Exempt Status Denied for Motorcycle Club

Published October 31, 2025

GiftLaw Note: Organization applied for tax exempt status under Sec. 501(c)(3). It operates as a social club for motorcycle riders, hosting regular meetings and group rides that members’ family and friends are welcome to join. Organization holds picnics and events featuring activities like horseshoe games and performances by local bands. Once a year, Organization hosts a chili cookoff where plates are sold, with proceeds donated to different 501(c)(3) organizations. The recipient organizations are selected by members holding a vote. Members pay a monthly membership fee to cover the costs of Organization’s clubhouse and utilities.
 
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. Here, the Service determined that Organization did not pass the operational test for exemption. The Service found that Organization’s activities were primarily social and recreational. As a result, its tax-exempt status was denied.

PLR 202540010                                             Exempt Status Denied for Motorcycle Club

10/3/25 (5/20/25)

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, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the internal Revenue Code.

You attest that you were incorporated on B, in the state of C. 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 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 IRC 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

During review of your Form 1023-EZ, detailed information was requested supplemental to your attestations.

You stated you are a social club for motorcycle riders. Members pay j dollars per month for their membership to pay for your clubhouse and utilities. You have meetings and get together to ride motorcycles. Family and friends of members are also invited to join the rides. You have picnics about once per month weather permitting. You also play horseshoes and invite local bands to play at your events. You spend d percent of your time on these recreational activities.

Once a year you have a chili cookoff. A fee of k dollars is charged per plate and all funds collected are divided equally between organizations exempt under Section 501(c)(3). You select the organizations by taking nominations from the members and taking a vote. You spend e percent of your time on this chili cookoff fundraising event.

Law

IRC Section 501(c)(3) provides for the recognition of exemption of organizations that are organized and operated exclusively for religious, charitable or other purposes as specified in the statute. No part of the net earnings may inure to the benefit of any private shareholder or individual.

Treasury Regulation Section 1.501(c)(3)-1(a)(1) states that, in order 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 is not exempt.

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 IRC 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.

Revenue Ruling 77-366, 1977-2 C.B. 192 held that an organization formed to conduct winter-time ocean cruises that included activities to further religious and educational purposes in addition to substantial social and recreational activities didn't qualify for exemption under IRC Section 501(c)(3). “[T]he extensive amount of time, energy, and other resources which are regularly devoted to the conduct of social and recreational activities, together with the manner in which such activities are scheduled in relation to other cruise programs . . . demonstrate that the organization's conduct of such social and recreational activities serve substantial independent purposes of a noncharitable nature.”

In St. Louis Science Fiction, Ltd. v. Commissioner, T.C. Memo 1985-162, the Tax Court considered the annual convention of a science fiction organization. It held that while the conventions may have provided some educational benefit to some of the individuals involved, social and recreational activities (e.g., pool party, masquerade party, gaming rooms) and private benefit (art sales) predominated and exemption under IRC Section 501(c)(3) wasn't warranted.

In Better Business Bureau of Washington, D.C. Inc. v. United States, 326 U.S. 279 (1945), the Supreme Court held that the presence of a single non-exempt purpose, if substantial in nature, will destroy a claim for exemption regardless of the number or importance of truly exempt purposes.

Application of law

A ruling on exempt status is based solely on facts and representations in the administrative file. You have not provided supporting documentation to establish you meet the requirements of IRC Section 501(c)(3). As stated in Treas. Reg. 1.501(c)(3)-1(a)(1), an organization must be both organized and operated exclusively for purposes described in Section 501(c)(3). You do not meet the requirements for recognition of tax exemption under Section 501(c)(3) because you do not meet the operational test for exemption.

Treas. Reg. Section 1.501(c)(3)-1(c)(1) provides that an organization will not qualify under IRC Section 501(c)(3) if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. You engage in activities that are primarily social and recreational. These activities are organizing motorcycle rides, picnics, playing horseshoes, and inviting bands to play at your event. You spend d percent of your time on these social and recreational activities.

You are similar to Rev. Rul. 77-366 in that you further a substantial non-exempt purpose. Namely, your picnics, motorcycle rides, and other recreational activities further a substantial social and recreational purpose.

You are like the organization in St. Louis Science Fiction, Ltd. You are not operating exclusively for exempt purposes under IRC Section 501(c)(3) because substantially all of your activities further non-exempt social and recreational purposes.

Like the organization in Better Business Bureau, you have a substantial non-exempt purpose and are therefore not operating exclusively for exempt purposes under IRC Section 501(c)(3).

Conclusion

Based on the information submitted, you do not meet the requirements for tax exemption under IRC Section 501(c)(3). You are not operated exclusively for charitable purposes within the meaning of Section 501(c)(3) of the Code. You engage in a substantial amount of social and recreational activities that are not in furtherance of an exempt purpose within the meaning of 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