IRS denies 501(c)(4) status to a police-officers' association

Plain-English summary

The IRS issued a final adverse determination denying tax-exempt status under IRC § 501(c)(4) to a police-officers' association. The association's primary activities were collective bargaining, grievance processing, legal representation, and member events, with some donations and volunteer work for community organizations. The IRS concluded that the organization primarily served the mutual economic interests of its members rather than the community and did not devote its net earnings exclusively to charitable, educational, or recreational purposes. It therefore did not qualify either as a social-welfare organization or as a local association of employees.

Ruling snapshot

• Question: Does the police-officers' association qualify for exemption under IRC § 501(c)(4), including as a local association of employees?
• Outcome: Denied.
• Key authorities: IRC §§ 501(a), 501(c)(4), 501(c)(5), 6110, and 7428(b)(2); Treas. Reg. § 1.501(c)(4)-1(b); Rev. Ruls. 54-394, 62-167, 75-199, 79-128, and 81-58; Consumer-Farmer Milk Cooperative, Inc. v. Commissioner of Internal Revenue, 186 F.2d 68 (2d Cir. 1950); New York State Association of Real Estate Boards Group Insurance Fund v. Commissioner, 54 T.C. 1325 (1970); Police Benevolent Association of Richmond v. U.S., 661 F. Supp. 765 (E.D. Va.), aff'd, 836 F.2d 547 (4th Cir. 1987).

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 06/10/2026
IRS Tax Exempt and Government Entities Employer ID number:

Form you must file:

Tax years:

Release Number: 202636018 Person to contact:
Release Date: 9/4/26
UIL Code: 501.04-00, 561.04-01

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)(4). 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.

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.

We sent a copy of this letter to your representative as indicated in your power of attorney.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Letter 437

Redacted Letter 4034
Redacted Letter 4038

cc: [insert representative's name]

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

Department of the Treasury
Internal Revenue Service

Date:
05/22/2026

Employer ID number:

Person to contact:

Name
ID number:
Telephone
Fax
Legend: UIL:
B = State 501.04-00
C = Date 501.04-01

D = City

e percent = Percent
f percent = Percent
g percent = Percent
h percent = Percent
j = Amount

k = Dues

n percent = Percent
0 percent = Percent

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)(4). This letter explains the reasons for our conclusion. Please keep it for your records.

Issues

1) Do you qualify for exemption under IRC Section 501(c)(4) as an organization operating as a local association of employees? No, for the reasons stated below.

2) Do you qualify for exemption under IRC Section 501(c)(4)? No, for the reasons stated below.

Facts

You were formed as an unincorporated association on C in B. According to your Constitution and Bylaws, you are a labor union formed to unite all superior officers employed by the D to protect and advance their interests, promote their welfare, and improve their wages and conditions of employment. Any individual employed as a superior officer by the D may apply for membership in your union by providing an application for membership and paying membership dues. You collectively bargain on behalf of your members with the D for better employment conditions, salaries, and process grievances. You have submitted copies of your collective bargaining agreements with the D, and you state that you are the sole and exclusive bargaining agent for all the

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

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city’s police captains, police lieutenants, and police sergeants.

You were previously granted exemption under IRC Section 501(c)(5) and currently your exemption was automatically revoked. Your application states you now wish to be recognized as a local association of employees under Section 501(c)(4). You currently have j} members, and your activities are supported by membership dues and admission fees to events such as annual holiday parties. Dues for active members shall be k dollars, or such other amount you establish. Your total membership fees received for your most recent year accounts for n percent and fees received from admission fees to events account for o percent of your revenues, respectively. You also provided your revenues for the two years prior. Your expenses consist of contributions paid out to other non-profit entities that you affiliate with, compensation of officers, professional fees, and other expenses that consist of dues, advertising, event and meeting expenses, and meals.

Per your application, your activities include negotiating labor contracts between the officers and the D, processing grievances, legal representation for members, and meetings and events that keeps members informed about the union’s activities. The percentage breakdown of time and resources allocated to these activities are e percent, f percent, g percent, and h percent respectively. You state your activities further your exempt purpose by promoting the welfare, rights, and interests of your members. Your

When responding to an inquiry for further information, you state you also conduct additional activities such as annual holiday celebrations and member social gatherings, donating to various non-profit organizations in the city, and volunteering services or spending time at these non-profit organizations.

You later explained that you are described as a local association of employees within the meaning of IRC Section 501(c)(4) because the bargaining on behalf of your members furthers a charitable purpose, meetings and events educate your members on labor laws which furthers an educational purpose, and you host recreational events for your members that furthers a recreational purpose. That your activities and use of funds are directed exclusively toward supporting the welfare, education, and morale of its members and their families, while strengthening the public safety infrastructure of D.

Law

IRC Section 501(c)(4) provides that 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 which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes and no part of the net earnings of such entity inures to the benefit of any private shareholder or individual may be exempt from federal income tax,

Treasury Regulation 1.501(c)(4)-1(b) provides that local association of employees described in IRC 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.

Revenue Ruling 54-394, 1954-2 C B 131, holds that an organization that provides antenna service only to its members to enable them to receive television reception is not exempt under IRC section 501(c)(4). The court held that when an organization’s only activity is to provide television reception on a cooperative basis to its

Letter 4034 (Rev. 01-2021)
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members, who contract and pay for such services, such organization is held to operate for the benefit of its members rather than for the promotion of the welfare of mankind.

Rev. Rul. 62-167, 1962-2 C.B. 142, holds that an antenna service organization that provides signals to any television receiver in the community is exempt under section IRC 501(c)(4). The court held that since it benefits the community as a whole rather than just the members, exemption under IRC Section 501(c)(4) is granted.

Rev. Rul. 75-199, 1975-1 C.B. 160, describes a nonprofit organization that was formed to provide sick benefits to its members and death benefits to the beneficiaries of members. Membership restricted to individuals of good moral character and health belonging to a particular ethnic group residing in a stated geographical area. The ruling held that providing sick benefits to members and death benefits to their beneficiaries is not exempt under IRC Section 501(c)(4). As stated in this ruling, “A membership organization of the type here described is essentially a mutual, self-interest type of organization. Its income is used to provide direct economic benefits to members and any benefit to the larger community is minor and incidental. Where the benefit from an organization is limited to that organization's members (except for some minor and incidental benefit to the community as a whole), the organization is not operated exclusively for the promotion of social welfare within the meaning of IRC Section 501(c)(4).”

Rev. Rul. 79-128, 1979-1 C.B. 197 concludes that an organization whose membership is limited to the employees of an employer in a particular municipality and whose primary purpose is to obtain discount prices on goods, services and activities for members is not a local association of employees for purposes of IRC Section 501(c)(4).

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).

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) because the organization’s purpose is primarily to benefit its members economically and only incidentally to further larger public welfare.

In New York State Association of Real Estate Boards Group Insurance Fund v. Commissioner, 54 T.C. 1325 (1970), an association organized by a small group interested in obtaining group insurance did not qualify for

exemption because it offered its benefits to only a limited class of its members and their employees. Where the primary benefit from an organization is limited to that organization's members, and not provided to the community as a whole, the organization is not operated primarily for the social 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 the organization did not qualify under IRC Section 501(c)(4) because a substantial purpose of the association and its activities were intended to serve the pecuniary interests of its members.

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

Application of law

You are not described in IRC Section 501(c)(4) nor Treas. Reg. Section 1.501(c)(4)-1(b) because you are not operated exclusively for the promotion of social welfare. Additionally, based on the information provided, you are not operating as a local association of employees as described in Treas. Reg. Section 1.501(c)(4)-1(b) since your net earnings are not exclusively devoted to charitable, educational, or recreational purposes as required. An explanation of each of these issues is explained below.

Issue One; IRC Section 501 (4) — Social Welfare Organization:

While you have provided evidence that you do conduct activities for the benefit of your local community, such as donating to various organizations, you are dissimilar to the organization described in Rev. Rul. 62-167. The organization described in this ruling was formed to provide a service to everyone one in its local area, while you are formed primarily to serve the interests of your members. As such, you are like the organizations described in Rev. Ruls. 54-394 and 75-199. While you have been primarily operating as a labor union since your inception, this serves the mutual benefit of your members and not for the benefit of the community. Any fees and income you have received are for the direct benefit of your members. Any benefit that the public may receive from your activities is inconsequential compared to the services you provide to represent your members to collectively bargain, and any other services that are focused on the benefit of your members.

You are similar to the organizations described in Rev. Ruls, 79-128 and 81-58 in that you too were formed primarily for the purpose of providing various benefits to your members. You are financially supported by your members and will use your funding to negotiate with your member’s employer for better employment conditions, higher compensation, to process grievances, and provide legal representation. Although your members comprise of police officers who are engaged in public services, you provide an incidental benefit to the community.

You are analogous to the organizations described in Consumer-Farmer Milk Cooperative, Inc., New York State Association of Real Estate Boards Group Insurance Fund, and Police Benevolent Association of Richmond. You are a mutual benefit organization organized to benefit your members economically and advance your member’s interests. This is apparent by the fact that you were initially organized as a labor union, have been operating as such since your inception, and your assets will be distributed to your members if you dissolve. So based on the information you have presented, you are not primarily organized to confer a community benefit and any benefit you may provide to the community is merely incidental.

Conclusion

You do not qualify for exemption from Federal income tax under IRC Section 501(c)(4) as a local association of employees nor as an organization that is operated exclusively for the promotion of social welfare within the meaning of Section 501{c)(4). You are organized and operating primarily for the betterment of employment conditions and other various benefits for your due paying members. Your net earnings are not primarily devoted to a charitable, education or recreational purpose but are instead geared towards assisting your members with issues related to their employment. These activities ultimately serve to mutually benefit the economic interest of your members and such activities do not promote social welfare within the meaning of Section 501(c)(4).

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

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 4 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

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

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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.

We sent a copy of this letter to your representative as indicated in your power of attorney,

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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