IRS denies charity status to a private road association

Plain-English summary

A membership organization maintained dirt roads in a mountain community by
collecting annual dues from local property owners. Its volunteers repaired
roads, dug drainage ditches, spread road base, and repaired culverts, with
related expenses reimbursed from the dues fund. The IRS found that the work
primarily benefited the association's restricted group of property-owning
members in a limited geographic area. Any benefit to the general public was
incidental. Because serving those private interests was a substantial
nonexempt purpose, the IRS denied exemption under section 501(c)(3).

Ruling snapshot

• Question: Does a property-owner association qualify under section 501(c)(3) when it uses member dues to maintain roads serving their mountain community?
• Outcome: Denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1(a)(1), (c)(1), and (d)(1)(ii); Rev. Rul. 69-175; Rev. Rul. 75-286

Full text (IRS public release)

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

Date:
04/27/2026

Employer ID number:
[redacted]

Form you must file:
[redacted]

Person to contact:
[redacted]

Release Number: 202630013
Release Date: 7/24/26
UIL Code: 501.03-00, 501.33-00

Dear [redacted]:

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
Letter 4038

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

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

Date:
02/26/2026

Employer ID number:
[redacted]

Person to contact:
Name: [redacted]
ID number: [redacted]
Telephone: [redacted]
Fax: [redacted]

Legend:
B = State
C = Date
D = Location
E = City, State
x dollars = dollar amount

UIL:
501.03-00
501.33-00

Dear [redacted]:

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 were incorporated in the State of B on 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 Section 501(c)(3).

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

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

2

• 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 more than expenditure limitations
outlined in Section 501(h)
• Not provide commercial-type insurance as a substantial part of your activities

Your application indicates you are a membership organization formed to maintain dirt roads in a mountain
community.

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

You provide basic maintenance and repairs to keep the dirt roads in a mountain area known as D located in E
safe and passable for property owners. Specific activities include maintaining dirt roads, digging ditches for
water draining, hauling and spreading road base, and repairing culverts for water drainage.

Your membership includes D property owners who currently pay yearly dues of x dollars. The dues are placed
into a fund for road work. You have a volunteer committee who makes most of the decisions about road
maintenance and repairs. Your committee and other property owners volunteer their time to complete most of
the road work and get reimbursed from the dues fund for any related expenses.

Law

IRC Section 501(c)(3) provides for the recognition of exemption from federal income tax for organizations
organized and operated exclusively for religious, charitable, educational, or other purposes as specified in the
statute, provided no part of the net earnings inures to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) provides 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 purposes
specified in such section. If an organization fails to meet either the organizational or operational test, it is not
exempt.

Treas. Reg. Section 1.501(c)(3)-1(c)(1) provides that an organization will be regarded as operating exclusively
for exempt purposes if it engages primarily in activities that accomplish 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 one or more exempt purposes unless it serves a public rather than a private interest. Thus, 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.

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

3

Revenue Ruling 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 belonged to the organization. The organization did not qualify for exemption under IRC
Section 501(c)(3) because it served a private rather than a public interest.

Rev. Rul. 75-286, 1975-2 C.B. 210, held that a nonprofit organization with membership limited to the residents
and business operators within a city block and formed to preserve and beautify the public areas in the block,
thereby benefitting the community as well as enhancing members' property rights, did not qualify for exemption
under IRC Section 501(c)(3). The restricted nature of its membership and the limited area in which its
improvements were made indicated it served the private interests of its members and not the public interest.

In Benedict Ginsberg and Adele W. Ginsberg v. Commissioner, 46 T.C. 47 (1966), exemption was retroactively
revoked from a corporation organized to conduct the dredging of certain waterways. It was held that the
corporation was organized and operated primarily for the benefit of those persons owning property adjacent to
the waterways dredged rather than for public or charitable 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 you provided in your application and supporting
documentation, you do not meet the operational test.

You do not meet the operational test under IRC Section 501(c)(3) because you are not operating exclusively for
exempt purposes as required under Treas. Reg. Section 1.501(c)(3)-1(c)(1). You provide private benefits to your
members. Your members are property owners in D who are assessed fees to maintain dirt roads in D. This does
not serve any exempt purposes under IRC Section 501(c)(3) and is substantial in nature.

You are like the organization in Rev. Rul. 69-175 in that you were formed to provide benefits to your members,
the property owners at D, by collecting dues to reimburse for maintenance work and repairs to roads.
Maintaining roads for property owners who will later have to be reimbursed for any expenses incurred serves
private interests. Therefore, your activities primarily serve the private interests of your members, which
precludes you from exemption under Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii).

You are like the organizations described in Rev. Rul. 75-286 and Benedict Ginsberg and Adele W. Ginsberg
because your activities serve private interests rather than public interests. Similar to these organizations, you
also have a restricted membership and limited area in which you make improvements which primarily benefit
people owning property in D. Reimbursing property owners for providing road maintenance in D primarily
serves the private interests of your members. Like these organizations, any benefits from your activities are
incidental to the public, precluding exemption under IRC Section 501(c)(3).

Conclusion

Based on the facts presented, you are not operated exclusively for exempt purposes as set forth in IRC Section
501(c)(3). You are formed for the private benefit of your members, which is a substantial non-exempt purpose.
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.

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

4

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:

Internal Revenue Service
EO Determinations Quality Assurance
Mail Stop 6403
PO Box 2508
Cincinnati, OH 45201

Street address for delivery service:

Internal Revenue Service
EO Determinations Quality Assurance
550 Main Street, Mail Stop 6403
Cincinnati, OH 45202

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.

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

5

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