Beef-breed association denied charitable tax exemption

Plain-English summary

An international association of national beef-breed organizations applied for recognition under IRC § 501(c)(3). Its stated purposes included promoting the breed and its products, exchanging technical and genetic information, organizing a world conference, and benefiting member associations that paid dues. The IRS found that the articles did not limit the organization to exempt purposes, so it failed the organizational test. The IRS also found that its activities substantially promoted the business and private interests of members rather than serving the general public, so it failed the operational test. The organization did not protest the proposed adverse determination within 30 days. The IRS therefore issued a final denial of exemption, and contributions generally are not deductible under IRC § 170.

Ruling snapshot

• Question: Does the international beef-breed association qualify for exemption under IRC § 501(c)(3)?
• Outcome: Denied because it failed both the organizational and operational tests and served substantial private member interests
• Key authorities: IRC §§ 170, 501(a), 501(c)(3); Treas. Reg. § 1.501(c)(3)-1(a), (b), (c), (d); Rev. Rul. 61-170; Rev. Rul. 71-505; Better Business Bureau of Washington, D.C., Inc. v. United States

Full text (IRS public release)

Department of the Treasury

Internal Revenue Service

Tax Exempt and Government Entities
PO Box 2508
Cincinnati, OH 45201

Date:
04/29/2025

Employer ID number:

Person to contact:

Release Number: 202530019
Release Date: 7/25/2025
UIL Code: 501.03-00, 501.03-30

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:
02/27/2025

Employer ID number:

Person to contact:
Name:
ID number:
Telephone:
Fax:

Legend:
C = State
D = Date
E = Beef

UIL:
501.03-00
501.03-30

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 were formed as a nonprofit corporation in C on D. Your Articles of Incorporation states that your purpose
is to offer, conduct, support, encourage and/or assist with educational, charitable, and other programs and
projects that are related to promoting the raising, marketing and benefits of E by: (i) facilitating the
development of the E breed and product internationally with good will and integrity; (ii) to foster good relations
between members in the association; (iii) to promote the E and product throughout the world; (iv) to
exchange scientific and technical information among its members; (v) to provide a forum for establishing a
world E conference; (vi) establish protocols for the exchange of E genetic information between and among its
members; (vii) help facilitate and promote E products; and (viii) providing charitable, educational and other
programs and projects. Also, your Articles of Incorporation states that your directors are made of individuals
from different countries. The Articles of Incorporation include provisions for the distribution of assets upon
dissolution.

The bylaws states that you will have two classes of Members: Full members and Associate Members. Full
members shall be an E association that has been established to represent the E breed in a country. Full members
may be represented by up to delegates but have only one vote. Associate Members are E associations or
societies from countries that do wish to be full members. Associate members may attend member meetings but
are not allowed to vote on any matter. Any person, eligible and qualified for membership will be admitted only
on the approval by the Board of Directors and upon the payment of the annual fees. There is no fee for

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

2

applying for membership. Members pay annual dues in the amounts determined by resolution of the Board of
Directors, from time to time. There is no limit on the number of members that may be admitted. If members
fail to pay its dues or assessments within 90 days of the due date, they are automatically terminated at the end of
the 90-day period, provided that the member was given fifteen days prior written notice of the termination
stating the reasons for termination and a timely opportunity to be heard on the matter of the termination.

You state that you're made up of member E associations around the world to discuss ideas and pursue initiatives
that will promote the E brand internationally. The activity is conducted virtually by phone conferences and at
least every years in a face-to-face meeting in a country hosted by the member country in charge of
administrative duties. Funding is provided by annual membership dues. Based on the website provided on your
application, your mission is to enhance the international brand of E for the benefit of your member countries. It
also states that you're comprised of E associations and societies from countries around the world
dedicated to cooperative efforts and initiatives from members to promote and develop the integrity of the E
and brand internationally.

Law

IRC Section 501(c)(3) provides for the exemption from federal income tax of organizations organized and
operated exclusively for charitable, education and other purposes, including the prevention of cruelty to children
or animals provided that no part of the net earnings inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) provides that, in order to be exempt as an organization
described in 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 organization test or the
operational test, it is not exempt.

Treas. Reg. 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 articles of organization:

a) Limit the purposes of such organization to one or more exempt purposes; and

b) Do not expressly empower the organization to engage, otherwise than as an insubstantial part of its
activities, in activities that in themselves are not in furtherance of one or more exempt purposes.

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)(1)(ii) provides an applicant must show that it serves a public rather than a
private interest and specifically that is not organized or operated for the benefit of private interests, such as
designated individuals, the creator or his family, shareholders of the organizations, or persons, controlled,
directly or indirectly, by such private interests.

Revenue Ruling 61-170, 1961-2 C.B. 112, held that an association of professional nurses that operated a nurses'
registry to provide greater employment opportunities to its members and to organize an adequate and available
nursing placement service for the community did not qualify for exemption under IRC Section 501(c)(3). By
operating an employment service principally for the benefit of its members, the organization served private

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

3

interest more than insubstantially and consequently was not organized and operated exclusively for charitable or
other exempt purposes.

Rev. Rul. 71-505, 1971-2 C.B. 232 describes a city bar association cannot be reclassified as an organization
described in Section 501(c)(3). Specifically, a substantial portion of the organization's activities were directed
at the promotion and protection of the practice of law and thus further the common business purpose of its
members. These activities were substantial and reflect noncharitable and noneducation purposes.

Quality Auditing Company, Inc. v Commissioner, 114 T.C. 498 (2000), describes an organization whose activities
consisted of performing quality audits of steel fabricators. It was held the organization more than
incidentally served private interests of the owners and developers and therefore did not qualify for exemption under
IRC Section 501(c)(3).

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 the exemption
regardless of the number or importance of truly exempt purposes.

Application of law

IRC Section 501(c)(3) and Treas. Reg. Section 1.501(c)(3)-1(a)(1) set forth two main tests to qualify for exempt
status. An organization must be both organized and operated exclusively for purposes described in IRC Section
501(c)(3). You have failed to meet the organizational and operational requirements, as explained below.

Your Articles of Incorporation state in part that your purpose is formed to “other programs and projects that are
related to promoting the raising, marketing and benefits of E by: (i) facilitating the development of the E
and product internationally with good will and integrity; (ii) to foster good relations between members
association; (iii) to provide a form for establishing a world E conference; (iv) to exchange scientific and
technical information among its members; (v) establish protocols in the exchange of E genetic information
between and among its members; and (vi) help facilitate and promote E products. Because your Articles of
Incorporation do not limit your purposes to those described in Treas. Reg. Section 1.501(c)(3)-1(b)(1)(i), you
fail the organizational test under Section 501(c)(3).

You fail the operational test because you do not meet Treas. Reg. Section 1.501(c)(3)-1(c)(1). Your purposes
are focused on promoting the E brand and to foster good relations between your members . Your programs are
related to promoting the raising, marketing, and benefits of E, to facilitate the development of the E brand and
product internationally and to exchange scientific and technical information between your members. These
activities show that you are not operated exclusively for charitable or educational purposes, but for the purpose
of benefits to your members.

Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii) provides an applicant must show that it serves a public rather than a
private interest and specifically that is not organized or operated for the benefit of private interests. You are like
the organization described in Rev. Rul. 61-170 and Rev. Rul. 71-505 in that the primary beneficiaries of your
activities are your members and not the general public. You have a limited membership. Your members pay a
fee. Your members receive a benefit.

Like the organization in the court case, Quality Auditing Company, you are more than incidentally serving private
interests. As explained in the court case, Better Business Bureau, although you may have some educational purpose,
you are operated for substantial nonexempt purposes.

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

4

Conclusion

Based on the facts and circumstances presented, you do not qualify for exemption from federal income tax as an
organization described in IRC Section 501(c)(3). You are not organized and operated exclusively for exempt
purposes set forth in Section 501(c)(3). You do not meet the organizational test because your organizing
document does not limit your purposes to those described in IRC Section 501(c)(3). You also do not meet the
operational test or IRC Section 501(c)(3) because you are operated to further the private interest of your
members and are operate for substantial non-exempt purpose. Your operations are not exclusively charitable nor
educational. Therefore, you do not qualify for exemption under IRC Section 501(c)(3).

If you agree

If you agree with our proposed adverse determination, you don't need to do anything. If we don't hear from
you within 30 days, we'll issue a final adverse determination letter. That letter will provide information on
your income tax filing requirements.

If you don't agree

You have a right to protest if you don't agree with our proposed adverse determination. To do so, send us a
protest within 30 days of the date of this letter. You must include:

• Your name, address, employer identification number (EIN), and a daytime phone number

• A statement of the facts, law, and arguments supporting your position

• A statement indicating whether you are requesting an Appeals Office conference

• The signature of an officer, director, trustee, or other official who is authorized to sign for the
organization or your authorized representative

• The following declaration:

For an officer, director, trustee, or other official who is authorized to sign for the organization:

Under penalties of perjury, I declare that I have examined this request, or this modification to the
request, including accompanying documents, and to the best of my knowledge and belief, the request
or the modification contains all relevant facts relating to the request, and such facts are true, correct,
and complete.

Your representative (attorney, certified public accountant, or other individual enrolled to practice before the
IRS) must file a Form 2848, Power of Attorney and Declaration of Representative, with us if they haven't
already done so. You can find more information about representation in Publication 947, Practice Before the
IRS and Power of Attorney.

We'll review your protest statement and decide if you gave us a basis to reconsider our determination. If so,
we'll continue to process your case considering the information you provided. If you haven't given us a basis
for reconsideration, we'll send your case to the Appeals Office and notify you. You can find more information
in Publication 892, How to Appeal an IRS 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:

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

5

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

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. 01-2021)
Catalog Number 47628K