Religious, Charitable, etc., Institutions and Community Chest

Department of the Treasury intema1 Revenue Service
IRS Tax Exempt and Government Entitles
Release Number: 2024430 i 9
Release Dale: 10/25/202,i till., Code: 50 l .03-00
Dear
Date;
08/01/2024
Employer lD number:
Person to contact:
This letter is cm.r final determination that y0u don't qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(a) 11s an organization described i:n IRC Section 50l(c)(3 ). Recently, we sent you a proposed adverse detenuination in response io yom- application. llte proposed adverse detenuination explained the facts, law. and basis for mu conclusion,. and it gave yon 30 days to file a protesL Because \Ve didn't receive a pro1est within the required 30 days, the proposed determination is uow final.
Because you don't qua lit)' as a tax-exempt organization under lRC Section 50 l ( c )(3), donors generally can't deduct contrilm1ious io you unrler IRC Section l 70.
We may notify the appropriate state offic1als of our determination, as required by IRC Section 6104(c). by sending them a copy of this final letter along with the proposed detennination letter.
You must file the federal income tax fonns fi:,r the tax years shown above within 30 days from the date of this letter unless you request au extension of time to file. For further instrnctions, forms, and infonnation, visit ,v,n,·.irs.gov.
\\"e'll make this final adverse detennination letter and the proposed adverse detennination letter available for public inspection after deleting certain identitYiug infonnation, as requ1red by !RC Section 6110. Read the enclosed Letter-l37, Notice of Intention to Disdose - Rulings, and review the t\VO attached letters that show our proposed ddetions. If you disa_llree with om proposed deletions, foUow the instructions in the Letter 43 7 on how to notify us. If you ap.:ree with our deletions, ylm don't need to take any forther action.
If you have questions abon1 this letter, you can call the contact person stlQwn above. If you have questions about your foderal income tax stmus and responsibilities, call our cusio.mer sen:ice number at 800-829-l 040 (TTY 800-829--1933 for deaf or hard of hearing) or customer service for businesses at 800-829-4933.
Letter 4038 {Rev~ 11~2021)
Ca1alog Number 4If-.::tt.s
Enclosures:
Letter 437
Redacted Letter 4034
Letter 4038
Sincerely,
Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements
Letter 4038 (Rev. 11-2021)
Catalog Number 47632S
IRS
Legend:
X :=:= Date
Y = State
Department of the Treasury
Internal Revenue Service
Z = City, State
B =Number c percent= Amount
Dear
Date: 06/06/2024
Employer ID number:
Person to contact:
Name:
ID number:
Telephone:
Fax:
UIL:
501.03-00
We considered your application for recognition of exemption from federal income tax under Internal Revenue Code (IRC) Section S0l(a). We determined that you don't qualify for exemption under IRC Section 50l(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 50 I ( c )(3) of the Internal Revenue Code.
You attest that you were incorporated on X, in the state of Y. 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 50l(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 50l(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 lRC Section 501(c)(3). Specifically, you attest you will:
• Refrain from supporting or opposing candidates in political campaigns in any way
• Ensure that your net earnings do not inure in whole or in part to the benefit of private shareholders or individuals Letter 4034 (Rev. 01-2021) Catalog Number 47628K
• 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 50l(h)
• Not provide commercial-type insurance as a substantial part of your activities
You indicated in Form 1023-EZ that your most significant activities are the promotion of physical fitness and healthy lifestyle within the restaurant and service communities.
Detailed information was subsequently requested. You elaborated on the activities by explaining that you focus on running and yoga. The physical activities you conduct are not directed towards children, elderly, disabled persons, or any charitable class. You focus on individuals in the restaurant and service communities. The yoga and running activities take place in downtown Z, B times a week and represent c percent of your activities.

# Law

IRC Section 501(c)(3) exempts organizations organized and operated exclusively for religious, charitable, scientific, literary, testing for public safety, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals, as long as no part of the net earnings of which inures to the benefit of any private shareholder or individual.
[RC Section 5010) 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 50l(c)(3) if the organization is considered a •'qualified amateur sports organization'· under Section 501 U)(2). Qualified amateur sports organizations ,,viJl qualiiY for tax-exempt status vvhether or not they provide facilities or equipment to their members, and whether or not their membership is local or regional in nature. 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)-l (a)(I) states in order to be exempt as an organization described in [RC 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 1.50 l ( 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 that accomplish one or more of such exempt purposes specified in [RC 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)(2) defines the term charitable as including the relief of the poor and distressed or of the underprivileged, and the promotion of social welfare by organizations designed to lessen Letter 4034 (Rev. 01 6 2021) Catalog Number 47628K neighborhood tensions, to eliminate prejudice and discrimination, or to combat community deterioration. The term "charitable" also includes lessening of the burdens of government.
Revenue Ruling 70-4, 1970-1 C.B. 126, describes an organization formed for the stated purposes of promoting the health of the general public by encouraging all persons to improve their physical condition and of fostering by educational means public interest in a particular sport for amateurs. Its primary activities include promoting the sport by circulating printed materials conducting exhibitions, tournaments and giving occasional instructive clinics. The organization's activities were not considered exclusively educational within the meaning of lRC Section 501(c}(3), and therefore the organization is not exempt under Section 501(c)(3). HO\vcver, it may qualify for exemption under Section 50l(c)(4) for providing wholesome activity for the social improvement and welfare of the community.
Rev. Rul. 77-365, 1977-2 C.B. l 92, describes an organization that was organized and operated to instruct and educate individuals of all ages and skill levels in a particular sport. It conducts clinics, workshops, lessons, and seminars. The organization was recognized as an educational organization described in TRC Section 501(c)(3). ln Better Business Bureau of Washington, D.C., Inc. v. U.S .. 326 U.S. 279 (1945), the court held that the presence of a single non-exempt purpose, if substantial in nature, will preclude exemption, regardless of the number or importance of statutorily exempt purposes.
Application of law
You are not described in IRC Section 501(c)(3) or Treas. Reg. Section I.50 l(c)(3)-l(a) because you fail the operational test.
You do not foster national or international amateur sports competition nor are you operated primarily to conduct national or international sports competition to support and develop amateur athletes for national or intemationa1 competitions as described in IRC Section 501 (i). The persons involved in your activities arc participating in a sport for their own personal health, fitness, and well-being as well as recreational and social purposes. Thus, you are not an amateur sports organization as described in Section 501 G).
Treas. Reg. Section l .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 that accomplish one or more of such exempt purposes specified in IRC section 50 I (c )(3). You indicated you are charitable on Form 1023EZ, however more than an insubstantial part of your activities are not in furtherance of a charitable purpose. You organize recreational yoga and running activities that serve the private interests of the participants of your events.
Treas. Reg. Section 1.501 ( c)(3 )-1 ( d)(2) defines the term charitable as including the relief of the poor and distressed or of the underprivileged, the promotion of social welfare by organizations designed to lessen neighborhood tensions, elimination of prejudice and discrimination, or to combat community deterioration. The term "charitable" also includes lessening of the burdens of government. Your activities of running and yoga directed to adults who work in service industry do not accomplish one or more exempt purposes in IRC Section 501(c)(3).
You are similar to the organization described in Rev. Ru!. 70-4 that was formed for the purposes of promoting the health of the general public by encouraging all persons to improve their physical conditioning. This letter 4034 (Rev. 01-2021) Catalog Number 47628K organization was denied exemption under !RC Section 501 ( c)(3). You and this organization are both created for the promotion of the wellbeing of your participants, in your case, by providing an opportunity to improve their physical conditioning through running and yoga recreational activities. Your activities are not exclusively educational but rather are directed to the improvement of your participants' general fitness levels.
You are not like the organization described in Rev. Rul. 77~365. You do not instruct individuals of all skill levels in a particular sport through clinics, workshops, or lessons. Rather, you organize recreational and social events for your participants.
In Better Business Bureau of Washington. D.C .. Inc. the court determined that the presence of a substantial nonexempt purpose will preclude exemption. Your activities are substantially directed towards non-exempt recreational and social puqJOses. Any educational activities you conduct are incidental to your recreational and social activities. Because you conduct substantial non-exempt activities, you are precluded from exemption under IRC Section 501(c)(3).

# Conclusion

We conclude that you do not qualify for exemption from federal income tax as an organization described in IRC Section 501(c)(3). You do not meet the operational test for Section 50I(c)(3) because you are operated for the substantial nonexempt purpose of providing yoga and running for both recreational and general physical fitness purposes to a non-charitable class.
If you agree
If you agree with our proposed adverse determination, you don't need to do anything. Ifwe 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 arc requesting an Appeals Office conference
• The signature of an officer, director, trustee, or other official ,vho 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 pe1jury, I declare that l have examined this request, or this modification to the request, including accompanying documents, and to the best of my knowledge and bcliet: 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 [RS and Power of Attorney.
Letter 4034 (Rev. 01-2021)
Catalog Number 47628K
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. ff you haven't given us a basis for reconsideration, we' 11 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 vvithin 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(6)(2)).
Where to send your protest
Send your protest, Form 2848, if applicable, and any supporting documents to the applicable address: lJ.S. mail:
Internal Revenue Service
EO Determinations Quality Assurance
Mail Stop 6403
PO Box 2508
Cincinnati, OH 45201
Street address for deliverv service:
1nternal Revenue Service
EO Determinations Quality Assurance
550 Main Street, Mail Stop 6403
Cincinnati, OH 45202
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/formspubs 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 (T AS) 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 \V\Vw.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