Recreational adult golf league denied 501(c)(3) status

Plain-English summary

A women's nine-hole golf league applied to be recognized as a tax-exempt charity under Section 501(c)(3) using the streamlined Form 1023-EZ. The group plays golf weekly at a local course in warmer months and holds monthly potlucks; members pay a fee that funds weekly cash prizes and social events. The IRS denied exemption. To qualify, an organization must be operated exclusively for exempt purposes, and a sports group generally qualifies only if it mainly teaches the sport, serves youth, or develops amateur athletes for national or international competition. This league did none of those: it exists for the recreation and socializing of adult members, which is a substantial non-exempt purpose that fails the "operational test." The fact that about half the members are seniors was not enough to make it charitable. Because exemption was denied, donors cannot deduct contributions under Section 170, and the group must file corporate income tax returns (Form 1120). The organization did not protest the proposed denial within 30 days, so it became final.

Ruling snapshot

• Question: Does a recreational adult golf league qualify for exemption under IRC § 501(c)(3)?
• Outcome: denied
• Key authorities: IRC §§ 501(c)(3), 501(j); Treas. Reg. § 1.501(c)(3)-1(a)(1), (c)(1); Rev. Ruls. 64-275, 65-2, 70-4, 77-365, 80-215; Hutchinson Baseball Enterprises, Inc. v. Commissioner, 696 F.2d 757 (1982); Media Sports League, Inc. v. Commissioner, T.C. Memo 1986-568

Full text (IRS public release)

                    Department of the Treasury                     Date:
                    Internal Revenue Service                       03/21/2024
                    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: 202424022                                          All

                                                                   Person to contact:

Release Date: 6/14/2024
UIL Code: 501.00-00,
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 47632B

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 47632B

               PO Box 2508
               Department of the Treasury
               Internal Revenue Service
        IRS    Cincinnati, OH 45201

Date: 01/08/2024

Employer ID number:

Person to contact:
Name:
ID number:
Telephone:
Fax:
Legend:                                    UIL:
B = Attested Formation Date                501.00-00
C = State                                  501.03-00
D = Actual Formation Date                  501.03-30
E = Members
f dollars = Membership Fee
g dollars = Portion of Membership Fee
H = Related Organization

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 Section 501(c)(3)
of the Internal Revenue Code.

You attest that you were incorporated on 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 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:

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

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* 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

On your Form 1023-EZ, you stated that you are a weekly league.
Detailed information was subsequently requested. You provided additional information about your activities.

Your Articles of Incorporation (AOI) show you were formed on D. Originally, your AOI did not contain a
proper purpose clause. Moreover, your AOI stated that upon dissolution, your assets will be distributed among
the league roster. You attested, under penalties of perjury, that your AOI was amended to include the proper
purpose and dissolution clauses.

You play nine holes of golf weekly at a local golf course starting in the springtime and ending in fall.
Additionally, you have six potlucks (one each month) at a member's home for the purpose of socializing with
other members. You have E members.

Your members pay a fee of f dollars to participate in the league. Of that, g dollars goes to H for membership.
The remaining balance goes for weekly prizes paid to individual members. The money is spent in the pro shop
only. In addition, money collected is used for other social events which sometimes includes other leagues in
your area.

All your time is spent on golfing and other social/recreational activities. The activities provide members with
the ability to improve their handicaps along with the social activity of golfing with other women that enjoy golf.
The golf league is directed to any women that wants to play in a nine-hole league. Approximately half of your
members are seniors, aged J years or older.

Law

IRC 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.

IRC Section 501(j)(1) provides generally that a "qualified amateur sports organization" that otherwise satisfies
the requirements of Section 501(c)(3) will qualify as exempt regardless of whether it provides athletic facilities
or equipment and regardless of whether its membership is local or regional in nature.

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

3

IRC Section 501(j)(2) defines a "qualified amateur sports organization" as an organization organized and
operated primarily to conduct or to support and develop amateur athletes for national or international
competition in sports.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states 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(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 64-275, 1964-2 C.B. 142, held an organization formed for the purpose of training suitable
candidates in the techniques of racing sailboats in national and international competition, and thereby improving
the caliber of candidates representing the United States in Olympic and Pan-American games, qualifies for
exemption as an educational organization described in IRC Section 501(c)(3).

Rev. Rul. 65-2, 1965-1 C.B. 227, described an organization that is organized and operated for the purpose of
teaching a particular sport to children under the ages of 18 by holding clinics conducted by qualified instructors.
The organization was recognized as an organization described in IRC Section 501(c)(3) because it is
exclusively charitable and educational.

Rev. Rul. 70-4, 1970-1 C.B. 126, described an organization engaged in promoting and regulating a sport for
amateurs. The organization's stated purposes were to promote the health of the general public by encouraging
all persons to improve their physical condition and fostering public interest in a particular sport. Its activities
were directed toward promoting sport tournaments, exhibitions and holding instructive clinics. The organization
did not qualify for exemption under IRC Section 501(c)(3).

Rev. Rul. 77-365, 1977-2 C.B. 192, held that an organization formed to conduct clinics, workshops, lessons,
and seminars at municipal parks and recreational areas to instruct and educate individuals in a sport may qualify
for exemption under IRC Section 501(c)(3). The organization does not establish rules, set standards for
equipment, or sponsor league competition for the sport in which it provides instruction.

Rev. Rul. 80-215, 1980-2 C.B. 174, described an organization that was formed to develop, promote, and
regulate a sport for youth under the ages of 18 and to promote sportsmanlike competition among the players.
Additionally, it promulgated rules, organized officials, and presented seminars for players and coaches and
referees. The organization combatted juvenile delinquency by providing a recreational outlet for the young
people, which is a charitable purpose. Furthermore, the organization was educational because it taught and
developed the skills of the youth.

In Hutchinson Baseball Enterprises, Inc. v. Commissioner, 696 F.2d 757 (1982), the court held that an
organization that promoted recreational and amateur sports was exempt as a charitable organization under IRC
Section 501(c)(3). The organization undertook numerous activities to promote the sport of baseball and the

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

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court found that the purpose of promoting sports predominated over subsidiary purposes, such as members'
recreational or social benefit.

In Media Sports League, Inc. v. Commissioner, T.C. Memo 1986-568 (1986), the court ruled that an
organization that sponsored sports competitions for adults in the community was not exempt under IRC Section
501(c)(3). The court found that the organization had the substantial nonexempt purpose of promoting the social
and recreational interests of its members.

Application of law

IRC Section 501(c)(3) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests to qualify for exempt
status. An organization must be both organized and operated exclusively for purposes described in Section
501(c)(3). You have failed to meet the operational test, as explained below.

You do not meet the operational test under IRC Section 501(c)(3) because you are not operating exclusively for
exempt purposes as required under Treas. Reg. Section 1.501(c)(3)-1(c)(1). Your activities consist of organizing
and operating an adult golf league, which is neither exclusively educational nor charitable.

An organization conducting a sport for adults may be exempt under IRC Section 501(c)(3) if its activities are
directed primarily toward the instruction or teaching of the sport. See Rev. Ruls. 64-275 and 77-365. However,
you are unlike the organizations described in those rulings because you do not provide a training program which
prepares participants for national and international competitions. Your events are for social and recreational
purposes and are not intended for the furthering of competition at higher levels. Further, while you are
promoting the teaching of the sport of golf, you are also formed to encourage participation in regular league
play. You are formed and operate for the recreational and social purposes of your members. See Hutchinson
Baseball Enterprises v IRS.

An organization teaching or conducting sports may also be exempt under IRC Section 501(c)(3) if its activities
are directed primarily at youth participants. You are unlike the organizations described in Rev. Rul. 65-2 and
Rev. Rul. 80-215 because your recreational activities are for adults only. Although approximately half of your
members are seniors, the percentage is not high enough to determine that you operate exclusively for a
charitable class. Further, your events and membership is not limited in any way to a particular age range or
charitable class. See also Media Sports v IRS. You are like the organization described in Rev. Rul. 70-4, which
did not qualify for exemption under IRC Section 501(c)(3), because you provide a recreational golf league for
adults.

Finally, while you are teaching and promoting the sport of golf you are not participating in any national or
international competitions or developing athletes further for these types of competitions. An organization whose
primary purpose is the support and development of amateur athletes for participation in international
competition can qualify under IRC Section 501(j). Organizations whose primary purpose is the recreation of
their members or whose facilities are used primarily by casual athletes will not qualify. As your league play is
local and primarily recreational in nature you do not meet the requirements for an amateur athletic organization
that would qualify under Section 501(j)(1) or 501(j)(2).

Conclusion
Based on the above facts and analysis, you do not qualify for exemption under IRC Section 501(c)(3) because
you are not operated exclusively for exempt purposes within the meaning of Section 501(c)(3). You fail the

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

5

operational test because your recreational activities further a substantial non-exempt purpose. Accordingly, you
do not qualify for exemption under 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 IRS 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:

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

6

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,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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