Family reunion organization denied charitable exemption

Plain-English summary

A family organization sought exemption under IRC § 501(c)(3) for reunions, holiday gatherings, other family events, and financial support for elderly relatives. Its activities were restricted to family members and funded through dues charged to them. The IRS found that the articles themselves stated a substantial noncharitable purpose of supporting family functions and events, causing the organization to fail both the organizational and operational tests. It also concluded that the gatherings were primarily social and recreational and that payments to elderly relatives served private family interests rather than the public. The IRS denied exemption, and the denial became final when the organization did not protest within 30 days.

Ruling snapshot

• Question: Did an organization funded by family dues and operated for family gatherings and assistance qualify under IRC § 501(c)(3)?
• Outcome: Denied
• Key authorities: IRC §§ 170, 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 69-175; Rev. Rul. 77-366; Better Business Bureau v. United States

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 07/03/2025
IRS Tax Exempt and Government Entities Employer ID number:

Form you must file:
Tax years:

Person to contact:

Release Number: 202539011
Release Date: 9/26/2025
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

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

Date:
04/29/2025
Employer ID number:

Person to contact:

Name:
ID number
Telephone:
Fax
Legend: UIL:
S = Date 501.03-00
T = State 501.03-30
U = City
Dear t:

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 S in the State of T. 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

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• 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 application and your Articles of Incorporation state your purpose and mission is to support family
functions, activities, gatherings, and events. Your specific activities include reunions and holiday gatherings.
Your reunions are held every 2-3 years and other events take place based on a planning consensus among
family members. Your activities are restricted to your family members and are conducted in the U, T area. You
also provide financial support to your elderly family members as needed.

Your funds come from family dues that are charged to each family member. The amount is decided by family
leaders who are elected to their positions. Ten percent of your funds goes to cover the cost of food for events.

Law

IRC Section 501(c)(3) provides for the recognition of exemption from federal income tax of organizations that
are organized and operated exclusively for charitable, religious, or other purposes, provided that no part of the
net earnings 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 does not qualify for exemption.

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 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.

Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized or operated
exclusively for exempt purposes unless it serves a public rather than a private interest. The organization must
establish that it is not organized or operated for the benefit of private interests such as designated individuals,
the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such
private interests.

Treas. Reg. Section 1.501(c)(3)-1(d)(2) defines the term charitable as including the relief of the poor and
distressed or of the underprivileged, and the promotion of social welfare by organizations designed to lessen
neighborhood tensions, to eliminate prejudice and discrimination, or to combat community deterioration. The
term “charitable” also includes lessening of the burdens of government.

In Revenue Ruling 69-175, 1969-1 C.B. 149, a nonprofit organization that was formed by parents of pupils
attending private schedule that provides school bus transportation for its members’ children serves a private
rather than a public interest and does not qualify for exemption under IRC Section 501(c)(3).

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

3

In Rev. Rul. 77-366, 1977-2 C.B. 192, a nonprofit organization that arranged and conducted wintertime ocean
cruises during which activities to further religious and educational purposes were provided in addition to
extensive social and recreational activities was not operated exclusively for exempt purposes and does not
qualify for exemption under IRC Section 501(c)(3).

In Better Business Bureau of Washington D.C. Inc v. United States, 326 U.S. 279 (1945), the Supreme Court of
the United States interpreted the requirement in IRC Section 501(c)(3) that an organization be “operated
exclusively” by indicating that an organization must be exclusively devoted to exempt purposes. The presence
of a single non-exempt purpose, if more than insubstantial in nature, will destroy the exemption regardless of
the number and importance of truly 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.

Application of law

Section 501(c)(3) sets forth two main tests for qualification for exempt status. As stated in Treas. Reg. Section
1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in
IRC Section 501(c)(3). You are not operated exclusively for exempt purposes as required under Treas. Reg.
Section 1.501(c)(3)-1(c)(1) and you have not established that your operations accomplish exclusively charitable
purposes as provided in Treas. Reg. Section 1.501(c)(3)-1(d)(2). You are operating for the substantial non-
exempt purpose of hosting family functions. Additionally, your Articles of Incorporation state that you were
formed to support family functions, activities, gatherings and events. You therefore do not meet the
organizational test or operational test.

You are similar to the organization in Rev. Rul. 77-366 as well as the organizations in St. Louis Science Fiction
Limited v. Commissioner and Minnesota Kingsmen Chess Association Inc v. Commissioner. A substantial part
of your activities are family reunions and holiday gatherings for the benefit, pleasure, and recreation of your
members. As provided for in Better Business Bureau, this substantial, non-exempt purpose precludes exemption
under IRC Section 501(c)(3).

Additionally, you have not established that you are not organized or operated for the benefit of private interests
as stated in Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii). As stated in Rev. Rul. 69-175, when a group of
individuals provide a cooperative service to themselves, they are serving a private interest. By giving some of
your funds to elderly family members for financial support as needed you are serving private interests rather
than public interests.

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

4

Conclusion

Based on the information submitted, you are not organized and operated exclusively for exempt purposes within
the meaning of IRC Section 501(c)(3). Rather, you are organized and operated for the substantial non-exempt
purpose of hosting family reunions and holiday activities as well as providing financial assistance to family
members. Therefore, 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 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:

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

5

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