Family reunion organization denied charitable exemption

Plain-English summary

An organization devoted all of its current time and resources to a biennial reunion and gala for one extended family and the family's friends. The event combined educational, social, and spiritual activities, and the organization planned scholarships, a cultural-history and financial-literacy website, and public monthly content. Despite those proposed public-facing elements, fundraising, planning, marketing, and other operations centered on the family event. The IRS concluded that the organization's earnings and activities primarily benefited the family and that organizing its reunion and gala was a substantial nonexempt purpose. It denied exemption, and the determination became final when no protest was filed.

Ruling snapshot

• Question: Does an organization centered on one family's reunion and gala operate primarily for public charitable purposes under section 501(c)(3)?
• Outcome: denied
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 67-367; Rev. Rul. 69-175; Rev. Rul. 80-302; Wendy Parker Rehabilitation Foundation, Inc. v. Commissioner, T.C. Memo. 1986-348

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
P.O. Box 2508
Cincinnati, OH 45201

Release Number: 202016022
Release Date: 4/17/2020

UIL Number: 501.32-00, 501.33-00

Date:
January 21, 2020

Employer ID number:

Contact person/ID number:
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 Internal Revenue Code
(IRC) Section 501(c)(3). 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 IRC Section 501(c)(3), donors can’t deduct
contributions to you under IRC Section 170. 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 IRC Section 6110) 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 IRC Section 6104(c)). 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:

November 14, 2019
Employer ID number:

Contact person/ID number:
Contact telephone number:

Contact fax number:

Legend:                                     UIL:

B = Date                                    501.32-00
C = Date                                    501.33-00
M = State

D = Name

E = Name

x = Amount

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 IRC Section 501(c)(3)? No, for the reasons stated below.

Facts
You submitted Form 1023-EZ, Streamline Application for Recognition of Exemption Under Section 501(c)(3) of

the Internal Revenue Code, on B. You attested on Form 1023-EZ that you are organized and operated
exclusively to further charitable and educational purposes. You also attested that you have not conducted and
will not conduct prohibited activities under IRC Section 501(c)(3).

During review of your Form 1023-EZ, detailed information was requested supplemental to your attestations.
You incorporated on C in the state of M. Your stated mission is to maintain and sustain the legacy of the D

through the preservation of its rich, historical traditions by engaging in and promoting initiatives that
affirm its cultural, social and economic values.

You organize and promote a biennial f reunion and gala event that draws approximately x members
and friends from across the United States. The event, which is open to the D family and their friends, lasts

days and is usually held during E. It includes a combination of educational, social, and spiritual activities
advancing the D family’s core values of love, unity, and progress.

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

You stated your reunion and gala event has been so successful that you are now using it to provide
scholarship funding, awarding individuals who have excellence in the arts or community or public service. In
addition, you are creating a website that will feature content related to cultural history, financial literacy, and
entertainment events. You plan to have monthly activities and digital content available to the public.

All your time and resources are currently allocated to the reunion and gala event, including vendor
contract negotiations, database management, event planning, fundraising, and marketing.

Law
Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order to be exempt as an organization described

in IRC Section 501(c)(3), 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(c)(1) of the regulations provides that an organization will be regarded as
operated exclusively for one or more exempt purposes only if it engages primarily in activities that accomplish
one or more of such exempt purposes specified in IRC Section 501(c)(3). 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(c)(2) provides an organization is not operated exclusively for one or more
exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals.

Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) states that an organization is not operated exclusively for one or
more exempt purposes unless it serves a public rather than a private interest. It must not be operated for the
benefit of designated individuals or the persons who created it.

Revenue Ruling 67-367, 1967-2 C.B. 188, describes an organization whose sole activity was the operation of a
“scholarship plan” for making payments to pre-selected, specifically named individuals. The organization did
not qualify for exemption under IRC Section 501(c)(3) because it was serving the private interests of its
subscribers rather than public or charitable interests.

Revenue Ruling 69-175, 1969-1 C.B. 149, describes an organization formed by the parents of pupils attending a
private school exempt under IRC Section 501(c)(3). The organization provides bus transportation to and from
the school for those children whose parents belong to the organization. The ruling states that when a group of
individuals associate to provide a cooperative service for themselves, they are serving a private interest. By
providing bus transportation for school children to school, the organization enables the participating parents to
fulfill their individual responsibility of transporting their children to school.

Revenue Ruling 80-302, 1980-2 C.B. 182, describes an organization that (1) limits its membership to
descendants of a particular family, (2) compiles family genealogical research data for use by its members for
reasons other than to conform to the religious precepts of the family's denomination, (3) presents the data to
designated libraries, (4) publishes volumes of family history, and (5) promotes social activities among family
members. The organization did not qualify for exemption under IRC Section 501(c)(3) because the activities are

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

3

primarily limited to one particular family. Therefore, these activities do not advance education to benefit the
public interest.

In Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945), the court held that
the presence of a single non-exempt purpose, if substantial in nature, will preclude exemption regardless of the
number or importance of statutorily exempt purposes.

In Wendy Parker Rehabilitation Foundation, Inc. v. Commissioner, T.C. Memo 1986-348, 52 T.C.M. (CCH) 51
(1986), the organization was created by the Parker family to aid an open-ended class of "victims of coma."
However, the organization stated that it anticipated spending 30 percent of its income for the benefit of Wendy
Parker, significant contributions were made to the organization by the Parker family, and the Parker family
controlled the organization. Wendy's selection as a substantial recipient of funds substantially benefited the
Parker family by assisting with the economic burden of caring for her. The benefit did not flow primarily to the
general public as required under Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii). Therefore, the organization did not
qualify for exemption under IRC Section 501(c)(3).

Application of law
Treas. Reg. Section 1.501(c)(3)-1(a)(1) provides that an organization described in IRC Section 501(c)(3) must

be operated exclusively for one or more of the purposes specified in such section. Treas. Reg. Section
1.501(c)(3)-1(c)(1). Because more than an insubstantial part of your activities involves organizing reunion and
gala events for the benefit of the D , you do not engage primarily in activities that accomplish one or
more of such exempt purposes.

Treas. Reg. Section 1.501(c)(3)-1(c)(2) provides that an organization is not operated exclusively for one or
more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or
individuals. Your net earnings inure in part or in whole to the benefit of the D . You do not, therefore,
meet the operational test under Section 501(c)(3).

Likewise, you do not meet the requirement of Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) because you operate
for private interests rather than public interests by organizing reunion and gala events for the benefit of the D

family.

You are like the organizations described in Revenue Ruling 67-367, 69-175, and 80-302 because you serve the
private interests of the D family rather than the public interest.

Although you conduct some educational activities, you have specifically been raising funds since inception for
the non-exempt purpose of organizing D’s reunion and gala events. According to the court in Better
Business Bureau of Washington, D.C., Inc., such a single non-exempt purpose, if substantial in nature, will
preclude exemption regardless of the number or importance of exempt purposes the organization serves.

You closely resemble the organization described in Wendy Parker Rehabilitation Foundation, Inc. because you
were formed to relieve the D economic burdens by raising funds to pay for their family reunion and

gala events.

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

Conclusion

Based on the information submitted, you fail the operational test under IRC Section 501(c)(3) because your
funds inure to the benefit of the D . Additionally, your activity of organizing reunion and gala events for
the D constitutes a substantial non-exempt purpose. Therefore, you do not qualify for exemption under

Section 501(c)(3).
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)).

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

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

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.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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