Dog training organization lost its charitable exemption

Plain-English summary

An organization that had previously been exempt as a social club was later reinstated as a Section 501(c)(3) public charity. It conducted training classes, agility practice matches, membership meetings, and member holiday gatherings, and its website offered training videos and instructions. The IRS found that its organizing documents permitted social and recreational activities and did not limit it to exempt purposes. The IRS also concluded that the training primarily benefited dogs and members rather than educating the public, and that more than an insubstantial part of its activities served private interests. The IRS revoked the organization's charitable exemption and stated that contributions were no longer deductible.

Ruling snapshot

• Question: Did the organization remain organized and operated exclusively for charitable or educational purposes under Section 501(c)(3)?
• Outcome: revocation
• Key authorities: IRC §§ 170, 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Ruls. 71-421, 73-456; Ann Arbor Dog Training Club, Inc. v. Commissioner

Full text (IRS public release)

Department of the Treasury                         Date: FEB 27 2024
Internal Revenue Service
Independent Office of Appeals                      Person to contact:

Release Number: 202421010                          Employer ID number:
Release Date: 5/24/2024

                                                   Uniform issue list (UIL):
                                                   501.00-00
                                                   501.03-05
                                                   501.03-30

Certified Mail

Dear [redacted]:

This is a final adverse determination that you do not 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).

We have hereby revoked the favorable determination letter to you dated [redacted] and you are no longer exempt under
IRC Section 501(a) effective [redacted].

We made the adverse determination for the following reasons:

You do not meet the organizational test and operational tests under Treasury Regulations 1.501(c)(3)-1(b) &
1.501(c)(3)-1(c)(1), respectively. The organization’s organizing documents do not limit its purposes to one of
more exempt purposes and they expressly empower the organization to engage in activities which are not in
furtherance of exempt purposes. The organization’s activities are not exclusively charitable or educational,
causing it to fail the operational test. Further, more than an insubstantial part of your overall activities further
the private interests of your members, instead of the public as a whole.

Contributions to your organization are not deductible under IRC Section 170.

You're required to file federal income tax returns on Forms 1120, U.S. Corporation Income Tax Return. 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 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 IRC
Section 6110 after deleting certain identifying information. We provided to you, in a separate mailing, Letter
437, Notice of Intention to Disclose. Please review the Letter 437 and the documents attached that show our
proposed deletions. If you disagree with our proposed deletions, follow the instructions in Letter 437.

If you decide to contest this determination, you can file an action for declaratory judgment under the provisions
of IRC Section 7428 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. 9-2022)
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. You can download a fillable petition or complaint form and get information about
filing at each respective court's website listed below or by contacting the Office of the Clerk of the Court at one
of the addresses below. Be sure to include a copy of this letter and any attachments and the applicable filing fee
with the petition or complaint.

You can eFile your completed U.S. Tax Court petition by following the instructions and user guides available
on the Tax Court website at ustaxcourt.gov/dawson.html. You will need to register for a DAWSON account
to do so. You may also file your petition at the address below:

United States Tax Court
400 Second Street, NW
Washington, DC 20217
ustaxcourt.gov

The websites of the U.S. Court of Federal Claims and the U.S. District Court for the District of Columbia
contain instructions about how to file your completed complaint electronically. You may also file your
complaint at one of the addresses below:

U.S. Court of Federal Claims
717 Madison Place, NW
Washington, DC 20439
uscfc.uscourts.gov

U.S. District Court for the District of Columbia
333 Constitution Avenue, NW
Washington, DC 20001
dcd.uscourts.gov

Note: We will not delay processing income tax returns and assessing any taxes due even if you file a petition for
declaratory judgment under IRC Section 7428.

Taxpayer rights and sources for assistance

The Internal Revenue Code (IRC) gives taxpayers specific rights. The Taxpayer Bill of Rights groups these into
10 fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and
following these rights. For additional information about your taxpayer rights, please see the enclosed Publication 1,
Your Rights as a Taxpayer, or visit IRS.gov/taxpayer-bill-of-rights.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers and
protects taxpayers’ rights. TAS can offer you help if your tax problem is causing a financial difficulty, you've
tried but been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure
isn't working as it should. If you qualify for TAS assistance, which is always free, TAS will do everything
possible to help you. To learn more, visit taxpayeradvocate.IRS.gov or call 877-777-4778.

Tax professionals who are independent from the IRS may be able to help you.

Low Income Taxpayer Clinics (LITCs) can represent low-income persons before the IRS or in court. LITCs can
also help persons who speak English as a second language. Any services provided by an LITC must be for free
or a small fee. To find an LITC near you:

* Go to taxpayeradvocate.IRS.gov/litmap;
* Download IRS Publication 4134, Low Income Taxpayer Clinic List, available at IRS.gov/forms; or
* Call the IRS toll-free at 800-829-3676 and ask for a copy of Publication 4134.

Letter 1371 (Rev. 9-2022)
Catalog Number 40683R

State bar associations, state or local societies of accountants or enrolled agents, or other nonprofit tax professional
organizations may also be able to provide referrals.

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,

Daniel I. Werfel
Commissioner

By: [signature]
Valeria B. Farr
Appeals Team Manager

Enclosures:
Publication 1
IRS Appeals Survey

cc:

Letter 1371 (Rev. 9-2022)
Catalog Number 40683R

Department of the Treasury                         Date:
Internal Revenue Service                           12/06/2022
Tax Exempt and Government Entities                 Taxpayer ID number:

                                                   Form:

                                                   Tax periods ended:

                                                   Person to contact:

                                                   Manager's contact information:
                                                   Name:
                                                   ID number:

CERTIFIED MAIL — Return Receipt Requested          Telephone:
                                                   Response due date:

Dear [redacted]:

Why you’re receiving this letter

We enclosed a copy of our audit report, Form 886-A, Explanation of Items, explaining that we propose to revoke
your tax-exempt status as an organization described in Internal Revenue Code (IRC) Section 501(c)(3).

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)(3) for the periods above.

After we issue the final adverse determination letter, we’ll announce that your organization is no longer eligible
to receive tax deductible contributions under IRC Section 170.

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.

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

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.

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,

[signature]
(for) Lynn A. Brinkley
Director, Exempt Organizations Examinations

Enclosures:

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

Department of the Treasury - Internal Revenue Service                 Schedule number or
Form 886-A                       Explanation of Items                  exhibit
(Rev. May 2017)
Name of Taxpayer                 Tax Identification Number (last 4 digits)  Year/Period Ended
[redacted]

ISSUE:

Does the organization continue to qualify for exemption under Section 501(c)(3) of the Internal Revenue Code (the
Code)?

FACTS:

[redacted] recognized as exempt under Section 501(c)(7) of the Internal Revenue Code, the organization’s exemption
was auto revoked on [redacted] due to failure to file Forms 990 for [redacted] consecutive years. Exempt status was
reinstated in [redacted] under Section 501(c)(3) with the public charity status under Section 509(a)(2) of the Code.
The organization’s Articles of Incorporation amended in [redacted] appears to have a proper dissolution clause.

Articles of Incorporation amended in [redacted] and bylaws amended in [redacted] posted on the organization’s website
provide that the organization’s objectives include:

* To [redacted]
* To [redacted]
* To [redacted]
* To [redacted]
* To [redacted]

During telephone discussions on [redacted] and [redacted] the organization’s president stated that its activities
included providing training classes to [redacted] who may or may not be members of the organizations, holding
membership meetings, agility practice matches, and members’ Christmas gatherings where members met to
discuss aspect of [redacted], help [redacted] work through problems with [redacted] and supporting other
charitable organizations involving [redacted] by making donations. The president mentioned that membership meetings
were open to the public and the meeting schedules could be found on the organization’s website.

The president stated that the organization did not provide any [redacted] trainings.

As part of the response to Information Document Request [redacted], the president provided a written statement of purpose
for the organization. It states that the most important sentence in the organization’s mission statement is “[redacted]”
and that the answer to [redacted] being returned to the [redacted] after [redacted] or [redacted] months
because the [redacted] could not cope with the [redacted] is “education” which the organization
provides through its training classes. The statement also includes a paragraph about over the last [redacted]-year period,
[redacted] trained in the organization’s classes becoming [redacted] used as [redacted] in
hospitals. When asked about the [redacted] during the telephone discussion on [redacted], the
organization’s president stated that those [redacted] were [redacted] under the organization’s supervision and
that the organization had not been able to participate in the program since [redacted].

The organization’s website contains links to [redacted] videos posted on [redacted]. Each of the videos
demonstrates how the training instructor provides lessons to the [redacted]. Documents that provide instructions to
[redacted] on how to [redacted] are also posted on the organization’s website.

The organization’s sources of income included [redacted] and [redacted] fees, membership dues, and interest
income. The organization’s expenses included [redacted], park rentals, equipment storage, donations, and
general/administrative expenses.

LAW:

Section 501(c)(3) of the Code provides for the recognition of exemption of organizations organized and operated
exclusively for charitable, educational, or other purposes as specified in the statute.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, 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.

Treasury Regulation 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 organizing document limits the purposes of such organization to one or more
exempt purposes and does 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.

Treasury Regulation 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.

Treasury Regulation 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/her capabilities or the instruction of the public on subjects
useful to the individual and beneficial to the community.

Revenue Ruling 71-421, 1971-2 C.B. 229 held that the nature of obedience training requires that the owner of the
dog appear at the classes so that the dog is trained to respond to his owner's commands. While the owner receives
some instruction in how to give commands to his dog, it is the dog that is the primary object of the training. The dog
is also the primary object of the subsequent training in sporting and show events. Therefore, the organization's
training program for dogs is not within the meaning of educational as defined in the regulations.

Catalog Number 20810W                                         www.irs.gov  Form 886-A (Rev. 5-2017)
Page 2 of 4

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 Section 501(c)(3) of the Code. 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) of the Code.

Ann Arbor Dog Training Club, Inc. v. Commissioner, 74 T.C. 207 (1980), describes an organization, the primary
purpose of which was to train dogs, did not qualify for exemption under Section 501(c)(3) of the Code. Although the
organization’s advertisements began, “We train you to train your dog,” they concluded, “Puppy, basic, advanced
obedience training.” The court found that conclusion from Revenue Ruling 71-421 was sound which states that the
dog owners received some instructions as to the training of the dogs, the dogs were the primary objects of the
organization’s training classes and evaluation. Since training of dogs is not an educational purpose described in the
regulations, the organization did not qualify for exemption under the Code.

TAXPAYER’S POSITION:

The organization's president believes that the organization qualifies for exemption under Section 501(c)(3) of the
Code because it is organized and operated for educational purposes.

GOVERNMENT'S POSITION:

The organization is not exempt as an organization described in Section 501(c)(3) of the Code because it meets neither
the organizational test nor the operational test outlined in Treasury Regulation Section 1.501(c)(3)-1(a)(1).

The organization does not meet the organizational test under Section 501(c)(3) of the Code because its organizing
documents do not limit its purposes to those which are exempt, and it allows for activities that have been
determined to be primarily social and recreational. Accordingly, the organization does not meet the requirements as
described in Treasury Regulation Section 1.501(c)(3)-1(b)(1)(i).

The organization does not meet the operational test under Section 501(c)(3) of the Code because it is not operating
exclusively for educational purposes as required under Treasury Regulation Section 1.501(c)(3)-1(c)(1). The
organization’s [redacted] training activities are more than an insubstantial part of its activities, which are primarily social
and recreational. Therefore, the organization does not qualify for exemption under Section 501(c)(3) of the Code.

The organization’s activities are not devoted exclusively to the education of individuals/persons as required in
Treasury Regulations Section 1.501(c)(3)-1(d)(3)(i). The organization’s activities are devoted to training [redacted]. Unlike
the organization described in Revenue Ruling 73-456, the organization is not training disabled individuals to function
with the aid of guide [redacted]. The object of the organization’s training is that of the [redacted], not the individual. The
organization’s operations are similar to those described in Revenue Ruling 71-421 and Ann Arbor Dog Training Club,
Inc. because [redacted] primary objects of the training and evaluation.

Catalog Number 20810W                                         www.irs.gov  Form 886-A (Rev. 5-2017)
Page 3 of 4

CONCLUSION:

It is the Internal Revenue Service’s position that the organization failed to meet the requirements described in
Section 501(c)(3) of the Code because it failed to be organized and operated exclusively for exempt purposes. The
organization’s organizing documents do not limit its purposes to one of more exempt purposes and they expressly
empower the organization to engage in activities which are not in furtherance of exempt purposes. The
organization’s [redacted] training activities are not exclusively charitable or educational, causing it to fail the operational
test. Accordingly, revocation of the organization’s exempt status is proposed effective [redacted].

If you agree to this conclusion, please sign the attached forms.

If you disagree, please submit a statement of your position.

Catalog Number 20810W                                         www.irs.gov  Form 886-A (Rev. 5-2017)
Page 4 of 4