Membership business activity failed the social welfare test

Plain-English summary

The IRS examined an organization that claimed exemption as a social welfare organization under section 501(c)(4). The final determination states that the organization was not a civic league or operated primarily to promote the common good and general welfare of the community. Instead, its primary activity promoted the business interests of its members. The IRS therefore determined that the organization did not qualify under section 501(c)(4) for the examined tax periods and explained its right to seek declaratory judgment within 90 days.

Ruling snapshot

• Question: Did the organization's activities primarily promote social welfare within section 501(c)(4)?
• Outcome: revocation (the organization did not qualify for the examined tax periods)
• Key authorities: IRC §§ 501(c)(4), 6110, and 7428

Full text (IRS public release)

Internal Revenue Service
Department of the Treasury
Appeals Office
300 North Los Angeles Street
Employer Identification Number:
MS LA-8000 Room 3054
LOS ANGELES, CA 90012

Date: December 31, 2019
Person to Contact:

Employee ID Number: *
Tel:
Fax: ***

Form:
Tax Period(s) Ended:

Number: 202017039
Release Date: 4/24/2020
UIL: 501.04-00

Certified Mail

Dear

This is a final determination explaining why your organization does not qualify as an organization described in section 501(c) (4) of the Internal Revenue Code (the “Code”) for the tax periods listed above.

This letter is not a determination of (1) your exempt status for any periods other than the tax periods listed above or (2) whether your organization qualifies as an organization described in any other paragraph of section 501(c). In the future, if you believe your organization qualifies for tax exempt status and would like to establish its status, you may request a determination from the Internal Revenue Service by filing Form 1024, Application for Recognition of Exemption Under Section 501(a), or Form 1024-A, Application for Recognition of Exemption Under Section 501(c)(4) of the Internal Revenue Code, (as applicable) and paying the required user fee.

Our adverse determination as to your exempt status was made for the following reasons:

---------------- is not an organization described in section 501(c)(4) of the Internal Revenue Code because it is not a civic league or organization operated exclusively for the promotion of social welfare. It is not primarily engaged in promoting in some way the common good and general welfare of the people of the community. Its primary activity is to promote the business interests of its members.

We'll make this letter and the proposed adverse determination letter available for public inspection under Code section 6110 after deleting certain identifying information. We have provided to you, in a separate mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents attached that show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in Notice 437.

If you decide to contest this determination, you may file an action for declaratory judgment under the provisions of section 7428 of the Code in one of the following three venues: 1) United States Tax

Court, 2) the United States Court of Federal Claims, or 3) the United States District Court for the District of Columbia. A petition or complaint in one of these three courts must be filed within 90 days from the date this determination letter was mailed to you. Please contact the clerk of the appropriate court for rules and the appropriate forms for filing petitions for declaratory judgment by referring to the enclosed Publication 892. You can write to the courts at the following addresses:

United States Tax Court
400 Second Street, NW
Washington, DC 20217

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005

U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001

You may also be eligible for help from the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.

If you have any questions about this letter, please contact the person whose name and telephone number are shown in the heading of this letter.

Sincerely,

Appeals Team Manager

Date: August 29, 2018

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities
Exempt Organizations Examinations

Taxpayer Identification Number:

Form:
990 Return
Tax Year(s) Ended:
December 31, 20
December 31, 20
UIL: 501.04-00
Person to Contact:

Employee ID:

Telephone:

Fax:
Manager’s Contact Information:

Employee ID:

Telephone:
Response Due Date:
September 28, 2018

CERTIFIED MAIL — Return Receipt Requested
Dear

Why you're receiving this letter
We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that your organization doesn't qualify as an organization described in Internal Revenue Code (IRC)

Section 501 (c)(4).

This letter is not a determination of your tax-exempt status under IRC Section 501 for any period other than the tax periods above.

If you agree

If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an organization described in IRC Section 501 (c)(4) for the periods above.

If you disagree

1. Request a meeting or telephone conference with the manager shown at the top of this

letter.

2. Send any information you want us to consider.

3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or
   send additional information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after the meeting or after we consider the information.

The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes informally. If you file a protest, the auditing agent may ask you to

Letter 3618 (Rev. 9-2017)
Catalog Number 34809F

sign a consent to extend the period of limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case. For your protest to be valid, it must contain certain specific information, including a statement of the facts, applicable law, and arguments in support of your position. For specific information needed for a valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax- Exempt Status.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn’t apply now that we've issued this letter.

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt
   Government Entities) if you feel the issue hasn’t been addressed in published precedent or has been treated inconsistently by the IRS.

If you're considering requesting technical advice, contact the person shown at the top of this letter. If you disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as explained above. A decision made in a technical advice memorandum, however, generally is final and binding on Appeals.

If we don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final adverse determination letter.

In the future, if you believe your organization qualifies for tax-exempt status and would like a status determination letter from the IRS, you can request a determination by filing Form 1024, Application for Recognition of Exemption Under Section 501(a), and paying the required user fee.

Contacting the Taxpayer Advocate Office is a taxpayer right

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you.

Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

For additional information
You can get any of the forms and publications mentioned in this letter by visiting our website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).

If you have questions, you can contact the person shown at the top of this letter.

Sincerely,
Maria Hooke
Maria Hooke
Director, Exempt Organizations
Examinations
Enclosures:
Form 886-A
Form 6018
2 Letter 3618 (Rev. 9-2017)

Catalog Number 34809F