Rev. Rul. 70-244

Advice has been requested whether the nonprofit organization described below qualifies for exemption from Federal income tax under section 501(c)(63 of the Internal Revenue Code of 1954.

The organization's membership consists of business and professional persons in the community. Its articles of incorporation state that it was formed to bring together its members and their guests to exchange ideas for improving business conditions within the community. It owns and operates luncheon and bar facilities for the use of its members during business hours on working days of the year. It does not have any specific program directed to the improvement of business conditions in the community.

Section 501(c)(6) of the Code provides for the exemption from Federal income tax of nonprofit business leagues whose net earnings do not inure to the benefit of any private shareholder or individual.

Section 1.501(c)(6)-1 of the Income Tax Regulations defines a business league as an association of persons having some common business interest, the purpose of which is to promote such common business interest and not to engage in a regular business of a kind ordinarily carried on for profit. The purpose of the association must be to further business conditions of one or more lines of business rather than perform particular services for individual persons.

Providing luncheon and bar facilities for members and their guests is not, in and of itself, an activity in furtherance of a business league purpose even if business matters are the principal subject of discussion of those using the facilities. On the other hand, if the facilities were used in connection with a program that meets the requirements set forth in the regulations for improving business conditions of one or more lines of business, such use might be incidental and related to the business league purpose of the organization. See Rev. Rul. 67-295, C.B. 1967-2, 197. Since this organization has no program designed to improve business conditions of one or more lines of business, it is held that the organization is not exempt from Federal income tax under section 501(c)(6) of the Code.