A recreational sports club does not qualify as a 501(c)(6) business league

Plain-English summary

A nonprofit mutual-benefit corporation applied to be recognized as a tax-exempt business league under Section 501(c)(6). It was organized to promote recreational indoor and racquet sports (table tennis, badminton, tennis) through leagues, tournaments, clinics, and social events, with members paying monthly dues. The IRS proposed to deny exemption. A 501(c)(6) business league must be an association of people with a common business interest whose activities improve business conditions in one or more lines of business, like a chamber of commerce or board of trade. Here the members' only shared interest was playing sports, not advancing a trade or industry, so the group did not meet the business-league test. This is a proposed adverse determination: the organization had 30 days to protest, and if it did not respond, a final adverse letter would follow. The letter also notes that failing to use the IRS administrative process forecloses a later declaratory-judgment suit under Section 7428(b)(2).

Ruling snapshot

• Question: Does a club organized to promote recreational and racquet sports among its members qualify for exemption as a business league under IRC § 501(c)(6)?
• Outcome: Denied (proposed adverse determination)
• Key authorities: IRC § 501(c)(6); Treas. Reg. § 1.501(c)(6)-1; Rev. Ruls. 58-502, 59-391, 70-244, 73-411; Associated Master Barbers & Beauticians of America, Inc. v. Commissioner, 69 T.C. 53 (1977); IRC § 7428(b)(2)

Full text (IRS public release)

            Department of the Treasury
            Internal Revenue Service



                                                                                 Date:
                                                                                6/11/2025
                                                                                 Employer ID number:


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




Legend:                                                                        UIL:
B = State                                                                      501.06-00
C = Date                                                                       501.06-01

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 a Non-Profit Mutual Benefit corporation. Your Articles of
Incorporation state that your specific purpose is to “provide recreational activities, primarily indoor activities,
like tabletop games.” Your Articles also state that you will organize tournaments throughout the year, to help
people in the region to have recreational indoor sports activities.

You are seeking exemption under IRC Section 501(c)(6). You describe the common business interest of your
members as the promotion of sports, community engagement, youth development, and volunteerism and
philanthropy. You said your members are united by a shared passion for promoting sports and physical activity
within the community. They believe in the positive impact of sports participation on individual health, youth
development, and community cohesion. Members are committed to fostering community engagement through
sports programs and events.

You said your members believe that sports have the power to bring people together, bridge divides, and
strengthen social connections within the community. Members prioritize youth development and recognize the
importance of providing young people with opportunities for skill-building, leadership development, and
personal growth through sports participation. Members are actively engaged in volunteerism and philanthropy,
dedicating their time, resources, and expertise to support your mission and programs.



                                                                                          Letter 4034 (Rev. 01-2021)
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You provide a wide range of sports programs and activities tailored to the interests and needs of your members.
These include youth leagues, adult recreational leagues, clinics, camps, tournaments, and special events.

You also provide access to health and wellness resources and information to support members in achieving their
fitness and wellness goals. This may include workshops, seminars, educational materials, and referrals to health
professionals.

You host social events and networking opportunities for members to connect with fellow sports enthusiasts,
build relationships, and share experiences. You also advocate for the interests of your members within the
broader sports community, including advocating for equitable access to sports facilities, funding opportunities,
and policy initiatives that support sports participation and community engagement.

When we asked for more information about your activities, you said that you are 100% sports based. You are
dedicated to promoting racquet sports within the community, including long tennis, table tennis, and badminton.
You aim to increase participation and appreciation for these sports through a variety of programs and services.
Your activities include organizing and hosting tournaments for players of all ages and skills levels and
maintaining and improving racquet sports facilities. You offer equipment rentals services as well. You also
stated that your exempt purpose is to promote physical health, wellness, and community engagement through
sports and recreational activities. You mentioned that the sports programs you offer are central to achieving this
purpose.

Your members have friendly table tennis and badminton games throughout the year. Once a year you have
competitive tournaments for table tennis and badminton, which are open to both members and non-members.

Members pay monthly dues. Anyone can become a member if they pay the dues. Your expenses are for rent and
the sports activities.

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

Treasury Regulation Section 1.501(c)(6)-1 provides that a business league is an association of persons having
some common business interest, the purpose of which is to promote such common interest and not to engage in
a regular business of a kind ordinarily carried on for profit. It is an organization of the same general class as a
chamber of commerce or board of trade. Thus, its activities should be 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.

Revenue Ruling 58-502, 1958-2 C.B. 271, concerns an organization that was found to be exempt under IRC
Section 501(c)(6). The organization was formed for the purpose of promoting and conserving the best interests
and true spirit of a game as embodied in its traditions. The organization's membership was composed of
regularly organized clubs throughout the United States. The organization was empowered to prescribe and
enforce the rules and tests governing amateur standing, the rules for the playing of the game, and to hold each
year championship tournaments and other such events. The organization acted as the authoritative national body
in the arbitration of controversies and in the final determination of all questions relating to the game in the
country. In addition to the membership dues it receives, the organization's income was derived from the



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championship tournaments it sponsored, the grant of radio and television broadcasting rights, and from the sale
of booklets containing the rules of the game.

In Rev. Rul. 59-391, 1959-2 C.B. 151, the organization was composed of individuals, firms, trades, businesses,
occupations, and professions. This organization was created for the purpose of exchanging information on
business prospects and has no common business interest other than a desire to increase sale of members. It was
held that such organization is not entitled to exemption from federal income tax as a business league under IRC
Section 501(c)(6).

In Rev. Rul. 70-244, 1970-1 C.B. 132, the organization's membership consisted of business and professional
persons in the community. Its articles of incorporation stated it was formed to bring together members and their
guests to exchange ideas for improving business conditions within the community. It did not have any specific
program directed to the improvement of business conditions in the community. Since this organization had no
program designed to improve business conditions of one or more lines of business, it was held that the
organization is not exempt under IRC Section 501(c)(6).

In Rev. Rul. 73-411, 1973-2, C.B. 180, the history of IRC Section 501(c)(6) was described while discussing the
exempt status of a shopping center. In the case of a chamber of commerce or similar organization, the common
business interest is usually the general economic welfare of a community. An organization seeking exemption
as a chamber of commerce must be one whose efforts are directed at promoting the common economic interests
of all commercial enterprises in a given trade community. The ruling also stresses that membership in a Section
501(c)(6) organization is voluntary and open generally to all businesses and professional persons in the
community.

In Associated Master Barbers & Beauticians of America, Inc. v. Commissioner, 69 T.C. 53 (1977), the court
stated one common formulation for the requirements under IRC Section 501(c)(6) is as follows:
        (1) It must be an association of persons having a common business interest,
        (2) Its purpose must be to promote that common business interest,
        (3) It must not be organized for profit,
        (4) It should not be engaged in a regular business of a kind ordinarily conducted for a profit,
        (5) Its activities should be directed toward the improvement of business conditions of one or more lines
        of business as opposed to the performance of particular services for individual persons, and
        (6) Its net earnings, if any, must not inure to the benefit of any private shareholder or individual.

If an organization fails to meet any one of these standards, it cannot be recognized as exempt or maintain its
exemption under IRC Section 501(c)(6).

Application of law
You do not qualify for exemption under IRC Section 501(c)(6) because you are not operating as a business
league. Your activities are not aimed at the improvement of business conditions of one or more lines of
business, or as a chamber of commerce or board of trade, as required by Treas. Reg. Section 1.501(c)(6)-1.
Rather, you are formed to promote the play of sports among your members.

You are distinguished from Rev. Rul. 58-502 because you don’t prescribe or enforce the rules or tests governing
amateur standing for a particular sport. You don’t act as an authoritative national body in the arbitration of
controversies relating a particular game. Accordingly, you aren’t furthering IRC Section 501(c)(6) purposes.



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Like the organization described in Rev. Rul. 59-391, you are not structured along any industry or business line.
Your members meet to play racquet sports; not to promote a particular industry or line of business.

You are similar to the organization described in Rev. Rul. 70-244 because your primary activities are centered
on the promotion of sports and community engagement, with no common business motive. You haven’t
described any programs designed to improve business conditions of one or more lines of business. None of your
activities further IRC Section 501(c)(6) purposes.

As explained in Rev. Rul. 73-411, a chamber of commerce's common business interest is the economic welfare
of the community. You do not bear resemblance to a chamber of commerce or a business league. Your
membership joins together to play racket sports, which isn’t in furtherance of an IRC Section 501(c)(6) purpose.

In Associated Master Barbers & Beauticians of America, Inc. the court provided a formulation for the
requirements under IRC Section 501(c)(6). You fail to meet the requirements of Section 501(c)(6) as outlined in
this case. Specifically, your primary purpose is not promoting a common business interest, and your activities
aren’t directed toward the improvement of business conditions of one or more lines of business.

Conclusion
Your members have no common business interest other than the mutual desire to play sports. Furthermore, your
activities are neither primarily directed toward the improvement of business conditions of one or more lines of
business, nor for the common economic interests of all the businesses in the community like a chamber of
commerce. Therefore, you do not meet the requirements for exemption under IRC 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
    • 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


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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,




                                                             Stephen A. Martin
                                                             Director, Exempt Organizations
                                                             Rulings and Agreements




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