501(c)(3) denied, an open-source blockchain software project fails the organizational and operational tests and serves private interests

Plain-English summary

An organization formed to develop and promote open-source software for a decentralized content-sharing blockchain applied for 501(c)(3) status on Form 1023-EZ. The IRS issued a proposed adverse determination and, after no protest was filed within 30 days, made the denial final. The IRS found the organization failed the organizational test because its articles of incorporation did not limit its purposes to exempt purposes. It also failed the operational test on three grounds: its educational activities were insubstantial next to the work of maintaining and developing the blockchain code; it ran substantial recreational forums (gaming, music, sports, video sharing); and it served the private interests of the blockchain network and its content publishers, who charge fees and monetize content. Citing Better Business Bureau, Minnesota Kingsmen Chess, St. Louis Science Fiction, and American Campaign Academy, the IRS concluded that a substantial non-exempt purpose and private benefit defeated exemption. Contributions to the organization are not deductible under Section 170.

Ruling snapshot

• Question: Does an organization developing and promoting open-source blockchain software qualify for exemption under IRC Section 501(c)(3)?
• Outcome: denied
• Key authorities: IRC §§ 501(c)(3), 170; Treas. Reg. §§ 1.501(c)(3)-1(a)(1), (b)(1)(i), (c)(1), (d)(1)(ii), (d)(3); Better Business Bureau v. United States, 326 U.S. 279 (1945); American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989)

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

Date:
08/12/2025

Employer ID number:

Form you must file:

Tax years:

Release Number: 202552032
Release Date: 12/26/2025
UIL Code: 501.03-05, 501.03-30, 501.33-00, 501.35-00

Person to contact:
Name:
ID number:
Telephone:

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:
06/27/2025

Employer ID number:

Person to contact:

Name:
ID number:
Telephone
Fax:

Legend:                 UIL:
S = Date                501.03-05
T = State               501.03-30
U = Date                501.33-00
V = Name                501.35-00

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)(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 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).

We provided you with a copy of your organizing document, Articles of Incorporation, that was downloaded
from your state's website. Your Articles of Incorporation indicate you were incorporated on U in T. Your
articles state that you are formed to provide development of open source software related to the V blockchain.
They further state that your assets, upon dissolution, will be donated to a charity to be chosen during your
dissolution.

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

2

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

• 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

You attest on Form 1023-EZ that you are formed to organize, educate and develop the open-source technology
surrounding your organization's content sharing technology. Your activities include fundraising to support
infrastructure and development of your organization, community growth programs, and education of your
organization's ecosystem. You describe your activities as computer science.

During our review of your Form 1023-EZ we requested detailed information to supplement the above
attestations. You state your mission is to support the development and adoption of your organization's open-
source software protocol and ecosystem. Your focus is on free speech, transparency, and user control over
digital content.

You help drive and maintain projects aligned with your organization's mission and further the V ecosystem.
You also help maintain and develop the code on your managed repositories and maintain your websites.

V describes itself as a digital marketplace controlled by the market's participants. V allows users to publish
content, and these publishers can then choose to charge a fee to other users that wish to view that content. V
also maintains a program to reward users in exchange for contributing bandwidth, disk space, or processing
power to the network. No party other than the publisher of the content can unilaterally remove or block content
on the V network. V further states that the interactions on V are extremely similar to those that happen on
hundreds of other sites, similar to YouTube, Amazon, and Netflix. The key difference is that V happens to be a
network that is completely decentralized. Publishers on V control the prices they charge to view their content
which can allow them to earn more per view than if they used these similar sites. V also does not take a
commission or fee from the earnings of the publisher, other than the publishing cost.

You fundraise through crowd funding to pay expenses and raise capital required to develop V source code and
projects. You provide grants to developers and creators that help maintain and contribute to the growth and
development of V.

You maintain online forums and support channels to assist users with the V protocol, technical issues, and
questions. These support channels revolve around gaming, music, sports, blockchain data/statistics, and a video
sharing app on the V network. You will also act as a hub for people interested in helping forward the V protocol

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

3

and help direct interested parties where their work will be most effective, for example, helping maintain the
code base, coordinating a public appearance, or virtual event gatherings. Your event gatherings help to bring
awareness of U to local communities.

You create educational materials to teach individuals and organizations about sharing decentralized content and
the benefits of the V protocol. You will host documentation regarding the V project while making it as publicly
accessible as possible. Your community members will maintain their own infrastructure to further the growth of
the V network by creating and maintaining documentation to support it.

You run both hardware and software stack which includes web portals for public access to the V network,
servers that contribute to the V blockchain, and snapshots of the V blockchain to facilitate public replication of
the V network. You arrange and run mutually beneficial projects with other non-profit and charitable
organizations aligning with and benefiting you. You plan to help host available content through the public
domain.

Currently all of your activities are conducted online. In the future, you plan to conduct in-person events. You do
not charge any membership fees to participate in any activities, but you take donations to support your mission
and your projects. Your board members are not compensated for any of their activities. Your time spent on
activities is flexible, designated as needed, and member specific. You will spend most of your financial
resources on maintaining and contributing to the V code. Your smaller financial parts will be designated to
growing the publicly accessible infrastructure hosted by you and your specific educational content creation.

You state your revenues will be generated from crowd-funding sources for all years you have reported. Your
expenses include registered agent services, mail forwarding services, webhosting and email services, and annual
filing services.

Law

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.

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 Section 501(c)(3). If an organization fails to meet either the organizational test or
operational test, it is not exempt.

Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or
more exempt purposes only if its articles of organization:

(a) Limit the purposes of such organization to one or more exempt purposes; and
(b) Do not expressly empower the organization engage, otherwise than as an insubstantial part of its
activities, in activities that in themselves are not in furtherance of one or more exempt purposes.

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.

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

4

Treas. Reg. Section 1.501(c)(3)-1(d)(3) defines "educational" as instruction or training of the individual for the
purpose of improving or developing his capabilities and/or the instruction of the public on subjects useful to the
individual and beneficial to the community.

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. To meet this
requirement, it is necessary for an organization to establish that it is not organized or operated for the benefit of
private interests.

Revenue Ruling 77-111, 1977-1 C.B. 144, in Situation 1, held that an organization formed to increase business
patronage in a deteriorated area by providing information on the area's shopping opportunities, local
transportation, and accommodations is not operated exclusively for charitable purposes and does not qualify for
exemption under IRC Section 501(c)(3). The overall thrust is to promote business rather than to accomplish
Section 501(c)(3) objectives exclusively.

In Better Business Bureau of Washington D.C., Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court
of the United States held that the presence of a single non-exempt purpose, if substantial in nature, will destroy
a claim for exemption regardless of the number or 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 the tax-exempt status under IRC Section 501(c)(3). Although many
of the organization's functions at its annual conventions were educational, its overall agenda was not
exclusively educational. A substantial portion of convention affairs were social and recreational in nature.

In American Campaign Academy v. Commissioner, 92 T.C. 1053 (1989), the Tax Court held that an
organization conducted its activities to serve the private interests of partisan entities and candidates, and
therefore did not qualify for exemption under IRC Section 501(c)(3). The organization's primary activity was to
operate a school (the "Academy") to train individuals for careers as political campaign professionals. The
academy was an outgrowth of program separated by a partisan congressional committee to train candidates and
subsequently place campaign professionals in partisan campaigns. The committee contributed physical assets to
the academy, faculty members, directors, and was exclusively funded by a partisan trust.

Application of law

IRC Section 501(c)(3) sets forth two main tests for qualification for exempt status. As stated in Treas. Reg.
1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in
Section 501(c)(3).

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

Organizational Test

Your Articles of Incorporation do not contain an adequate purpose clause that limits your purposes to one or
more exempt purposes under IRC Section 501(c)(3). As a result, you have not satisfied the organizational test
described in Treas. Reg. Sections 1.501(c)(3)-1(b)(1)(i).

Operational Test
You do not satisfy the operational test because you are not operated exclusively for educational purposes, are
operated for substantially non-exempt purposes, and are serving private interests.

Not Exclusively Advancing Education
While you have presented that you offer educational materials to teach individuals and organizations about the
V protocol and the V project as described in Treas. Reg. Section 1.501(c)(3)-1(d)(3), you have also presented
that the majority of your resources are spent on maintaining and contributing to the V code, and only a small
part of your resources will be designated to creating V specific educational content. Because these educational
activities are insubstantial compared to your non-exempt V protocol support and development activities, you are
not operated exclusively for exempt purposes as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1).

Conducting Substantial Non-Exempt Activities

The majority of your resources are dedicated to maintaining and contributing to the V code. You have not
described how supporting the development and adoption of the V protocol furthers Section 501(c)(3) purposes.
You also maintain online recreational forums and support channels revolving around gaming, music, sports,
blockchain data/statistics, and a video sharing app on the V network. Similar to the organizations described in
Minnesota Kingsmen and St. Louis you are not operated exclusively for exempt purposes because you operate
for substantial recreational purposes. These substantial non-exempt purpose, as described in Better Business
Bureau which precludes you from exemption under Section 501(c)(3).

Serving Private Interests
You are similar to the organizations described in American Campaign Academy, and Rev. Rul. 77-111,
situation 1. You maintain and contribute to the V code. Publishers pay a fee to V to publish their content and
make it accessible to other users. These publishers can then charge a fee to users that access their content. By
maintaining and contributing to this code, you are serving the private interests of V. By supporting the V project
which is used by its publishers to post and monetize content, you are also serving the private economic interests
of these publishers rather than public interest as described in Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii). These
economic benefits are not occasional, nor an incidental consequence of exempt activities.

Conclusion

Based on the information you have submitted, you are not organized and operated exclusively for one or more
purposes as described in IRC Section 501(c)(3). You are not operated exclusively for educational purposes, are
operated for substantially non-exempt purposes, and are serving private interests. Therefore, you do not qualify
for 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.

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

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:

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.

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

7

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