One-party political symposium denied charitable exemption

Plain-English summary

An organization planned an educational symposium featuring more than 15 politicians, judges, and policy experts, all apparently affiliated with one political party. Its records focused on recruiting that party’s candidates and officials, and the event was scheduled shortly before a presidential primary. The symposium was canceled, and the organization provided no later activities or detailed future plans. The IRS found that the articles did not adequately limit the organization’s purposes and that its planning showed political campaign intervention and substantial private benefit to the party and its candidates. The IRS denied section 501(c)(3) status, and the determination became final when the organization did not protest within 30 days.

Ruling snapshot

• Question: Did an organization planning a symposium for one party’s candidates and officials qualify as a charitable and educational organization?
• Outcome: Denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 74-574; Rev. Rul. 2007-41; Better Business Bureau v. United States, 326 U.S. 279 (1945); American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989)

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201

Release Number: 201523021
Release Date: 6/5/2015
UIL Code: 501.33-00
501.35-00

Date: March 13, 2015
Employer ID number:
Contact person/ID number:
Contact telephone number:
Form you must file:
Tax years:

Dear

This letter is our final determination that you don’t qualify for tax-exempt status under Section
501(c)(3) of the Internal Revenue Code (the Code). Recently, we sent you a proposed adverse
determination in response to your application. The proposed adverse determination explained the
facts, law, and basis for our conclusion, and it gave you 30 days to file a protest. Because we didn’t
receive a protest within the required 30 days, the proposed determination is now final.

Because you don’t qualify as a tax-exempt organization under Section 501(c)(3) of the Code, donors
can’t deduct contributions to you under Section 170 of the Code. You must file federal income tax
returns for the tax years listed at the top of this letter using the required form (also listed at the top of
this letter) within 30 days of this letter unless you request an extension of time to file.

We’ll make this final adverse determination letter and the proposed adverse determination letter
available for public inspection (as required under Section 6110 of the Code) after deleting certain
identifying information. Please read the enclosed Notice 437, Notice of Intention to Disclose, and
review the two attached letters that show our proposed deletions. If you disagree with our proposed
deletions, follow the instructions in the Notice 437 on how to notify us. If you agree with our
deletions, you don’t need to take any further action.

We’ll also notify the appropriate state officials of our determination by sending them a copy of this
final letter and the proposed determination letter (under Section 6104(c) of the Code). You should
contact your state officials if you have questions about how this determination will affect your state
responsibilities and requirements.

Letter 4038 (Rev. 7-2014)
Catalog Number 47632S

If you have questions about this letter, you can contact the person listed at the top of this letter. If
you have questions about your federal income tax status and responsibilities, call our customer
service number at 1-800-829-1040 (TTY 1-800-829-4933 for deaf or hard of hearing) or customer
service for businesses at 1-800-829-4933.

Sincerely,

Director, Exempt Organizations

Enclosure:

Notice 437

Redacted Letter 4036, Proposed Adverse Determination Under IRC Section 501(c)(3)
Redacted Letter 4038, Final Adverse Determination Under IRC Section 501(c)(3) - No Protest

Letter 4038 (Rev. 7-2014)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201

Date: February 3, 2015
Employer ID number:
Contact person/ID number:
Contact telephone number:
Contact fax number:

UIL:
501.33-00
501.35-00

Legend:
B = date
C = state

D = conference
E = political ideology
F = political party

G = date

H = individual

J = individual

K = individual

L = individual

M = political party
R = individual

S = state

T = individual
Dear

We considered your application for recognition of exemption from federal income tax under Section
501(a) of the Internal Revenue Code (the Code). Based on the information provided, we determined
that you don’t qualify for exemption under Section 501(c)(3) of the Code. This letter explains the basis
for our conclusion. Please keep it for your records.

Issues
Do you meet the organizational test of section 501(c)(3) of the Internal Revenue Code? No, for the
reasons explained below.

Do you meet the operational test of section 501(c)(3) of the Internal Revenue Code? No, for the
reasons explained below.

Facts

You were formed in B in the state of C. Your Articles of Incorporation state you were formed as a
public benefit corporation. Your By-Laws indicate that general purpose is to “create symposiums as a
national, educational convention of E thinkers, statesmen and opinion leaders.” Specifically, you will
hold the first symposium, called D, in G, and additional symposiums will be organized either annually
or as approved by your board. While no board members were listed on page 2 of Form 1023, meeting
minutes submitted showed H as president, J as vice president, K as secretary, along with five other
individuals as additional directors/committee members.

In planning for D you contracted with a hotel/resort in C as the event’s location. You submitted a
contract with the resort stipulating the responsibility for utilizing at least 450 rooms over the course of
the four day event. If this commitment could not be met you would be responsible for related
“damages” to the hotel resulting in pre-arranged payments to be made by you for room attrition.
Further, the contract stipulated damages for cancellation based as a percentage of the room revenue
not accrued.

A flyer for D stated in recent years the debate has become more intense as politicians on one side of
the political spectrum have pushed massive new federal programs at the expense of the state. As the
2012 election looms, this is an opportunity to “offer a platform to key E leaders in state and national
government to share their views with those assembled.” Your further goal was to have people in
attendance “prepare a set of documents reflecting their perspective which will then be shared with
political leaders as the election season unfolds.” Additional documents outlining your purposes
indicated D would immediately precede the all-important C presidential primary so you expected a
showing at D by many of the F presidential candidates.

You submitted a copy of the proposed agenda/schedule for D. This agenda includes a listing of over
15 current and former politicians, judges, policy experts and individuals with current or former
experience in prominent political positions. Of all the individuals listed, who were invited and/or
confirmed to attend D, all were apparently affiliated with the F political party and some were in current
campaigns for political offices. Further, the agenda listed a “Meet the Candidates” special event

scheduled; you did not, however, indicate who would be available at this session. The session would

be available to attendees paying an additional fee.

You submitted seven months of meeting minutes from prior to your incorporation through a week
before D was scheduled to begin. The majority of the documentation outlines your plans for soliciting
volunteers for D, marketing/publicizing D, the actual topics/sessions scheduled for D, budgeting and
web presence. However, the remainder of your minutes addressed who you wanted to attend this
event in terms of speakers. Many of these potential speakers were current positioned politicians, and
contacting/committing them to attend D required multiple contacts, scheduling and networking. You
also noted a lack of the ability to raise funds until a list of speakers was compiled and shared with
donors. Among the strategies used were contacting statewide F party and relative committee group
chairs, keeping the chair of the F party of C up to date, obtaining a list of F staffers in Congress and
inviting them to attend, having H look for every F party group within the counties of C and send them
notice, then proceeding with the same plan for other bordering states, directly contacting other
prominent F group leaders, coordinating events with local county F fundraising committees, meeting
with the heads of local college and high school F groups, meeting with the chair of the F party of C
who would in turn contact other state F chair members.

Also within your minutes you have a “trying to get” list of individuals to attend, including at least five
well known positioned politicians. You go on over the course of planning to continually reference
various politicians in federal, state and local positions, all with apparent affiliations to the F party. For
example, “getting R (F senator from S) should be a focus”, “ask senator L if they have contacted R”;
and you “tried many different ways to get T (former F vice presidential candidate).” “We should invite
the attorney general of C (F party)”. You also noted at one point that it would be one individual's job to
contact the candidates. You did not indicate why these particular individuals were being mentioned

and/or contacted for invitation, however, all appear to share the same political party of F.

You indicated D would need to be cancelled in one of your meetings about a month prior to the event.
You had noted your cash position was not strong, your credit was disapproved by the resort, and
ticket sales were low. In contacting the resort you noted essentially the lack of interest in the event to
meet room requirements. You planned for steps to refund tickets that had been sold and paying
needed accounts. J asked in a meeting if “we were going to try to do this next year.” One of your
board members responded by stating “it would be hard to convince people another time” — everyone
would think about it. You also went on to note that you would need to have the 501(c)(3) completed
so that “donations are tax deductible.”

In later correspondence you indicated the intent to hold one or more symposiums in the future.
However, you were not able to submit any further details on operations or meetings that had been
conducted since the cancellation of D. All efforts appear to have been suspended from the
cancellation up until currently and you stated you were not resurrected. You restated your mission to:
be providing an educational forum to assist citizens in becoming more effective advocates, focusing
on the Constitution and founding principles, policy, economy, education, health and values.

You also reiterated that D was not a candidate forum, nor one for influencing attendees to vote
for/against any political party or candidate. While there were elected officials and some candidates
invited to speak it would only be for an educational purpose. Symposiums would not be political
fundraising events.

You submitted financial data for only one year, citing that in subsequent years you had no data or
budgets due to suspended operations. Expenses were related mainly to event costs, insurance and
event refunds.

Law

Section 501(c)(3) provides for the exemption from federal income tax of organizations organized and
operated exclusively for charitable or educational purposes, no substantial part of the activities of
which is carrying on propaganda, or otherwise attempting to influence legislation (except as otherwise
provided in section 501(h)), and which does not participate in, or intervene in (including the publishing
or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate
for public office.

Section 1.501(c)(3)-1(a)(1) of the regulations provides that in order to qualify under section 501(c)(3)
of the Code, an organization must be both organized and operated exclusively for one or more
exempt purposes. If an organization fails to meet either the organizational or the operational test, it is
not exempt.

Section 1.501(c)(3)-1(b)(1)(i) of the regulations provides that an organization is organized exclusively
for one or more exempt purposes only if its articles of organization limit its purposes to one or more

exempt purposes and do not expressly empower it to engage, otherwise than as an insubstantial part,
in activities which in themselves are not in furtherance of one or more exempt purposes.

Section 1.501(c)(3)-1(c)(1) of the regulations provides that an organization operates exclusively for
exempt purposes only if it engages primarily in activities that accomplish exempt purposes specified
in section 501(c)(3) of the Code. An organization must not engage in substantial activities that fail to
further an exempt purpose.

Section 1.501(c) (3)-1(c)(3)(i) of the regulations state that an organization is not operated exclusively
for one or more exempt purposes if it is an “action” organization.

Section 1.501(c)(3)-1(c)(3)(iii) of the regulations defines an “action” organization as an organization
that participates or intervenes, directly or indirectly, in any political campaign on behalf of or in
opposition to any candidate for public office. The term “candidate for public office” is defined as an
individual who offers himself, or is proposed by others, as a contestant for an elective public office,
whether such office be national, State, or local. The regulations further provide that activities that
constitute participation or intervention in a political campaign on behalf of or in opposition to a
candidate include, but are not limited to, the publication or distribution of written statements or the
making of oral statements on behalf of or in opposition to such a candidate.

Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated exclusively
for exempt purposes unless it serves a public rather than a private interest. To meet this requirement
it is necessary for an organization to establish that it is not organized or operated for the benefit of
private interests.

Revenue Ruling 74-574, 1974-2 C.B. 161 states that an organization exempt under section 501(c)(3)
of the Code, operating a broadcasting station presenting religious, educational, and public interest
programs, is not participating in political campaigns on behalf of public candidates in violation of the
provisions of that section by providing reasonable air time equally available to all legally qualified
candidates for election to public office in compliance with section 312(a)(7) of the Federal
Communications Act of 1934 as amended and endorsing no candidate or viewpoint.

Revenue Ruling 2007-41, 2007-25 I.R.B. and its 21 situations state that organizations that are
exempt from income tax under section 501(a) of the Internal Revenue Code as organizations
described in section 501(c)(3) may not participate in, or intervene in (including the publishing or
distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for
public office. Section 501(c)(3) organizations are permitted to conduct certain voter education
activities (including the presentation of public forums and the publication of voter education guides) if
they are carried out in a non-partisan manner. Providing a forum for candidates is not, in and of itself,
prohibited political activity. However, a forum for candidates could be operated in a manner that
would show a bias or preference for or against a particular candidate.

In Better Business Bureau v. United States, 326 U.S. 279 (1945), the Supreme Court stated that the
presence of a single nonexempt purpose, if substantial in nature, will preclude exemption under
section 501(c)(3) of the Code, regardless of the number or importance of statutorily exempt purposes.
Thus, the operational test standard prohibiting a substantial non-exempt purpose is broad enough to
include inurement, private benefit, and operations that further nonprofit goals outside the scope of
section 501(c)(3).

In American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), the court held that an
organization that operated a school to train individuals for careers as political campaign professionals,
but that could not establish that it operated on a nonpartisan basis, did not exclusively serve purposes
described in § 501(c)(3) because it also served private interests more than incidentally. The court
found that the organization was created and funded by persons affiliated with a particular political
party and that most of the organization’s graduates worked in campaigns for the party’s candidates.
Consequently, the court concluded that the organization conducted its educational activities with the
objective of benefiting the party’s candidates and entities. Although the candidates and entities
benefited were not organization “insiders,” the court stated that the conferral of benefits on
disinterested persons who are not members of a charitable class may cause an organization to serve
a private interest within the meaning of § 1.501(c)(3)-1(d)(1)(ii). The court concluded by stating that
even if the political party's candidates and entities did “comprise a charitable class, [the organization]
would bear the burden of proving that its activities benefited members of the class in a non-select
manner.” American Campaign Academy, 92 T.C. at 1077.

Application of law

You are not as described in Code section 501(c) (3) because you are not organized and operated
exclusively for charitable and educational purposes. You fail both the organizational and operational
tests.

You fail the organizational provisions of section 1.501(c)(3)-1(b)(1)(i) of the regulations. Your Articles
of Incorporation do not limit your purposes to one or more exempt purposes.

You do not meet the provisions of Section 1.501(c)(3)-1(a)(1) of the regulations because you fail the
operational test. Per section 1.501(c)(3)-1(c)(1) of the regulations more than an insubstantial part of
your activities are devoted to a non-exempt purpose, that of political campaign intervention. You
engage in substantial non-exempt activities similar to those of an action organization. In determining
when an organization has conducted political campaign intervention the focus is not on the viewpoint
or position, but rather the purposes and activities of the organization in communicating or advancing
its viewpoints. Political campaign intervention includes any and all activities that favor or oppose one
or more candidates for public office. The prohibition extends beyond candidate endorsements.
Allowing a candidate to use an organization’s assets or facilities also constitutes political campaign
intervention if other candidates are not given an equivalent opportunity. You have invited candidates
of only one political party, F, to participate in a forum as speakers. Some of these speakers are
themselves candidates for office. While inviting candidates to participate is not in itself campaign
intervention, inviting only one particular party of candidates is. There is no evidence in your
application that you have attempted to contact, invite or allow to participate in your symposium
anyone from any party outside of F.

Additionally, you have submitted no future plans for activities or budgets for funding those activities.
You've indicated you are suspended without resurrection. While you have indicated the intent to
conduct future symposiums you have not detailed how these would be any different from D allowing
for a determination to be made that these would meet qualifications for 501(c)(3) exemption. Because
you have conducted no activities after cancelling D this demonstrates you are not operated for
501(c)(3) purposes and fail the operational test.

You are described in Section 1.501(c)(3)-1(c)(3)(i) of the regulations in that you spend a substantial
amount of time and resources devoted to activities that are typical of an action organization. Section
1.501(c)(3)-1(c)(3)(iii) of the regulations defines an “action” organization as one that plans to

participate and intervene in political campaigns on behalf of or in opposition to candidates for public
office. In determining if your activities constitute political campaign intervention we considered
whether you are distinguishing a candidate, excluding a candidate, or lacking neutrality in allowing
candidates to participate. Your intent was to hold a symposium inviting only F candidates or current
positioned F politicians, promote those speakers through the symposium, and do so at a time
prominent during a campaign season (before a presidential primary). In focusing on only one political
party you lack neutrality, exclude candidates and distinguish those focused at your event. Even
though D was eventually cancelled your only activity since formation had been planning D. This
clearly shows your purpose was to support and further the interests of candidates of the F party.

You are not like the organization described in Revenue Ruling 74-574. You do not provide equal time
to all candidates. You only provide time to candidates who are from the F party.

You are similar to certain organizations described in Revenue Ruling 2007-41. Certain aspects are
weighed in determining campaign intervention as evidenced within the ruling. While you are providing
a neutral location for your event, there is limited availability due to the need to book rooms at the
event and travel. There is an incentive for speakers to attend as they are receiving “comps” — free
rooms, meals and transportation, as well as publicity for speaking at an event preceding a
presidential primary, which is another factor (timing) in determining campaign intervention. D was
scheduled to lead into the C presidential primary. Another factor is determining if those invited to
attend are candidates. While you have not made clear on your agenda/schedule if those listed were
campaigning for any position at that time, you continually refer to them as candidates, you scheduled
a meet and greet session with candidates during D, and that D is a place to hear candidates. Further,
other facts indicating political campaign intervention is not providing an equal opportunity for all
candidates for the same office to appear. You are only inviting speakers from one political party — F.
While you have indicated that your purpose is not to provide support or opposition to any candidate,
or provide a platform for political fundraising, all other factors considered demonstrate your planning
for and actions taken prior to D as well as D itself are activities supporting the purpose of campaign
intervention.

As stated in Better Business Bureau of Washington v US, a single non-exempt purpose, if substantial,
will preclude tax exemption under section 501(c)(3) of the code. Although your symposiums may
have some educational value you have more than an insubstantial amount of non-exempt purposes,
primarily, campaign intervention. The presence of this single non-exempt purpose precludes
exemption under Section 501(c)(3).

You do not meet the provisions of Section 1.501(c)(3)-1(d)(1)(ii) of the regulations. You are operating
for the benefit of the F party in order to confer the benefits of tax exemption under Section 501(c)(3).
For example, you only invited candidates from the F party and promoted yourself to individuals
affiliated with F party. Your meeting minutes demonstrate the priority to recruit prominent members of
the F party. Coupled with the timing of F, and no data to indicate any individuals of the same positions
or public prominence were even discussed from the other major representative political party (M), nor
extended any invitations to participate at D, it is clear your purpose is to support F candidates. This
constitutes a private benefit to those candidates and thereby serves private rather than public
interests.

You are like the organization in American Campaign Academy v. Commissioner, who could not
establish that it operated on a nonpartisan basis. The organization in that ruling was found to be using
its educational activities to benefit one party's candidates. Similarly, you were planning to use D to

benefit F party candidates. This is evident though the event planning in extending invitations to only
those affiliated with the F party. The organization in that ruling was found to have an affiliation to one
political party. Your meeting minutes provide numerous examples of networking with those affiliated
with the F party; be it locally, statewide or even nationally. D was structured and set for a time to
specifically serve and benefit the candidates of one party, F. As a result, by conferring this benefit to
those invited to speak you serve the private interests of those individuals and of the F party more than
incidentally.

Conclusion

You do not qualify for exemption under section 501(c)(3) of the Internal Revenue Code, because you do
not meet the organizational or operational tests. Further, you are operating as an action organization
and providing substantial private benefit to one particular political party. Therefore, you do not qualify for
exemption under section 501(c)(3) of the Code.

If you don’t agree

You have a right to file a protest if you don’t agree with our proposed adverse determination. To do
so, you must send a statement to us within 30 days of the date of this letter. The statement must
include:

• Your name, address, employer identification number (EIN), and a daytime
  phone number

• A copy of this letter highlighting the findings you disagree with

• An explanation of why you disagree, including any supporting documents

• The law or authority, if any, you are relying on

• The signature of an officer, director, trustee, or other official who is authorized to sign for
  the organization, or your authorized representative

• One of the following declarations:

For an officer, director, trustee, or other official who is authorized to sign for the
organization:

Under penalties of perjury, I declare that I examined this protest statement, including
accompanying documents, and to the best of my knowledge and belief, the statement
contains all relevant facts and such facts are true, correct, and complete.

For authorized representatives:

Under penalties of perjury, I declare that I prepared this protest statement, including
accompanying documents, and to the best of my knowledge and belief, the statement
contains all relevant facts and such facts are true, correct, and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice
before the IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us
if he or she hasn’t already done so. You can find more information about representation in Publication
947, Practice Before the IRS and Power of Attorney.

We’ll review your protest statement and decide if you provided a basis for us to reconsider our
determination. If so, we’ll continue to process your case considering the information you provided. If
you haven’t provided a basis for reconsideration, we’ll forward your case to the Office of Appeals and
notify you. You can find more information about the role of the Appeals Office in Publication 892, How
to Appeal an IRS Decision on Tax-Exempt Status.

If you don’t file a protest within 30 days, you can’t seek a declaratory judgment in court at a later date
because the law requires that you use the IRS administrative process first (Section 7428(b)(2) of the
Code).

Where to send your protest
Please send your protest statement, Form 2848, if needed, and any supporting documents to the
applicable address:

U.S. mail:
Internal Revenue Service
EO Determinations Quality Assurance
Room 7-008
P.O. Box 2508
Cincinnati, OH 45201

Street address for delivery service:
Internal Revenue Service
EO Determinations Quality Assurance
550 Main Street, Room 7-008
Cincinnati, OH 45202

You can also fax your statement and supporting documents to the fax number listed at the top of this
letter. If you fax your statement, please contact the person listed at the top of this letter to confirm that
he or she received it.

If you agree

If you agree with our proposed adverse determination, you don’t need to do anything. If we don’t hear
from you within 30 days, we’ll issue a final adverse determination letter. That letter will provide
information on your income tax filing requirements.

You can find all forms and publications mentioned in this letter on our website at

www.irs.gov/formspubs. If you have questions, you can contact the person listed at the top of this
letter.

Sincerely,

Director, Exempt Organizations

Enclosure:
Publication 892