501(c)(3) exemption denied to a family-reunion and family-scholarship organization

Plain-English summary

An organization applied for charitable exemption under Section 501(c)(3), but the IRS denied it. The group was formed to plan and run reunions for one family, providing the location, transportation, meals, and lectures, held every few years for family members and their guests, funded by registration fees. It also gave scholarships to family high-school graduates accepted to college, and split leftover money equally among eligible family members. To be exempt, an organization must operate exclusively for public exempt purposes and must not be run for the benefit of designated individuals or the people who created it. The IRS found the group failed the operational test: substantially all of its activities served the private interests of one family rather than the public, and the scholarships were open only to that family. The IRS compared it to prior authorities denying exemption to family or member-serving groups, including a case denying exemption to a scholarship foundation limited to descendants of a particular immigrant group. This is the final adverse determination: the applicant did not protest 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 an organization that runs reunions and scholarships limited to one family qualify for exemption under § 501(c)(3)?
• Outcome: Denied (fails the operational test; serves private family interests, not the public); 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); St. Louis Science Fiction, Ltd. v. Commissioner, 49 TCM 1126 (1985); Educational Assistance Foundation for Descendants of Hungarian Immigrants in Performing Arts, Inc. v. United States, 111 F. Supp. 3d 34 (D.D.C. 2015).

Full text (IRS public release)

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

IRS

Form you must file:

Tax years:
Release Number: 202606006
Release Date: 2/6/2026 Person to contact:
UIL Code: 501.03-05, 501.03-08, 501.03-22, 501.03-31 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 476328

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 476328

Department of the Treasury
Internal Revenue Service

Date:
09/16/2025

Employer ID number:

Person to contact:

Name:
ID number:
Telephone:
Fax:
Legend: UIL:
B = Date 501.03-05
C = State 501.03-08
D = Name 501.03-22
E = Number 501.03-31

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 B, in the state of C. 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:

e 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

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

2

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 related
to your exempt purpose(s)

e 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)

e Not provide commercial-type insurance as a substantial part of your activities

During review of your Form 1023-EZ, detailed information was requested supplemental to the above
attestations, which you provided.

You state that you plan, organize, coordinate, and execute family reunions for the D family. You provide the
location, transportation, and meals related to the reunion, and also hold lectures during the reunion. Your family
reunions are held every E years for all D family members and guests. You charge registration fees to cover the
projected event cost.

You also provide scholarships to all high school graduates that have been accepted to a college or university the
year of the reunion. Any money left over from fundraisers, donations, and registration fees will be divided
equally among the family members who meet this eligibility criteria.

Law

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and
operated exclusively for religious, charitable 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, in order 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) states that an organization is not operated exclusively for one or
more exempt purposes unless it serves a public rather than a private interest. It must not be operated for the
benefit of designated individuals or the persons who created it.

Revenue Ruling 67-367, 1967-2 C.B. 188, describes a nonprofit 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 from federal income tax under IRC Section 501(c)(3) because it was
serving private rather than public or charitable interests.

Rev. Rul. 69-175, 1969-1 C.B. 149 describes an organization formed by parents of pupils attending a private

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

3

school, in order to provide school bus transportation for its members' children. When a group of individuals
associate to provide a cooperative service for themselves, they are serving private interests. By providing this
transportation the organization enabled the parents to fulfill their individual responsibility of transporting
their children to school. It was determined that this organization serves a private rather than a public interest
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, 66 S. Ct. 112, 90 L. Ed. 67,
1945 C.B. 375 (1945), the Supreme Court stated that the presence of a single nonexempt purpose, if substantial

in nature, will preclude exemption under IRC Section 501(c)(3), regardless of the number or importance of
statutorily exempt purposes. Thus, the operational test standard prohibiting a substantial non-exempt purpose is
broad enough to include inurement, private benefit, and operations that further nonprofit goals outside of the
scope of IRC Section 501(c)(3).

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 in nature.

In Educational Assistance Foundation for Descendants of Hungarian Immigrants in Performing Arts, Inc. v.
United States, 111 F. Supp. 3d 34 (D.D.C. 2015), the court held that a foundation created to provide

scholarships to descendants of Hungarian immigrants operated in a manner that inured to the benefit of one
family, precluding it from having tax-exempt status.

Application of law

IRC Section 501(c)(3) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests to qualify for exempt
status. An organization must be both organized and operated exclusively for purposes described in Section
501(c)(3). You have failed to meet the operational test, as explained below.

You are not described in Treas. Reg. Section 1.501(c)(3)-1(c)(1) because more than an insubstantial part of your
activities are devoted to the non-exempt private purpose of operating family reunions and a scholarship program
exclusively for the D family. This program is not open to the general public, which causes your program to
further a substantial non-exempt private purpose.

You are not operated exclusively for exempt purposes under Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii)
because, like the organization described in Rev. Rul. 69-175, substantially all your activities further the private
interests of the D family, and any benefit to the general public is incidental.

You are like the organization described in Rev. Rul. 67-367 because you operate a scholarship program that
specifically benefits the D family. Eligibility is only open to members of the D family, which serves the private
interests of the D family rather than public charitable and educational interests.

You are like the organization described in Educational Assistance Foundation because you were formed by the
D family primarily to organize family reunions and a scholarship program for the benefit of the D family. Your
activities primarily benefit the D family and not the general public, which precludes you from exemption under
IRC Section 501(c)(3).

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

You are like the organization described St. Louis Science Fiction Limited. While portions of your activities are
in part educational, more than an insubstantial amount of your activities are directed towards organizing family
reunions for the D family, direct bereavement benefits to your members and social events. Similar to where a
substantial portion of convention affairs were social and recreational in nature in St Louis, the family reunions
that you organize for the D family serve substantial non-exempt social purposes and will preclude exemption
under IRC Section 501(c)(3), as described in Better Business Bureau.

Conclusion

You fail the operational test because you are not operated exclusively for exempt purposes within the meaning
of Section 501(c)(3). You operate to serve the private interests of the D family as opposed to the interests of the
public. Accordingly, you do not qualify for exemption under IRC 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)).

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

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