Addo, 410 F.2d

871, 875 (9th Cir. 1969).
                                 -11-

     The reply letter doctrine, applying the general dictates of

the knowledge principle in rule 901(b)(4) of the Federal Rules of

Evidence, has been utilized to authenticate the source of reply

correspondence by examining indicia therein of its purported

author’s knowledge of referenced or acknowledged prior

correspondence.   See Winel v. United States, supra at 648; see

also United States v. Henry, supra at 1309; Purer & Co. v.

Aktiebolaget Addo, supra at 875.    Analogously, circumstantial

evidence involving the responsive nature of petitioner’s

subsequent August 31, 2004, letter supports the inference here

that petitioner received the prior disputed letter.

     Accordingly, we shall grant respondent’s motion to dismiss

this case for lack of jurisdiction.

     To reflect the foregoing,



                                 An order of dismissal for lack

                          of jurisdiction will be entered.
