Hunting and fishing group denied charitable exemption

Plain-English summary

An organization applied for section 501(c)(3) status with purposes that included protecting wildlife, enhancing hunting and fishing, and uniting sportsmen. It gave members and their immediate families unlimited hunting and fishing access to its property, held meetings and hunting events, and rented outdoor pavilions to the public. Some activities, including hunter-safety programs, served children and teens and had an educational component. The IRS concluded that the property was primarily used for members' recreation and that this substantial nonexempt purpose outweighed the organization's educational activities. The organization therefore failed the operational test, and the denial became final after no protest was filed within 30 days.

Ruling snapshot

• Question: Did a membership organization centered on hunting and fishing 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(a)(1), 1.501(c)(3)-1(c)(1), 1.501(c)(3)-1(d)(3); Rev. Rul. 77-365; Better Business Bureau of Washington, D.C. v. United States; Minnesota Kingsmen Chess Association v. Commissioner; St. Louis Science Fiction Limited v. Commissioner

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 10/23/2023
Tax Exempt and Government Entities Employer ID number:
IRS P.O. Box 2508
Cincinnati, OH 45201 Form you must file:
1120
Tax years:

Release Number: 202403013
Release Date: 1/19/2024
UIL Code: 501.03-00,
501.03-30

All

Person to contact:

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
PO Box 2508
Cincinnati, OH 45201

Date: 08/23/2023

Employer ID number:

Person to contact:
Name:
ID number:
Telephone:
Fax:

Legend:                              UIL:
B = Date of Formation                501-03.00
C = State of Formation               501-03.30
x dollars = Rental Fee
y dollars = Membership Fee

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 date B, in the state of C. 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 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 Section 501(c)(3). Specifically,
you attest you will:

• Refrain from supporting or opposing candidates in political campaigns in any way

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

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• 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

During review of your Form 1023-EZ, detailed information was requested supplemental to the above
attestations. Your Constitution and Bylaws state your purposes include:

• To protect wild birds, fish and animals from extinction by over hunting, poison from pollution
and lack of food and natural habitat.

• To enhance the sports of hunting and fishing.

• To unite members as sportsmen who respect each other socially, and as fellow men dedicated to
good sportsmanship.

You state you [redacted] that includes a [redacted], numerous [redacted]
and a clubhouse with a few outdoor pavilions. You provide access to unlimited hunting and fishing for
your members and their immediate families on your property. You [redacted] annually with [redacted].
You also purchased and released [redacted] birds on your property. You rent your
outdoor pavilions to the public for private parties, BBQs, and wedding showers. Your rental fee is x
dollars.

You hold an [redacted] event, hunter safety training sessions, monthly meetings, self-guided
hunting and unlimited hunting and fishing. Your [redacted] and hunter safety activities are directed to
children and teens. You state hunting is your most popular activity followed by fishing and [redacted].

Your membership is open to anyone who wishes to join. Your annual membership fee is y dollars.

You are supported by membership fees, proceeds from small inheritances and gifts. Your expenses
include the maintenance of your property.

Law

IRC Section 501(c)(3) provides, in part, for the exemption from federal income tax of organizations
organized and operated exclusively for charitable, religious or educational purposes, no part of the net
earnings of which inures to the benefit of any private shareholder or individual.

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

3

Treasury Regulation Section 1.501(c)(3)-1(a)(1) provides that, for an organization to be exempt under
IRC Section 501(c)(3), it 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 or
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 that 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.

Rev. Rul. 77-365, 1977-2 C.B. 192, held an otherwise qualifying nonprofit organization that conducts
clinics, workshops, lessons, and seminars at municipal parks and recreational areas to instruct and educate
individuals in a particular sport is operated exclusively for educational purposes and qualifies for exemption
under IRC Section 501(c)(3).

In Better Business Bureau of Washington, D.C., Inc., v. U.S., 326 U.S. 279 (1945), the court held that
the presence of a single non-exempt purpose, if substantial in nature, will preclude exemption,
regardless of the number or importance of statutorily exempt purposes.

In Minnesota Kingsmen Chess Association Inc. v. Commissioner, T.C. Memo. 1983-495, the
organization sponsored chess tournaments, provided chess magazines and books to libraries, offered free
chess lessons, and published a newsletter that primarily contained reports of past tournaments and
announcements of future ones. The petitioner sought exemption under IRC Section 501(c)(3) because its
purposes and activities were described as educational. The court found that the promotion of chess
tournaments furthers a substantial recreational purpose, even though individual participants may have
received some educational benefits.

In St. Louis Science Fiction Limited v. Commissioner, 49 TCM 1126, 1985-162, the Tax Court held that
a science fiction society failed to qualify for tax-exempt status under IRC Section 501(c)(3). Although
many of the organization's functions at its annual conventions (the organization's principal activity) were
educational, its overall agenda was not exclusively educational. A substantial portion of convention
affairs were social and recreational in nature.

Application of law

You are not described in IRC Section 501(c)(3) because you fail the operational tests as described in
Treas. Reg. Section 1.501(c)(3)-1(a)(1). Your purpose is to enhance the sport of hunting and fishing by
providing unlimited recreational hunting and fishing for your members and their immediate families.

You do not meet the provisions in Treas. Reg. Section 1.501(c)(3)-1(c)(1). Although some of your
activities are educational in nature, your property is primarily used by your members for recreational
purposes. Your property which is described as a [redacted] is used for recreational hunting and

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

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fishing by your members. Such activities as described do not serve exclusively charitable or educational
purposes under Treas. Reg. Section 1.501(c)(3)-1(c)(1) or Treas. Reg. Section 1.501(c)(3)-1(d)(3).

You are not like the organization described in Rev. Rul. 77-365 that was granted exemption under IRC
Section 501(c)(3). Although you do provide some educational training, your primary activity is uniting
members as sportsmen for hunting and fishing on your property. This precludes exemption under IRC
Section 501(c)(3).

Similar to St. Louis Science Fiction Limited v. Commissioner and Minnesota Kingsmen Chess
Association v. Commissioner, while a portion of your activities are educational in nature, your property
is used for hunting and fishing by your members which furthers a substantial recreational purpose. Like
the organization in Better Business Bureau, this is a substantial non-exempt purpose that will destroy
exemption regardless of the number and importance of any truly exempt purposes.

Conclusion

Based on the facts and information submitted, you are not operated exclusively for exempt purposes
within the meaning of IRC Section 501(c)(3). Your activities serve a substantial non-exempt
recreational purpose, causing you to fail the operational test. Therefore, you do not qualify for
exemption under IRC 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.

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

5

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.

Sincerely,

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