Sportsmen’s social club denied charitable exemption

Plain-English summary

A long-running sportsmen’s club conducted conservation, youth, hunter-safety, and habitat activities, but also maintained year-round recreational facilities and events for adult members. Its articles expressly included sports, member meetings, amusement, and social recreation. The IRS concluded that those broad purposes failed the organizational test and that substantial social and recreational operations failed the operational test, so the club did not qualify under section 501(c)(3).

Ruling snapshot

• Question: Does a sportsmen’s club with conservation and educational activities qualify under section 501(c)(3) when it also substantially serves members’ social and recreational interests?
• Outcome: denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Ruls. 66-179 and 77-366; Better Business Bureau v. United States

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201
Date: DECEMBER 23, 2019

Employer ID number:

Release Number: 202012013
Release Date: 4/3/2020 Contact person/ID number:

UIL: 501.03-00, 501.03-30

Contact telephone number:
Form you must file:

Tax years:

Dear

This letter is our final determination that you don’t qualify for tax-exempt status under Section 501(c)(3) of the
Internal Revenue Code (the Code). Recently, we sent you a proposed adverse determination in response to your
application. The proposed adverse determination explained the facts, law, and basis for our conclusion, and it
gave you 30 days to file a protest. Because we didn’t receive a protest within the required 30 days, the proposed
determination is now final.

Because you don’t qualify as a tax-exempt organization under Section 501(c)(3) of the Code, donors can’t
deduct contributions to you under Section 170 of the Code. You must file federal income tax returns for the tax
years listed at the top of this letter using the required form (also listed at the top of this letter) within 30 days of
this letter unless you request an extension of time to file.

We’ll make this final adverse determination letter and the proposed adverse determination letter available for
public inspection (as required under Section 6110 of the Code) after deleting certain identifying information.
Please read the enclosed Notice 437, Notice of Intention to Disclose, and review the two attached letters that
show our proposed deletions. If you disagree with our proposed deletions, follow the instructions in the Notice
437 on how to notify us. If you agree with our deletions, you don’t need to take any further action.

We’ll also notify the appropriate state officials of our determination by sending them a copy of this final letter
and the proposed determination letter (under Section 6104(c) of the Code). You should contact your state
officials if you have questions about how this determination will affect your state responsibilities and
requirements.

Letter 4038 (Rev. 7-2014)
Catalog Number 47632S

If you have questions about this letter, you can contact the person listed at the top of this letter. If you have
questions about your federal income tax status and responsibilities, call our customer service number at
1-800-829-1040 (TTY 1-800-829-4933 for deaf or hard of hearing) or customer service for businesses at
1-800-829-4933.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Notice 437

Redacted Letter 4036, Proposed Adverse Determination Under IRC Section 501(c)(3)
Redacted Letter 4038, Final Adverse Determination Under IRC Section 501(c)(3) - No Protest

Letter 4038 (Rev. 7-2014)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201
Date:
October 28, 2019

Employer ID number:

Contact person/ID number:
Contact telephone number:

Contact fax number:

Legend: UIL:
P = state 501.03-00

Q = date 501.03-30

R = township/state
s = number
t = number

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)(3).
This letter explains the reasons 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 have been operating as a social club, specializing in ecology, conservation and preservation of the fish and

wildlife in the area for many years. Recently, you wished to be recognized as a non-profit organization and the
proceedings began to accomplish that task. You incorporated in the state of P on Q. According to your Articles
of Incorporation, you were formed to provide a legal means and location for area youth and adults to engage in
outdoor activities, ecological conservation and promote citizenship. Specifically, you are:

Organized to unite and bind together the sportsmen of R: to have a general meeting place, to
exchange views, to solve problems confronting members, to harmonize their ideas, to assist and
co-operate with the State Game, Fish, and Forestry Departments, to work for and encourage
proper legislation relative to game, fish, forests and streams, to oppose political interference with
the administration of game and fish laws, to engage in sportsman’s activities and sport, to afford
the members a place where they may meet and engage in social recreation for their own
amusement, none of which purposes contemplate or provide for pecuniary gain or profit,
incidentally or otherwise, to the members of the Club.

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

2

In addition to containing the same purpose clause, your Bylaws provide that you shall charge an annual dues fee
for adult members with free or reduced fees for youth, seniors, and active members of the US armed forces.
Members receive a membership card, membership badge and the pass code for entry to the facilities.

Each month the club holds a general meeting with officers, members, and guests. Special meetings are called as
needed. The attendees discuss upcoming events and preparation needed for these events. They review prior
years’ events and approve remedies to solve any problems. Volunteers are scheduled to properly complete the

events.

Guest speakers are often scheduled to appear at the monthly membership meeting. P Game, Forestry & Fish
Commission officials speak to the members about the conditions of the wildlife, forests, and river environments
and ask the membership to assist with improving the conditions for these habitats. The Commissioners discuss
threats of disease and insect infestations found in northwestern P. Recently, the Fish Commission educated the
members of a fatal disease involving trout at the local fisheries. The members organized a work party and
assisted in cleaning up the fisheries and local streams to prevent the spread of the disease.

They also inform the members of upcoming legislation in P that may affect these habitats. Question and answer
sessions help to educate the members and promote action to solve the issues. Members are encouraged to
communicate with their state representatives to voice their opinions in favor or against current pending

legislation.

The club is available to all members every day throughout the year. Members may use the acreage, rifle range,
horse shoe pits, skeet and trap facilities at their convenience for their personal recreation. The multitude of
events coordinated by the club provide social recreation for all members, both youth and adults. In addition to
members’ personal uses, your volunteer events provide enormous entertainment and social recreation for
participants and volunteer workers. Pride, competition and fellowship keeps your membership strong and
increases new membership of the area youth. Member statistics for the current year include approximately s
youth members and t adult members.

According to your application, your mission has been and will continue to be the preservation of the ecosystem
through education, experience and competition. In the past, you have conducted events such as: kids fish rodeo,
pheasant raising program, high school trap league, hunter safety education classes, and sporting clays benefit
shoot. These activities account for all your club members’ volunteer hours.

The fish rodeo is held annually, right after fishing season begins in your state. The event brings an opportunity
for family outings and competition. The children learn how to fish while preserving the ecology around them.
Competition promotes good sportsmanship, education and fellowship.

You purchase pheasant chicks to raise. Along with increasing the area’s pheasant population, the youth
involved in the program learn how to nurture the chicks and improve the habitat that pheasants live in. This
program occurs each year at your club facilities. early spring and continues through summer.

Your club hosts and participates in high school trap matches where area youth compete. Education classes and
practice times are held before the events. These events promote good sportsmanship, competition, education
and fellowship.

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

3

Hunter safety classes are held for the area’s youth and adults. These courses are available to members and non-
members. These classes run each year in early fall, prior to P hunting season, and are required by P to qualify
for a hunting license.

The sporting clays benefit shoots are competition style shooting held to benefit a local citizen. Your club is the
preferred location for the events in your area. While another organization administers the event, you are
responsible for the equipment and grounds for the event to take place. These shoots occur frequently throughout
the summer months and promote competition, good sportsmanship and fellowship.

Your club includes over acres of land, on which is located a facility building with electricity, plumbing
and heating. Event areas include

Your income is derived from gifts, grants and contributions, membership fees, payments for
, and a small amount of rental income from private parties.

Law
Section 501(c)(3) of the Code provides for the recognition of exemption of organizations that are organized and

operated exclusively for charitable, educational, or other enumerated purposes as specified in the statute. No
part of the net earnings may inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) provides that, in order to be exempt as an organization
described in Section 501(c)(3) of the Code, an organization must be both organized and operated exclusively for
one or more of the purposes specified in such section. If an organization fails to meet either the organizational

test or the operational test, it is not exempt.

Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i) provides that an organization is organized exclusively for one or
more exempt purposes only if its articles of organization:

(a) Limit the purposes of such organization to one or more exempt purposes; and
(b) Do not expressly empower the organization engage, otherwise than as an insubstantial part of its
activities, in activities that in themselves are not in furtherance of one or more exempt purposes.

Treas. Reg. Section 1.501(c)(3)-1(b)(1)(iv) provides that in no case shall an organization be considered to be
organized exclusively for one or more exempt purposes, if, by the terms of its articles, the purposes for which
such organization is created are broader than the purposes specified in Section 501(c)(3) of the Code.

Treas. Reg. Section 1.501(c)(3)-1(c)(1) provides 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)(2) defines the term charitable as including the relief of the poor and
distressed or of the underprivileged, and the promotion of social welfare by organizations designed to lessen
neighborhood tensions, to eliminate prejudice and discrimination, or to combat community deterioration. The
term "charitable" also includes lessening of the burdens of government.

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

4

Treas. Reg. Section 1.501(c)(3)-1(d)(3)(i) defines the term educational as the instruction or training of the
individual for the purpose of improving or developing his capabilities or the instruction of the public on subjects
useful to the individual and beneficial to the community.

Revenue Ruling 66-179, 1966-1 C.B. 139 describes situations under which garden clubs may qualify for
exemption under section 501 of the Code. Situation 1 describes an organization that is incorporated as a
nonprofit organization to instruct the public on horticultural subjects and stimulating interest in the
beautification of the geographic area. In furtherance of these purposes, the organization (1) maintains and
operates a free library of materials on horticulture and allied subjects; (2) instructs the public on correct
gardening procedures and conservation of trees and plants by means of radio, television, and lecture programs;
(3) holds public flower shows of a noncommercial nature at which new varieties of plants and flowers are
exhibited; (4) makes awards to children for achievements in gardening; (5) encourages roadside beautification
and civic planting; and (6) makes awards for civic achievement in conservation and horticulture. Situation 2
described an organization with the same facts as described in Situation 1 except that a substantial part of the
organization's activities, but not its primary activity, consists of social functions for the benefit, pleasure, and
recreation of its members. The organization in Situation 1 is organized and operated exclusively for charitable
and educational purposes and qualifies for exemption under section 501(c)(3) of the Code. The facts in
Situation 2 are distinguishable from those in Situation 1 in that the organization in Situation 2 conducts
substantial social functions not in furtherance of any of the purposes specified in section 501(c)(3).
Accordingly, the organization does not qualify for exemption under section 501(c)(3). However, because the
organization is operated primarily to bring about civic betterment and social improvements and the social
functions for the benefit, pleasure and recreation of the members do not constitute its primary activity, the
organization qualifies for exemption under section 501(c)(4).

Revenue Ruling 77-366, 1977-2 C.B. 192 states 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 under section 501(c)(3) of the Code.

In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (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.

In First Libertarian Church v. Commissioner of Internal Revenue, 74 T.C. 396 (1980), the Court stated that the
church failed to show that it successfully segregated the clearly social and political aspects of its supper club
meetings and its publication from its purpose to further the doctrine of ethical egoism. As the church operated
for social and political purposes to more than an insubstantial degree, it fails to qualify for exemption under
Section 501(c)(3) of the Code. The court stated that an organization will not qualify for exemption if a non-
exempt activity is more than an insubstantial part of its overall activities or if an activity has more than an
insubstantial non-exempt purpose. The court explained that "clearly the regulations and cases contemplate that a
single activity may be carried on for more than one purpose. If a substantial secondary purpose is not an exempt
one, qualification under section 501(c)(3) will be denied."

In Schoger Foundation v. Commissioner, 76 T.C. 380 (1981), it was held that if an activity serves a substantial
non-exempt purpose, the organization does not qualify for exemption even if the activity also furthers an
exempt purpose.

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

Application of law

Section 501(c)(3) of the Code and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests for an
organization to be recognized as exempt. An organization must be both organized and operated exclusively for
purposes described in Section 501(c)(3). Based on the information you provided in your application and
supporting documentation, we conclude that you fail both tests.

Your Articles of Incorporation do not include language that limits your purposes to one or more exempt
purposes. The purposes for which you were created are broader than the purposes specified in Section 501(c)(3)
of the Code, including social and recreational purposes. Accordingly, you do not satisfy the organizational test
required by Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i) and 1.501(c)(3)-1(b)(1)(iv), and you are not organized for
exclusively exempt purposes.

You are also not described in Section 501(c)(3) of the Code because you fail the operational test. Specifically,
you are not operated exclusively for an exempt purpose as described in Treas. Reg. Section 1.501(c)(3)-1(c)(1).
The facts show you are not operated exclusively for charitable and educational purposes, but for the purpose of
sportsman’s activities and sport, and to provide a club which your members use at their convenience throughout

the year.

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. You did not provide evidence that you limit your activities to the poor and distressed, or
exclusively for youth. While you do conduct activities that benefit the area youth, this is incidental to your
operation of a social and recreational club for your adult members.

Treas. Reg. Section 1.501(c)(3)-1(d)(3)(i) provides, in part, 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. While you do provide some educational services, such as hunter safety education classes,
there is no evidence you were formed and are operated exclusively for these purposes.

Although an organization may carry on activities that further one or more tax-exempt purposes, it will not be
treated as operated exclusively for an exempt purpose if it has a single non-charitable purpose that is substantial
in nature. See Better Business Bureau v United States and Schoger Foundation v. Commissioner. Furthermore,
more than insubstantial non-501(c)(3) purposes will defeat exemption under Section 501(c)(3) of the Code. See
First Libertarian Church v. Commissioner of Internal Revenue (church that operated for social and political
purposes to more than an insubstantial degree failed to qualify for exemption under 501(c)(3)); See Rev. Rul.
77-366 (winter cruise with religious and educational purposes, as well as social and recreational activities, not
exempt under 501(c)(3)); and See Rev. Rul. 66-179 (garden club that conducts substantial social functions not
exempt under 501(c)(3)). As stated above, while you do conduct some activities and serve some purposes that
are exempt under Section 501(c)(3) you also serve more than insubstantial purposes that do not qualify under
Section 501(c)(3).

Conclusion
Based on the facts and circumstances presented, you do not qualify for exemption from federal income tax as an

organization described in Section 501(c)(3) of the Code. You are not organized or operated exclusively for
exempt purposes as set forth in Section 501(c)(3). By providing members with an opportunity to pursue social

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

6

and recreational sports activities, you are operated for a substantial non-exempt purpose. Your operations are
not exclusively charitable or educational and resemble those of a social club.

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 a
protest within 30 days of the date of this letter. You must include:

• Your name, address, employer identification number (EIN), and a daytime phone number
• A statement of the facts, law, and arguments supporting your position
• A statement indicating whether you are requesting an Appeals Office conference

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

• The following declaration:

For an officer, director, trustee, or other official who is authorized to sign for the organization:
Under penalties of perjury, I declare that I have examined this request, or this modification to the
request, including accompanying documents, and to the best of my knowledge and belief, the request
or the modification contains all relevant facts relating to the request, and such facts are true, correct,
and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the
IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if they haven’t
already done so. You can find more information about representation in Publication 947, Practice Before the
IRS and Power of Attorney.

We’ll review your protest statement and decide if you gave us a basis to reconsider our determination. If so,
we’ll continue to process your case considering the information you provided. If you haven’t given us a basis
for reconsideration, we’ll send your case to the Appeals Office and notify you. You can find more information
in Publication 892, How to Appeal an IRS Decision 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:

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K

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

P.O. Box 2508 Cincinnati, OH 45202

Cincinnati, OH 45201

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

cc:

Letter 4034 (Rev. 11-2018)
Catalog Number 47628K