501(c)(3) exemption denied to a cultural mutual-aid membership organization

Plain-English summary

An organization applied for charitable exemption under Section 501(c)(3), but the IRS denied it. The group is a cultural community organization whose members share a common cultural background. Its main activity is mutual aid: members contribute money that is paid out to support a fellow member's family with funeral or other expenses after a death. It planned to add cultural festivals, workshops, social gatherings, and collaborations, mostly open to members and their families, with some events possibly open to the public. To be exempt, an organization must operate exclusively for public exempt purposes and not primarily for the private interests of its members. The IRS found the group failed the operational test: nearly all its activities benefit its own members rather than the public, and its financial-support function serves members' private interests. Even if some cultural or educational activities exist, they are generally limited to members. The IRS compared it to prior rulings denying exemption to member-serving groups. This is the final adverse determination: no protest was filed within 30 days, so the denial became final, and donors generally cannot deduct contributions under § 170. The document reproduces both the final adverse letter (Letter 4038) and the enclosed proposed adverse letter (Letter 4034).

Ruling snapshot

• Question: Does a cultural membership group that pools money to support members' funeral and hardship expenses qualify for exemption under § 501(c)(3)?
• Outcome: Denied (activities primarily serve members' private interests, not the public; fails the operational test); final adverse determination.
• Key authorities: IRC § 501(c)(3); IRC § 170; Treas. Reg. § 1.501(c)(3)-1(a)(1), (c)(1), and (d)(1)(ii); Rev. Rul. 67-367; Rev. Rul. 69-175; Better Business Bureau of Washington, D.C. v. United States, 326 U.S. 279 (1945).

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 11/12/2025
IRS Tax Exempt and Government Entities Employer ID number:

Form you must file:

Tax years:
Release Number: 202606001 Person to contact:
Release Date: 2/6/2026 Name:
UIL Code: 501.03-00, 501.33-00 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 476325

Department of the Treasury
Internal Revenue Service

Date:
08/28/2025

Employer ID number:

Person to contact:

Name:
ID number:
Telephone:
Fax:
Legend: UIL:
X = Date 501.03-00
Y = State 501.33-00
Z = Number
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 X, in the state of Y. 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 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 IRC 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
e Ensure that your net earnings do not inure in whole or in part to the benefit of private
shareholders or individuals
e Not further non-exempt purposes (such as purposes that benefit private interests) more than
insubstantially
e Not be organized or operated for the primary purpose of conducting a trade or business that is not

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

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 state that you promote and develop members of your community in social and cultural values in the
United States of America.

During review of your application, detailed information was requested supplemental to the above attestations.

You were founded to support your community's distressed families after the death of a loved one. You collect
money from your members to financially support the affected member for funeral or other expenses. You have
Z members who are primarily individuals who share a common cultural background.

You plan to add the following activities:

e Cultural festivals and events (e.g., traditional music, dance performances, and
exhibitions).

e Workshops and educational programs that will foster cultural awareness and
engagement.

e Social gatherings include community dinners, networking events, and recreational
outings for our members.

¢ Collaborations with other cultural organizations to provide additional programs, such as
guest speakers or collaborative projects.

These activities will be open to your members and their families. The events may be open to the broader public
to promote awareness of cultural heritage.

You have not maintained formal financial records or reports. You are not engaged in any other financial
activities outside of collecting contributions and distributing support to distressed members as needed.

Law

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and
operated exclusively for religious, charitable, educational 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.

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 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.

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.

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

3

Revenue Ruling 67-367, 1967-2 C.B. 188, describes an organization whose sole activity was the operation of a
"scholarship plan" for making payments to pre-selected, specifically named individuals. The organization did not
qualify for exemption under IRC Section 501(c)(3) because it was serving the private interests of its subscribers
rather than public or charitable interests.

Rev. Rul. 69-175, 1969-1 C.B. 149, describes an organization which was formed by parents of pupils attending
a private school. The organization provided bus transportation to and from the school for those children whose
parents belong to the organization. The organization did not qualify for exemption under IRC Section 501(c)(3)
because it served a private rather than public interest.

In Better Business Bureau of Washington, D.C. v. United States, 326 U.S. 279 (1945), the Supreme Court 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.

Application of law

IRC Section 501(c)(3) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests for an organization to
be recognized as exempt. An organization must be both organized and operated exclusively for purposes described
in Section 501(c)(3). Based on the information provided, you fail the operational test.

You are not operating exclusively for exempt purposes as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1)
because you were formed to primarily benefit your members. Your activities are limited to your members, with
limited events being open to the broader public. Nearly all of your activities are operated for the benefit of your
members, serving the private interests of your members as opposed to the interests of the public at large as
described in Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii).

Like the organizations described in Rev. Rul. 67-367 and Rev. Rul. 69-175, you were formed to provide benefits
to your members, as opposed to the general public. While you may conduct some educational or charitable
activities, these activities are generally limited to your members. By limiting your activities to your members you
are primarily serving the private interests of your members rather than the public interest. The presence of this
substantial non-exempt purpose, as described in Better Business Bureau, precludes exemption under Section
501(c)(3).

Conclusion

You are not operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(3). You
operate to serve the private interests of your members and are operating for substantial nonexempt purposes.
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

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

4

• 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.

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.

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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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