IRS revokes a member death-benefit association's 501(c)(4) status

Plain-English summary

A membership association collected dues and additional amounts when a member
died, then paid the collected funds to the deceased member's family after
deducting certain costs and retaining a percentage. It also held member events,
but the audit described funeral assistance as its main activity. Section
501(c)(4) requires an organization to operate primarily for civic betterment or
the common good, not for the direct economic benefit of its members. The IRS
concluded that the association functioned as a mutual-benefit organization and
that any benefit to the wider community was minor and incidental. It therefore
revoked the association's tax exemption and said the organization generally
must file federal income tax returns.

Ruling snapshot

• Question: Does a membership association primarily providing death benefits to members' families continue to qualify under section 501(c)(4)?
• Outcome: Revocation
• Key authorities: IRC §§ 501(a), 501(c)(4), 6033, and 7428; Treas. Reg. § 1.501(c)(4)-1(a)(2)(i), (a)(2)(ii), and (b); Rev. Rul. 66-59; Rev. Rul. 75-199; Rev. Rul. 81-58

Full text (IRS public release)

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

[redacted]

[redacted]

Date:
January 15, 2026

Taxpayer ID number (last 4 digits):
[redacted]

Form:
[redacted]

Tax periods ended:
[redacted]

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

Release Number: 202630019
Release Date: 7/24/26
UIL Code: 501.03-00

Last day to file petition with United States
Tax Court:
April 15, 2026

CERTIFIED MAIL - Return Receipt Requested

Dear [redacted]:

Why we are sending you this letter

This is a 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)(4), for the tax
periods above. Your determination letter dated [redacted], is revoked.

Our adverse determination as to your exempt status was made for the following reasons: Your organization is
organized and operated to serve the private benefit of your members and any benefit to the community is
incidental. Therefore, because your organization does not primarily operate for the promotion of civic
betterment or social welfare, it does not meet exemption under Internal Revenue Code Section 501(c)(4).

Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax returns
and pay tax, where applicable. For further instructions, forms and information please visit IRS.gov.

What you must do if you disagree with this determination

If you want to contest our final determination, you have 90 days from the date this determination letter was
mailed to you to file a petition or complaint in one of the three federal courts listed below.

How to file your action for declaratory judgment

If you decide to contest this determination, you can file an action for declaratory judgment under the provisions
of Section 7428 of the Code in either:
• The United States Tax Court,
• The United States Court of Federal Claims, or
• The United States District Court for the District of Columbia

You must file a petition or complaint in one of these three courts within 90 days from the date we mailed this
determination letter to you. You can download a fillable petition or complaint form and get information about
filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one
of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee
with the petition or complaint.

You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available
on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account to
do so. You may also file your petition at the address below:

Letter 6337 (Rev. 3-2024)
Catalog Number 74808E

United States Tax Court
400 Second Street, NW
Washington, DC 20217
ustaxcourt.gov

The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia contain
instructions about how to file your completed complaint electronically. You may also file your complaint at one of
the addresses below:

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20439
uscfc.uscourts.gov

US District Court for the District of Columbia
333 Constitution Avenue, NW
Washington, DC 20001
dcd.uscourts.gov

Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for
declaratory judgment under IRC Section 7428.

The IRS office whose phone number appears at the top of the notice can best address and access your tax
information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate
Service (TAS) if you can't resolve your tax problem with the IRS or if you believe an IRS procedure just isn't
working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects
taxpayer rights. Visit TaxpayerAdvocate.IRS.gov/contact-us or call 877-777-4778 (TTY/TDD 800-829-4059)
to find the location and phone number of your local advocate. Learn more about TAS and your rights under the
Taxpayer Bill of Rights at TaxpayerAdvocate.IRS.gov. Do not send your Tax Court petition to TAS. Use the
Tax Court address provided earlier in the letter. Contacting TAS does not extend the time to file a petition.

Where you can find more information

Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for
more comprehensive information.

Find tax forms or publications by visiting IRS.gov/forms or calling 800-TAX-FORM (800-829-3676). If you
have questions, you can call the person shown at the top of this letter.

If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best
time to call, and a copy of this letter.

You may fax your documents to the fax number shown above, using either a fax machine or online fax service.
Protect yourself when sending digital data by understanding the fax service's privacy and security policies.

Letter 6337 (Rev. 3-2024)
Catalog Number 74808E

Keep the original letter for your records.

Sincerely,

[redacted]

Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

cc: [redacted]

Letter 6337 (Rev. 3-2024)
Catalog Number 74808E

Tax Exempt and Government Entities

Department of the Treasury
Internal Revenue Service
Exempt Organizations Examinations

[redacted]

[redacted]

Date:
07/08/2025

Taxpayer ID number:
[redacted]

Form:
[redacted]

Tax periods ended:
[redacted]

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

Manager's contact information:
Name: [redacted]
ID number: [redacted]
Telephone: [redacted]

Response due date:
08/07/2025

CERTIFIED MAIL - Return Receipt Requested

Dear [redacted]:

Why you're receiving this letter

We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke
your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(4).

If you agree

If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the
contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an
organization described in IRC Section 501(c)(4) for the periods above.

If you disagree

1. Request a meeting or telephone conference with the manager shown at the top of this letter.

2. Send any information you want us to consider.

3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional
information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after
the meeting or after we consider the information.

The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes
informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of
limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case.
For your protest to be valid, it must contain certain specific information, including a statement of the
facts, applicable law, and arguments in support of your position. For specific information needed for a
valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't
apply now that we've issued this letter.

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities)
if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the
IRS.

Letter 3618 (Rev. 3-2024)
Catalog Number 34809F

If you're considering requesting technical advice, contact the person shown at the top of this letter. If you
disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as
explained above. A decision made in a technical advice memorandum, however, generally is final and
binding on Appeals.

If we don't hear from you

If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final
adverse determination letter.

Contacting the Taxpayer Advocate Office is a taxpayer right

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 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.

Additional information

You can get any of 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 shown at the top of this letter.

Sincerely,

[redacted]

for Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures: Form
886-A
Form 6018
Form 4621-A
Publication 892
Publication 3498

Letter 3618 (Rev. 3-2024)
Catalog Number 34809F

Form 886-A
(May 2017)

Department of the Treasury - Internal Revenue Service

Explanations of Items

Schedule number or exhibit

Name of taxpayer
[redacted]

Tax Identification Number (last 4 digits)
[redacted]

Year/Period ended
[redacted]

ISSUES:

Is [redacted] operating within the meaning of Section 501(c)(4) of
the Internal Revenue Code?

FACTS:

Background:

On [redacted], [redacted] incorporated in the State of [redacted] as a nonprofit public benefit
corporation. [redacted]'s purpose is “[redacted].”

On [redacted], the IRS received Form 1024 Application for Recognition of Exemption Under
Section 501(a) Section 501(c)(4) of the Internal Revenue Code. [redacted] stated in their application
they previously applied for recognition of exemption. Attachments provided explained “[redacted]” of tax
returns.

[redacted] provided a detailed narrative description of the activities of the organization with the
Form 1024 application:

ATTACHMENT [redacted]:

Item [redacted]

Catalog Number 20810W Page 1 www.irs.gov Form 886-A (Rev. 5-2017)

On [redacted], the IRS issued a letter to [redacted] indicating it determined they are exempt under
section 501(c)(4) of the Internal Revenue Code.

On [redacted], Letter 3611 and Form 4564 Information Document Request “IDR”, was
issued to [redacted] requesting information for the examination, as well a request to schedule a future
appointment with an officer [redacted]. On [redacted], the Agent conducted a phone
interview with [redacted] (Director), [redacted] (CEO), and [redacted] (POA).

[redacted] assisted as interpreter for CEO [redacted]. The following information was requested
and provided during the interview:

1. The agent requested explanation of daily duties; organization stated:

a. CEO- [redacted] handles the [redacted]. The duties when people pass away or event
happens is to meet to support the families and funeral expense. The families
contact [redacted].

b. POA- The family provides the death certificate and will meet with [redacted] board. Other
members will help. They go to funerals. They send $[redacted]-$[redacted], it depends on
how much EO collects. They will have a meeting with officers and prove expenses.
They record the amounts given. The family acknowledges receipt.

2. The agent requested an explanation on how they determine the amount of death
payouts and activities related to:

a. POA- Depends on the donation. If [redacted] members are in the organization, they ask for
help of $[redacted] per member. [redacted], $[redacted] for dues. If the other members do not pay, they
will not be eligible for help in the future. Acknowledgement of receipt is a check.

b. CEO- Provided an example: They provide membership numbers, death date,
membership joined date, age, amount of membership time, how much he will get,
number of existing, expected number, subtract [redacted]% that organization keeps.

c. CEO- At [redacted] meeting, they read the report.
d. CEO- Also send out announcements.
e. CEO- Have photos and [redacted] video of the meetings.

3. The agent asked regarding [redacted] primary exempt purpose:

a. CEO- Provide financial aid for deceased family members.

b. CEO- [redacted] hosts [redacted] New Year event, with awards for students. They also have
[redacted] events which members participate. [redacted] also organizes
[redacted] meetings for members, and flu awareness health events [redacted].

c. POA- Funeral expenses are the main event.

d. POA- [redacted] New Year, scholarship for student festivals for former police
[redacted] ([redacted] run with other with organization.

e. POA- Meeting for [redacted].

f. POA- [redacted] picnics where announce how many people have passed.

g. POA- There are [redacted] dates when the magazine is published, every [redacted] months.
[redacted]'s magazine provides details on resent deceased member, finances and
expenses of [redacted]. The magazine is given to members and [redacted] goes through the
magazine, line by line at the meeting events.

Catalog Number 20810W Page 2 www.irs.gov Form 886-A (Rev. 5-2017)

4. The agent requested explanation on how membership benefits work:

a. Who can join: CEO- Any person who was a [redacted] in [redacted],
[redacted], and their family and children. They must ask to join. Limited to age [redacted] to
join. They pay $[redacted] per year membership fee, then they must contribute $[redacted] per
death.

b. How do let people know: CEO- It is community base, email, radio.

c. How many members do you have: CEO- As of [redacted], there are [redacted] members.

d. How do you keep track of members: CEO- Both the CEO and Treasure keep track of
members. [redacted] also helps and has agreed to go to [redacted] box and put
amounts in computer before giving checks to treasurer. He sends letters and
administrative duties.

e. When are memberships due: CEO- They are due in [redacted], $[redacted] per member.

f. Do members give more than asked? CEO- They generally only give $[redacted]. Due to the
number of deaths, any more would be [redacted].

g. What happens when a member dies: POA- They contact the organization, and the
org verifies death, letter is sent to members, delegation is sent to the house, and
funeral home. They get receipt from family for acceptance of check.

h. Can non-member receive benefits: POA- Only members, they must sign application
and join.

In response to Information Document Request (IDR) #1 issued [redacted], [redacted] provided a
break down explaining income and expenses associated to its yearly activities. As of [redacted],
according to [redacted] Regular Report:

1. Membership Information:

a. Have [redacted] current members.

b. As of [redacted] when the report was created, they had [redacted] deceased members for
the year and for which they issued payouts from the collected funeral fees for each
member.

c. [redacted] membership fees collected for [redacted] was $[redacted].

d. [redacted] new members who paid a joining fee of $[redacted] + $[redacted] membership
fee.

e. [redacted] also collected funeral fees for [redacted] deceased member totaling
$[redacted].

f. [redacted] income collected in [redacted] was: Membership fees $[redacted] +
funeral fees for [redacted] deceased member totaling $[redacted] with a
total income of $[redacted] as reported on Form 990 Return of
Organization Exempt From Income Tax return for [redacted] (see sample of
Regular Report ([redacted] to [redacted]) provided below. [redacted], provides a
breakdown of membership fees paid for [redacted], and [redacted] provides details for collected
funeral fees).

Catalog Number 20810W Page 3 www.irs.gov Form 886-A (Rev. 5-2017)

[redacted] of membership fees paid for [redacted], and [redacted] provides details for collected
funeral fees).

Catalog Number 20810W Page 4 www.irs.gov Form 886-A (Rev. 5-2017)

[redacted] collects funeral fees for deceased members in [redacted] and issues payouts
in the [redacted]. [redacted]-month financial reporting on deceased payouts
from [redacted] to [redacted], was [redacted] deceased members.
[redacted] member receives a different amount from the collected funeral fees,
[redacted] deducts costs related to condolences in newspaper, wreath and organization
retains [redacted]% of collected funeral fees. Total payout for this period is $[redacted] (see
[redacted] for the [redacted] deceased member):

[redacted table]

Catalog Number 20810W Page 5 www.irs.gov Form 886-A (Rev. 5-2017)

h. [redacted]'s [redacted]-month financial reporting on deceased payouts from [redacted]
to [redacted], was [redacted] individual deceased members. Each member
receives a different amount from the collected funeral fees, since [redacted] deducts
costs related to condolences in newspaper, wreath and organization retains [redacted]% of
collected funeral fees. Total payout for this period is $[redacted] (see below-
[redacted] for the [redacted] deceased member. [redacted] had a combined
total member death payout in [redacted]: [redacted] (see above) [redacted]-months of $[redacted] +
[redacted] (see below) [redacted]-months of $[redacted] = $[redacted] as reported on
Form 990 Return of Organization Exempt From Income Tax return for [redacted].

[redacted table]

Catalog Number 20810W Page 6 www.irs.gov Form 886-A (Rev. 5-2017)

2. In response to Information Document Request (IDR) #1 issued [redacted],
Regular Report ([redacted]) includes a breakdown of expenses related to
collected funeral fees for deceased members and operating cost associated to members
in [redacted] (see below [redacted]):

[redacted table]

3. [redacted]'s member events and related expenses for [redacted] included (see above
[redacted]):

a. [redacted]

Catalog Number 20810W Page 7 www.irs.gov Form 886-A (Rev. 5-2017)

b. The operating cost related to these [redacted] events was $[redacted] ([redacted]%) of its operating
costs, see above [redacted].

4. In response to Information Document Request (IDR) #1 issued [redacted],
provided updated details of their activities and instructions on reporting death of a
member. In [redacted] Regular Report ([redacted]), see below [redacted]
a description of its member activities:

[redacted table]

Catalog Number 20810W Page 8 www.irs.gov Form 886-A (Rev. 5-2017)

[redacted]'s Financial Information as Reported on Forms 990:

1. Income

Return Line | Account Description
[redacted] | Contributions, gifts, grants & other similar amounts
[redacted] | Membership dues
[redacted] | Total
[redacted] | Other Revenue
[redacted] | Investment income
[redacted] | Total All Revenue

2. Expenses

Return Line | Account Description
[redacted] | Benefits paid to/for members
[redacted] | Accounting
[redacted] | Office expenses
[redacted] | Conference, conventions & meetings
[redacted] | Total Expenses
[redacted] | Net Income

3. Balance Sheet

Return Line | Account Description
ASSETS:
[redacted] | Cash - non-interest-bearing
[redacted] | Savings & temporary cash investments
[redacted] | TOTAL ASSETS
LIABILITIES
[redacted] | TOTAL LIABILITIES
NET ASSETS or FUND BALANCES
[redacted] | Paid-in/capital surplus/land, building/equip
[redacted] | Retained earnings, endowment, accu inc.
[redacted] | TOTAL NET ASSETS/FUND BALANCES
[redacted] | Total Liabilities & Fund Balances

Catalog Number 20810W Page 9-10 www.irs.gov Form 886-A (Rev. 5-2017)

LAW:

Section 501(c)(4) Section 501(c)(4) of the Internal Revenue Code grants exemption to civic
leagues or organizations not organized for profit but operated exclusively for the promotion of
social welfare, or local associations of employees.
The membership of a local association of employees is limited to employees of a designated person or persons
in a particular municipality, and its net earnings are devoted exclusively to charitable, educational, or
recreational purposes. No part of the net earnings of such entity inures to the benefit of any private shareholder
or individual.

Treasury Regulation Section 1.501(c)(4)-1(a)(2)(i) states that an organization is operated
exclusively for the promotion of social welfare if it is primarily engaged in promoting in some way
the common good and general welfare of the people of the community. An organization embraced
within this section is one which is operated primarily for the purpose of bringing about civic
betterments and social improvements.

Treasury Regulation Section 1.501(c)(4)-1(a)(2)(ii) states the promotion of social welfare does not
include direct or indirect participation or intervention in political campaigns on behalf of or in
opposition to any candidate for public office. Nor is an organization operated primarily for the
promotion of social welfare if its primary activity is operating a social club for the benefit, pleasure,
or recreation of its members, or is carrying on a business with the general public in a manner
similar to organizations which are operated for profit.

Section 1.501(c)(4)-1(b) states local associations of employees described in section 501(c)(4) are
expressly entitled to exemption under section 501(a). As conditions to exemption, it is required (1)
that the membership of such an association be limited to the employees of a designated person or
persons in a particular municipality, and (2) that the net earnings of the association be devoted
exclusively to charitable, educational, or recreational purposes. The word local is defined in
paragraph (b) of section 1.501(c)(12)-1. See paragraph (d)(2) and (3) of section 1.501(c)(3)-1 with
reference to the meaning of charitable and educational as used in this section.

Rev. Rul. 75-199, 1975-1 C.B. 160, provides that a nonprofit organization that restricts its
membership to individuals, who belong to a particular ethnic group residing in a stated
geographical area, and that provides sick benefits to members and death benefits to beneficiaries
of deceased members does not qualify for exemption under IRC Section 501(c)(4) because the
benefit to the community at large is minor and incidental.

Rev. Rul. 81-58, 1981-1 C.B. 331, describes a nonprofit police officer association whose primary
activity is providing lump-sum retirement payments to its members or death benefits to their
beneficiaries. The organization primarily provides death and retirement benefits as a supplement
to the civil service benefit program provided by the political subdivision in which the police officers
are employed. Hence, the organization is essentially a mutual, self-interest type of organization.
Its income is used to provide direct economic benefits to members. Therefore, the organization is
not operated exclusively for the promotion of social welfare within the meaning of IRC Section
501(c)(4).

Rev. Rul. 66-59, 1966-1 C.B. 142, states that an organization whose purpose is to pay lump-sum
retirement benefits to its members or death benefits to their survivors does not qualify as a local
association of employees because such disbursements are not devoted to charitable, educational
or recreational purposes within the meaning of IRC section 501(c)(4).

In Consumer-Farmer Milk Cooperative, Inc. v. Commissioner of Internal Revenue, 186 F.2d 68 (2d
Cir. 1950), the court denied exemption under section 501(c)(4) of the Code because the
organization's purpose is primarily to benefit its members economically and only incidentally to
further larger public welfare.

In Police Benevolent Association of Richmond v. U.S., 661 F. Supp.765 (E.D. Va.), aff'd, 836 F.2d
547 (4th Cir. 1987), the court held that as a matter of law, the association could not establish that
it was organized and operated for the promotion of social welfare under any set of facts consistent
with its allegations. Because a substantial purpose of the association and its activities were
intended to serve the pecuniary interests of its members, a non-exempt purpose, the court held
that the association could not qualify as an organization operated exclusively for the promotion of
social welfare under IRC Section 501(c)(4).

TAXPAYER'S POSITION:

[redacted] position is not known at the time this report was drafted.

GOVERNMENT'S POSITION:

[redacted] is not as described in IRC Section 501(c)(4) and Treas. Reg. Section 501(c)(4)-1(a)(2)(i)
because your activities do not primarily promote civic betterment or social welfare. [redacted] is
primarily operating for the economic benefit of members, with little or no benefit to the community.
An analysis of [redacted] 990 tax return filings reflects [redacted]% of gross income is spent on civic
betterment, social welfare or charity.

[redacted] is essentially a mutual, self-interest type of organization operating for the economic benefit
of its members. [redacted] is not primarily engaged in promoting in some way the common good and
general welfare of the people of the community as required by Treas. Reg. Section 1.501(c)(4)-
1(a)(2)(i).

[redacted] is like the organization described in Rev. Rul. 75-199. For example, [redacted] is supported by
membership fees and its outlays are for death benefit to the members' designated beneficiaries.
[redacted] provides economic benefits to its members, who belong to a particular ethnic group
residing in a stated geographical area. [redacted] is wholly financially supported by its members. Any
exempt purposes are inherently minor and incidental to the economic benefits [redacted] provides to
its members.

[redacted] members are prior police in [redacted] and their family and children.
[redacted] is also similar to the organization described in Rev. Rul. 81-58, who's primary activity is to
provide death benefits to its members or beneficiaries of said members. [redacted] operates as a
mutual benefit, self-interest type of organization.

In the year under examination of [redacted], [redacted] had a [redacted]% office expense related to member
funerals and member operational cost, and paid member benefits of [redacted]%. This illustrates they
are not operated for promotion of civic betterment or social welfare. Like the organization in Police
Benevolent Association of Richmond v. U.S., [redacted] benefits are limited to their members no
minor or incidental benefit to the community as a whole. Therefore, [redacted] operates as a mutual
benefit society and doesn't qualify for exemption from federal income tax under IRC Section
501(c)(4).

CONCLUSION:

[redacted] is not described in IRC Section 501(c)(4), because it does not primarily operate for the
promotion of civic betterment or social welfare. [redacted] is organized and operated to serve the
private benefit of its members and any benefit to the community is incidental.

Therefore, [redacted] exemption under section 501(c)(4) should be revoked effective [redacted],
the first day of the year that we determined that it is not operated for exempt purposes, and it
failed to satisfy the conditions required for the continuation of exempt status as required under
section 6033.

Catalog Number 20810W Page 11-13 www.irs.gov Form 886-A (Rev. 5-2017)