Referral network served members rather than a line of business

Plain-English summary

A professional networking organization sought exemption as a business league under IRC § 501(c)(6). Its members came from different industries, met weekly to exchange referrals, and were limited to one representative per profession. The IRS found that the members shared only a desire to increase their own sales and business prospects. The organization did not improve conditions in a particular line of business, and its restricted membership did not resemble a chamber of commerce open to the broader business community. Its referral activity instead performed particular services for members and promoted their private interests. The IRS denied exemption, and the determination became final after no timely protest.

Ruling snapshot

• Question: Does a cross-industry referral network qualify as a business league under IRC § 501(c)(6)?
• Outcome: Denied
• Key authorities: IRC § 501(c)(6); Treas. Reg. § 1.501(c)(6)-1; Rev. Ruls. 59-391, 70-244, and 73-411; Indiana Retail Hardware Assn., Inc. v. United States

Full text (IRS public release)

Department of the Treasury
Internal Revenue Service
Tax Exempt and Government Entities

Date:
07/10/2025

Employer ID number:

Form you must file:

Tax years:

Person to contact:

Release Number: 202540021
Release Date: 10/3/2025
UIL Code: 501.06-00, 501.06-01

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)(6). 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.

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.

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:
05/22/2025

Employer ID number:

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

Legend: UIL:

B = State 501.06-00
C = Date 501.06-01
D = Number

x dollars = Amount

y dollars = 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)(6).
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)(6)? No, for the reasons stated below.

Facts

You were formed as a non-stock corporation in B on C. Your Articles of Incorporation are silent as to your
purpose or your asset distribution upon dissolution of the corporation. Your Bylaws states your purpose is to
operate a networking organization of local professionals and to provide education, resources, and support to
those members.

Your members have weekly virtual business referral meetings. You hold the last meeting of each quarter in
person. Your members are required to attend each meeting and invite as many guests as they can. Your
meetings are held to assist your members and their guests in increasing their revenue by giving them a platform
to share their contact information and business-related solutions. Your meetings are held for the sole purpose to
enable your members and their guests to earn revenue as individuals and business owners.

You indicate that the common business interest of your members is to help each other grow revenues by
referring their businesses to each other. Your members must come from different business backgrounds and no
two members can represent the same industry. Members pay x dollars annually in dues. Members that are D or
younger pay discounted dues of y dollars annually.

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

2

Your sole source of revenue is through membership fees. Your main expenses include website fees, background
check fees, team items, bank fees, uniforms, legal expenses, and the cost of your network gatherings.

Law

IRC Section 501(c)(6) provides exemption from federal income tax for business leagues, chambers of
commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a
pension fund for football players), not organized for profit and no part of the net earnings of which inures to the
benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(6)-1 states that a business league is an association of persons having some
common business interest, the purpose of which is to promote such common interest and not to engage in a
regular business of a kind ordinarily carried on for profit. It is an organization of the same general class as a
chamber of commerce or board of trade. Thus, its activities should be directed to the improvement of business
conditions of one or more lines of business as distinguished from the performance of particular services for
individual persons. An organization, whose purpose is to engage in a regular business of any kind ordinarily
carried on for profit, even though the business is conducted on a cooperative basis or produces only sufficient
income to be self-sustaining, is not a business league.

Revenue Ruling 59-391, 1959-2 C.B. 151, held that an organization composed of individuals, firms,
associations and corporations, each representing a different trade, business, occupation or profession whose
purpose is to exchange information on business prospects has no common business interest other than a mutual
desire to increase their individual sales. The activities are not directed to the improvement of one or more lines
of business, but rather to the promotion of the private interests of its members and is not exempt under IRC
section 501(c)(6).

In Rev. Rul. 70-244, 1970-1 C.B. 132, the organization’s membership consists of business and professional
persons in the community. Its articles of incorporation state it was formed to bring together members and their
guests to exchange idea for improving business conditions within the community. It does not have any specific
program directed to the improvement of business conditions in the community. Since this organization has no
program designed to improve business conditions of one or more lines of business, it is held that the
organization is not exempt from federal income tax under IRC Section 501(c)(6).

Rev. Rul. 73-411, 1973-2 C.B. 180, describes an organization that was not structured along industry or business
lines but was composed of various types of businesses and commercial endeavors comprising a shopping center.
Therefore, its right to exemption, if any, had to rest on its characterization as a chamber of commerce or board
of trade or similar organization. The revenue ruling further indicates that chambers of commerce and boards of
trade direct their efforts at promoting the common economic interests of all the commercial enterprises in a
given trade community. In the case of a chamber of commerce or similar organizations, the common business
interest is usually the general economic welfare of a community. Membership is voluntary and open generally
to all business and professionals in the community.

In Indiana Retail Hardware Assn., Inc. v. United States, 117 Ct. Cl. 288 (1966), the court held that when
conducting particular services for members is a substantial activity of an organization, the organization will be
precluded from exemption under IRC Section 501(c)(6).

Application of law

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

You are not described in IRC Section 501(c)(6) and Treas. Reg. Section 1.501(c)(6)-1 because you are not
formed to promote the common business interests of a particular industry or trade, but rather you are formed to
benefit your members’ business interests. This is evidenced by the fact that your membership is restricted to one
representative from each profession. Additionally, you have no common business interest other than a desire to
increase business leads and prospects of your members as illustrated from the nature of your weekly meetings.
Since you have no program designed to improve business conditions along one or more lines of business, you
do not qualify under Section 501(c)(6).

You are like the organization described in Rev. Rul. 59-391. Your members are from different professions who
are not in competition with one another. The purpose of your weekly meetings is to provide business referrals
for your members. This illustrates you have no common business interest other than a desire to increase the
business prospects of your members.

You are similar to the organization in Rev. Rul. 70-244 in that you do not have any specific program directed to
the improvement of business conditions in the community. Your weekly meetings provide referrals to the
businesses of your members. Since you have not described any programs designed to improve business
conditions of one or more lines of business, but instead referral opportunities for members, you do not qualify
under IRC Section 501(c)(6).

Like the organization in Rev. Rul. 73-411, you are not structured along any particular industry or business lines.
You are composed of various types of businesses. Therefore, to qualify for exemption under IRC Section
501(c)(6), you must depend on being characterized as a chamber of commerce. Because your membership is not
open to all businesses in your community but only to one business per category, you do not meet the definition
of a chamber of commerce within the meaning of Section 501(c)(6) as explained in this revenue ruling.

Like the organization in Indiana Retail Hardware Assn., Inc., your activities do not improve the business
conditions of one or more lines of business or business conditions of any community as a whole. Instead, you
serve the private interests of your members.

Conclusion

Based on the information provided, we conclude that you are not operated as a business league described in IRC
Section 501(c)(6). Your activities are not primarily directed to the improvement of business conditions of one or
more lines of business. Your activities are also not furthering the common economic interests of all the
businesses in a given trade community like of a chamber of commerce. Rather, you are formed to promote the

private interests of your members. Therefore, you do not meet the requirements for exemption under Section
501(c)(6).

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

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

4

• 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
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

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

5

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