Wellness-practitioner cooperative denied 501(c)(3) status for serving members' private interests

Plain-English summary

The IRS denied 501(c)(3) exemption to an organization that ran a shared-facility cooperative for wellness practitioners, artists, and educators, concluding it operated mainly for the private benefit of its members rather than for the public. To qualify, an organization must be operated exclusively for exempt purposes and serve public rather than private interests, and a single substantial non-exempt purpose defeats exemption. The applicant described itself as a collaborative consortium: members (about 95% of them for-profit private practices and businesses) paid membership fees and below-market space-usage rates to use a facility for their own private practices, classes, retail and art sales, and even personal events like weddings, keeping all their own earnings. The organization did point to genuine public activities such as twice-yearly free health-screening days, a weekly farmers' market, educational "full moon drummings," and donated memberships to nonprofits, and it argued it resembled charities that provide low-cost facilities to exempt tenants (Rev. Ruls. 69-572 and 71-529). The IRS distinguished those rulings because the applicant's tenants were mostly for-profit and it was funded by fees rather than contributions, and it applied Rev. Rul. 69-175 (a cooperative service for members serves private interests), Rev. Rul. 71-395 (a cooperative art gallery), Better Business Bureau, and Ginsberg to find the members were the primary beneficiaries. Because operating the members' cooperative was a substantial non-exempt purpose, the organization was not described in section 501(c)(3); contributions are not deductible under section 170. The document is thorough, laying out the facts, the applicable revenue rulings, the applicant's position, and the IRS's response point by point.

Ruling snapshot

• Question: Does a members' cooperative that provides a shared facility (mostly to for-profit practitioners) at below-market rates qualify for 501(c)(3) exemption, or does it serve substantial private interests?
• Outcome: denied (proposed and final adverse determination; substantial non-exempt private-benefit purpose; fails the operational test)
• Key authorities: IRC §§ 501(c)(3), 170; Treas. Reg. § 1.501(c)(3)-1(a), (c), (d); Rev. Ruls. 69-175, 69-572, 71-395, 76-147, 76-419, 77-111, 77-366; Better Business Bureau v. United States, 326 U.S. 279; Ginsberg v. Commissioner, 46 T.C. 47

Full text (IRS public release)

Scanned document; transcription proofread from IRS OCR. A few obvious scan misreads were corrected (for example, merged words like "Acommunity" restored to "A community"), and OCR bullet markers were restored to bullets; wording is otherwise verbatim, and redacted legend placeholders (A, B, C, D, F, G, H, w, x) appear as the IRS released them.

Internal Revenue Service
Appeals Office

300 N. Los Angeles Street
MS LA-8000 Room 3054
Los Angeles, CA 90012

Date: December 22, 2018
Number: 201911017
Release Date: 3/15/2019
A

B

Redaction legend:
A= taxpayer name
B= taxpayer address

C= taxpayer identification number

CERTIFIED

Dear

Department of the Treasury

Taxpayer Identification Number:

Person to Contact:
Employee ID Number:
Tel: ****

Fax: ****

kkkk

UIL Index:

501.03-00
501.33-00

This is a final adverse determination that you do not qualify for exemption from federal income tax under
Internal Revenue Code (the “Code”) section 501(a) as an organization described in Section 501(c)(3).

We made the adverse determination for the following reason(s):

You have not demonstrated that you are organized and operated exclusively for charitable, educational,
or other purposes and that no part of your net earnings inure to the benefit of private shareholders or
individuals as required by section 501(c)(3) of the Internal Revenue Code. Treas. Reg. § 1.501(c)(3)-
1(a)(1). You appear to be operated primarily for the purpose of operating a retail center for your members
to operate their individual businesses. Your proposed customers are not limited to any charitable class.
Further, you have not established that your operations serve public rather than private interests. Treas.

Reg. § 1.501(c)(3)-1(d)(1)(ii).

Contributions to your organization are not deductible under Code § 170.

You're required to file Federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return,
or 1041, U.S. Income Tax Return for Estates and Trusts. Mail your form to the appropriate Internal
Revenue Service Center per the form’s instructions. You can get forms and instructions by visiting our
website at www.irs.gov/forms-pubs or by calling 800-TAX-FORM (800-829-3676).

We'll make this letter and the proposed adverse determination letter available for public inspection under
Code section 6110 after deleting certain identifying information. We have provided to you, in a separate
mailing, Notice 437, Notice of Intention to Disclose. Please review the Notice 437 and the documents

attached that show our proposed deletions. If you disagree with our proposed deletions, follow the
instructions in Notice 437.

If you decide to contest this determination, you may file an action for declaratory judgment under the
provisions of section 7428 of the Code in either:

• United States Tax Court,
• The United States Court of Federal Claims,
• 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. Contact the clerk of the appropriate court for rules and the appropriate
forms for filing petitions for declaratory judgment. You can write to the courts at the following addresses:

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

US Court of Federal Claims
717 Madison Place, NW
Washington, DC 20005

U. S. District Court for the District of Columbia
333 Constitution Ave., N.W.
Washington, DC 20001

Note: We will not delay processing income tax returns and assessing any taxes due even if you file a
petition for declaratory judgment under section 7428 of the Code.

You also have the right to contact the Taxpayer Advocate Service (TAS). 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.
Please contact the Taxpayer Advocate for the IRS office that issued this letter. 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.

TAS assistance is not a substitute for established IRS procedures, such as the formal appeals process.
TAS cannot reverse a legally correct tax determination, or extend the time fixed by law that you have to

file a petition in a United States Court.

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

Sincerely,

ekkek

Appeals Team Manager

Department of the Treasury

Internal Revenue Service

Cincinnati, OH 45201
Date: August 23, 2017
Employer !D number:
Contact person/ID number:

Contact telephone number:

Contact fax number:

Legend: UIL:

B = State 501.03-00
C = Date 501.33-00
D = Name

F = Name

G = Types of Members
H = Types of Members
w = Number
x = Number

Dear

We considered your application for recognition of exemption from federal income tax under Section 501(a) of
the Internal Revenue Code (the Code). Based on the information provided, we determined that you don’t qualify
for exemption under Section 501(c)(3) of the Code. This letter explains the basis for our conclusion. Please
keep it for your records.

Issues
Do you qualify for exemption under Section 501(c)(3) of the Code? No, for the reasons stated below.

Facts

- You incorporated in B on C. You are organized exclusively for charitable, scientific and educational purposes

as defined in Section 501(c)(3) of the Code. Your Articles of Incorporation state you provide a place of
inspiration and opportunity for practitioners, artists and educators to promote, advance and study individualized
personal awareness and care. Also, you educate the general public regarding integrative wellness, the arts and
holistic living.

You have four directors, including D and F. Your Code of Regulations states your initial members are D and F,
and they shall be a member until resignation, incapacity, or death. The initial members may remove any
member with or without cause.

You are a cooperative, collaborative consortium for practitioners, educators, artists and service providers. You
benefit the general public by providing education on the importance of integrative wellness, the arts, holistic
living and related health matters and benefits, and by engaging in various community outreach activities. Your
members will be able to provide significant benefits to the community and interact with each other in a way
none could alone.

2

You currently have over w members. Around’ % use your facility full or part time, but most do their work in
offices, studios, and local businesses throughout central B.

Members represent their own businesses. You do not participate in any administrative aspects of member
business. Your function is to create an infrastructure for a cooperative community. You address the needs and
mission of the cooperative, not the administrative aids or small business support to members. However, many

fellow members are small business support professionals.

Approximately % of your members are for-profit members. Most are private practices or individual providers
in private practice. The remaining for-profit members represent academic institutions, local retailers or farms,
small business support professionals, artists, and educators.

The other % of your members are non-profits. About % of are non-profits who are gifted a membership. The
others are non-profits who pay the standard membership rates and fees.

You have two levels of membership: G and H. G are professionals offering integrative services or products,
wanting to be part of a community of referrals and resources. They can be incorporated into integrative
treatment teams and are easily searchable through your website. A G can be flexible, who are those not using
your space or using it rarely, a resident practitioner, who are those using your space regularly, or a resident
teacher, who are those holding regular classes at your facility.

H are people or businesses that support you, but are unlikely to work directly with patients, clients, or students.

H level benefits include:

Vast resource network for the public

Help promoting member business and events
Option to participate in member to member benefits
Option to support community outreach

Ability to rent gathering spaces or the entire facility
Sell or display art or retail and keep all sales

G level benefits include all the benefits provided to H members. In addition to those listed above, they also
receive:

• Access to small business support
• Ability to host four guest events per year
• Twenty-four hour access to the facility

Flexible G, resident practitioners, and resident teachers have benefits similar to G members, with different fee
levels.

Your members utilize you and pay rent that is substantially less than commercial rates for comparable facilities
to provide for the community and each other.

Letter 4036 (Rev. 7-2014)
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You are rooted in equal exchange. In furthering this philosophy, you and many of your members offer donation
based services. You ask that everyone donate something for services received, but if one cannot financially
donate, you provide a surplus container from which they may take a coin to donate. The support from donations
sustains you financially and ensures each person is truly invested in his or her own process.

While each of your members is an autonomous business owner, your co-op fosters an environment of
collaboration. You are based on the values of self-help, self-responsibility, authenticity, compassion, and
solidarity. Your founding goal is to be a place of inspiration, empowerment, and opportunity for practitioners,
artists, educators and service providers. You believe that working together, you can create far more good than
anyone can do on his or her own. Members join your cooperative to support your community outreach and to be
close to professional and personal resources.

'

You conduct the following community outreach activities:

• Twice per year, the public can receive free physicals, cholesterol tests, diabetes tests, hearing tests,
postural tests, lifestyle inventories, mental health screens, cardiovascular screens and the following free
classes from members: yoga, meditation, health insurance information, integrative health care, skin care,
tai chi, massage, reflexology, essential oils and acupuncture.

• Members participate in professional dialogue and resourcing for community questions and provide
community wide referrals and provide input and opportunities for creating integrative treatment teams.

• Allows local organizations access for fundraisers, support groups, meetings, and retreats, and access to
your practitioners, educators, artists and service providers. You do this through allowing such
organizations to become members and contribute to the collective.

• A community market held weekly during the summer, the market provides free space for local farmers

to sell their produce to the general public.
Full moon drummings held monthly to educate the. public about Native American traditions.

A medicinal herb garden maintained by you. Products are made available for sale in your facility.

You may provide the following additional activities in the future if the finances and resources of the center

allow:
• A community clinic program to provide free access to wellness services and support provided by your

practitioners, educators, artists and service providers.

• A scholarship fund to help make integrative wellness services, classes, programs and out-of-pocket
therapies more accessible to the general public.

• Educational conversations between the public and your members about their health needs.

Your members may use your x-acre facility and grounds as a benefit of membership. Your members may use
your facility for the following professional purposes:

Private practice
Workshops

Classes

Seminars

Continuing education
Meetings

Letter 4036 (Rev. 7-2014)
Catalog Number 47630W

Luncheons

Benefits

Administrative space

Retail display or sales

Art display or sales

Cd release Concerts
Musical performances
Book signings

Other professional purposes

You do not interfere in how members promote or price services or events. Members are always hosts, you do
not help with clients, students, patients, or guests. Members must promote their own events. Members keep all
the earnings and pay a space usage rate per their membership agreement.

All members may request an event be considered for a 50/50 split of all revenues with you in place of the
standard hourly rate.

Your members may also use your facility for the following private, family and social events provided they use
another member for their planning and catering needs:
• Weddings

Social Luncheons
Other personal uses

• Rehearsal dinners
• Bridal showers

• Baby showers

• Baptisms

• Celebrations

e

@

You allow the general public to visit Monday through Friday from 9am to Spm for coffee, tea, free Wi-Fi, shop
the retail spaces and enjoy the public outdoor space when not used for events.

You anticipate entering into a lease with D for the facility where you will conduct your activities. You also
received a loan from D that accrues interest at the short term federal minimum rate.

You state you are funded entirely by memberships, private donations, and space usage fees. Your financial
information shows revenues are almost exclusively from membership fees and gross receipts from rental
income. Your expenses include salaries, occupancy, professional fees, décor, repair and maintenance, and other
expenses.

Law ; . . °
Section 501(c)(3) of the Code provides, in part, for the exemption from Federal income tax of organizations
organized and operated exclusively for charitable, religious or educational purposes, no part of the net earnings
of which inures to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that in order to qualify under Section 501(c)(3) of the

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Code, an organization must be both organized and operated exclusively for one or more exempt purposes. 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) states 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 Section 501(c)(3) of the Code. 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 under Section 501(c)(3) of the Code unless it serves a public
rather a private interest. Thus, it is necessary for an organization to establish that it is not organized or operated
for the benefit of private interests.

Treas. Reg. Section 1.501(c)(3)-1(d)(2) provides the term “charitable” is used in Section 501(c)(3) of the Code
in its generally accepted legal sense and includes relieving the poor and distressed or the underprivileged,
combating community deterioration, lessening neighborhood tensions, and eliminating prejudice and
discrimination.

Treas. Reg. Section 1.501 (c)(3)-1(d)(3)(i) provides that the term “educational,” as used in Section 501(c)(3) of
the Code, relates to the instruction of the public on subjects useful to the individual and beneficial to the
community.

In Revenue Ruling 69-175, 1969-1 C.B. 149, an organization formed by parents of pupils attending a private
school, that provides school bus transportation for its members' does not qualify for exemption under Section
501(c)(3) of the Code because when a group of individuals associate to provide a cooperative service for
themselves, they are serving a private interest.

Revenue Ruling 69-572, 1969-2 C.B. 119, concluded that a nonprofit organization created to construct and
maintain a building for the exclusive purpose of housing and serving member agencies exempt under Section
501(c)(3) of the Code is exempt under Section 501(c)(3). Because of the close connection between the
organization and the charitable functions of the tenant-organizations and the rental of the facilities at rates
substantially below fair rental value, the organization furthers the charitable purposes of the tenants. The
organization primarily relied on charitable contributions from the public and loans from charitable organizations

to pay expenses and costs.

In Revenue Ruling 71-395, 1971-2 C.B. 228, a cooperative art gallery was formed and operated by a group of
artists for the purpose of exhibiting and selling their works and did not qualify for exemption under Section 501
(c)(3) of the Code. It served the private purposes of its members, even though the exhibition and sale of.
paintings may be an educational activity in other respects.

Revenue Ruling 76-147, 1976-1 C.B. 151, states that an organization formed to improve conditions in an area
of a city where the income level is higher and housing better than in other areas of the city and whose activities
include providing general information on methods of counteracting housing deterioration and ways of
improving homes may qualify for exemption under section 501(c)(3) of the Code

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In Revenue Ruling 76-419, 1976-2 C.B. 146, an organization that purchased blighted land, developed it into an
industrial park, and rented space in the park at favorable terms to industrial enterprises that would not ordinarily
locate in the area, was held to be organized and operated for the charitable purpose of promoting social welfare,
relieving the poor and distressed, and combating community deterioration. The organization required tenants to
hire a significant number of presently unemployed persons and it required tenants to train workers in needed
skills. Tenants that hired low skill workers were favored over those who had high initial job skill requirements.

Revenue Ruling 77-111, 1977-1 C.B. 144 involved two situations. In the first situation, an organization was
formed to increase business patronage in a deteriorated area mainly inhabited by minority groups. It provided
information to the public on the area's shopping opportunities, local transportation and accommodations. The
ruling concluded that the primary purpose of the organization was to promote business, which was not an
exempt purpose. As such, the organization did not qualify for exemption under Section 501(c)(3) of the Code.
In the second situation, the organization's purpose was to revive retail sales in an area suffering from continued
economic decline by constructing a retail shopping center. The organization purchased land, which it sold to the
city at no profit. The city acquired additional land for the project. The city required that minorities be utilized in
both the construction and the operation of the project. Stores located within the project were also required to
employ a certain percentage of minority group employees. Nevertheless, the ruling concluded that the
organization's activities resulted in major benefits accruing to the stores that will locate in the shopping center.
The ruling concluded that the organization's activities were directed to benefit the businesses in the shopping
center, rather than to accomplish exclusively 501(c)(3) purposes. Therefore, the organization did not qualify for
exemption under Section 501(c)(3).

Revenue Ruling 77-366, 1977-2 C.B. 192 concluded that a nonprofit organization that arranges and conducts
winter-time ocean cruises during which activities to further religious and educational purposes are provided in
addition to extensive social and recreational activities is not operated exclusively for exempt purposes and does
not qualify for exemption.

In Better Business Bureau of Washington. D.C.. Inc. v. United States, 326 U.S. 179 (1945), the Supreme Court

held that the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for
exemption regardless of the number or importance of truly exempt purposes. The Petitioner's activities were
largely animated by non-exempt purposes directed fundamentally to ends other than that of education.

In Ginsberg v. Commissioner, 46 T.C. 47 (1966), the court considered a collective organization created to

dredge waterways. The majority of the funds for this activity came from owners of property adjacent to the
waterways. The court found that the primary beneficiaries were the adjacent property owners. Any benefit to the
general public because these dredged waterways would be a safe harbor for boats during a storm was secondary.
Therefore, the organization was not exempt because of the significant private benefit provided.

Application of law

To qualify for exemption under Section 501(c)(3) of the Code you must be both organized and operated
exclusively for exempt purposes as described in Treas. Reg. Section 1.501(c)(3)-1(a)(1). Your operations
primarily function to provide cooperative services for your members and therefore, function to serve the private

interests of your members.

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To satisfy the operational test under Treas. Reg. Section 1.501(c)(3)-1(c)(1), an organization must establish that
it is operated exclusively for one or more exempt purposes. You were formed for the non-exempt purpose of
operating a cooperative for members, including providing a facility for professional and personal purposes.

You are distinguishable from Treas. Reg Sections 1.501(c)(3)-1(d)(2) and 1.501(c)(3)-1(d)(3)(1). You do
provide some charitable activities, such as providing non-profits with donated memberships, but this makes up
approximately 5% of your membership and is not your exclusive purpose. Similarly, you have educational
events, such as free health days where you educate the public on healthcare and full moon drummings to
educate people on Native American traditions. However, these activities are only held occasionally and are not
your exclusive purpose. Your operations and financial information demonstrate your primary purpose is
operating as a co-op for members.

As held in Better Business Bureau of Washington. D.C., Inc. v. United States, a single non-exempt purpose, if
substantial, will preclude tax exemption under Section 501(c)(3) of the Code. The operation of your
cooperative, a substantial part of your activities, is a non-exempt purpose. Like Revenue Ruling 69-175, your
members associate together to provide a cooperative service for themselves. To qualify for exemption under
Section 501(c)(3) of the Code you must serve a public, rather than a private, interest as described in Treas. Reg.
Section 1.501(c)(3)-1(d)(1)(ii).

As in Revenue Ruling 71-395, you are formed as a cooperative primarily for the benefit of your members. Your
members are autonomous business owners and you do not interfere in member events. Your function is to create
an infrastructure for a cooperative community. Members get benefits from joining you, including a resource
network, promotion of events, ability to rent the facility for professional and personal events, and the ability to
sell art or retail and keep all sales. Therefore, the cooperative nature of your membership serves a substantial
private benefit to your members.

You are distinguishable from Revenue Ruling 76-147 because you are a membership organization operating as
a cooperative. Even though your operations may result in benefit to the community, the primary beneficiaries of
your operations are your members, who are mostly for-profit organizations. Thus, even if the operations of your
members provide some benefit the community, you are not directly benefiting the community. Instead, your
operations directly and substantially benefit your members and their for-profit operations. This substantial
private benefit precludes exemption under Section 501(c)(3) of the Code.

You are not like the organization in Revenue Ruling 69-572. The majority of your members are for-profit
organizations; you are not providing your facility to exclusively to entities exempt under Section 501(c)(3) of
the Code. Additionally, you are almost entirely funded by membership fees and rental income from use of your
facility. These fees collected pay for your operating costs, including the costs of operating your facility, salaries,
and professional fees. This demonstrates that your services are not provided to charitable organizations, nor are
they provided in a charitable manner.

You are not like the organization in Revenue Ruling 76-419. Your members are mostly for-profit organizations,
and you do not require members to operate in a charitable manner, such as working to reduce unemployment by
offering jobs to low skill workers or providing job training. You describe your members as practitioners,
educators, artists and service providers, who are typically skilled professionals. Therefore, you are facilitating
the improvement of existing businesses by offering a cooperative business network and facility usage, rather
than improving the community as a whole.

Letter 4036 (Rev. 7-2014)
Catalog Number 47630W

You are like the organization in Revenue Ruling 77-111 because your activities primarily benefit your members

instead of accomplishing exclusively charitable and educational purposes. Even though you will provide some
educational benefits to the community through public events, your primary purpose is serving as a cooperative
for members. This substantial private benefit to your members precludes exemption under Section 501(c)(3) of
the Code.

Like the organization in Revenue Ruling 77-366, you are not operated for exclusively exempt purposes because
your primary activity is operating a business cooperative. Even though you do have some educational and
charitable programs, like public health screening days and donating memberships to non-profits, the purpose of
providing a facility to members for both business and personal use and facilitating for-profits to conduct
business is not exclusively educational or charitable. Therefore, you do not qualify for exemption under Section
501(c)(3) of the Code.

Similar to the organization described in Ginsberg v. Commissioner, the primary beneficiaries of your activities
are your members, Any benefit the public receives through occasional education programs is secondary to the
benefit members get from being able to use your facilities at reduced costs, having a network of businesses and
business support, and having the opportunity to sell art or retail goods.

Your position

You state you are similar to the organizations in Revenue Ruling 69-572 and Revenue Ruling 71-529 because
you provide a facility for rent substantially less than comparable rents for commercial facilities and you
materially assist your members in the performance of the respective functions and bring substantial benefits to
the users of the facility.

You provide a central place to enable your member tenants to facilitate effective coordination of their
operations and services, which furthers a charitable purpose within the meaning of Section 501(c)(3) of the
Code by serving as a collaborative consortium for your members.

You provide significant benefits to the general public that outweigh any private benefits to your members.

You are similar to the organization in Revenue Ruling 76-147 because the programs and activities conducted at
the center will benefit the individuals participating in such programs and activities in the short term and the
larger community and general public in the long term.

You are similar to the organization in Revenue Ruling 66-179, situation 1, because you will advance education
and science which is charitable and education is provided through various means. You promote social welfare
within the meaning of Section 501(c)(3) of the Code by advancing science and the education of those who
participate in the programs and activities conducted at the Center.

You are similar to other organizations that were granted tax-exemption by the Internal Revenue Service under
501(c)(3) of the Code for providing instruction and training that included diverse activities such as counseling
widows, dancing, marriage counseling, student exchange programs, counseling immigrants and training
prisoners as noted in Revenue Rulings 65-270, 67-150, 70-640, 76-205, 78-99 and 80-286.

Letter 4036 (Rev. 7-2014)
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Our response to your position
You are not similar to the organizations in Revenue Ruling 69-572 and 71-529 because substantially all of your

members are not exempt under Section 501(c)(3) of the Code. Your tenants are mostly for-profit organizations
conducting commercial activities, not exclusively charitable activities. You are not funded by contributions.
You are funded by membership fees and rental income from use of your facility. These fees collected pay for
your costs, including the costs of your facility, salaries, and professional fees, demonstrating that your services
are not provided substantially below cost. You are not providing essential functions for Section 501(c)(3)
organizations like the organizations in Revenue Ruling 69-572 and Revenue Ruling 71-529. Your primary
function is to provide a facility and a member cooperative to those who pay the membership fees and usage
rates for access to the facility. This is not an exclusively charitable or educational purpose within the meaning

of Section 501(c)(3).

You are not similar to the organization in Revenue Ruling 66-179, situation 1, as your primary activity is not
directly carrying out programs that further exempt purposes under 501(c)(3) of the Code. Your educational
programs are not your primary purpose; your primary purpose is providing a member cooperative to those who
have paid your membership and usage rate fees. Even if your members provide charitable or educational
activities themselves, your members are almost exclusively for-profit organizations. You have no requirements
restricting business or personal activities conducted at your facility to only educational or charitable activities.
Therefore, your primary purpose is furthering the operations of for-profit businesses, not educational or
charitable activities.

You are not exclusively providing educational activities, such as counseling or training as noted in Revenue
Rulings 65-270, 67-150, 70-640, 76-205, 78-99 and 80-286. Even though you have some educational activities,
like free health screening days and education about Native Americans, you have the substantial purpose of
operating a cooperative for your members. This benefit to your members, most who are for-profits, precludes

you from exemption.
Conclusion

Based on the information submitted, we conclude that you are not an organization described in Section
501(c)(3) of the Code because you are not operated exclusively for one or more exempt purposes set forth in

Section 501(c)(3).

If you don’t agree
You have a right to file a protest if you don’t agree with our proposed adverse determination. To do so, you

must send a statement to us within 30 days of the date of this letter. The statement must include:

• Your name, address, employer identification number (EIN), and a daytime phone
number

• A copy of this letter highlighting the findings you disagree with
• An explanation of why you disagree, including any supporting documents

• The law or authority, if any, you are relying on

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• The signature of an officer, director, trustee, or other official who is authorized to sign for the
organization, or your authorized representative

• One of the following declarations:

For an officer, director, trustee, or other official who is authorized to sign for the organization:
Under penalties of perjury, I declare that I examined this protest statement, including

accompanying documents, and to the best of my knowledge and belief, the statement contains all
relevant facts and such facts are true, correct, and complete.

For authorized representatives:
Under penalties of perjury, I declare that I prepared this protest statement, including
accompanying documents, and to the best of my knowledge and belief, the statement contains all

relevant facts 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 he or she hasn’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 provided a basis for us to reconsider our determination. If
so, we'll continue to process your case considering the information you provided. If you haven’t provided a
basis for reconsideration, we’ll forward your case to the Office of Appeals and notify you. You can find more
information about the role of the Appeals Office in Publication 892, How to Appeal an IRS Decision on Tax-

Exempt Status.

If you don’t file a protest within 30 days, you can’t seek a declaratory judgment in court at a later date because
the law requires that you use the IRS administrative process first (Section 7428(b)(2) of the Code).

Where to send your protest ;
Please send your protest statement, Form 2848, if needed, 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
Room 7-008 550 Main Street, Room 7-008

P.O. Box 2508 Cincinnati, OH 45202

Cincinnati, OH 45201

You can also fax your statement 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 he or she received

it.
If you agree

Letter 4036 (Rev. 7-2014)
Catalog Number 47630W

11
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.

You can find all forms and publications mentioned in this letter on our website at www.irs. gov/formspubs. If
you have questions, you can contact the person listed at the top of this letter.

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

Enclosure:
Publication 892

ce:

Letter 4036 (Rev. 7-2014)
Catalog Number 47630W