Determination 200601032: Business league exemption denied for member services

Plain-English summary

An organization sought exemption as a business league under § 501(c)(6). In a final adverse ruling, the IRS said its activities primarily provided particular services to individuals instead of improving conditions across a line of business. The IRS also found that the organization's purpose was to conduct a regular business ordinarily carried on for profit, rather than promote a common business interest of members. The letter directed the organization to file federal income tax returns.

Ruling snapshot

• Question: Does the organization's activity qualify it for business league exemption under § 501(c)(6)?
• Outcome: Denied in a final adverse ruling.
• Key authorities: IRC § 501(c)(6); related regulations cited without a specific regulation number.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Number:200601032
Release Date: 01/06/2006
SE:T:EO:RA:G1

Date: October 12, 2005

U.I.L. Nos.:
501.06-00
501.06-01
501.06-02

Congressional Contact: ------------------

Dear ------------:

This letter constitutes a final adverse ruling with respect to your claim of exemption from federal income taxation under section 501(c)( 6) of the Internal Revenue Code.

We make our ruling for the following reason(s): (1) your activities are primarily directed to the performance of particular services for individual persons rather than the improvement of business conditions of one or more lines of business; and, (2) your purpose is to engage in a regular business of a kind ordinarily carried on for profit (even thought the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining) rather than to promote a common business interest of your members.

The Code and the regulations issued thereunder require that you file federal income tax returns.
Based upon the financial information that you furnished, you should file returns on the Form and for the tax years indicated above within 30 days from the date of this letter, unless you request and are granted an extension of time to file the returns. You should attach a copy of this letter to the returns you file. Questions concerning the filing of returns should be directed to the Ohio Tax Exempt and Government Entities (TE/GE) office at 877-829-5500 (a toll free number).

This ruling will be made available for public inspection under section 6110 of the Code after certain deletions of identifying information are made. For details, see enclosed Notice 437, Notice of Intention to Disclose. A copy of this ruling with deletions that we intend to make available for public inspection is attached to Notice 437. If you disagree with our proposed deletions you should follow the instructions in Notice 437.
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If you have any questions concerning the reasons for this ruling, please contact the person
whose name and telephone number appear in the heading of this letter.

Sincerely,

Lois G. Lerner
Director, Exempt Organizations
Rulings & Agreements

Enclosures
Notice 437
Redacted copy of ruling