Motorsports facility denied Section 501(c)(3) status

Plain-English summary

An organization formed to operate a community motorsports facility applied for recognition under Section 501(c)(3). Its activities would include drag racing, drifting, off-road racing, motocross, autocross, mountain bike racing, and some safety and skills training. The IRS found that its articles did not limit its purposes to exempt purposes, so it failed the organizational test. The IRS also concluded that the facility's educational and safety elements did not overcome its substantial social and recreational purposes. It was not a qualified amateur sports organization because it did not prepare athletes for national or international competition and had no achievement requirements for participation. The IRS issued a final denial after the organization did not protest the proposed adverse determination within 30 days.

Ruling snapshot

• Question: Does the motorsports organization qualify for exemption under IRC Section 501(c)(3)?
• Outcome: denied
• Key authorities: IRC § 501(c)(3), (j); Treas. Reg. § 1.501(c)(3)-1(a), (b), (c), (d); Rev. Rul. 70-4; Rev. Rul. 80-215

Full text (IRS public release)

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

Date:
09/30/2025
Employer ID number:

Form you must file:

Tax years:

Person to contact:
Name:

Release Number: 202552024
Release Date: 12/26/2025
UIL Code: 501.03-00, 501.03-30

ID number:
Telephone:

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:
08/14/2025
Employer ID number:

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

Legend:                                  UIL:
C= Territory                             501.03-00
D= Date                                  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 in the C on D. Your Certificate of Incorporation states that your purpose is to safely promote
drag racing, auto-cross, auto-drifting, motorcycle racing, ATV’s and other off-road vehicles. Your assets, upon
dissolution, will be distributed to an organization or organizations operated for IRC Section 501(c)(3) purposes.

You intend to use a motorsports facility in C for recreational purposes, motorsports skills and safety training,
and competitive events to benefit the community at large. The majority of your motorsports activities include
drag racing, drifting, off road racing, motocross racing, autocross racing, and mountain bike racing. Your
volunteer members conduct these activities. Some of the skills and safety training offered will be under the
supervision of the Department of Public Safety. You note that these activities are intended to promote the safe
conduct of motor sports activities in C, lessening the possibility of injury from unsafe or illegal activities.

You state that you foster motorsports activities for the community, and do not officially participate in or prepare
participants for national or international competition. You state that you are not associated or affiliated with any
national or international sports organizations. You provided no evidence that you operate under the guidelines
or supervision of any motorsport governing bodies. You also state that there are no requirements to meet and
achievement level to participate in your activities.

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

2

You plan to be funded by public donations, sponsors, and entrance fees. Your primary expenses include
occupancy expenses, salaries and wages, and professional fees.

Law

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and
operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational
purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to
children or animals.” No part of the net earnings may inure to the benefit of any private shareholder or
individual.

IRC Section 501(j) provides that an organization which fosters national or international amateur sports
competition, but whose activities also involve the provision of athletic facilities or equipment, may still qualify
for exemption under Section 501(c)(3) if the organization is considered a "qualified amateur sports
organization" under Section 501(j)(2). For purposes of this subsection, the term "qualified amateur sports
organization" means any organization organized and operated exclusively to foster national or international
amateur sports competition if such organization is also organized and operated primarily to conduct national or
international competition in sports or to support and develop amateur athletes for national or international
competition in sports.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) provides that, in order for an organization to qualify for
exemption under IRC Section 501(c)(3), an organization must be both organized and operated exclusively for
one or more exempt purposes specified in such section. If an organization fails to meet either the organizational
or operational test, the organization will not qualify for exemption.

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)(3) defines “educational” as instruction or training of the individual for the
purpose of improving or developing his capabilities and/or the instruction of the public on subjects useful to the
individual and beneficial to the community.

Revenue Ruling 70-4, 1970-1 C.B. 126, describes an organization engaged in promoting and regulating a sport
for amateurs. The organization's purposes were to promote the health of the general public by encouraging all
persons to improve their physical condition and fostering public interest in a particular sport. Its activities were
directed toward promoting sport tournaments, exhibitions and holding instructive clinics. The organization did
not qualify for exemption under IRC Section 501(c)(3).

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

3

Rev. Rul. 80-215, 1980-2 C.B. 174, held that an otherwise qualifying organization that is formed to develop,
promote, and regulate a sport for individuals under 18 years of age by organizing local and statewide
competitions, promulgating rules, organizing officials, presenting seminars, distributing a newsletter, and
otherwise encouraging growth of the sport qualifies 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 a claim for
exemption regardless of the number of important truly exempt purposes.

In Hutchinson Baseball Enterprises, Inc. v. Commissioner, 696 F.2d. 757 (1982), the court held that an
organization that promoted recreational and amateur sports was exempt as a charitable organization under IRC
Section 501(c)(3). The organization undertook numerous activities to promote the sport of baseball, and the
court found that the purpose of promoting sports predominated over subsidiary purposes, such as members'
recreational or social benefit.

In Minnesota Kingsmen Chess Association Inc v. Commissioner, T.C. Memo. 1983-495, the organization
sponsored chess tournaments, provided chess magazines and books to libraries, offered free chess lessons, and
published a newsletter that primarily contained reports of past tournaments and announcements of future ones.
The petitioner sought exemption under IRC Section 501(c)(3) because its purposes and activities were described
as educational. The court found that the promotion of chess tournaments furthers a substantial recreational
purpose, even though individual participants may have received some educational benefits.

In St. Louis Science Fiction Limited v. Commissioner, 49 TCM 1126, 1985-162, the Tax Court held that a
science fiction society failed to qualify for tax-exempt status under Section 501(c)(3) of the Code. Although
many of the organization's functions at its annual conventions (the organization's principal activity) were
educational, its overall agenda was not exclusively educational. A substantial portion of convention affairs were
social and recreational in nature.

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). Based on the information provided, you fail the organizational and operational tests.

Organizational Test
Your Articles of Incorporation do not contain an adequate purpose clause that limits your purposes to one or
more exempt purposes under IRC Section 501(c)(3). As a result, you have not satisfied the organizational test
described in Treas. Reg. Sections 1.501(c)(3)-1(b)(1)(i).

Operational Test

You do not meet the operational test under IRC Section 501(c)(3) because you are not operated exclusively for
charitable, educational, fostering national or international amateur sports competition, or other Section
501(c)(3) purposes as required under Treas. Reg. Section 1.501(c)(3)-1(c)(1). Your motorsports activities may
serve some educational purposes, as described in Treas. Reg. Section 1.501(c)(3)-1(d)(3), through your
motorsports skills and safety training, but the overall purpose of these activities is to provide social and
recreational opportunities to the community.

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

4

You are not a qualified amateur sports organization, as described in IRC Section 501(j)(2), because you are not
operated primarily to foster national or international amateur sports competition, or support and develop
amateur athletes for national or international competition in sports. Rather, the persons involved in your
activities are participating in a sport for their own enjoyment and recreation. You do not have any special
requirements to participate in your activities. Thus, you are not an amateur sports organization as described in
Section 501(j).

You are like the organization described in Rev. Rul. 70-4 because you conduct recreational motorsports
activities for the general public rather than providing education with the goal of improving and developing the
capabilities of amateur motorsport participants. You are also unlike the organization described in Rev. Rul. 80-
215 because your motorsport activities are open to all ages rather than limited to those under the age of 18.

Similar to St. Louis Science Fiction and Minnesota Kingsmen, while a portion of your activities are educational
in nature, your sports activities further substantial recreational and social purposes. Like the organization in
Better Business Bureau, this is a substantial non-exempt purpose that will preclude exemption under section
501(c)(3).

You are unlike the organization in Hutchinson Baseball Enterprises, because your primary activity is to provide
recreational sports opportunities for all ages. In Hutchinson Baseball Enterprises, the organizations primary
activity resulted in the furtherance of amateur athletics. The organization provided coaching and instruction for
children and recruited only top amateur baseball players to play on the team it sponsored. The organization also
hired a coach, general manager, and trainer to work with the team. In contrast, you provide no formal or
ongoing instruction to your participants outside of occasional instructive clinics, nor do you have any other
characteristics that indicate that your activities are in furtherance of amateur athletics.

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). Your motorsport activities further substantial non-exempt social and
recreational purposes. 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:

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

5

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
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,

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

6

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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