Trade-promotion group denied charitable exemption

Plain-English summary

An organization sought charitable status for promoting companies from one country and helping them sell products and services in another market. It ran an annual exhibition, roadshows, and seminars, and participating companies paid for exhibition booths. The IRS found that the activities primarily facilitated trade and increased sales for the participating businesses. Any educational information supplied to prospective customers was secondary to that commercial objective. Because the organization operated for a substantial nonexempt purpose and the private benefit of participating businesses, the IRS denied exemption, and the denial became final when no protest was filed.

Ruling snapshot

• Question: Did an organization promoting cross-border sales through exhibitions, roadshows, and seminars qualify under IRC § 501(c)(3)?
• Outcome: Denied
• Key authorities: IRC §§ 170, 501(c)(3); Treas. Reg. § 1.501(c)(3)-1; Rev. Rul. 71-504; Rev. Rul. 73-567; Rev. Rul. 77-111

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 06/26/2025
IRS Tax Exempt and Government Entities Employer ID number:
Form you must file:

Tax years:

Person to contact:

Release Number: 202538033 Name:
Release Date: 9/19/2025 Telephone:

UIL Number: 501.03-00, 501.03-05, 501.33-00

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

Date:
05/06/2025

Employer ID number:

Person to contact:

Name:
ID number:
Telephone
Fax
Legend: UIL:
B = Date 501.03-00
C = State 501.03-05
D = Country 501.33-00
E = Topic
F = Country
G = Region
H = Topic
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, Streamlined Application for Recognition of Exemption Under Section 501(c)(3)
of the Internal Revenue Code.

You attest that you were incorporated on B, in the state of C. You attest that you have the necessary organizing
document, that your organizing document limits your purposes to one or more exempt purposes within the
meaning of the IRC Section 501(c)(3), that your organizing document does not expressly empower you to
engage in activities, other than an insubstantial part, that are not in furtherance of one or more exempt purposes,
and that your organizing document contains the dissolution provision required under Section 501(c)(3).

You attest that you are organized and operated exclusively to further charitable purposes. You attest that you
have not conducted and will not conduct prohibited activities under IRC Section 501(c)(3). Specifically, you
attest you will:

• Refrain from supporting or opposing candidates in political campaigns in any way

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

2

• Ensure that your net earnings do not inure in whole or in part to the benefit of private shareholders or
  individuals

• Not further non-exempt purposes (such as purposes that benefit private interests) more than
  insubstantially

• Not be organized or operated for the primary purpose of conducting a trade or business that is not related
  to your exempt purpose(s)

• Not devote more than an insubstantial part of your activities attempting to influence legislation or, if you
  made a Section 501(h) election, not normally make expenditures in excess of expenditure limitations
  outlined in Section 501(h)

• Not provide commercial-type insurance as a substantial part of your activities

You state that you serve a group of companies in D by promoting their E products and services for use in E
facilities located in F. You do this in order to help companies in D to open up a portion of the potential trade
market in G.

Detailed information was subsequently requested. You further state that this promotion is conducted through an
annual exhibition, roadshows, and seminars. E and H companies from D and F participate in these promotion
activities. These companies pay for booths at the annual exhibition. Principally, you are facilitating trade
between E and H product/service vendors and customers in F.

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, in order 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(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.

Revenue Ruling 71-504, 1971-2 C.B. 139, describes a city medical society, exempt under IRC
Section 501(c)(6), that primarily directs its activities toward the promotion of the common business interests of
its members. The ruling provides that since the society has substantial noncharitable and noneducational
purposes and activities, it is not a charitable organization. Accordingly, it is held that this association may not
be reclassified as an organization exempt from federal income tax under Section 501(c)(3) of the Code.

Rev. Rul. 73-567, 1973-2 C.B. 178, states that by examining and certifying physicians under the circumstances
described, the board promotes high professional standards. Although some public benefit may be derived from
promoting high professional standards in a particular medical specialty, the activities of the board are directed
primarily to serving the interest of the medical profession. Under these circumstances, the board is not

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

3

organized and operated exclusively for charitable purposes and does not qualify for exemption from Federal
income tax under Section 501(c)(3) of the Code.

Revenue Ruling 77-111, 1977-1 C.B. 144, in Situation 1, held that an organization formed to increase business
patronage in a deteriorated area by providing information on the area's shopping opportunities, local
transportation, and accommodations is not operated exclusively for charitable purposes and does not qualify for
exemption under IRC Section 501(c)(3). The overall thrust is to promote business rather than to accomplish
Section 501(c)(3) objectives exclusively.

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

A ruling on exempt status is based solely on facts and representations in the administrative file. You have not
provided supporting documentation to establish you meet the requirements of IRC Section 501(c)(3). Section
501(c)(3) sets forth two main tests for qualification for exempt status. As stated in Treas. Reg. Section
1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in
Section 501(c)(3). You do not meet the operational test under Section 501(c)(3) because you are not operating
exclusively for charitable purposes as required under Treas. Reg. Section 1.501(c)(3)-1(c)(1). You were formed
to promote the trade of E products between producers in D and customers in F.

You are like the organization described in Rev. Rul. 71-504 and Rev. Rul. 73-567. You provide a direct
monetary benefit to your participating businesses through the increase in trade and sales of their products. This
direct benefit serves the private interests of your participating businesses rather than the interests of the public.

Similar to the organization described in Rev. Rul. 77-111, Situation 1, your overall thrust is to increase the sales
of your participating businesses by facilitating trade of their products. Although your event, roadshows, and
seminars may provide some educational information to prospective customers, your primary objective is to
facilitate sales for your participating businesses.

Like the organization described in Better Business Bureau of Washington D.C., you operate for a substantial
nonexempt purpose. You devote a substantial amount of your time, resources, and activities to creating an event
to generate sales for your participating businesses. This substantial nonexempt purpose precludes exemption
under IRC Section 501(c)(3).

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) because you are not operated exclusively for exempt purposes.
By providing your participating businesses with an opportunity and venue to sell their products for a fee, you
are operated primarily for the private benefit of your participating businesses. This is a substantial non-exempt
purpose, which disqualifies you from 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

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

4

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:

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.

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

5

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.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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