Dog-training and breed-evaluation club denied 501(c)(3) exemption

Plain-English summary

A club applied for 501(c)(3) charitable/educational status using the streamlined Form 1023-EZ, describing its mission as training owners and handlers of a certain breed of dogs and promoting the breed through testing and registration. The IRS denied the exemption on both the organizational and operational tests. On the organizational test, the club's articles state a purpose (promoting training and breed of the dogs through testing and registration) that is broader than the purposes allowed under 501(c)(3). On the operational test, its primary activity, running dog training and evaluation clinics, is not charitable or educational within the meaning of the regulations, because the dog (not the person) is the main object of the training, echoing Rev. Rul. 71-421 and the Ann Arbor Dog Training Club case. The IRS also rejected the club's argument that evaluating dogs against breed standards prevents cruelty to animals, distinguishing rulings about animal shelters and spay/neuter programs. Because the club did not protest the earlier proposed adverse determination within 30 days, that determination became final. Donors generally cannot deduct contributions, and the organization must file corporate income tax returns.

Ruling snapshot

• Question: Does a club that runs dog training and breed-evaluation clinics qualify as a charitable or educational organization under section 501(c)(3)?
• Outcome: Denied (final adverse determination; no protest filed).
• Key authorities: IRC § 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Ruls. 71-421, 73-456, 73-587, 74-194; Better Business Bureau of Washington, D.C., Inc. v. United States, 326 U.S. 279 (1945); Ann Arbor Dog Training Club, Inc. v. Commissioner, 74 T.C. 207 (1980).

Full text (IRS public release)

                              Department of the Treasury          Date:
                              Internal Revenue Service            12/07/2022
                              Tax Exempt and Government Entities  Employer ID number:
IRS  PO Box 2508
     Cincinnati, OH 45201                                         Form you must file:
                                                                  1120
                                                                  Tax years:
                                                                  All
                                                                  Person to contact:

Release Number: 202309017
Release Date: 3/3/2023

UIL Code: 501.00-00,
501.03-00, 501.03-30,
501.35-00

Dear

This letter is our final determination that you don't qualify for exemption from federal income tax under Internal
Revenue Code (IRC) Section 501(a) as an organization described in 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 generally can't
deduct contributions to you under IRC Section 170.

We may notify the appropriate state officials of our determination, as required by IRC Section 6104(c), by
sending them a copy of this final letter along with the proposed determination letter.

You must file the federal income tax forms for the tax years shown above within 30 days from the date of this
letter unless you request an extension of time to file. For further instructions, forms, and information, visit
www.irs.gov.

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

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

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:

Letter 437

Redacted Letter 4034
Redacted Letter 4038

Letter 4038 (Rev. 11-2021)
Catalog Number 47632S

Department of the Treasury
Internal Revenue Service
PO Box 2508

Cincinnati, OH 45201

Date:
October 12, 2022

Employer ID number:

Person to contact:

Name:

ID number:

Telephone:
Legend:                          UIL:
W = activity                     501.00-00
X = Date                         501.03-00
Y = State                        501.03-30
Z = Organization                 501.35-00

b percent = amount
c percent = 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. You attested that you are organized and operated exclusively to further

educational purposes and that you have not conducted and will not conduct prohibited activities under Section
501(c)(3).

Your mission as stated on the Form 1023-EZ is to train owners and handlers of W dogs proper behavior in the
field, home, and public and providing owners and handlers with the necessary dog training tools. You were
formed as a corporation on X in the state of Y.

During review of your Form 1023-EZ, detailed information was requested to supplement the above information.
Your Articles of Incorporation state your purpose is to be a club that promotes the training and breed promotion
of W dogs through testing and registration. Your website states that your mission is to help dog owners fulfill
their potential through proper training.

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

2

You are a registered chapter of Z. Your activities consist of training and evaluation clinics. You hold

training clinics a year focused on training dogs and dog owners with proper dog obedience and behavior. You
hold -day evaluation clinics a year where unpaid, trained judges evaluate temperament,
conformation, and drive at basic and senior levels.

You are a membership organization. Your members and members of other Z chapters may register and
participate in all activities. Nonmembers may also participate in training events for a nominal fee.

Sources of revenue include membership fees, training and event fees, and merchandise sales; with training and
event fees being most significant at b percent. Expenses include merchandise, training and evaluation events,
and annual banquet; with training and evaluation events being most significant at c percent.

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

operated exclusively for religious, charitable, or other 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) states that, 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(b)(1) states an organization is organized exclusively for one or more exempt
purposes only if its articles of organization limit the purposes of such organization to one or more exempt
purposes; and do not expressly empower the organization to engage, otherwise than as an insubstantial part of
its activities, in activities which in themselves are not in furtherance of one or more exempt purposes. In
meeting the organizational test, the organization's purposes, as stated in its articles, may be as broad as, or more
specific than, the purposes stated in IRC Section 501(c)(3). 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).

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 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(d)(2) provides the term "charitable" is used in IRC Section 501(c)(3) in its
generally accepted legal sense and includes relieving the poor and distressed or the underprivileged, combating
community deterioration, lessening neighborhood tensions, and eliminating prejudice and discrimination.

Treas. Reg. Section 1.501(c)(3)-1(d)(3)(i) provides that the term "educational," as used in IRC Section
501(c)(3), relates to the instruction or training of the individual for the purpose of improving or developing
his/her capabilities or the instruction of the public on subjects useful to the individual and beneficial to the
community.

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

3

Revenue Ruling 71-421, 1971-2 C.B. 229, held that a dog club, exempt under IRC Section 501(c)(7), formed to
promote the ownership and training of purebred dogs which conducted obedience training classes, could not be
reclassified as an educational organization exempt under IRC Section 501(c)(3).

Revenue Ruling 73-456, 1973-2 C.B. 342, held that a training center established to instruct the blind to properly
function with the aid of guide dogs met the operational test under IRC 501(c)(3). They have programs to train
dogs to lead and assist the blind, and to instruct them to function with their dogs. The organization's program,
consisting of detailed instruction of blind persons in the use and care of guide dogs, is a 'curriculum' within the
meaning of the applicable section of the Code. Furthermore, the organization has a regular group of instructors
and an enrolled body of students in regular attendance at a designated place where the instruction of the students

is carried on at regular sessions. Accordingly, the organization was found to be exempt as a school under
Section 501(c)(3).

Revenue Ruling 73-587, 1973-2 C.B. 192, describes an organization that maintains and operates an animal
shelter for the care, protection, placement, and, if necessary, humane disposal of stray or unwanted animals. The
ruling determined these activities constituted the prevention of cruelty to animals under IRC Section 501(c)(3).

Revenue Ruling 74-194, 1974-1 C.B. 129, describes a nonprofit organization formed to prevent the
overbreeding of cats and dogs by providing funds to pet owners who wish to have their pets spayed or neutered
but cannot afford the cost of such operations qualifies for exemption under IRC Section 501(c)(3). The ruling
determined that by preventing the birth of unwanted animals and their eventual suffering by providing funds for
those owners of pets who cannot afford the spaying or neutering operation, the organization is engaged in the
prevention of cruelty to animals.

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 Ann Arbor Dog Training Club, Inc. v. Commissioner, 74 T.C. 207 (1980), the court held that the training of
animals does not come within the meaning of "educational" as set forth in IRC Section 501(c)(3). The
organization conducted dog obedience training classes, awarded the dogs a degree after completion, and
awarded them prizes at show events. While the dog owners received some instruction as to the training of the
dogs, it was the dog that was the primary object of the training and evaluation.

Application of law

You are not described in IRC Section 501(c)(3) because you don't meet the organizational and operational tests
outlined in Treas. Reg. Section 1.501(c)(3)-1(a)(1).

As explained in Treas. Reg. Section 1.501(c)(3)-1(b)(1), you do not meet the organizational test because your
articles do not limit your purposes to one or more exempt purposes under IRC Section 501(c)(3). Your purpose,
as stated in your Articles of Incorporation, is to promote the training and breed of W dogs through testing and
registration, which is broader than the purposes specified in Section 501(c)(3).

You do not meet the operational test because you are not operating exclusively for charitable or educational
purposes as required by Treas. Reg. Section 1.501(c)(3)-1(c)(1). Your primary activity is dog training and

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

4

evaluation clinics. Such activities as described do not serve exclusively charitable or educational purposes under
Treas. Reg. Section 1.501(c)(3)-1(d)(2) or Treas. Reg. Section 1.501(c)(3)-1(d)(3)(i).

Like the organizations in Rev. Rul. 71-421 and Ann Arbor Dog Training Club, your dog training and evaluation
activities do not come within the meaning of educational as defined in the regulations. While the dog owner
may receive some instruction, it is the dog that is the primary object of the training and evaluation. Conversely,
you are unlike Rev. Rul. 73-456 where the primary focus of training was on the individual (instructing the blind
to properly function with aid of guide dogs). You are similar to Better Business Bureau because you have a

substantial, nonexempt purpose (dog training and evaluation) that precludes exemption under IRC Section
501(c)(3).

Your position

You state that you will aid in the prevention of cruelty to animals by establishing breed standards and evaluating
dogs against those standards. The standards include an evaluation of the natural or given attributes of a dog
which reduces the perpetuation of birth defects and certain instincts which greatly reduces the dog being
abandoned. Also, you evaluate temperament which reduces the risk of aggressive or low drive temperaments
that often result in the abuse of the dog. Dogs are evaluated by trained judges that utilize a standard and proven
test that has been used for decades by Z. Breeders are encouraged to register litters with Z so buyers can
research dam and sire evaluation results. Breeders who register litters are naturally encouraged to breed litters
that will meet or exceed conformation, temperament, and certain ability standards.

Our response to your position

Establishing breed standards and evaluating dogs against those standards is not an exempt purpose under IRC
Section 501(c)(3). You indicated that your training and clinics evaluate dogs against specific attributes which
could reduce the chance of them being abandoned or abused. This is not similar to Rev. Rul. 73-587 or Rev.
Rul. 74-194; both rulings determined an organization conducted activities that constituted the prevention of
cruelty to animals under Section 501(c)(3).

Unlike Rev. Rul. 73-587, your activities are not directed towards the care, protection, and placement of stray or
unwanted animals. You are also unlike Rev. Rul. 74-194 because your activities are not preventing the birth of
unwanted animals or their eventual suffering. Instead, you are helping owners train and evaluate their W dogs

and improve specific attributes. Thus, you are not preventing cruelty to animals within the meaning of IRC
Section 501(c)(3).

Conclusion

You do not qualify for tax exemption under IRC Section 501(c)(3) because you are not organized or operated
exclusively for exempt purposes.

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:

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

5

* 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 Determination 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:

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

PO 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

Letter 4034 (Rev. 01-2021)
Catalog Number 47628K

6

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. 01-2021)
Catalog Number 47628K