501(c)(3) application denied to a membership hunting club that serves its members' recreational interests

Plain-English summary

An organization applied for 501(c)(3) charitable status using the short Form 1023-EZ, describing itself as a "Hunting Organization." On closer review, the IRS found it was a membership hunting club: members (recommended by existing members and voted in) pay annual dues to hunt year-round on leased land, use a lodge, and take part in gun classes, shooting practice, and hunting-safety instruction. The IRS denied the application. To qualify under section 501(c)(3), an organization must be operated exclusively for exempt purposes (like charity or education) and must serve a public rather than a private interest. This club failed the operational test: its activities were run mainly for the social and recreational benefit of its own dues-paying members, and although it offered some safety and rules classes, those were a small part of what it did and were for members. The IRS noted the club looks more like a social club (section 501(c)(7)) or a community firearms-safety organization (section 501(c)(4)) than a charity, citing rulings on hunting/fishing clubs and marksmanship groups, and cases holding that a substantial non-exempt (member-serving) purpose defeats 501(c)(3) exemption. Because no protest was filed within 30 days, the denial became final; the club must file Form 1120 and contributions to it are not deductible. This is a reminder that a members-only recreational club generally is not a 501(c)(3) charity, even if it teaches safety.

Ruling snapshot

• Question: Does a dues-funded membership hunting club qualify for exemption under IRC § 501(c)(3)?
• Outcome: Denied (application; proposed adverse became final for lack of a timely protest)
• Key authorities: IRC § 501(c)(3); Treas. Reg. §§ 1.501(c)(3)-1(a)(1), (c)(1), (d)(1)(ii); Rev. Ruls. 65-64, 66-273, 69-175; Better Business Bureau v. United States, 326 U.S. 279 (1945); Schoger Foundation v. Commissioner, 76 T.C. 380 (1981); Media Sports League, Inc. v. Commissioner, T.C. Memo 1986-568

Full text (IRS public release)

(Scanned document; OCR-proofread. Obvious scan misreads were corrected; wording is preserved verbatim. Letter 4034 uses a LEGEND for redacted items: D = Date, E = State, G = Date, h dollars = Amount, j = Number.)

Department of the Treasury
Internal Revenue Service                                   Date: 11/09/2022
IRS PO Box 2508
Cincinnati, OH 45201

Form you must file: 1120
Tax years: All

Release Number: 202305017
Release Date: 2/3/2023
UIL Code: 501.03-00, 501.03-30

Dear     :

This letter is our final determination that you don't qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in IRC Section 501(c)(3). 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 IRC Section 501(c)(3), donors generally can't
deduct contributions to you under IRC Section 170.

We may notify the appropriate state officials of our determination, as required by IRC Section 6104(c), by
sending them a copy of this final letter along with the proposed determination letter.

You must file the federal income tax forms for the tax years shown above within 30 days from the date of this
letter unless you request an extension of time to file. For further instructions, forms, and information, visit
www.irs.gov.

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

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

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

We sent a copy of this letter to your representative as indicated in your power of attorney.

Sincerely,
Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Letter 437
Redacted Letter 4034
Redacted Letter 4038

cc:

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S


------------------------------------------------------------------------

Department of the Treasury
Internal Revenue Service                                   Date: August 18, 2022
PO Box 2508
Cincinnati, OH 45201

Legend:                        UIL:
D = Date                       501.03-00
E = State                      501.03-30
G = Date
h dollars = Amount
j = Number

Dear     :

We considered your application for recognition of exemption from federal income tax under Internal Revenue
Code (IRC) Section 501(a). We determined that you don't qualify for exemption under IRC Section 501(c)(3).
This letter explains the reasons for our conclusion. Please keep it for your records.

Issues
Do you qualify for exemption under IRC Section 501(c)(3)? No, for the reasons stated below.

Facts
You submitted Form 1023-EZ, Streamline Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code.

You attest that you were incorporated on D in the state of E. You attest that you have the necessary organizing
document, that your organizing document limits your purposes to one or more exempt purposes within the
meaning of the IRC Section 501(c)(3), that your organizing document does not expressly empower you to
engage in activities, other than an insubstantial part, that are not in furtherance of one or more exempt purposes,
and that your organizing document contains the dissolution provision required under Section 501(c)(3).

You attest that you are organized and operated exclusively to further charitable purposes. You attest that you
have not conducted and will not conduct prohibited activities under IRC Section 501(c)(3). Specifically, you
attest you will:

    - Refrain from supporting or opposing candidates in political campaigns in any way
    - Ensure that your net earnings do not inure in whole or in part to the benefit of private shareholders or
     individuals
    - Not further non-exempt purposes (such as purposes that benefit private interests) more than
     insubstantially
    - Not be organized or operated for the primary purpose of conducting a trade or business that is not related
     to your exempt purpose(s)
    - Not devote more than an insubstantial part of your activities attempting to influence legislation or, if you
     made a Section 501(h) election, not normally make expenditures in excess of expenditure limitations
     outlined in Section 501(h)
    - Not provide commercial-type insurance as a substantial part of your activities

You described your mission or most significant activity as "Hunting Organization."

During review of your Form 1023-EZ, detailed information was requested supplemental to the above
attestations. This information shows you are a membership hunting club. Members are given the opportunity to
hunt year-round for all legal game such as wild hogs, deer, turkey, squirrels, bear, and other wild game on land
leased by you. The participants of these activities include members of your club, potential members, youths, and
any member of the public interested in game and fish hunting.

The activities are conducted on the land you lease. The types of activities conducted are based on the hunting
season and the particular quarter as well as any needs for hunting and weapon training. The percentage of time
spent on your activities is mainly on a quarterly basis and weekends. During the winter quarter no specific
activities are conducted. Members and interested members visit the lodge and facilities to locate a potential
hunting location. The spring quarter is used for cleanup, repairs and rifle and gun activities. This includes
practicing shooting, conducting gun classes, and conducting classes on the rules and regulations for the
upcoming hunting season. You also educate new members and kids on the rules and regulations of hunting and
rifle safety.

During the summer quarter you carry on the same activities as spring quarter and prepare for the hunting season
in fall. The major season for your activities is the fall season. This is when members are allowed to hunt and
utilize the hunting lodge and area. The only activity during this season is practicing shooting and conducting
land scouting for good hunting areas.

Your major source of income is membership fees. New membership is based on recommendation of existing
members and voted on by the entire club membership. You charge club dues of h dollars per year for existing
and new members. These dues are used to support operating expenses and collected by G of every year.

Your club includes over j acres of land, and no other activities are conducted on the property outside scheduled
events.

Law
IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and
operated exclusively for charitable, educational, or other enumerated purposes as specified in the statute. No
part of the net earnings may inure to the benefit of any private shareholder or individual.

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

Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) states that an organization is not organized or operated exclusively
for one or more exempt purpose unless it serves a public rather than a private interest. It must not be operated
for the benefit of designated individuals or the persons who created it.

Revenue Ruling 65-64, 1965-1 C.B. 241, upheld the exemption under IRC Section 501(c)(7), a nonprofit
membership organization that provided hunting and fishing facilities for its members through the propagation
and stocking fish and game on the club property. The organization's purposes were the maintenance of a club
for the promotion of fellowship, recreation, hunting, fishing and similar sports among its members, their
families and bona fide guests, and the conservation of fish and game.

Revenue Ruling 66-273, 1966-2 C.B. 222, held that a nonprofit organization may qualify for exemption under
IRC Section 501(c)(4) where it provides a community with facilities for rifle, pistol, and shotgun practice and
instructions in the safe handling and proper care of weapons. The general public was permitted full use of the
organization's facilities, which were also available free of charge to units of the armed services of the United
States and for their use in conducting required training classes, to local law enforcement officers, and to junior
rifle organizations. The ruling concluded that providing a community with supervised facilities for firearm
shooting, giving instructions in the safe handling and proper care of guns, and teaching better marksmanship are
considered activities that promote the common good and general welfare of the community under Section
501(c)(4).

Revenue Ruling 69-175, 1969-1 C.B. 149, describes an organization created to provide bus transportation for
school children to a tax-exempt private school. The organization was formed by the parents of pupils attending
the school. The organization provided transportation to and from the school for those children whose parents
belonged to the organization. Parents were required to pay an initial family fee and an additional annual charge
for each child. The Service determined that "When a group of individuals associate to provide a cooperative
service for themselves, they are serving a private interest."

In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court
determined the activities of the organization were aimed at promoting the prosperity and standing of the
business community, and therefore served         .

In Schoger Foundation v. Commissioner, 76 T.C. 380 (1981), it was held that if an activity serves a substantial
non-exempt purpose, the organization does not qualify for exemption even if the activity also furthers an
exempt purpose.

In Media Sports League, Inc. v. Commissioner, T.C. Memo 1986-568, the Tax Court addressed an organization
that arranged football, softball, volleyball, and other games among its members with membership open to all
persons over age twenty-one without regard to their skills in the sport. The organization offered members
informal instruction in the fundamentals of each sport, but members were not required to receive instruction or
to participate in any athletic activities. The Tax Court held that the organization was not exempt from federal
income tax under IRC Section 501(c)(3) because the social and recreational interests of its members constituted
a substantial purpose, which is not an exempt one under Section 501(c)(3).

Application of law
IRC Section 501(c)(3) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests for an organization
to be recognized as exempt. An organization must be both organized and operated exclusively for purposes
described in IRC Section 501(c)(3). Based on the information you provided in your application and supporting
documentation, we conclude you do not meet the operational test.

You are not described in IRC Section 501(c)(3) because you fail the operational test. Specifically, you are not
operated exclusively for an exempt purpose as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1). The facts
show you are not operated exclusively for charitable and educational purposes, but for the social and
recreational purposes of members. Specifically, you are operating a hunting club in order for your members to
use at their convenience throughout the year.

You do not meet the provisions of Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) because you are not operating
exclusively for public purposes; rather, you are serving the private interests of your members. You collect dues
and use that revenue to provide social and recreational events for your members. Although you provide some
educational classes, they are for the benefit of your members and are only a small part of your overall activities.
Your members benefit more than incidentally from the events you conduct.

You have not differentiated your activities from those that are organizations exempt under IRC Section
501(c)(7) as described in Rev. Rul. 65-64. You have not provided evidence that you are doing any more
than operating a club for the private interests of your members.

You are similar to the organization described in Rev. Rul. 66-273. Through conducting hunting and weapon
practice and instructions in the safe handling of weapons for members, you are doing more to promote the
common good and general welfare of the community under IRC Section 501(c)(4) than operating exclusively
for Section 501(c)(3) purposes.

You are like the organization described in Revenue Ruling 69-175, a substantial part of your activities is carried
on for the benefit of your members. You collect dues from your members and these dues are used to support
operating expenses of your hunting club. This serves a private interest rather than a public interest.

Like the organizations in the court cases, Better Business Bureau of Washington, D.C., Inc. v. United States,
Schoger Foundation v. Commissioner, and Media Sports League, Inc. v. Commissioner, you do not qualify
under IRC Section 501(c)(3). You do provide some educational classes, but your activities are mainly open
to your members. You serve a substantial non-exempt purpose of serving the private interests of your
members.

Conclusion
Based on the facts and circumstances presented, you do not qualify for exemption from federal income tax as an
organization described in IRC Section 501(c)(3). You are not operated exclusively for exempt purposes as set
forth in Section 501(c)(3). Specifically, more than an insubstantial part of your activities consists of operating a
membership-based hunting club for the benefit of your members. This is neither exclusively educational nor
charitable.

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.

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

    - Your name, address, employer identification number (EIN), and a daytime phone number
    - A statement of the facts, law, and arguments supporting your position
    - A statement indicating whether you are requesting an Appeals Office conference
    - The signature of an officer, director, trustee, or other official who is authorized to sign for the
     organization or your authorized representative
    - The following declaration:

     For an officer, director, trustee, or other official who is authorized to sign for the organization:
     Under penalties of perjury, I declare that I have examined this request, or this modification to the
     request, including accompanying documents, and to the best of my knowledge and belief, the request
     or the modification contains all relevant facts relating to the request, 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 they haven'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 gave us a basis to reconsider our determination. If so,
we'll continue to process your case considering the information you provided. If you haven't given us a basis
for reconsideration, we'll send your case to the Appeals Office and notify you. You can find more information
in Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status.

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

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

U.S. mail:                                      Street address for delivery service:
Internal Revenue Service                        Internal Revenue Service
EO Determinations Quality Assurance             EO Determinations Quality Assurance
Mail Stop 6403                                  550 Main Street, Mail Stop 6403
PO Box 2508                                      Cincinnati, OH 45202
Cincinnati, OH 45201

You can also fax your protest 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 they received it.

You can get 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 listed at
the top of this letter.

Contacting the Taxpayer Advocate Service
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 if 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.

We sent a copy of this letter to your representative as indicated in your power of attorney.

Sincerely,
Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

cc:

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K