IRS denies 501(c)(6) status to a business networking and referral group

Plain-English summary

A business networking and referral group applied for tax-exempt status as a
section 501(c)(6) business league, and this is the IRS's final determination
denying it (the group did not protest the earlier proposed denial within 30
days). A 501(c)(6) business league must promote the common business interests of
a particular trade or line of business, not perform particular services for
individual members. Here the members each came from a different trade or
profession (membership was capped at one business per industry) and shared no
common line of business, only a desire to grow their own sales, customer base,
and profitability through networking, referrals, and a member directory. Citing
Revenue Ruling 59-391 and cases like Indiana Retail Hardware and MIB, the IRS
concluded the group mainly runs a referral service that benefits members' private
business interests rather than improving conditions across a line of business or
the community as a whole. It therefore does not qualify for exemption, and the
organization must file federal income tax returns.

Ruling snapshot

• Question: Does a members-only networking and referral club qualify as a 501(c)(6) business league?
• Outcome: Denied (final adverse determination)
• Key authorities: IRC § 501(c)(6); Treas. Reg. § 1.501(c)(6)-1; Rev. Rul. 59-391; Indiana Retail Hardware Assn., Inc. v. United States; MIB, Inc. v. Commissioner

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 04/21/2026
Tax Exempt and Government Entities Employer ID number:

Form you must file:

Tax years:

Release Number: 202629021 Person to contact:
Release Date: 7/17/26
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 476328

Department of the Treasury
Internal Revenue Service

Date:
03/04/2026

Employer ID number:

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

Legend: UIL:

B = Date 501.06-00
C = State 501.06-01
e dollars = Fee

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 incorporated on B, in the state of C. Your application states that your purpose is to promote the common
business interests of your members. You state your goal is to cultivate a vibrant and supportive community of
professionals, entrepreneurs, and business leaders through meaningful networking opportunities and
connections, exchange knowledge and resources, along with other related activities. Your board will coordinate
and lead these activities. You later indicate that your common business interest is not a single line of business,
but rather you are focused on the general economic welfare and improvement of all business conditions within
your local community.

You are a membership organization, and your membership is open to the public. Your activities include
monthly meetings for members, and quarterly meetings that will be open to the general, non-member, business
community. Your meetings will include networking opportunities with dedicated time for members to engage,
learn, and make valuable business connections. There will be times when you invite guest speakers or have
members share their expertise on topics relevant to business marketing, finance, sales, technology, etc. Guest
speakers may or may not be a current member. Your members will provide leads, referrals, and strategic
partnerships to other members. You operate a listing and referral system that is covered financially by your

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

2

annual membership dues. You have a directory listing of all businesses of your members. The listing will
provide another way for members to increase sales, revenue, and connections in your city. Your members do
not have common business interests except to grow revenue, increase customer base, and improve their
individual profitability.

Your membership will be restricted to specific individuals, firms, associations, and/or corporations, who
each represent a different trade, business, occupation, or profession to avoid diminishing the opportunities to
your members. There are no restrictions on the types of trades, businesses or professions, as long as it is not
currently being represented. The eligibility requirement for members will be that they do not represent a
business or industry that is already represented. There is no limit on the number of members as long as each
member represents a unique and specific industry of business and has been in operation for a minimum amount
of time. All members will be considered associate members and will not have voting rights; however, they can
serve on your committees. These requirements are outlined in your membership agreement.

You indicate you are funded by an annual membership fee of e dollars. All fees received will be to conduct your
meetings, produce any promotional materials, operate your referral system and any additional administrative
costs related to your purpose and activities.

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, 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 Indiana Retail Hardware Assn., Inc. v. United States, 366 F.2d 998 (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).

In MIB, Inc. v. Commissioner, 734 F.2d 71 (1986), the Court held that the organization's activities by their
nature consisted of rendering particular services for individual member companies and served to benefit the
members' businesses. It also stated that even though the services produced various indirect and tangible benefits

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

3

for the industry as a whole, the fact remained that the services rendered were in form and substance particular
services for individual member companies.

Application of law

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, to increase revenue, increase customer base, and improve the
profitability. Your membership is restricted to anyone from a different trade, business, occupation, or profession
to avoid diminishing the opportunities to your members. Your members have no common business interest
other than a desire to increase sales, and their individual profitability. Since you have no program designed to
improve actual 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. This is evidenced by the fact that your members
are from different trades of businesses who are seeking to improve their own individual sales and overall
success in their individual businesses or careers, and this is evidenced by the purpose and overall stated goals of
your meetings. Seeking business referrals for your individual and the promotion of their private interests is not
an exempt activity within the meaning of IRC Section 501(c)(3).

Like the organizations described in Indiana Retail Hardware Assn., Inc. and MIB, 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, a substantial portion of your activities and the membership fees that you collect are geared
toward providing a referral service to your members, and as such, you serve the private business interests of
your individual members. Therefore, you are precluded from exemption under IRC Section 501(c)(6).

Conclusion

Based on the information provided, you are not operated as a business league described in IRC Section
501(c)(6). Your primary purpose is to further the private business interests of your members, and your activities
are not directed toward the improvement of business conditions of one or more lines of business. You do not
have a common business interest other than a desire to increase sales of members. Accordingly, you do not
qualify 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
* 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

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

* 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
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.

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

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

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