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Giving Home > Professional Advisor Resources > Private Letter Ruling > Family Reunion Organization Exempt Status Denied

Family Reunion Organization Exempt Status Denied

Published October 3, 2025

GiftLaw Note: Organization applied for exempt status under Sec. 501(c)(3). Its primary activity is to support family functions, activities, gatherings and events. Organization’s activities include reunions and holiday gatherings. Reunions are held every two to three years and other events are held based on a consensus among the family members. Activities are restricted to only Organization’s family members. Organization’s funds derive from dues that are charged to each family member. Dues amounts are decided by family leaders who are elected to their positions. Organization uses 10% of its funds to pay for the cost of food for the events. Organization also provides financial support to elderly family members as needed.   
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable or educational purposes and no part of the earnings may inure to the benefit of any private shareholder or individual. Regulation 1.501(c)(3)-1(a)(1) states that an organization that fails to meet either the organizational or operational test is not exempt. Under Reg. 1.501(c)(3)-1(c)(1), an organization is operated exclusively for an exempt purpose only if it engages primarily in activities which accomplish an exempt purpose. An organization will not qualify if a significant portion of its activities does not support an exempt purpose. Here, the Service determined that Organization failed the operational test under Reg. 1.501(c)(3)-(1)(c)(1) because its activities are for the substantial non-exempt purpose of hosting family functions, which serves private interests by financially supporting elderly family members. Therefore, tax-exempt status was denied.

PLR 202539011                       Family Reunion Organization Exempt Status Denied

9/26/2025 (4/29/2025)

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 submitted Form 1023-EZ Streamline Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.

You attest that you were incorporated on S in the State of T. 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 501(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 501(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 IRC 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
  • 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 501(h)
  • Not provide commercial-type insurance as a substantial part of your activities

Your application and your Articles of Incorporation state your purpose and mission is to support family functions, activities, gatherings, and events. Your specific activities include reunions and holiday gatherings. Your reunions are held every 2-3 years and other events take place based on a planning consensus among family members. Your activities are restricted to your family members and are conducted in the U, T area. You also provide financial support to your elderly family members as needed.

Your funds come from family dues that are charged to each family member. The amount is decided by family leaders who are elected to their positions. Ten percent of your funds goes to cover the cost of food for events.

Law

IRC Section 501(c)(3) provides for the recognition of exemption from federal income tax of organizations that are organized and operated exclusively for charitable, religious, or other purposes, provided that no part of the net earnings inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that to be exempt as an organization described in IRC 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 does not qualify for exemption.

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 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)(1)(ii) provides that an organization is not organized or operated exclusively for exempt purposes unless it serves a public rather than a private interest. The organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals, the creator or his family, shareholders of the organization, or persons controlled, directly or indirectly, by such private interests.

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 neighborhood tensions, to eliminate prejudice and discrimination, or to combat community deterioration. The term “charitable” also includes lessening of the burdens of government.

In Revenue Ruling 69-175, 1969-1 C.B. 149, a nonprofit organization that was formed by parents of pupils attending private schedule that provides school bus transportation for its members' children serves a private rather than a public interest and does not qualify for exemption under IRC Section 501(c)(3).

In Rev. Rul. 77-366, 1977-2 C.B. 192, a nonprofit organization that arranged and conducted wintertime ocean cruises during which activities to further religious and educational purposes were provided in addition to extensive social and recreational activities was not operated exclusively for exempt purposes and does not qualify 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 of the United States interpreted the requirement in IRC Section 501(c)(3) that an organization be “operated exclusively” by indicating that an organization must be exclusively devoted to exempt purposes. The presence of a single non-exempt purpose, if more than insubstantial in nature, will destroy the exemption regardless of the number and importance of truly exempt purposes.

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 IRC Section 501(c)(3). 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.

Application of law

Section 501(c)(3) sets forth two main tests for qualification for exempt status. As stated in Treas. Reg. Section 1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in IRC Section 501(c)(3). You are not operated exclusively for exempt purposes as required under Treas. Reg. Section 1.501(c)(3)-1(c)(1) and you have not established that your operations accomplish exclusively charitable purposes as provided in Treas. Reg. Section 1.501(c)(3)-1(d)(2). You are operating for the substantial non-exempt purpose of hosting family functions. Additionally, your Articles of Incorporation state that you were formed to support family functions, activities, gatherings and events. You therefore do not meet the organizational test or operational test.

You are similar to the organization in Rev. Rul. 77-366 as well as the organizations in St. Louis Science Fiction Limited v. Commissioner and Minnesota Kingsmen Chess Association Inc v. Commissioner. A substantial part of your activities are family reunions and holiday gatherings for the benefit, pleasure, and recreation of your members. As provided for in Better Business Bureau, this substantial, non-exempt purpose precludes exemption under IRC Section 501(c)(3).

Additionally, you have not established that you are not organized or operated for the benefit of private interests as stated in Treas. Reg. Section 1.501(c)(3)-1(d)(1)(ii). As stated in Rev. Rul. 69-175, when a group of individuals provide a cooperative service to themselves, they are serving a private interest. By giving some of your funds to elderly family members for financial support as needed you are serving private interests rather than public interests.

Conclusion

Based on the information submitted, you are not organized and operated exclusively for exempt purposes within the meaning of IRC Section 501(c)(3). Rather, you are organized and operated for the substantial non-exempt purpose of hosting family reunions and holiday activities as well as providing financial assistance to family members. Therefore, you do not qualify for exemption under 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:

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:

Internal Revenue Service
EO Determinations Quality Assurance
Mail Stop 6403
PO Box 2508
Cincinnati, OH 45201

Street address for delivery service:

Internal 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/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,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements