Exemption denied to an estate-planning member association

Plain-English summary

An association of estate-planning professionals applied for section 501(c)(3) status after filing Form 1023-EZ. Its activities included meetings with professional speakers, information about developments in estate planning, social networking, and cooperation among lawyers, accountants, financial advisers, insurance agents, trust officers, and other members. The IRS found that the association served the professional and economic interests of its members rather than a public educational purpose. Although some meetings had educational content, the social, networking, and business-promotion activities were substantial. Because the organization was not operated exclusively for exempt purposes, the IRS denied section 501(c)(3) status.

Ruling snapshot

• Question: Did the estate-planning association operate exclusively for charitable or educational purposes under section 501(c)(3)?
• Outcome: Denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 71-504; Rev. Rul. 76-366

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 03/20/2023
Tax Exempt and Government Entities Employer ID number:

IRS PO Box 2508
Cincinnati, OH 45201

Tax years:

Person to contact:

Number: 202324011
Release Date: 6/16/2023

UIL: 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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Letter 437

Redacted Letter 4034
Redacted Letter 4038

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

Department of the Treasury
Internal Revenue Service
Cincinnati, OH 45201

Date:
January 11, 2023

Employer ID number:

Person to contact:

Name:
ID number:
Telephone:
Fax:
Legend: UIL:
X = date 1 501.03-00
Y = state 501.03-30
Z = date 2
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, Streamlined Application for Recognition of Exemption Under IRC Section
501(c)(3).

You attest that you were incorporated on X in Y. 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

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

2

• 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

Your mission or most significant activities are to promote cooperative efforts in the field of estate planning
among professions and businesses represented by your members.

Detailed information was subsequently requested. You were incorporated on Z. Your Articles of Incorporation
states your purpose is to promote estate planning, to inform members on new laws and developments, plan
meetings and disseminate information, and to promote respect and understanding of the functions in the field of
estate planning.

You organize four meetings annually for estate planning professionals and promote cooperation among the

various disciplines involve in estate planning. of these meetings involve inviting a speaker on a topic of
interest relative to the estate planning field. Your meeting is for social and networking for estate planning
professionals.

Your participants are lawyers, accountants, financials advisors, insurance agents, trust and planned giving
officers or other professionals involved in the member disciplines: law, accounting, financial planning,
insurance, trust and estate administration, and charitable giving. A membership fee is charged to cover speaker
fees, your website and other expenses.

Law

Internal Revenue Code Section 501(c)(3) provides for the recognition of exemption of organizations that are
organized and operated exclusively for religious, charitable, or other 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) states that, 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(c)(1) provides that an organization will be regarded as operated exclusively for
one or more exempt purposes only if it engages primarily in activities which accomplish one or more of such
exempt purposes specified in IRC Section 501(c)(3). An organization will not be so regarded if more than an
insubstantial part of its activities is not in furtherance of an exempt purpose.

Revenue Ruling 71-504, 1971-2 C.B. 231 describes a city medical society, which has been recognized as
exempt from Federal income tax under section 501(c)(6) of the Code, that asked the Internal Revenue Service
whether it may be reclassified as a charitable and educational organization exempt from Federal income tax
under section 501(c)(3) of the Code. While some of its activities were charitable, most of its activities were
directed primarily at the promotion of businesses and thus furthered the common business purpose of its
members. The Revenue Ruling held that the presence of a single non-charitable or non-educational purpose,

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

3

substantial in nature, precluded exemption under section 501(c)(3) regardless of the number or importance of
truly charitable or educational purposes.

Revenue Ruling 76-366 held that an association of investment clubs formed to enable members and prospective
investors to make sound investments by the mutual exchange of investment information that carries on not only
educational activities but other activities to support and promote the economic interest of its members doesn’t
qualify for exemption under IRC Section 501(c)(3). “While some of the association's activities are educational,
and of the kind that might be carried on by an organization described in IRC Section 501(c) (3) of the Code,
many of the activities listed above are directed in whole or in part to the support and promotion of the economic
interests of the investment clubs that comprise its membership.”

In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court
held that the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for

exemption regardless of the number or importance of truly exempt purposes.

In Benjamin Price Genealogical Association v. Commissioner, 44 A.F.T.R.2d (1979), the court held that an
organization formed to disseminate information on, and to preserve documents relating to, the genealogy of
Benjamin Price did not qualify for exemption under IRC Section 501(c)(3) because it was created and operated
primarily for the benefit of the private interests of its members rather than exclusively for educational purposes.

Application of law

IRC Section 501(c)(3) sets 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 Section 501(c)(3) as
specified in Treas. Reg. Section 1.501(c)(3)-1(a)(1). You are not operated exclusively for purposes described in
Section 501(c)(3) as your activities are aimed at serving members of a particular professional industry. While
certain activities you conduct are aimed at educating your members, these are not exclusive, as you are also
providing social and networking opportunities. These are not insubstantial and therefore you are not operating
exclusively for an exempt purpose as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1).

You are similar to the organization in Revenue Ruling 71-504 in that your activities are serving the personal and
professional interests of your members, versus the general public. The organization in this ruling was already
exempt under IRC Section 501(c)(6) as its activities were primarily aimed at the promotion of business.
Similarly, you are aimed at the promotion of estate planning professionals. As seen in Revenue Ruling 76-366,
an organization that carries on educational activities as well as other activities that support and promote
personal economic interests of its members does not qualify. In both rulings it is noted that while some of the
activities are educational the presence of a substantial non-exempt purpose precluded exemption under Section
501(c)(3). (see Better Business Bureau of Washington, D.C., Inc. v. United States)

You are similar to the organization described in Benjamin Price Genealogical Association v. Commissioner
because your activities serve a private interest to your members and not the general public. Your educational
and networking activities are directed primarily towards the field of estate planning, which furthers the common
business and economic interest of your members. Your non-exempt activities are substantial in nature and are
serving private rather than exclusive educational purposes.

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

Conclusion

Based on the facts and information provided, you are not operated exclusively for exempt purposes. You are
serving the private interests of your members rather than a public educational purpose. Therefore, you are not
described in Section 501(c)(3).

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)).

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

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

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