Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 8Business Leagues: §501(c)(6)

• 8.1 Basic Characteristics
• 8.2 Meaning of “Common Business Interest”
• 8.3 Line of Business
  • (a) User Groups
  • (b) Dealer Associations
  • (c) Hobby or Recreational Groups
• 8.4 Rendering Services for Members
  • (a) Services Benefiting the Industry
  • (b) Disqualifying Services to Individual Members
  • (c) Avoiding the Exploitation Rule
• 8.5 Sources of Revenue
• 8.6 Membership Categories
• 8.7 Member Inurement
• 8.8 Chambers of Commerce and Boards of Trade
• 8.9 Comparison to §501(c)(5)
• 8.10 Recognition of Exempt Status
  • (a) Federal Recognition
  • (b) State Exemptions
• 8.11 Formation of a Related Charitable Organization
• 8.12 Disclosures for Lobbying and Nondeductibility

Internal Revenue Code (IRC) §501(c)(6) provides exemption for business and professional associations not organized for profit and no part of the earnings of which inure to the benefit of private individuals or shareholders. It specifically names:

• Business leagues
• Chambers of commerce
• Real estate boards
• Boards of trade
• Professional football leagues

8.1 Basic Characteristics

To qualify under §501(c)(6), a business league must have the following attributes:¹

• It is an association of persons having some common business interest.
• Its organizational purpose is to promote such common interest and to improve conditions of one or more “lines of business.”
• It does not engage in a regular business of a kind ordinarily carried on for profit.
• It does not perform services for individuals or organizations ...