Private Letter Ruling

Exempt Status Denied for Hunting Retriever Club

June 5, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it was formed as a recreational hunting retriever club. Organization’s activities consist of training days that are held approximately five times per year and hunting competitions held one to two times a year. During hunting competitions, individuals from neighboring states are invited to participate may receive certifications for their dogs. Organization’s main participants are adults and their pet dogs, but children who demonstrate proper gun safety and individuals with disabilities who can participate with appropriate assistance are also permitted to participate. Any individual who submits a membership application and pays the required dues may become a member of Organization. Organization’s revenue is derived from membership dues and competition entry fees, and profits are used to purchase equipment and supplies and to support Organization’s future events and activities.

To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious or educational purposes. 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. Regulation 1.501(c)(3)-1(d)(3)(i) defines the term educational as the instruction or training of the individual to improve or develop his/her capabilities or the instruction of the public on subjects useful to the individual and beneficial to the community. Here, the Service determined that Organization failed the operational test under Reg. 1.501(c)(3)-(1)(a)(1) because Organization is not operating exclusively for educational purposes. Additionally, Organization’s activities for dogs are not within the meaning of “educational” as defined by Reg. 1.501(c)(3)-1(d)(3)(i) because the dogs are the object of the training. Therefore, tax-exempt status was denied....

Artist Promotional Group Exempt Status Denied

May 29, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it was formed to support, develop and promote musicians, bands and recording artists through equitable and transparent recording contracts and development opportunities. Organization represents that the artists it works with will retain ownership of their intellectual property and that the public will have access to a greater variety of music. Organization offers programs including artist development, marketing, promotion, live concerts and tours in exchange for a royalty fee. Organization estimates that it spends approximately 20% of its time dedicated to the artist development program, 30% to the label services program, 25% to marketing and promotional services and 20% to live concerts and tours.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious or educational purposes. 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. Regulation 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. In this case, the Service determined that Organization does not operate exclusively for an exempt purpose because its primary activities serve the private interests of its artists by providing them services to achieve greater commercial success in the music industry in exchange for a royalty, thereby serving a substantial nonexempt private purpose under Reg. 1.501(c)(3)-1(d)(1)(ii). Therefore, the application for tax-exempt status was denied....

Foundation's Educational Grant Procedures Approved

May 22, 2026
Foundation requested advanced approval of its employer-related scholarships under Sec. 4945(g)(1). Scholarships will be awarded annually and can be applied to tuition expenses at accredited community colleges, trade schools or four-year schools. Foundation will publicize the scholarships through internal communications. To be eligible, applicants must be an employee or the dependent of an employee who has been employed by the specified employer for one year or longer and must be citizens of the United States. In addition, applicants must have either graduated high school, received their GED with a minimum grade point average of 2.5 or be currently enrolled in an undergraduate program with a minimum grade point average of 2.5. The selection committee will consider several factors during the evaluation process including academic performance, academic awards, extracurricular activities, community service, work experience and volunteer experience. Foundation will maintain records and implement procedures to ensure funds are used for its intended purposes.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is generally any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Revenue Procedure 76-47 further provides guidelines to determine whether grants made under an employer-related program qualify as scholarships or fellowships under Sec. 117(a), requiring that the number of grants awarded shall not exceed the greater of: 25% of eligible employee children who applied and were considered, 10% of all eligible employee children regardless of application or 10% of eligible employees who applied and were considered. Here, the Service determined that Foundation’s employer-related scholarship procedures met the requirements of Sec. 4945(g)(1) and satisfied the requirements in Rev. Proc. 76-47. Thus, the grants will not be considered taxable expenditures....

Extension to Allocate GSTT Exemption Granted

May 15, 2026
Grantor established an irrevocable trust for the benefit of Grantor’s children. The trust provides for the division of trust principal into two equal shares, Trust A and Trust B (Trusts). Grantor hired an attorney to provide advice with respect to estate planning, including the GST planning and to draft the Trusts. Grantor hired an accountant to prepare Form 709, United States Gift (and Generation-Skipping Transfer) Tax Returns. Accountant prepared Form 709 reflecting the transfer of assets into Trusts but does not have record of filing the form despite being instructed to do so by Grantor. As such, Grantor did not elect out of automatic allocation of GST exemption. Grantor requests an extension of time under Section 2642(g) and Section 26.2642-7 to allocate GST exemption with respect to transfers made by Grantor to Trusts.
 
Section 2601 imposes a tax on every GST made by a transferor to a skip person. Section 2611(a) defines GST as a taxable distribution, a taxable termination or a direct skip. Section 2631(a) allows each individual to allocate a GST exemption to property transferred by the individual. Under Sec. 2631(b), the Sec. 2631(a) exemption allocation is irrevocable. Section 2632(a)(1) states that a GST exemption can be allocated on or before the date prescribed for filing the estate tax return. Section 2632(a)(2) provides that the allocations are to be made are to be prescribed by forms or regulations provided by the Secretary. Under Sec. 2642(b)(1), an individual may allocate the GST exemption based on the value of the property as determined for gift tax purposes if the allocation of the GST exemption is made on a gift tax return filed on or before the date prescribed by Sec. 6075(b). If the allocation is not made on a timely-filed return, the Service may grant an extension of time to make the allocation. Sec. 2642(g)(1)(A). Section 2642(g)(1)(B) states that all relevant circumstances, including evidence of intent in the trust or transfer instrument, will be considered when determining whether to grant relief. Section 26.2642-7 outlines the procedures and criteria for requesting an extension of time to allocate GST exemption or make related elections, including consideration of whether the transferor or executor reasonably relied on a qualified tax professional’s advice. Here, the Service determined that the requirements of Sec. 26.2642-7 were met and granted an extension of 120 days to allocate Grantor’s GST exemption to the transfers into Trusts....

Payments from Estate Qualify for Charitable Deduction

May 8, 2026
Decedent established a will (“Will”) and is now deceased. Pursuant to the terms of Will, a specified percentage of the residue of Decedent’s Estate (Estate) is to be distributed to charitable organizations (“Charitable Organizations”) that are exempt from tax under Sec. 501(c)(3). Under applicable state law, income earned by assets that are not specifically bequeathed must be paid to residuary beneficiaries. Furthermore, as part of the probate administration of Estate, the state court has ordered that all income from such assets be distributed to Estate’s residuary beneficiaries, which include Charitable Organizations. Estate represents that, during the first two taxable years, it has paid the specified percentage of gross income to Charitable Organizations as required. Estate also represents that such payments are expected to continue in future taxable years throughout administration. Estate requested a ruling to be allowed a charitable deduction under Sec. 642(c) for the portion of income distributed by Estate to Charitable Organizations under the terms of Will and applicable state law.

Section 642(c)(1) provides that an estate or trust will be permitted a deduction for charitable contributions and gifts paid during the taxable year to eligible purposes specified in Sec. 170(c). Section 1.642(c)-1(a) provides for an unlimited deduction for any part of the gross income of an estate that is paid or treated as paid during the taxable year for a purpose specified in Sec. 170(c). If the will or trust does not provide otherwise, state law determines whether a bequest to a charitable organization is paid from an estate’s corpus or income. A determination made by a state trial court may be given “proper regard” by a federal court or agency in a federal tax controversy but is not binding. Here, the Service determined that Estate may deduct the gross income paid or that will be paid to Charitable Organizations under Sec. 642(c)(1) provided those amounts are included as gross income of the Estate in that taxable year....

Tax Exempt Status Denied for Religious Broadcasting Organization

May 1, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it was formed to conduct religious broadcasting of biblical teachings for furtherance of the evangelistic Christian religion. Organization’s primary activity is a television ministry, which involves the performance, recording, and production of weekly broadcasts led by the organization’s founder and sole officer. These broadcasts are distributed worldwide through an international Christian television network. The founder of Organization also owns a for-profit media company that sells biblical media products. Although the Organization and the for-profit company maintain separate websites, they share a common mission and certain resources. Organization purchases products from the for-profit company at below fair market value and offers them to the public in exchange for donations. Organization’s website includes links directing users to the for-profit company for additional purchases. The website also features a page for submitting prayer requests and promotes an online radio station that broadcasts music produced by the founder and the founder’s spouse. Organization’s revenue is derived primarily from gifts, grants and contributions, with a smaller portion of revenue coming from admissions, merchandise sales and services performed.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious or educational purposes. 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. Regulation 1.501(c)(3)-1(c)(2) states that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure to the benefit of private shareholders, in whole or in part. Regulation 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. Here, the Service determined that Organization failed the operational tests under Reg. 1.501(c)(3)-(1)(a)(1) because it served the private interests of prohibited parties under Reg. 1.501(c)(3)-1(c)(2) and did not exclusively further exempt purposes. As such, tax-exempt status was denied....

Homeowners Association Denied Exempt Status

April 24, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it was formed to provide civic and social services and assistance for the benefit, betterment, social improvement and social welfare of the residents of a particular community. Organization will purchase, lease, acquire, own and sell personal properties to promote its mission. Membership is open to homeowners within the boundaries of the community. Membership includes any individual or entity who becomes an owner of any lot within the community’s boundaries. Organization assesses and collects monthly fees from its members for the maintenance of common areas in the community. All facilities and common areas are solely for the use and benefit of Organization’s members and their guests.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious or educational purposes. 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. Regulation 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. Here, the Service determined that Organization failed both the organizational and operational tests under Reg. 1.501(c)(3)-(1)(a)(1) because it was formed to serve the private interests of members who are homeowners of a particular community development, thereby serving a substantial nonexempt private purpose under Reg. 1.501(c)(3)-1(d)(1)(ii). Therefore, tax-exempt status was denied....

Foundation's Educational Grant Procedures Approved

April 17, 2026
Foundation requested advanced approval of its educational grants under Sec. 4945(g)(3). The purpose of the grants is to develop a network of education professionals with a platform designed to reinvigorate teaching practices through mentorship, peer support and professional development that will help teachers feel confident and enthusiastic about their curriculums. Grants will provide travel support for meeting-related expenses to members and allow them to participate in educational convenings. Educational convenings include educational sessions on maximizing education opportunities in and out of the classroom, developing an education ecosystem, how to teach students to be problem solvers and the need for expanding access to education. Foundation will publicize the availability of the grants in its newsletter and through emails. Applicants must complete an application form and will be selected based on financial need and their level of engagement in the network’s activities. Each grant will be for a specific convening, and awardees are allowed to apply for additional grants.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Here, the Service determined that Foundation’s grant procedures met the requirements of Sec. 4945(g)(3). Thus, the grants will not be considered taxable expenditures....

Distributions from Charitable Trust to DAF Approved

April 10, 2026
Grantor is the settlor of a charitable lead annuity unitrust (Trust). Trust provides that Trustee is required to distribute a fixed annual annuity payment to a donor advised fund (DAF) each year for a term of twenty years. DAF is administered and maintained by Sponsoring Organization which is tax exempt under Sec. 501(c)(3). At the conclusion of the term, the remainder interest in Trust will be distributed to Trustee. Currently, there are ten annuity payments remaining under the terms of Trust. Trust’s investments have significantly outperformed the expected returns and, therefore, the fair market value of the assets is significantly greater than the present value of the remaining payments. DAF has requested that Trustee pay the remaining annuity payments to DAF immediately to use for DAF’s charitable purposes. Trust will obtain approval from the applicable state court to modify Trust. Upon approval, Trustee would distribute the remaining undiscounted annuity payments to DAF and distribute the remainder to Trustee as the sole remainder beneficiary. A ruling was requested, among others, on whether the payment to DAF constituted self-dealing under Sec. 4941 and would be considered a taxable expenditure under Sec. 4945.
 
Under Sec. 4947(a)(2), a CLAT is a split-interest trust that is treated as a private foundation for certain purposes including Sec. 4941, 4945 and 507. According to these sections, a tax may be imposed on a private foundation for certain acts including termination and expenditures to non-qualified persons. According to Sec. 4946(a), the term “disqualified person” includes a substantial contributor to a private foundation, a foundation manager and specified family members of such persons. Furthermore, under Reg. 53.4946-1(a)(8), the term “disqualified person” does not include a Sec. 501(c)(3) organization. Here, the Service determined that an accelerated payment of the remaining annuity amount will not constitute self-dealing because DAF is a Sec. 501(c)(3) organization and, thus, not a disqualified person. The Service also determined that the proposed payment was not a taxable expenditure because payments are for a permitted charitable purpose....

Tax-Exempt Status Denied for Alumni Membership Group

April 3, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it is organized and operated as an association of graduates from a specific high school class. Organization’s purpose is to promote the wellbeing of Organization’s members and celebrate the lives and memories of deceased classmates. Organization also intends to raise funds for scholarships to family members of classmates who have passed away. Organization’s activities include holding annual class reunions and other social events for its members. Membership is limited to individuals who graduated from that particular class, although events may be attended by graduates from other classes and their family members. Organization solicits donations for its scholarships through social media, and any fees for events are determined by the related costs for Organization to meet its expenses. Organization is not affiliated with the high school and operates independently but retains the right to establish a partnership with the school in the future.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious 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. Regulation 1.501(c)3-1(d)(2) provides that the term “charitable” includes relieving the poor and distressed or the underprivileged, combating community deterioration, lessening neighborhood tensions and eliminating prejudice and discrimination. Section 1.501(c)(3)-1(d)(3)(i) defines “educational” as the instruction or training of individuals to improve or develop their capabilities, or the education of the public on subjects that are useful to individuals and beneficial to the community. In this case, the Service determined in part that Organization does not operate exclusively for an exempt purpose because its primary activities serve the private interests of its limited members rather than the public charitable objectives required under 1.501(c)(3)-1(c)(1). Therefore, tax-exempt status was denied....

Foundation's Scholarship Procedures Approved

March 27, 2026
Foundation requested advanced approval of its scholarship procedures under Sec. 4945(g)(1). The scholarships will be available to graduating high school seniors who plan to enter post-secondary educational institutions. Foundation will publicize the scholarships through high schools and local organizations. To be eligible for the scholarships, students must be pursuing post-secondary education in the United States and reside in a specified county within the state graduating from designated schools. The committee will consider several factors during the evaluation process including academic performance, entrance exam scores, community service, work experience, recommendations and optional written essays. All applications will be reviewed by a selection committee selected by Foundation’s Board of Directors. The scholarships will be renewable for an additional three years provided the recipient maintains satisfactory academic progress. Foundation will maintain records and implement procedures to ensure funds are used for intended purposes.

Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). In addition, the IRS will require that Foundation keep adequate records and case histories to substantiate its compliance with the grant distribution requirements. Here, the Service determined that the Foundation’s grant procedures meet the requirements of Sec. 4945(g)(1). Therefore, grants awarded under these procedures will not be considered taxable expenditures....

Foundation's Educational Grant Procedures Approved

March 20, 2026
Foundation requested advanced approval of its educational grants under Sec. 4945(g)(3). The purpose of the grants are to help individual members of Organization’s initiative community participate in educational convenings, meetings and conferences for its members to improve their educational capabilities and skills. Grants will help cover the cost of transportation, lodging, supplies and food during conferences. Organization will publicize the availability of the grants in its newsletter, media and other conferences. Candidates must complete an application form and will be selected based on their level of engagement, motivation and potential to realize their specific charitable, educational or scientific goals. Each grant is awarded for a particular initiative convening and any individual who has received a grant in the past is not prohibited from applying to receive a subsequent grant if they continue to meet the requirements for eligibility and selection.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Here, the Service determined that Foundation’s grant procedures met the requirements of Sec. 4945(g)(3). Thus, the grants will not be considered taxable expenditures....

Winter Sports Organization's Tax-Exempt Status Denied

March 13, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it is organized and operated as a social activity club that promotes health, education and safety in outdoor sports, with a primary focus on winter activities such as snowboarding and snow skiing. Organization’s purpose is to form a social club for like-minded members who enjoy skiing and related winter social activities. The activities of the Organization will include coordinating ski trips at least once a year which include snowmobiling and sleigh rides. The trips will be open to members of any ski club in the same vicinity. Organization also provides international ski trips, which vary from year to year, and business meetings are accompanied by social events for its members. Organization is funded by membership dues and has no donors, loans or rent payments. In the next few years, Organization intends to provide more ski trips for members, continue social events and organize community service projects a couple times each year.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious 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. Regulation 1.501(c)3-1(d)(2) provides that the term “charitable” includes relieving the poor and distressed or the underprivileged, combating community deterioration, lessening neighborhood tensions and eliminating prejudice and discrimination. Section 1.501(c)(3)-1(d)(3)(i) defines “educational” as the instruction or training of individuals to improve or develop their capabilities, or the education of the public on subjects that are useful to individuals and beneficial to the community. In this case, the Service determined that Organization does not advance an exempt purpose as described in Reg. 1.501(c)(3)-1(d)(2) because its activities are not limited to a specific charitable class. The Service further found that Organization’s activities are not educational and primarily serve nonexempt purposes, in violation of Reg. 1.501(c)(3)-1(c)(1). Therefore, tax-exempt status was denied....

Extension for Portability Election Granted

March 6, 2026
Decedent passed away and was survived by Spouse. Under Sec. 6018(a), Decedent’s estate (Estate) was not required to file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Estate represents there was an unused portion of Decedent’s applicable exclusion amount. A portability election would have allowed Spouse to take into account the amount of the deceased spousal unused exemption (DSUE). For various reasons, Estate did not timely file Form 706 or make a portability election. Information, affidavits and representations submitted on behalf of Estate explained the circumstances related to the failure to file Form 706 and showed the Estate acted reasonably and in good faith. Estate requested an extension of time under Reg. 301.9100-3 to make a portability election.
 
The transfer of the taxable estate of every decedent is subject to tax under Sec. 2001(a). Section 2010(a) provides an applicable credit amount for every decedent. Section 2010(c) allows spousal portability of a deceased spouse’s unused applicable exclusion amount. Under Sec. 2010(c)(5)(A), the DSUE may not be accounted for unless the deceased spouse’s estate files an estate tax return making the election. Regulation 20.2010-2(a)(1) provides that the due date for filing the estate tax return is nine months after the decedent’s date of death. The estate may, however, file for an extension of time under Reg. 301.9100-3 to make a portability election if the estate was not required under Sec. 6018(a) to file an estate tax return. Regulation 301.9100-1(c) gives the Commissioner the discretion to grant a reasonable extension of time. The Commissioner will grant relief under Reg. 301.9100-3 if the taxpayer provides satisfactory evidence that establishes that they acted reasonably and in good faith and that granting the relief will not prejudice the interests of the government. Here, the Service determined that Estate’s representations satisfied the requirements under Reg. 301.9100-1 and Reg. 301.9100-3. Therefore, Estate was granted a 120-day extension to make the portability election....

Tax-Exempt Status Denied for Software Organization

February 27, 2026
Organization applied for tax exempt status under Sec. 501(c)(3). Organization’s mission is the development, maintenance and promotion of open-source software for public use. Organization’s primary concentration is on developing tools and patches for applications. Users are primarily individuals who can use the patches to introduce new features, remove undesired functionality or modify app user’s interface. All source code is publicly available for anyone to access, use and contribute to the software. Contractors are compensated as software developers based on industry-standard salaries. Revenue is expected from “user donations” and expenses will include hosting and infrastructure, subscriptions for services, administrative expenses, software expenses and future contractor compensation.
 
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 do not support an exempt purpose. Here, the Service determined that Organization failed the organizational and operational test under Reg. 1.501(c)(3)-1(b)(1)(i) and Reg. 1.501(c)(3)-(1)(a)(1) because Organization fails to limit its purposes to exempt purposes and its open-source software activities are not limited for charitable purposes or to a charitable class. Therefore, tax-exempt status was denied....

Foundation's Scholarship Grant Procedures Approved

February 20, 2026
Foundation requested advanced approval of its scholarship procedures under Sec. 4945(g)(1). The purpose of the scholarship is to help local students overcome financial barriers to achieve their dream of acquiring high-quality American education. Scholarships are available to high school and undergraduate students who demonstrate financial need, are residents of a particular state B and provide proof of enrollment at an accredited four-year college or university. Applicants must meet a minimum grade point average (GPA) of 3.0 on a 4.0 scale for high school students or 2.5 on a 4.0 scale for undergraduate students. Foundation will publish the scholarship program through local news outlets, social media advertisements and mailing lists. An independent selection committee will review the scholarship applications and select winners. The scholarships are awarded on a one-time basis and are not renewable.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Here, the Service determined that Foundation’s grant procedures met the requirements of Sec. 4945(g)(1). Thus, the grants will not be considered taxable expenditures....

Family Group's Tax-Exempt Status Denied

February 13, 2026
Organization applied for exempt status under Sec. 501(c)(3). Organization states that it is organized and operated to exclusively further charitable purposes. Organization’s purpose is to plan, organize, coordinate and hold family reunions for a specified family. The activities of the Organization will include providing the location, transportation and meals for the reunion as well as holding lectures. The reunions will be open to family members and guests, and fees will be charged to cover the reunion’s costs. Organization also intends to provide scholarships to high school graduates who are family members and have been accepted to a college or university in the year the reunion is held. Scholarships will be funded from any remaining proceeds from fundraisers, donations and registration fees.
 
To be exempt under Sec. 501(c)(3), an organization must be both organized and operated exclusively for charitable, religious 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. Section 1.501(c)(3)-1(d)(1)(ii) provides that an organization is not organized and operated exclusively for charitable purposes unless it serves a public interest, rather than private interests. An organization will not be tax exempt if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. Here, the Service determined that Organization fails the operational test under Reg. 1.501(c)(3)-(1)(c)(1) because the activities conducted provide a direct benefit to private individuals of the family, not the public. Therefore, tax-exempt status was denied.
 ...

Foundation's Scholarship Grant Procedures Approved

February 6, 2026
Foundation requested advance approval of its scholarship grant procedures under Sec. 4945(g)(3). The grant program will provide funding for research projects, financial assistance for clinical research participants and awards recognizing researchers who go beyond their regular duties to support Foundation’s mission. Foundation will accept research project grant applications based on, among other things, projects that study and treat human genetic diseases. Applicants must submit a letter of intent with the project’s title, goals, significance, approach and proposed budget. Foundation’s Board of Trustees will appoint a research Advisory committee to determine the grant amount for each recipient. After being awarded the grant, grantees must submit progress reports and quarterly accountings of expenditures with copies of receipts and must agree to return any unexpended funds.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Section 4945(g)(3) provides that the purpose of the grant must be to achieve a specific objective, produce a report or other similar product, or improve or enhance literacy, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the grantee. Here, the Service determined that Foundation’s scholarship procedures met the requirements of Sec. 4945(g)(3). Thus, the grants will not be considered taxable expenditures....

IRS Denies Mental Health Group's Exempt Status

January 30, 2026
Organization applied for tax exempt status under Sec. 501(c)(3). Organization’s purpose is to provide financial assistance for those who cannot afford the full cost of mental health services. The three directors of Organization own a for-profit counseling practice that may receive distributions from Organization to pay for services for qualified individuals rendered at the counseling practice. To qualify for subsidized services, an individual will be interviewed and evaluated for the level of services needed, the amount of subsidy needed and determination of the best provider for services. If a therapist at the for-profit counseling practice is considered the best fit for services, the applicant will be referred there and the subsidy will be distributed to the for-profit counseling practice. Organization asserted that none of the distributions will subsidize counseling provided directly by the directors. Instead, services may be provided to qualified individuals by other therapists at the counseling center, most of whom are independent contractors and who share a portion of their earnings with the counseling center.
 
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. Regulation 1.501(c)(3)-1(d)(1)(ii) states that an organization is not organized or operated exclusively for one or more exempt purposes unless it serves a public rather than a private interest. To meet this requirement, an organization must establish that it is not organized or operated for the benefit of private interests. Here, the IRS found that Organization failed the operational test under Reg. 1.501(c)(3)-1(a)(1) because Organization’s funding flows through to private individuals to compensate them for their for-profit counseling services which is a substantial nonexempt purpose. Therefore, tax-exempt status was denied....

Foundation's Scholarship Procedures Approved

January 23, 2026
Foundation requested advance approval of its scholarship procedures under Sec. 4945(g)(1). Approval is requested for a scholarship program for the education of certain qualifying students. Applicants must be U.S. citizens who are enrolled in, or accepted to, an accredited U.S. undergraduate or graduate degree program, have a minimum GPA of 3.75 and submit a personal essay describing their educational goals, motivations and expected impact. Selection criteria will be based on academic performance, community involvement or leadership, financial need, a personal essay and overall impression. Grants are paid directly to the recipient’s college or university with instructions that they are only for students in good academic standing. The scholarships are not renewable. If a student fails to enroll or is no longer eligible, the grant is cancelled. Foundation’s selection committee is family-based, but it follows a structured, non-discriminatory scoring rubric and does not consider applicants with a personal or financial connection.
 
Under Sec. 4945, there is an excise tax on taxable expenditures of private foundations. A taxable expenditure is any amount paid to an individual for travel, study or other similar purposes. Under Sec. 4945(g), an expenditure is not taxable if it is awarded on an objective and nondiscriminatory basis, the IRS approves the grant procedures in advance, the grant is a scholarship or fellowship subject to Sec. 117(a) and the grant is to be used for study at an educational organization described in Sec. 170(b)(1)(A)(ii). Here, the Service determined that Foundation’s scholarship procedures met the requirements of Sec. 4945(g)(1). Thus, the grants will not be considered taxable expenditures....