IRS denies 501(c)(4) status to a gated-community homeowners' association whose amenities are walled off from the public

Plain-English summary

A homeowners' association for a gated residential community applied for tax-exempt status as a social welfare organization under IRC § 501(c)(4). The association maintains private streets, greenbelts, monument signs, a lake, a nature trail, playgrounds, and other amenities, and it runs a 24-hour guarded gate with a private security patrol. It argued that these functions promote the general welfare and lessen the burden on local government, much like a small municipality. The IRS disagreed and denied exemption. The controlling problem was access: the community is enclosed by fences and masonry walls, and only member homeowners, their guests, and members of a co-located private country club can get past the gate. Under Rev. Rul. 74-99 (which clarified Rev. Rul. 72-102) and Rev. Rul. 80-63, a § 501(c)(4) homeowners' association must serve a "community" resembling a governmental subdivision and must open its common areas to the general public. Because this association's roads, parks, and facilities benefit only a restricted group behind the gate, the IRS found it more like the denied associations in Flat Top Lake, Lake Forest, and Rev. Rul. 77-273 than the qualifying, publicly accessible development in Rancho Santa Fe. The association must file Form 1120 as a taxable corporation. This letter bundles the final adverse determination (Letter 1371) with the earlier proposed determination (Letter 4034) that lays out the full analysis.

Ruling snapshot

• Question: Does a gated-community homeowners' association that restricts its common areas to members, their guests, and members of a co-located private club qualify for exemption as a § 501(c)(4) social welfare organization?
• Outcome: Denied (final adverse determination)
• Key authorities: IRC § 501(c)(4); Treas. Reg. § 1.501(c)(4)-1(a)(1), (a)(2)(i); Rev. Rul. 72-102; Rev. Rul. 74-99; Rev. Rul. 75-386; Rev. Rul. 77-273; Rev. Rul. 80-63; Commissioner v. Lake Forest, Inc., 305 F.2d 814 (4th Cir. 1962); Rancho Santa Fe Ass'n v. U.S., 589 F. Supp. 54 (S.D. Cal. 1984); Flat Top Lake Ass'n v. United States, 868 F.2d 108 (4th Cir. 1989)

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Independent Office of Appeals

Date: APR 06 2022

Person to contact:
Name:
Employee ID number:
Number: 202226014
Release Date: 7/1/2022 Hours:
Employer ID number:

Uniform issue list (UIL):
UIL: 501.04-07, 501.04-06

Certified Mail

Dear

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)(4) of the
Code.

We made the adverse determination for the following reasons:

Your organization does not promote the social welfare or provide a community benefit because it does not
allow public access.

You're required to file federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return and 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 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
Section 6110 of the Code after deleting certain identifying information. We 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 can file an action for declaratory judgment under the provisions
of Section 7428 of the Code in either:

* The United States Tax Court,
* The United States Court of Federal Claims, or
* The United States District Court for the District of Columbia

Letter 1371 (Rev. 10-2021)
Catalog Number 40683R

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          US Court of Federal Claims     US District Court for the District of Columbia
400 Second Street, NW            717 Madison Place, NW          333 Constitution Avenue, NW
Washington, DC 20217             Washington, DC 20005           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. 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 questions, contact the person at the top of this letter.

Sincerely,

Enclosures:
cc:

Letter 1371 (Rev. 10-2021)
Catalog Number 40683R

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

Legend:
B = State
C = Date
D = Gated Community
E = County Real Estate Records
F = Year
G = Date
H = Country Club
u = Number
v = Number
w = Number
x = Number
y = Number
z = Number

Dear

Date: 02/02/2021

Employer ID number:
Contact person/ID number:
Contact telephone number:
Contact fax number:

UIL:
501.04-06
501.04-07

We considered your application for recognition of exemption from federal income tax under Internal Revenue
Code (IRC) Section 501(a). We determined that you don't qualify for exemption under IRC Section 501(c)(4).
This letter explains the reasons for our conclusion. Please keep it for your records.

Issues

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

Facts

You were formed as a Mutual Benefit Corporation in the State of B on C. You have been filing Form 1120,
U.S. Corporation Income Tax Return, consistently since the year F and have recently applied for tax exemption
under IRC Section 501(c)(4) on G. Your corporate purposes include:

* To promote the common good, health, safety and general welfare of the residents of D;

Letter 4034 (Rev. 11-2018)
Catalog Number 47828K

* To exercise all of the powers and privileges and to perform all of the duties and obligations arising from
the Declaration applicable to the D Property, as amended from time to time, the Declaration being
incorporated herein by reference for all purposes;

* To enforce applicable provisions of the Declaration, your bylaws, any of your rules and regulations and
any other instrument for the management and control of the D property;

* To fix, levy, collect and enforce payment by any lawful means, all charges or assessments pursuant to
the terms of the Declaration; to contract for and pay all expenses in connection with the maintenance,
landscaping, utilities, materials, supplies and services relating to the D property and facilities thereon; to
employ personnel reasonably necessary for administration and control of the D property, including
lawyers and accountants where appropriate; and to pay all office and other expenses incident to the
conduct of the business, including all licenses, taxes and special assessments which are or would
become a lien on any portion of the D Property;

Additionally, as a Mutual Benefit Corporation in B, assets can only be distributed to members upon dissolution
and these types of corporations in B generally are formed for the benefit of members.

Your bylaws indicate you were formed to govern, operate and maintain the Common Properties situated in D,
recorded in E. Further, they state you will operate and maintain a system that will enhance the security of D
and Common Properties as well as to enforce the covenants, conditions, restrictions, uses, limitations,
obligations and maintenance and landscape of common areas and all other provisions set forth in the
Declaration.

Your bylaws also state that you have one class of members, which are the individual property owners in D. A
person automatically becomes a member upon his/her becoming an owner and will remain a member for so
long as he/she is an owner. Each member/owner has one vote on each matter for each lot owned.

Your Form 1024A indicates that you maintain the common areas of D which is a gated community comprised
of z single-family homesites. Common areas include numerous monument entry signs, perimeter fences and
walls, y acres of common area greenbelts and slopes, x miles of privately maintained streets, a w-acre lake, and
paved sidewalks throughout D. You also maintain recreational facilities consisting of a pavilion at the lake, a
manmade lake, a nature trail, picnic tables, restrooms, a fishing dock, and playground equipment.

You also explained that there is a seven foot high vinyl-coated chain-link fence, mounted to steel posts set in
concrete that is about u linear feet in length as well as a 7 and 8-foot high masonry wall which is about v linear
feet in length which enclose D. There is also a gatehouse at the only entrance to D where there is a paid
security patrol based 24/7. Your members and their guests have unrestricted access through this single point
entry.

You further indicated that you were constructed around a country club golf course known as H. H and elements
associated with H have not been operated or controlled by you for numerous years and is exempt under IRC
Section 501(c)(7). These elements include parking areas, swimming pools, tennis courts, golf course irrigation
systems, the club house, trails and pathways specific to the golf course. etc. Membership criteria for H is
unrelated to membership with you and is open to the general public. Specifically, there is no mutual
membership requirement for either organization. However, approximately one half of your members hold
memberships to H. You also stated that D's members and guests, employees, and vendors have access to D. In

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

addition, you explained that H has hosted several charity golf tournaments throughout the years. H also hosts
other community events.

You provided the specifics concerning your activities:

a. Code enforcement:

You administer and enforce architectural controls related to the homes within D.

You explained you work closely with local city compliance officers and allow them access to D
to enforce all city building and other residential codes.

b. Private patrol service:

You provide a paid private patrol service to D. The patrol service duties include patrolling D
while watching out for unusual or suspicious activity to reduce crime. The patrol service also
issues citations for traffic violations within D.

You further explained that this program promotes the general welfare of D. You state your
security personnel work closely with the local police and fire departments, relaying monitored
alarm calls, and escorting and assisting public safety personnel when called to the community.
This security operation is similar to law enforcement operations of small municipalities and is an
essential governmental type service.

c. Maintenance of monument signs, greenbelts, and fences:

You maintain monument signs, greenbelts, and fences throughout D.

You explained this is a beautification project which benefits those who may visit D.

d. Road maintenance:

You own, maintain, and repair x miles of your privately-owned roads.

You explained that your road maintenance activities promote the general welfare of D and,
because road maintenance is an essential governmental function, the activities lessen the burden
of the local city.

e. Guard and gate facilities:

You maintain a 24-hour guard gate facility that serves as the base of operations for the private
patrol service.

You state this promotes the general welfare of the community and reduces the burden of the local
city.

f. Cooperation with local government.

You allow access of your property to the local city code compliance officers so they may enforce
all city building and other residential codes. You allow access to the local city water department
so they may ensure that homeowners are in compliance with regulations related to residential
watering days and times. You allow access to other city services and contractors, including
garbage and recycling collection, and streetlight maintenance.

g. Committees:

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

* You maintain standing committees to support your governance structure. Your committees
include matters of nominating, security, landscape, finance, architectural control, community
development, and communications.

* You state your governance structure is similar to the structure of local governmental entities and
lessens the burden of the local city.

You are supported primarily by members/homeowners' assessment fees and governed by a volunteer board
elected from among your membership.

Finally, you stated that you are not claiming exemption as a homeowner's association under IRC Section
501(c)(4) but as a social welfare organization per IRC Section 501(c)(4) and Treasury Regulation Section
1.501(c)(4)-1, which further define a social welfare organization. Specifically, the law states that "An
organization is operated exclusively for the promotion of social welfare if it is primarily engaged in promoting
in some way the common good and general welfare of the people of the community." You believe the findings
in the court case, Rancho Santa Fe Association 84-2 USTC 9536 support that you qualify under IRC Section
501(c)(4) as well as the findings in Revenue Rulings 72-102, 1972-1 C.B. 149, 74-99, 1974-1 C.B. 132, 75-
386, 1975-2 C.B. 211 and 80-63, 1980-1 C.B. 116.

Law

IRC Section 501(c)(4) provides for the exemption from Federal income tax of civic leagues or organizations not
organized for profit but operated exclusively for the promotion of social welfare or legal associations of
employees, the membership of which is limited to the employees of the designated person or persons in a
particular municipality, and the net earnings of which are devoted exclusively to charitable, educational or
recreational purposes.

Treas. Reg. Section 1.501(c)(4)-1(a)(1) states an organization may be exempt if: (i) it is not operated for profit
and (ii) it is operated exclusively for the promoting of social welfare.

Treas. Reg. Section 1.501(c)(4)-1(a)(2)(i) provides that an organization is operated exclusively for the
promotion of social welfare if it is primarily engaged in promoting in some way the common good and general
welfare of the people of the community. An organization embraced within this section is one, which is operated
primarily for the purpose of bringing about civic betterments and social improvements.

Rev. Rul. 72-102, 1972-1 C.B. 149, describes a non-profit organization formed to preserve the appearance of a
housing development and to maintain streets, sidewalks, and common areas for use of the residents that is found
to be exempt under Section 501(c)(4). The ruling describes what may constitute a community, which may be
exemplified in a neighborhood, precinct, subdivision, or housing development. It states by administering and
enforcing covenants, and owning and maintaining certain non-residential, non-commercial properties of the
type normally owned and maintained by municipal governments, this organization is serving the common good
and the general welfare of the people of the entire development.

Rev. Rul. 74-99, 1974-1 C.B. 132, modified Rev. Rul. 72-102. It clarified that to qualify for exemption under
IRC Section 501(c)(4), a homeowners' association must:

1. serve a "community" which bears a reasonable recognizable relationship to an area ordinarily identified
as governmental,

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

2. not conduct activities directed to the exterior maintenance of private residences, and

3. open its common areas or facilities it owns and maintains must for the use and enjoyment of the general
public.

This ruling provides clarification for the term "community". Rev. Rul. 72-102 caused a misconception that "any
housing development may qualify as a community for exemption purposes regardless of any other attendant
facts and circumstances in the case." This ruling continues to explain, "A community within the meaning of
IRC Section 501(c)(4) and the regulations is not simply an aggregation of homeowners bound together in a
structured unit formed as an integral part of a plan for the development of a real estate subdivision and the sale
and purchase of homes therein. Although an exact delineation of the boundaries of a "community"
contemplated by Section 501(c)(4) is not possible, the term as used in that section has traditionally been
construed as having reference to a geographical unit bearing a reasonably recognizable relationship to an area
ordinarily identified as a governmental subdivision or a unit or district thereof"

This ruling also provides clarification for the phrase "non-residential, non-commercial properties of the type
normally owned and maintained by municipal government." It is further explained that the only areas and
facilities encompassed were those traditionally recognized and accepted as being of direct governmental
concern in the exercise of the powers and duties entrusted to governments to regulate community health, safety,
and welfare. Thus, it was "intended only to approve ownership and maintenance by a homeowners' association
of such areas as roadways and parklands, sidewalks and street lights, access to, or the use and enjoyment of
which is extended to members of the general public, as distinguished from controlled use or access restricted to
the members of the homeowners' association..."

Rev. Rul. 75-386, 1975-2 C.B. 211, describes an organization that contracts with a private firm to provide the
community with security patrols assisted by guard dogs, works to improve public services, housing, and
residential parking, and that publishes a newspaper distributed free of charge to all community residents and
sponsors a community basketball league, holiday programs, and meetings of community residents is operated
exclusively for the promotion of social welfare and qualifies for exemption under IRC Section 501(c)(4).

Rev. Rul. 77-273, 1977-2 C.B. 195, describes a non-profit organization that provides security services for
residents and property owners of a particular community, who agree to voluntarily donate money at a specified
hourly rate to defray the cost of the services, is carrying on a business with the general public in a manner
similar to organizations operated for profit and does not qualify for exemption under IRC Section 501(c)(4).

Rev. Rul. 80-63, 1980-1 C.B. 116, provides further clarification of Rev. Rul. 74-99 through specific questions.
The answer to Question 1 reiterates that a qualifying association's common areas and facilities must be open for
the use and enjoyment of the general public, as distinguished from areas and facilities whose use and enjoyment
is controlled and restricted to members of the association, to satisfy the requirement of serving a community.
The answer to Question 2 points out that an association will not qualify if it restricts the use of its recreational
facilities (within the definition of "common areas"), such as swimming pools, tennis courts, and picnic areas, to
members of the association.

Commissioner v. Lake Forest, Inc., 305 F.2d 814 (4th Cir., 1962), denied exemption to a social welfare
organization because the organization did not benefit the public at large, nor was its contribution of a public
character. The case involved a non-profit membership housing cooperative that provided low-cost housing to its
members. In denying exemption as a social welfare organization, the court found that although the
organization's activities were available to all citizens eligible for membership, opining, "[I]ts contribution is

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

neither to the public at large nor of a public character." The court looked to the benefits provided and not to the
number of persons who received benefits through membership. In this case, benefits were largely directed to
certain individuals rather than the general public, so the organization did not qualify as a social welfare
organization.

Rancho Santa Fe Association v. U.S., 589 F. Supp. 54 (S.D. Cal. 1984), held that a housing development
functioning as a public municipality, constituted an independent community under Section 1.501(c)(4)-1 of the
Treasury Regulations, and that the homeowners' association representing the property owners within the
housing development bestowed benefits on the entire community. Therefore, the association was exempt under
Section 501(c)(4) even though the public was restricted from certain recreational facilities.

Of note, the Rancho Santa Fe development was significant in size, separated geographically from the central
area of a large city, and had its own post office and zip code. In addition, the organization performed the
functions of a governmental entity, and it brought about civic betterments and social improvements on an
unrestricted basis that would be sorely missed by the community without the activities of the organization. The
homeowners' association owned 600 acres and the remainder was owned by individual members. Of the 600
acres owned by the Association, 300 acres were dedicated to parkland and open space, 165 acres were improved
as playgrounds, athletic fields, a public parking lot, a community clubhouse, and hiking and bridle trails. The
remaining 135 acres comprised a golf course and tennis courts. In sum, out of the 600 acres owned directly by
the Association, 465 of these acres were available for use by the general public on an unrestricted basis. The
remaining 135 acres were available to all the members of the Rancho Santa Fe community and to the general
public, but only when the public used the inn located in Rancho Santa Fe. The court summarized, "The critical
factor is that the Association benefits the community it serves and represents on an unrestricted basis."

Flat Top Lake Ass'n v. United States, 868 F.2d 108 (4th Cir., 1989), held that a homeowners' association that
encompassed a very large area but restricted use of its facilities to its members did not qualify for exemption
under Section 501(c)(4). Of note, in Flat Top Lake there were no schools, churches nor commercial
establishments within the bounds of the property, nor was commercial development permitted by the
Association. They undertook certain tasks of a quasi-governmental nature; they constructed a bridge within the
development, maintained certain common areas including the road, a park, and the lake itself; and provided
waste disposal for residents. Finally, they arranged for law enforcement by obtaining the appointment of a
conservator of the peace pursuant to local state code. The conservator is paid by the local sheriff's department
which is in turn reimbursed by the Association. The factual circumstances presented in Rancho Santa Fe are
distinguishable from the instant case. The housing development served by the organization in Rancho Santa Fe
was much larger than Flat Top and, functioned as a public municipality. Access to the development by
nonresidents was unrestricted and the use of a substantial portion of the development's recreational facilities by
the general public was unlimited. Unlike the inhabitants of Flat Top Lake, there was no indication that the
inhabitants of Rancho Santa Fe sought to shut themselves off from society and to hold the outside world at
arms' length. While the court in Rancho Santa Fe did believe that a development that attained "community"
status could exclude the public at large and still obtain Section 501(c)(4) exemption, that conclusion must be
regarded largely as dicta in light of the actual nature of Rancho Santa Fe. Flat Top Lake Association created a
wholly private environment for its members.

Application of law

You are not as described in IRC Section 501(c)(4) and Treas. Reg. Section 1.501(c)(4)-1(a)(1) because your
activities do not primarily promote social welfare. You are a gated community; no one can get past the gate
into D unless they are resident members or guests as well as members and guests of H a private country club.

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

Members of the general public only have access only on limited occasions. This illustrates you do not primarily
operate to promote social welfare within the meaning of IRC Section 501(c)(4).

Moreover, you do not meet the provisions of Section 1.501(c)(4)-1(a)(2)(i) because your activities are focused
on providing services and amenities to the Z member homeowners and do not primarily promote civic
betterment or social welfare. For example, although you assert that the community you serve, D is open to the
public, D is a gated community enclosed by u linear feet of a seven foot high chain-link fence, mounted to steel
posts set in concrete as well about v linear feet of seven-eight feet high masonry walls. There is also a
gatehouse with 24-hour security who monitor access. Generally, only your members, their guests as well as H
members and their guests have unlimited access. This illustrates that your activities do not serve or benefit the
community at-large and promote social welfare, but rather benefit a small limited group of people who have
specific authorization to enter through your gate which precludes exemption under IRC Section 501(c)(4).

Additionally, Rev. Rul. 72-102 was modified by Rev. Rul. 74-99, which clarified the meaning of the term
"community". You do not serve a community within the meaning of the revenue rulings. For instance, you do
not serve a community that bears a relationship to a governmental subdivision or unit; the community you serve
is gated development of Z, homeowners. Additionally, you are reliant on the services of wholly distinct local
government agencies, such as the police department, fire department, water department, code enforcement, trash
collection, etc. Further, your activities do not convey benefits to the community beyond your restricted gated
community as shown by the fact that your activities are directed toward benefitting the limited persons who
may enter inside your gated community. Furthermore, while you maintain such areas as roadways, parklands,
and sidewalks, these areas are not available to the general public but are open only to your members and guests,
and members and guests of the co-located private club H. Thus, you are not operating in the manner
contemplated by Rev. Rul. 72-102 nor Rev. Rul. 74-99 which provided exemption to homeowners' associations
under IRC Section 501(c)(4).

You deem yourself to be similar to the organization described in Rev. Rul. 75-386, which provided a
community at large with security patrols. Security services were not limited to those who are dues-paying or
fee-paying persons. You are not similar to the instant organization because you are not providing services to a
"community" as clarified and explained in Rev. Rul. 74-99. You are providing security services solely to your
members and members of a co-located private country club only, which is not the community at large.

However, the manner in which you provide security services is similar to the denied organization described in
Rev. Rul. 77-273, which provides security services only to residents who pay fees for such services. Likewise,
your security services only directly benefit those who fall within the limited membership criteria for your
homeowners' association and members of a certain private country club, when they are on your premises.

You are not operated in a manner described in Rev. Rul. 80-63 that is required to qualify for exemption under
IRC Section 501(c)(4). Access to your property and all of its common areas is restricted to your members and
members of a co-located private country club. Serving this limited special group does not serve the community
as a whole.

You are similar to the denied organization described in Lake Forest. Like this organization, your benefits only
extend to those who are dues-paying members of yours and of a co-located private country club. Thus, your
benefits do not extend to the public at large, but primarily to a very limited group of citizens.

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

You are not similar to the qualifying organization described in Rancho Santa Fe. Of note, Rancho Santa Fe did
not have physically restricted access, as you do. Any person could access their property at will and utilize all
common areas, with the exception of the golf and tennis facilities, which comprised less than a quarter of the
organization's property per square foot. You, however, do have physically restricted access to your property in
the form of a 24-hour guarded gate, which only admits your homeowner-members and members of the co-
located private country club. No parallel is able to be drawn between the golf and tennis club at Rancho Santa
Fe and the country club within your gates. In your case the country club is a separate entity, in which you have
no voice in operations nor policies. Thus, any leniency with respect to golf and tennis facilities limited to certain
persons in Rancho Santa Fe has no bearing on you. Also, of note, Rancho Santa Fe was determined to be an
independent community in itself. It has been shown that you are not described within the term "community" as
proffered in Rev. Rul. 72-102 and clarified in Rev. Rul. 74-99 and Rev. Rul 80-63. So, Rancho Santa Fe's
benefits were available - on an unrestricted basis - to the immediate community and to the community at large.
Your benefits are only available - on a restricted basis - to your homeowner-members and members of a co-
located private country club, which is not the community at large.

You are similar to the denied organization described in Flat Top Lake; you are a residential homeowners'
association who has undertaken certain road, common area, and landscape maintenance, as well as provision of
security, which benefits only your members and members of the co-located private country club when they are
on your premises, due to the restricted physical access to your property.

You are similar to the denied organization described in Lake Forest. Like this organization, your benefits only
extend to those who are dues-paying members of yours and of a co-located private country club. Thus, your
benefits do not extend to the public at large, but rather a limited group of citizens.

You are not similar to the qualifying organization described in Rancho Santa Fe. Of note, Rancho Santa Fe did
not have physically restricted access, as you do. Any person could access their property at will and utilize all
common areas, with the exception of the golf and tennis facilities, which comprised less than a quarter of the
organization's property per square foot. You, however, do have physically restricted access to your property in
the form of a 24-hour guarded gate, which only admits your homeowner-members and members of the co-
located private country club. No parallel is able to be drawn between the golf and tennis club at Rancho Santa
Fe and the country club within your gates. In your cases the country club is a separate entity, in which you have
no voice in operations nor policies. Thus, any leniency with respect to golf and tennis facilities limited to certain
persons in Rancho Santa Fe has no bearing on you. Also, of note, Rancho Santa Fe was determined to be an
independent community in itself. It has been shown that you are not described within the term "community" as
proffered in Rev. Rul. 72-102 and clarified in Rev. Rul. 74-99 and Rev. Rul 80-63. So, Rancho Santa Fe's
benefits were available - on an unrestricted basis - to the immediate community and to the community at large.
Your benefits are only available - on a restricted basis - to your homeowner-members and members of a co-
located private country club, which is not the community at large.

You are similar to the denied organization described in Flat Top Lake; you are a residential homeowners'
association who has undertaken certain road, common area, and landscape maintenance, as well as provision of
security, which benefits only your members and members of the co-located private country club when they are
on your premises, due to the restricted physical access to your property.

Conclusion

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

You are not described under IRC Section 501(c)(4) because you are not operated exclusively for the promotion
of social welfare. You are not primarily engaged in promoting the common good and general welfare of the
people of the community within the meaning of the regulations. And, you are further found to not be described
within the term "community". Thus, activities directed toward your members only are not directed toward a
community or to the general public, as is required for exemption under Section 501(c)(4). Your activities serve
to benefit only the select few who are permitted to enter your guarded gate.

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.

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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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