Volunteer fire department loses labor organization status

Plain-English summary

A volunteer fire department reported on Form 990 that it was exempt as a labor, agricultural, or horticultural organization under § 501(c)(5). The IRS found that its objectives did not concern bettering working conditions, improving products, or increasing occupational efficiency for people engaged in those pursuits. It therefore revoked the department's self-declared § 501(c)(5) status for the specified tax year, required it to file Form 1120, and stated that contributions were no longer deductible for that year. The examination report noted that providing fire, ambulance, and rescue services could support treatment as a social welfare organization under § 501(c)(4), or potentially as a charitable organization under § 501(c)(3) after filing Form 1023. The final letter did not determine the organization's exempt status for any other period.

Ruling snapshot

• Question: Did the volunteer fire department qualify as a labor, agricultural, or horticultural organization under § 501(c)(5)?
• Outcome: revocation
• Key authorities: IRC §§ 170, 501(c)(3), 501(c)(4), 501(c)(5), and 7428; Treas. Reg. § 1.501(c)(5)-1(a)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
TEGE EO Examinations Mail Stop 4920 DAL
1100 Commerce St.
Dallas, Texas 75242

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

Date: August 15, 2016

Number: 201646007 Taxpayer Identification Number:

Release Date: 11/10/2016 Person to Contact:

UIL: 501.05-00 Employee Identification Number:

Employee Telephone Number:

CERTIFIED MAIL — RETURN RECEIPT
Dear

This is a final adverse determination regarding your exempt status under section 501(c)(5) of the
Internal Revenue Code. You are no longer exempt under section 501(a) of the Code for the tax
year ending December 31, 20XX. This letter is not a determination of your exempt status under
section 501 for any other period.

The revocation of your exempt status was made for the following reason(s):

You incorrectly self-declared your exempt status under IRC 501(c)(5) as a labor, agricultural or
horticultural organization on your Form 990 for the year ending December 31, 20XX. You do not
have as your objectives the betterment of the conditions of those engaged in labor, agricultural or
horticultural pursuits, the improvement of the grade of their products, or the development of a
higher degree of efficiency in their respective occupations.

You are not operated as a labor, agricultural or horticultural organization within the meaning of
IRC 501(c)(5). Consequently your self-declared exempt status under IRC 501(c)(5) should be
revoked for the tax year ending December 31, 20XX.

Contributions to your organization are no longer deductible under IRC §170 for the tax year ending
December 31, 20XX.

You are required to file an income tax return on Form 1120. This return should be filed with the
appropriate Service Center for the tax year ending December 31, 20XX in accordance with the


instructions of the return.

Processing of income tax returns and assessments of any taxes due will not be delayed should a
petition for declaratory judgment be filed under section 7428 of the Internal Revenue Code.

If you decide to contest this determination under the declaratory judgment provisions of section
7428 of the Code, a petition to the United States Tax Court, the United States Claims Court, or the
district court of the United States for the District of Columbia must be filed before the 91st Day
after the date this determination was mailed to you. Please contact the clerk of the appropriate
court for rules regarding filing petitions for declaratory judgments by referring to the enclosed
Publication 892. You may write to the United States Tax Court at the following address:

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

You also have the right to contact the Office of the Taxpayer Advocate. 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 taxpayeradvocate.irs.gov or call 1-
877-777-4778. If you prefer, you may contact your local Taxpayer Advocate at:

Internal Revenue Service
Office of the Taxpayer Advocate

If you have any questions, please contact the person whose name and telephone number are
shown in the heading of this letter.

Sincerely,

Margaret Von Lienen
Director, EO Examinations

Enclosures:
Publication 892


Department of the Treasury Date: May 2, 2016

Internal Revenue Service Taxpayer Identification Number:
Tax Exempt and Government Entities

IRS Exempt Organizations Examinations
1100 Commerce Street-MC4900 DAL Form:

Dallas, TX 75242
Tax Year(s) Ended:

Person to Contact/ID Number:

Contact Numbers:
Telephone:

Fax:
Manager's Name/ID Number:

Manager's Contact Number:

Response due date:

Certified Mail- Return Receipt Requested

Dear

Why you are receiving this letter
We propose to revoke your status as an organization described in section 501(c)(5) of the

Internal Revenue Code (Code). Enclosed is our report of examination explaining the proposed
action.

What you need to do if you agree
If you agree with our proposal, please sign the enclosed Form 6018, Consent to Proposed

Action - Section 7428, and return it to the contact person at the address listed above (unless
you have already provided us a signed Form 6018). We'll issue a final revocation letter
determining that you aren't an organization described in section 501(c)(5).

After we issue the final revocation letter, we'll announce that your organization is no longer
eligible for contributions deductible under section 170 of the Code.

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 revocation letter. Failing to respond to this proposal will adversely impact your legal
standing to seek a declaratory judgment because you failed to exhaust your administrative
remedies.

Effect of revocation status
If you receive a final revocation letter, you'll be required to file federal income tax returns for the

tax year(s) shown above as well as for subsequent tax years.

Letter 3618 (Rev. 6-2012)
Catalog Number 34809F


What you need to do if you disagree with the proposed revocation

If you disagree with our proposed revocation, you may request a meeting or telephone
conference with the supervisor of the IRS contact identified in the heading of this letter. You also
may file a protest with the IRS Appeals office by submitting a written request to the contact
person at the address listed above within 30 calendar days from the date of this letter.

The Appeals office is independent of the Exempt Organizations division and resolves most
disputes informally.

For your protest to be valid, it must contain certain specific information including a statement of
the facts, the applicable law, and arguments in support of your position. For specific information
needed for a valid protest, please refer to page one of the enclosed Publication 892, How to
Appeal an IRS Decision on Tax-Exempt Status, and page six of the enclosed Publication 3498,
The Examination Process. Publication 3498 also includes information on your rights as a
taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in
Publication 3498 generally doesn't apply after we issue this letter.

You also may request that we refer this matter for technical advice as explained in Publication

892. Please contact the individual identified on the first page of this letter if you are considering
requesting technical advice. If we issue a determination letter to you based on a technical
advice memorandum issued by the Exempt Organizations Rulings and Agreements office, no
further IRS administrative appeal will be available to you.

Contacting the Taxpayer Advocate Office is a taxpayer right

You have the right to contact the office of the Taxpayer Advocate. Their assistance isn't a
substitute for established IRS procedures, such as the formal appeals process. The Taxpayer
Advocate can't reverse a legally correct tax determination or extend the time you have (fixed by
law) to file a petition in a United States court. They can, however, see that a tax matter that
hasn't been resolved through normal channels gets prompt and proper handling. You may call
toll-free 1-877-777-4778 and ask for Taxpayer Advocate assistance. ff you prefer, you may
contact your local Taxpayer Advocate at:

Internal Revenue Service
Office of the Taxpayer Advocate

2 Letter 3618 (Rev. 6-2012)
Catalog Number 34809F


For additional information
If you have any questions, please call the contact person at the telephone number shown in the
heading of this letter. If you write, please provide a telephone number and the most convenient

time to call if we need to contact you.

Thank you for your cooperation.

Sincerely,

Margaret Von Lienen
Director, EO Examinations

Enclosures:

Report of Examination
Form 6018
Publication 892
Publication 3498

3 Letter 3618 (Rev. 6-2012)
Catalog Number 34809F


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
12/31/20XX

ISSUE
Does the (the organization) qualify for tax exemption under IRC
501(c)(5)?
FACTS
The indicated on its December 31, 20XX Form 990 that it considered itself to
be exempt under IRC 501(c)(5) as a labor, agricultural, and horticultural organization. The
Agent examining the organization found that the is actually an all-volunteer fire

department. The organization has been in existence since the 18XXs. It is a nonprofit
organization which is organized and operated as a volunteer fire company that is composed of
over XXX members. This volunteer fire department provides fire protection, ambulance and
rescue services to the communities of and in . The
organization owns the following buildings:

1. The department’s main headquarters located at in
2. The in the northeastern portion of the district.
The district has provided the with a fleet of XX

fully equipped emergency vehicles which are housed in the above facilities.
LAW
IRC 501(c)(5) Labor, agricultural or horticultural organizations

Reg.1.501(c)(5)-1(a) The organizations contemplated by section 501(c)(5) as entitled to
exemption from income taxation are those which (1) Have no net earnings inuring to the benefit
of any member, and (2) Have as their objectives the betterment of the conditions of those
engaged in such pursuits, the improvement of the grade of their products, and the development of
a higher degree of efficiency in their respective occupations.

IRC 501(c)(4)(A) Civic League or organizations not organized for profit but operated exclusively
for the promotion of social welfare, or local association of employees, the membership of which
is limited to the employees of a designated person or person in a particular municipality, and the
net earnings of which are devoted exclusively to charitable, educational, or recreational
purposes.

Revenue Ruling 74-361, 1974-2 CB 159 (January 01, 1974) provides, in part, that "Because the
activities of this organization (providing fire and rescue services for the general community) may
also be regarded as promoting the common good and general welfare of the community, the

Form 886-A (Rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -1-


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
12/31/20XX

organization could have applied for and received a ruling recognizing its exemption from Federal
income tax as a social welfare organization described in section 501(c)(4) of the Code.

IRC Section 501(c)(3) provides tax exemption for corporations and foundations that are operated
exclusively for religious, charitable, scientific, testing for public safety, literary, or educational
purposes, no part of the net earnings of which inures to the benefit of any private shareholder or
individual.

Providing fire and rescue service for the general community has been held to be a charitable
purpose because it lessens the burden of government. Sherman v. Richmond Hose Co., 230 N.Y.
462, 130 N.E. 613 (1921); Magill v. Brown, Fed. Case No. 8952 (C.C. E.D. Pa., 1833); Roy G.
McKenna, 5 T.C. 712 (1945), acq., 1950-2 C.B. 3. See also Rev. Rul. 69-174, 1969-1 C.B. 149,
which holds that rescue service for the relief of distressed persons is also a charitable purpose.

Revenue Ruling 71-47, 1971-1 CB 92 (January 01,1971), contributions or gifts to nonprofit
volunteer fire companies which are for the use of a political subdivision of a State for exclusively
public purposes and are deductible under section 170(c)(1) of the code

GOVERNMENT'S POSITION

incorrectly self-declared their exempt status under 501(c)(5) as a labor,
agricultural or horticultural organization on their Form 990 for the year ending December 31,
20XX. The organization does not have its objectives in the betterment of the conditions of those
engaged in labor, agricultural or horticultural pursuits, the improvement of the grade of their
products, or the development of a higher degree of efficiency in their respective occupations.

does provide emergency fire, ambulance and rescue services to the
communities of and in . These types of
services can be regarded as promoting the common good and general welfare of the community
which could qualify them under IRC 501(c)(4). After the organization's revocation of its self-
declare IRC 501(c)(5) status it could self-declare under IRC 501(c)(4) by filing Form 990 and
indicating 501(c)(4) as its exempt status.

The organization's activities could also be considered charitable within the meaning of IRC
501(c)(3) and Rev. Rul. 69-174. If the organization choose to pursue exemption under IRC
501(c)(3) it cannot self-declare its exemption but would need to a file Form 1023 with the
Internal Revenue Service.

CONCLUSION

Form 886-A rev.4-68) Department of the Treasury - Internal Revenue Service
Page: -2-


Form 886A Department of the Treasury - Internal Revenue Service Schedule No. or
Explanation of Items Exhibit
Name of Taxpayer Year/Period Ended
12/31/20XX
The is not operated as a labor, agricultural or horticultural

organization within the meaning of IRC 501(c)(5). Consequently its self-declared exempt status
under IRC 501(c)(5) should be revoked as of January 1, 20XX.

Form 886-A (Rev.4-68)

Department of the Treasury - Internal Revenue Service

Page: -3-