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The IRS denied a professional organization tax exempt status under Section 501(c)(3) in Letter 4034 (Jan. 11, 2023). The organization, whose name was redacted in the letter, was dedicated to educating estate planning professionals and promoting cooperation among businesses and individuals in the field such as lawyers, accountants, insurance agents and planned giving officers.
The IRS noted that the Treasury regulations provide that an organization must be organized and operated exclusively for exempt purposes. To meet that standard, only an insubstantial part of its activities may be outside its exempt purposes. The IRS found that a good portion of the organization’s activities were devoted to social and networking opportunities for its members, which was a private, not public, purpose.
This non-exempt purpose drove more than an insubstantial portion of the organization’s activities, and therefore, it wasn’t operated exclusively for exempt purposes.
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