part7-57

Financial counseling—A nonprofit organization formed to advise, counsel, and assist individuals in solving their financial
difficulties by budgeting their income and expenses and effecting an orderly program for the payment of their obligations
is entitled to exemption from Federal income tax as a social welfare organization described in IRC 501(c)(4). See Rev. Rul.
65–299, 1965–2 C.B. 165.

Community water supply—A nonprofit organization formed for the purpose of establishing and maintaining a system for storage
and distribution of water in order to increase underground water levels of a community is entitled to exemption from tax under
IRC 501(c)(4) as an organization operated exclusively for the promotion of social welfare. See Rev Rul. 66–148, 1966–1 C.B.
143.

Rifle range; safe handling of weapons—A nonprofit organization may qualify for exemption from Federal income tax under IRC
501(c)(4) where it provides a community with supervised facilities for rifle, pistol, and shotgun practice and instructions
in the safe handling and proper care of weapons. See Rev. Rul. 66–273, 1966–2 C.B. 222.

Organized sports—An organization that stimulates the interest of youth in the community in organized sports by furnishing
virtually free admission to youths and encouraging their attendance at sporting events may qualify under IRC 501(c)(4). See Rev. Rul. 68–118, 1968–1 C.B. 261. See also Rev. Rul. 69–384, 1969–2 C.B. 122, and Rev. Rul. 70–9, 1970–1 C.B. 126

Festival—A nonprofit organization that conducts an annual festival centered around regional customs and traditions may qualify
for exemption under IRC 501(c)(4). The organization provides the community with recreation and provides a means for citizens
to express their interest in the community’s history, customs, and traditions. See Rev. Rul. 68–224, 1968–1 C.B. 262.

Loans to businesses to alleviate unemployment—A nonprofit organization created to make loans to businesses as an inducement
to locate in an economically depressed area in order to alleviate a community’s unemployment may be exempt under IRC 501(c)(4).
See Rev. Rul. 67–294, 1967–2 C.B. 193.

P.T.A. sponsored corporation; student insurance reviews—A nonprofit corporation whose sole purpose is cooperating with the
parent-teacher association of a local school district in its activities, by reviewing the proposals of and designating the
insurance company allowed to solicit accident insurance from the students, teachers, and other employees of the school district
qualifies under IRC 501(c)(4). See Rev. Rul. 61–153, 1961–2 C.B. 114.

Junior chamber of commerce; community welfare—A junior chamber of commerce operated exclusively for the purpose of rendering
civic services for the promotion of the welfare of the community and its citizens is exempt from Federal income tax as an
organization described in IRC 501(c)(4). Its various programs, such as activities on behalf of youth, community benefit projects,
and community leadership training, promote the common good and general welfare of the people of the community. Ordinary chambers
of commerce, which are organized to promote the business interests of a community, instead generally qualify for exemption
under IRC 501(c)(6). See Rev. Rul. 65–195, 1965–2 C.B. 164.

Stadium for school district—A corporation formed to provide a school district with a stadium is exempt as an organization
operated for the promotion of social welfare. See Rev. Rul. 57–493, 1957–2 C.B. 314.

Public safety and community services—A nonprofit organization that carried on activities in the general areas of public safety
and crime prevention, housing and community development, recreation, and community services was held exempt under IRC 501(c)(4).
Membership in the organization was open to any interested person or business enterprise in the community and the benefits
of its activities were extended to both members and nonmembers on equal terms. The holding of the above revenue ruling was
based on the conclusion that by carrying on its activities, including contracting for security patrols designed to increase
public safety and reduce crime in the community, the organization was promoting the common good and general welfare of the
people of the community. See Rev. Rul. 75–386, 1975–2 C.B. 211. Compare Rev. Rul. 77–273, 1977–2 C.B. 194, which is discussed in IRM 7.25.4.10.1(11).

Bus transportation during rush hours for suburban community—The Service concluded that an organization formed by residents
of a suburban community to provide bus transportation during rush hours between the community and the major employment center
in a metropolitan area is exempt under IRC 501(c)(4). Regular bus service was inadequate during rush hours. Because revenue
from fares was not sufficient to meet expenses, the organization sought and received financial assistance from different governmental
units to enable it to continue operation of the bus service. The organization was supervised by an uncompensated board of
directors elected by community residents, and its meetings were publicized in advance and were open to all residents. These
factors indicated that the organization was not carrying on a business with the general public in a manner similar to organizations
operated for profit, but instead was promoting social welfare within the meaning of Reg. 1 .501(c)(4)–1(a)(2). See Rev. Rul. 78–69, 1978–1 C.B. 156.

Airport serving rural needs—An organization that operates an airport in a rural area that has no other airport, and which
is essential to the economy of the area, is exempt under IRC 501(c)(4). The use of volunteer services and the receipt of government
grants, as well as overall supervision and control by a municipality, were factors that led the Service to conclude that the
organization was not carrying on a business with the general public in a manner similar to organizations operated for profit.
See Rev. Rul. 78–429, 1978–2 C.B. 178.

Television antenna services—An organization that provides antenna service only to its members to enable them to receive television
is not exempt. See Rev. Rul. 54–394, 1954–2 C.B. 131. However, an antenna service that provides signals to any television receiver in the community
is exempt since it benefits the community as a whole rather than just the members. See Rev. Rul. 62–167, 1962–2 C.B. 142.

Grocery cooperative—An organization formed to purchase groceries for its membership at the lowest possible prices on a cooperative
basis is not exempt as a social welfare organization. See Rev. Rul. 73–349, 1973–2 C.B. 179.

Parking services—An organization established by merchants which operates a public parking facility that provides parking for
the merchants’ customers at free or reduced rates does not qualify because it primarily serves the private interests of the
merchants and is a business. See Rev. Rul. 78–86, 1978–1 C.B. 152. On the other hand, an organization whose membership is open to the community and provides
free parking to all would qualify. See Rev. Rul. 81–116, 1981–1 C.B. 333. The Service does not follow the decision in Monterey Public Parking Corporation v. United States, 481 F. 2d 175 (9th Cir. 1973).

Port area spillage control—An organization that tries to prevent liquid spills, primarily of oil, and contain and clean up
spills within a city port area is exempt under IRC 501(c)(4) if its services are equally available to members and nonmembers
at the same costs. See Rev. Rul. 79–316, 1979–2 C.B. 228.

Rehabilitation of unemployed—A corporation organized for the purpose of rehabilitating and placing unemployed persons over
a stated age may be exempt as an organization operated exclusively for the promotion of social welfare. Although substantial
private benefit to the unemployed individuals exists, the community benefit found in employing those individuals is dominant.
See Rev. Rul. 57–297, 1957–2 C.B. 307. Distinguished by Rev. Rul. 66–257, 1966–2 C.B. 212.

Memorial association; funeral information and arrangements—A memorial association organized to study and develop methods of
achieving simplicity and dignity in funeral and memorial services; educate and inform its members as well as the public as
to the results of such study; and maintain a registry for the wishes of its members in regard to arrangements following death,
is entitled to exemption from Federal income tax as a social welfare organization described in IRC 501(c)(4). The organization
serves a social welfare purpose through education of the public and providing a useful service to the community on a noncommercial
basis. See Rev. Rul. 64–313, 1964–2 C.B. 146.

Mutual benefit societies—Organizations that provide life, sickness, and accident benefits for their members do not qualify
under IRC 501(c)(4) because their activities primarily benefit their members. See Rev. Rul. 75–199, 1975–1 C.B. 160, which modified Rev. Rul. 55–495, 1955–2 C.B. 259. See also, N.Y. State Assn. of Real Est. Bds. Group Ins. Fund v. Commissioner, 54 T.C. 1325 (1970). Police and fire relief associations are discussed at IRM 7.25.4.11.

Trade association—In American Women Buyers Club, Inc. v. Commissioner, 238 F.2d 526 (2nd Cir. 1964), the court affirmed denial of exemption to a membership corporation of female ready-to-wear
buyers organized to promote the general good and welfare of members in the trade, encourage friendly relations, and give aid
to members in distress. Membership, even within the trade, was restrictive as approximately 15% of the applicants were turned
down. The services provided by the club (such as employment facilities, information about sources of supply, lectures, dinners,
installations, publications, and sick and death benefits) were all primarily, if not exclusively, for the club membership.

Street restoration for members—In Contracting Plumbers Cooperative Restoration Corp. v. United States, 488 F. 2d 684 (2nd Cir. 1973), cert. denied, 419 U.S. 827, an organization whose purpose was to ensure the efficient repair
of
“cuts”
in city streets which resulted from its members’ plumbing activities did not qualify for exemption under IRC 501(c)(4).
The Court concluded that there were several factors which evidenced the existence of a substantial nonexempt purpose. The
factors included, but were not limited to, the members’ substantial business interest in the organization’s formation and
the fact that each member of the cooperative enjoyed economic benefits precisely to the extent they used and paid for restoration
services.

Art exhibit sponsorship—A nonprofit organization whose purpose is to develop and encourage interest in painting, sculpture,
and other art forms by conducting, in a noncommercial manner, a community art show qualifies for exemption as an organization
operated exclusively for the promotion of social welfare under IRC 501(c)(4). See Rev. Rul. 78–131, 1978–1 C.B. 156.

Personal service cooperative —A community cooperative organization formed to facilitate the exchange of personal services
among members is operating primarily for the private benefit of its members and is not exempt from tax as a social welfare
organization under IRC 501(c)(4). See Rev. Rul. 78–1 32, 1978–1 C.B. 157.

Tenants association—An organization formed to promote the legal rights of tenants in a community by publishing a newsletter,
testifying before administrative and legislative bodies and occasionally initiating litigation qualifies under IRC 501(c)(4).
See Rev. Rul. 80–206, 1980–2 C.B. 185. However, an organization made up of tenants in an apartment complex which represented
those tenants in negotiations with apartment management would not qualify. See Rev. Rul. 73–306, 1973–2 C.B. 185.

Beautification of public areas—A nonprofit organization with membership limited to the residents and business operators within
a city block and formed to preserve and beautify the public areas in the block, thereby benefiting the community as a whole
as well as enhancing the value of its members’ property rights, will not qualify for exemption under IRC 501(c)(3) but may
qualify under IRC 501(c)(4). See Rev. Rul. 75–286, 1975–2 C.B. 210. Rev. Rul. 68–14 distinguished.

Recreational facility; restricted use—The Service will not follow the decision in Eden Hall Farm v. United States, 389 F. Supp. 858 (W.D. PA 1975), which held that an organization providing recreational facilities to the employees of selected
corporations qualifies for exemption as a social welfare organization described in IRC 501(c)(4). See Rev. Rul. 80–205, 1980–2 C.B. 184.

Employment taxes; collection and payment—An organization established by a collective bargaining agreement between an association
of manufacturers and a labor union to collect Federal and State employment taxes which the manufacturers are required to deduct
from the wages of their employees who are members of the union, and pay over the amounts so collected to the appropriate tax
authorities does not qualify for exemption under IRC 501(c)(4), 501(c)(5), 501(c)(6) or 501(c)(9). See Rev. Rul. 66–354, 1966–2 C.B. 207.

Operation of a resort—In People’s Educational Camp Society, Inc. v. Commissioner, 331 F.2d 923 (2nd Cir. 1964), a nonprofit corporation’s social welfare activities were supported by its operation of a commercial
resort. The court rejected the argument that the resort activities were social welfare and characterized them as business
activities. It noted that a large portion of the revenue was being reinvested in the commercial operation. As the business
activities were of such magnitude in comparison with the social welfare activities that the organization could not be said
to be exclusively (that is,
“primarily”
) engaged in the promotion of social welfare, the court held the organization nonexempt.

Public dances—In Club Gaona. Inc. v. United States, 167 F. Supp. 741 (S.D. CA 1958), the organization’s principal activity was the promotion of regular public dances, which
were its main source of income. The club used these profits for speculative real estate dealings. The court held that the
organization was not primarily promoting social welfare as its profits were devoted to the accumulation of funds which were
not used for ascertainable civic projects.

Housing projects—An organization formed to manage low and moderate income housing projects for a fee does not qualify for
exemption under IRC 501(c)(4). Management services were the primary activity and were carried on in a manner similar to organizations
operated for profit. See Rev. Rul. 70–535, 1970–2 C.B. 117.

Thrift stores—A foundation reselling donated goods for a profit was held taxable even though its net profits were payable
to a veterans’ organization exempt under IRC 501(c)(4). Veterans Foundation v. United States, 281 F.2d 912 (10th Cir. 1960). In that case, the primary purpose of the organization, as evidenced by its activities, was
to engage in business.

Lottery; profits used for expenses—A nonprofit organization, created exclusively for the promotion of social welfare, which
conducts weekly drawings among members of the general public as its principal activity and uses the profits therefrom primarily
for the payment of its general expenses is not entitled to exemption as an organization described in IRC 501(c)(4). See Rev. Rul. 61–1 58, 1961–2 C.B. 115.

Semiprofessional baseball club—A nonprofit corporation that operates a semiprofessional baseball club as its principal activity
is not entitled to exemption under IRC 501(c)(4). See Rev. Rul. 55–516, 1955–2 C.B. 260. On the other hand, an amateur baseball team was held to qualify. See Rev. Rul. 69–384, 1969–2 C.B. 122.

Sorority; control by business corporation—When a national sorority is created and controlled by a business corporation engaged
in furnishing services and supplies to the sorority and its member chapters, neither the sorority nor its chapters can qualify
for exemption from Federal income tax under IRC 501(c)(7) or IRC 501(c)(4) because they serve the financial interests of the
business corporation. Under the circumstances, the sorority activity assumed the coloration of a business activity. See Rev. Rul. 66–360, 1966–2 C.B. 228.

Golf tournament sponsorship—A nonprofit organization, whose membership is limited to local residents, and whose sole activity
is sponsoring an annual professional golf tournament for which it leases a golf course and charges admission, is not operated
primarily for the promotion of social welfare and does not qualify for exemption. See Rev. Rul. 74–298, 1974–1 C.B. 133.

Security services—A nonprofit organization provides security services for residents and property owners of a particular community,
who agree to pay at a specified hourly rate to defray the cost of the services. By providing security services in return for
compensation the organization is carrying on a business with the general public in a manner similar to organizations operated
for profit and does not qualify for exemption under IRC 501(c)(4). See Rev. Rul. 77–273, 1977–2 C.B. 194.

Business activities; profits to members—A community welfare corporation that purchases and sells unimproved land and engages
in other business activities, the profits from which are distributed to members, is not exempt under IRC 501(c)(4). See Rev. Rul. 69–385, 1969–2 C.B. 123.