Philanthropic Impact


Information and Resources for Donors and Professional Advisors

Professional Organization Denied IRC Section 501(c) Status

Laura L. Brownfield
General Counsel

In June, the IRS denied a professional organization tax-exempt status under Section 501(c)(3) in Letter 4034. The organization 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 Treasury regulations require that the entity 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 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 the IRS concluded it was not operated exclusively for exempt purposes.

Note: This material was developed by Community Foundation for Southeast Michigan. It is published with the understanding that neither the publisher nor the author is engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a professional advisor should be sought.