IRS finds a self-declared social-welfare group does not qualify under 501(c)(4)

Plain-English summary

An organization incorporated in its state and began filing annual returns with
the IRS without ever applying for exempt status. Because a § 501(c)(4) social
welfare organization does not need a formal application, the IRS had been
treating the group as a 501(c)(4). On examination, the IRS found a discrepancy:
the group's own website claimed it was a § 501(c)(3) charity, but it had never
filed a Form 1023 to get that status. The revenue agent determined the
organization does not qualify as a § 501(c)(4) civic league or social welfare
organization for the tax period examined, and the organization's president agreed
to the disqualification. This document bundles the final adverse determination
(Letter 6337), the proposed determination (Letter 3618), and the Form 886-A audit
report. The finding is limited to the single tax period examined; the group can
apply for exemption in the future by filing Form 1024 or Form 1024-A. Names,
dates, and the effective date of disqualification were redacted by the IRS.

Ruling snapshot

• Question: Does a self-declared organization qualify as a § 501(c)(4) social welfare organization for the examined tax period?
• Outcome: Denied (adverse determination; organization agreed)
• Key authorities: IRC §§ 501(c)(3), 501(c)(4)

Full text (IRS public release)

Department of the Treasury                          Date: May 10, 2021
Internal Revenue Service
Tax Exempt and Government Entities

IRS Taxpayer ID number:

Form:

Tax periods ended:
Release Number: 202233017
Release Date: 8/19/2022                             Person to contact:
                                                    Name:
UIL Code: 501.04-00                                 ID number:
                                                    Telephone:
                                                    Fax:

CERTIFIED MAIL - RETURN RECEIPT REQUESTED:
Dear

Why we are sending you this letter

This is a final determination explaining why your organization doesn't qualify as an organization described in
Internal Revenue Code (IRC) Section 501(c)(4) for the tax periods above.

In the future, if you believe your organization qualifies for tax-exempt status and would like a determination
letter from the Internal Revenue Service, you can request a determination by filing Form 1024, Application for
Recognition of Exemption Under Section 501(a), or Form 1024-A, Application for Recognition of Exemption
Under Section 501(c)(4) of the Internal Revenue Code, (as applicable) and paying the required user fee.

Our adverse determination as to your exempt status was made for the following reasons: During our
examination of the return indicated above, we determined that your organization was not described in IRC
Section 501(c)(4) for the tax period and therefore, it does not qualify for exemption from federal income tax.

This letter is not a determination of your exempt status under IRC Section 501 for any period other than the tax
period listed above.

Organizations that are not exempt under IRC Section 501 generally are required to file federal income tax
returns and pay tax, where applicable. For further instructions, forms and information please visit www.irs.gov.

What you must do if you disagree with this determination
If you want to contest our final determination, you have 90 days from the date this determination letter was
mailed to you to file a petition or complaint in one of the three federal courts listed below.

How to file your action for declaratory judgment

If you decide to contest this determination, you may file an action for declaratory judgment under the provisions
of IRC Section 7428 in one of the following three venues: 1) United States Tax Court, 2) the United States Court
of Federal Claims or 3) the United States District Court for the District of Columbia.

Please contact the clerk of the appropriate court for rules and the appropriate forms for filing an action for
declaratory judgment by referring to the enclosed Publication 892, How to Appeal an IRS Determination on
Tax-Exempt Status. You may write to the courts at the following addresses:

United States Tax Court        U.S. Court of Federal Claims    U.S. District Court for the District of Columbia
400 Second Street, NW          717 Madison Place, NW           333 Constitution Ave., N.W.
Washington, DC 20217           Washington, DC 20439            Washington, DC 20001

Letter 6337 (12-2020)
Catalog Number 74808E

Processing of income tax returns and assessments of any taxes due will not be delayed if you file a petition for
declaratory judgment under IRC Section 7428.

Information about the IRS Taxpayer Advocate Service

The IRS office whose phone number appears at the top of the notice can best address and access your tax
information and help get you answers. However, you may be eligible for free help from the Taxpayer Advocate
Service (TAS) if you can't resolve your tax problem with the IRS, or you believe an IRS procedure just isn't
working as it should. TAS is an independent organization within the IRS that helps taxpayers and protects
taxpayer rights. Contact your local Taxpayer Advocate Office at:

Internal Revenue Service
Taxpayer Advocate Office

Or call TAS at 877-777-4778. For more information about TAS and your rights under the Taxpayer Bill of Rights,
go to taxpayeradvocate.irs.gov. Do not send your federal court pleading to the TAS address listed above. Use
the applicable federal court address provided earlier in the letter. Contacting TAS does not extend the time to
file an action for declaratory judgment.

Where you can find more information
Enclosed are Publication 1, Your Rights as a Taxpayer, and Publication 594, The IRS Collection Process, for
more comprehensive information.

Find tax forms or publications by visiting www.irs.gov/forms or calling 800-TAX-FORM (800-829-3676).
If you have questions, you can call the person shown at the top of this letter.

If you prefer to write, use the address shown at the top of this letter. Include your telephone number, the best
time to call, and a copy of this letter.

Keep the original letter for your records.

Sincerely,

[illegible signature]

Sean E. O'Reilly
Director, Exempt Organizations Examinations

Enclosures:
Publication 1
Publication 594
Publication 892

Letter 6337 (12-2020)
Catalog Number 74808E

Department of the Treasury                          Date:
Internal Revenue Service                            06/15/2020
Tax Exempt and Government Entities

IRS Taxpayer ID number:

Form:

Tax periods ended:

Person to contact:
Employee ID:
Telephone:
Fax:

Manager's contact information:

Employee ID:

CERTIFIED MAIL — Return Receipt Requested

Dear

Response due date:

07/16/2020

Why you're receiving this letter

If you agree

If you haven't already, please sign the enclosed Form 6018, Consent to Proposed Action, and return it to the
contact person shown at the top of this letter. We'll issue a final adverse letter determining that you aren't an
organization described in IRC Section 501(c)(4) for the periods above.

If you disagree

1. Request a meeting or telephone conference with the manager shown at the top of this letter.

2. Send any information you want us to consider.

3. File a protest with the IRS Appeals Office. If you request a meeting with the manager or send additional
information as stated in 1 and 2, above, you'll still be able to file a protest with IRS Appeals Office after
the meeting or after we consider the information.

The IRS Appeals Office is independent of the Exempt Organizations division and resolves most disputes
informally. If you file a protest, the auditing agent may ask you to sign a consent to extend the period of
limitations for assessing tax. This is to allow the IRS Appeals Office enough time to consider your case.
For your protest to be valid, it must contain certain specific information, including a statement of the
facts, applicable law, and arguments in support of your position. For specific information needed for a
valid protest, refer to Publication 892, How to Appeal an IRS Determination on Tax-Exempt Status.

Fast Track Mediation (FTM) referred to in Publication 3498, The Examination Process, generally doesn't
apply now that we've issued this letter.

4. Request technical advice from the Office of Associate Chief Counsel (Tax Exempt Government Entities)
if you feel the issue hasn't been addressed in published precedent or has been treated inconsistently by the
IRS.

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F

If you're considering requesting technical advice, contact the person shown at the top of this letter. If you
disagree with the technical advice decision, you will be able to appeal to the IRS Appeals Office, as
explained above. A decision made in a technical advice memorandum, however, generally is final and
binding on Appeals.

If we don't hear from you
If you don't respond to this proposal within 30 calendar days from the date of this letter, we'll issue a final
adverse determination letter.

Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your
taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you've tried but haven't
been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS
will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 877-777-4778.

Additional information
You can get any of 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 shown at the top of this letter.
Sincerely,
Sean E. O'Reilly
Director, Exempt Organizations Examinations

Enclosures:
Form 886-A
Form 6018

Letter 3618 (Rev. 8-2019)
Catalog Number 34809F

Form 886-A          Department of the Treasury - Internal Revenue Service          Schedule No. or
Explanation of Items                                                               Exhibit
Name of Taxpayer                                    Year/Period Ended
ISSUE
Should          .()          remain classified as a public
charity described in section 501(c)(4) of the Internal Revenue Code.

FACTS

          was incorporated in the State of          in          . It submitted an application to the
          to be classified as a tax-exempt entity, which was approved by the State of          .
          then began sending Form          annually to the IRS. Upon receipt of said form,
the IRS performed due diligence and realized that no determination had ever been issued
regarding the tax-exempt status of the organization. In other words,          never filed an
application (e.g., Form 1023) to be granted exemption [e.g., 501(c)(3)] formally. The IRS then
adjudicated          with Section 501(c)(4), since an application is not required for this tax-exempt
status.

          provides educational resources. A review of its website shows that          states it is a tax-
exempt organization under Section 501(c)(3). During the initial interview, Revenue Agent
discussed with the President the discrepancy between its stated tax-exempt status [i.e.,
501(c)(3)] and its classification with the IRS [i.e., 501(c)(4)].

LAW

Section 501(c)(3) of the Internal Revenue Code described an organization as being tax-exempt
if it is organized and operated exclusively for religious, charitable, scientific, testing for public
safety, literary or educational purposes.

Section 501(c)(4)(A) of the Internal Revenue Code describes as being tax-exempt those civic
leagues or organizations not organized for profit but operated exclusively for the promotion of
social welfare or local associations of employees..., and the net earnings of which are devoted
exclusively to charitable, educational or recreational purposes.

GOVERNMENT'S POSITION

          self-declared as a tax-exempt organization when it began to file Form          soon after its
incorporation; however, it never submitted an application for a determination to be made
regarding its status. Without an application for determination on file, the IRS branded          as tax
exempt under Section 501(c)(4), since it does not require an application for this status.

Upon due diligence by the Revenue Agent and after initial interview, it is determined that
does not qualify for tax exemption under Section 501(c)(4). The entity will be disqualified.

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

Form 886-A          Department of the Treasury - Internal Revenue Service          Schedule No. or
Explanation of Items                                                               Exhibit

Name of Taxpayer                                    Year/Period Ended

TAXPAYER'S POSITION

          agrees with disqualification of its tax-exempt status.

CONCLUSION

After initial interview and due diligence, Revenue Agent spoke with President and stated that
          would be disqualifying as a tax-exempt organization under Section 501(c)(4).

The effective date of this disqualification is _

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