Single-company financial sales group denied business league exemption

Plain-English summary

An association whose members all sold financial products for one for-profit company applied for exemption as a business league under IRC § 501(c)(6). The group trained and developed the company's sales force through meetings, recruiting, networking, and other member activities funded by dues. The IRS found that these activities served a specific company and its employees rather than improving conditions across the financial services industry or another line of business. The organization also performed particular services for individual members, which is inconsistent with business league status. It did not protest the proposed adverse determination within 30 days. The IRS therefore issued a final denial and instructed the organization to file Form 1120 for all years.

Ruling snapshot

• Question: Does an association serving financial professionals who all sell one company's products qualify as a business league under IRC § 501(c)(6)?
• Outcome: Denied because the group promoted one company's brand and provided particular services to its employees rather than improving a line of business
• Key authorities: IRC §§ 501(a), 501(c)(6); Treas. Reg. § 1.501(c)(6)-1; Rev. Rul. 55-444; Rev. Rul. 58-294; Rev. Rul. 67-77; Rev. Rul. 68-182; Bluetooth SIG Inc. v. United States

Full text (IRS public release)

Department of the Treasury

Internal Revenue Service

Tax Exempt and Government Entities
IRS P.O. Box 2508
Cincinnati, OH 45201

Date:
04/29/2025

Employer ID number:

Form you must file:
1120

Tax years:
All Years

Person to contact:

Release Number: 202530018
Release Date: 7/25/2025
UIL Code: 501.06-00

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)(6). 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.

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.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Letter 437
Redacted Letter 4034
Letter 4038

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

Department of the Treasury

Internal Revenue Service

PO Box 2508
Cincinnati, OH 45201

Date: 01/30/2025

Employer ID number:

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

Legend:
B = State
C = Date
D = Company Name

UIL:
501.06-00

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)(6).
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)(6)? No, for the reasons stated below.

Facts

You were formed in the state of B on C as an unincorporated association.

You are a member organization wherein 100% of your members are financial professionals working on behalf
of D, a for-profit corporation selling financial services and products to clients to help them reach their financial
goals. You are formed to educate, develop, and train the salesforce of D, while providing a forum to facilitate
discussions in order to position D as a superior sales force within the financial services industry. Your activities
on behalf of D include a two-day annual meeting, a two-day annual executive committee meeting, an annual
recruiting campaign and quarterly virtual meetings with members. Your meetings provide networking
opportunities for members, while allowing all members to take advantage of trainings and discuss
improvements to the industry and/or the business of D. All members of your organization are financial
professionals who are responsible for selling D's financial products. While you do not sell or promote the
products and services of D directly, the members, to whom you are providing training and development
services, are financial professionals serving in a sales capacity for D. You are entirely supported by dues from
your members.

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

2

Law

IRC Section 501(c)(6) of the Code provides exemption from federal income tax for business leagues not
organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder
or individual.

Treasury Regulation Section 1.501(c)(6)-1 defines a business league as an association having a common
business interest, whose purpose is to promote the common business interest and not to engage in a
regular business of a kind ordinarily carried on for profit. Its activities should be directed to the
improvement of business conditions of one or more lines of business rather than the performance of
particular services for individual persons.

For exemption purposes, a line of business is a trade or occupation, entry into which is not restricted by
a patent, trademark, or similar device which would allow private parties to restrict the right to engage in
the business. A "segment" of a line of business is not considered a line of business under Section
501(c)(6) of the Code.

Revenue Ruling 55-444, 1955-2 C.B. 258, states that an organization formed to promote the business of
a particular industry that carries out its purposes primarily by conducting a general advertising campaign
to encourage the use of products and services of the industry as a whole is exempt from tax
notwithstanding that such advertising to a minor extent constitutes the performance of particular services
for its members.

Revenue Ruling 58-294, 1958-1 C.B. 244, holds that an association of licensed dealers in a certain type
of patented product did not qualify as a business league. The association in this ruling owned the
controlling interest in the corporation that held the basic patent of the product, it engaged mainly in
furthering the business interests of its member dealers, and it did not benefit businesses that
manufactured competing product of the same type covered by the patent.

Revenue Ruling 67-77, 1967-1 C.B. 138 also ruled that an association of dealers selling a particular make
of automobile that engaged in financing general advertising campaigns to promote the sale of that
particular make was not exempt because it was performing particular services for its members rather than
promoting a line of business, i.e., the automotive industry as a whole. In this ruling, membership in the
organization was restricted to dealers who held franchises for the sale of the automobiles designated in
the area.

In Revenue Ruling 68-182, 1968-1 C.B. 263, the Service's position was stated that organizations
promoting a single brand or product within a line of business do not qualify for exemption under section
501(c)(6) of the Code.

In Engineers Club of San Francisco v. United States, 791 F.2d 686 (9th Cir. 1986), the court concluded
that in order to qualify for a business league classification, each and every requirement of Treas. Reg.
Section 1.501(c)(6)-1 must be met.

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

3

In Bluetooth SIG Inc. v. United States, 611 F.3d 617 (9th Cir. 2010), the court distilled Treas. Reg.
Section 1.501(c)(6)-1 into a six-factor test, which requires a business league to be an association (1) of
persons having a common business interest; (2) whose purpose is to promote the common business
interest; (3) not organized for profit; (4) that does not engage in a business ordinarily conducted for profit;
(5) whose activities are directed to the improvement of business conditions of one or more lines of
business as distinguished from the performance of particular services for individual persons; and (6) of the
same general class as a chamber of commerce or a board of trade.

In National Muffler Dealers Association, Inc. v. United States, 440 U.S. 472, Ct. D. 1997, 1979-1 C.B.
198 (1979), the Court held that an organization of muffler dealers franchised by Midas International
Corporation did not qualify for exemption from federal income tax as a business league under section
501(c)(6) of the Code. The organization's purpose was too narrow to satisfy the line of business test of
section 1.501(c)(6)-1 of the regulations.

In Guide International Corporation v. United States 948 F.2d 360 (7th Cir. 1991), the court concluded
that an association of computer users did not qualify for exemption under IRC 501(c)(6) because it
essentially benefited users of I.B.M. equipment.

Application of law

IRC Section 501(c)(6) and Treas. Reg. Section 1.501(c)(6)-1 set forth criteria to qualify for exemption as a
business league. Bluetooth Sig Inc. distilled Treas. Reg. Section 1.501(c)(6)-1 into six requirements, and
each requirement must be met.

You are not described in Section 501(c)(6) of the Code because you are not organized and operated as a
business league, but you are operated to perform particular services to your members and further to the
business these members work for.

You are not described in Treas. Reg. Section 1.501(c)(6) because your activities are directed to perform
services for the benefit of the owner of a particular business rather than to the improvement of business
conditions of one or more lines of business.

You are not similar to the organization described in Revenue Ruling 55-444 because your activities are
directed at only benefitting the D organization and promoting its interests as well as promotion of the D
brand. Therefore, you are not improving the business conditions of an industry as a whole.

You are similar to the organizations described in Revenue Rulings 58-294, and 67-77, because you are
engaged in furthering the business interests of D through the training of sales professionals exclusively in
the employment of D, selling D's financial products to its clients rather than the improvement of business
conditions of one or more lines of business.

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

4

You are like the organizations described in Revenue Rulings 68-182 and 83-164, because your activities
are exclusively directed for the interests and benefit of a specific business. Your workshops and training
are tailored for the D's specific needs to further the sales of its financial products.

Per Engineers Club of San Francisco, you do not qualify for business league classification because you did
not meet each and every requirement under of Treas. Reg. Section 1.501(c)(6)-1. Per Bluetooth SIG Inc.,
your activities may not be distinguished from the performance of particular services for individual persons.
In general, a particular service is an activity that serves as a convenience or economy to members in the
operation of their businesses. A particular service assists members in the pursuit of their individual
businesses rather than advance the members' interests generally, by virtue of their membership in the
industry.

You are similar to the organizations described in National Muffler Dealers Association and Guide
International Corporation v. United States, because your activities specifically serve members who are
particular employees of a single business organization. You provide assistance and services to a particular
business which does not represent one or more line of businesses.

Conclusion

All requirements of IRC Section 501(c)(6) and Treas. Reg. Section 1.501(c)(6)-1 must be met in order to
qualify as a business league. Your activities are not directed to the improvement of business conditions of
one or more lines of business, rather they are providing particular services for your individual members.
Your activities are directed towards a segment or a line of business because your members are limited to
employees of a particular brand. You do not meet all of the requirements of Section 501(c)(6) of the Code,
therefore, you do not qualify for exemption as a business league under Section 501(c)(6).

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

• One of the following declarations:

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

5

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.

For authorized representatives:

Under penalties of perjury, I declare that I prepared this protest statement, including
accompanying documents, and to the best of my knowledge and belief, the statement contains all
relevant facts, 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 find 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.

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

6

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