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    Internal Revenue Service
 Revenue Ruling

Rev. Rul. 66-179

1966-1 C.B. 139

Sec. 501

IRS Headnote

Situations under which garden clubs may qualify for exemption from Federal
income tax under section 501 of the Internal Revenue Code of 1954. 

Full Text

Rev. Rul. 66-179 

Depending upon its form of organization and method of operation an
organization commonly referred to as a `garden club' may qualify for
exemption from Federal income tax as a charitable or educational
organization described in section 501(c)(3) of the Internal Revenue Code of
1954, a civic organization described in section 501(c)(4), a horticultural
organization described in section 501(c)(5), or a social club described in
section 501(c)(7) of the Code. The proper classifications for exemption are
illustrated by the four situations set out below. 

Situation 1 .-Garden club qualifying under section 501(c)(3) of the Code. 

The organization was incorporated as a nonprofit organization for the
purposes of instructing the public on horticultural subjects and
stimulating interest in the beautification of the geographic area. In
furtherance of these purposes, the organization (1) maintains and operates
a free library of materials on horticulture and allied subjects, (2)
instructs the public on correct gardening procedures and conservation of
trees and plants by means of radio, television, and lecture programs, (3)
holds public flower shows of a noncommercial nature at which new varieties
of plants and flowers are exhibited, (4) makes awards to children for
achievements in gardening, (5) encourages roadside beautification and civic
planting, and (6) makes awards for civic achievement in conservation and
horticulture. 

Membership in the organization is open to the public and consists primarily
of amateur gardeners and others not professionally or commercially
connected with horticulture. The organization's funds are derived from
donations and membership dues, fees, and assessments. No part of its net
earnings inures to the benefit of any officer or member. 

Section 501(c)(3) of the Code provides that an organization organized and
operated exclusively for charitable or educational purposes is exempt from
Federal income tax, provided no part of its net earnings inures to the
benefit of any private shareholder or individual. 

Section 1.501(c)(3)-1(d)(2) of the Income Tax Regulations defines the term
`charitable' to include the advancement of education and the promotion of
social welfare by organization designed to combat community deterioration. 

Section 1.501(c)(3)-1(d)(3) of the regulations defines the term
`educational' as relating to (a) the instruction or training of the
individual for the purpose of improving or developing his capabilities or
(b) the instruction of the public on subjects useful to the individual and
beneficial to the community. An example in this section states that an
organization whose activities consist of presenting public discussion
groups, forums, panels, lectures, or other similar programs, may be an
educational organization. 

This organization is organized and, in carrying out its purposes in the
manner described above, is operated exclusively for charitable and
educational purposes. Accordingly, the organization qualifies for exemption
under section 501(c)(3) of the Code. 

Situation 2 .-Garden club qualifying under section 501(c)(4) of the Code. 

The facts are the same as in Situation 1 except that a substantial part of
the organization's activities, but not its primary activity, consists of
social functions for the benefit, pleasure, and recreation of its members. 

Section 501(c)(4) of the Code provides that a civic organization not
organized for profit but operated exclusively for the promotion of social
welfare is exempt from Federal income tax. 

Section 1.501(c)(4)-1 of the regulations states that an organization is
operated exclusively for the promotion of social welfare if it is primarily
engaged in promoting in some way the common good and general welfare of the
people of the community. An organization embraced within this section is
one which is operated to bring about civic betterment and social
improvements. 

In general, social activities for the benefit, pleasure, and recreation of
members do not preclude exemption under section 501(c)(4) of the Code.
However, section 1.501(c)(4)-1(a)(2)(ii) of the regulations provides that
an organization will not qualify for exemption as a civic organization
described in section 501(c)(4) of the Code if its primary activity is the
operation of a social club. 

The facts in this Situation are distinguishable from those in Situation 1
in that the instant organization conducts substantial social functions not
in furtherance of any of the purposes specified in section 501(c)(3) of the
Code. Section 1.501(c)(3)-1(c)(1) of the regulations provides that an
organization will not be regarded as `operated exclusively' for one or more
exempt purposes described in section 501(c)(3) of the Code if more than an
insubstantial part of its activities is not in furtherance of a 501(c)(3)
purpose. Accordingly, the organization does not qualify for exemption under
section 501(c)(3) of the Code. 

However this organization, in carrying out its purposes in the manner
described above, is being operated primarily to bring about civic
betterment and social improvements. The social functions for the benefit,
pleasure, and recreation of the members do not constitute its primary
activity. Accordingly, the organization qualifies for exemption under
section 501(c)(4) of the Code. 

Situation 3 .-Garden club qualifying under section 501(c)(5) of the Code. 

This organization was incorporated as a nonprofit organization for the
purposes of bettering the conditions of persons engaged in horticultural
pursuits and improving the grade of their products. In furtherance of these
purposes, the organization (1) publishes a monthly trade journal, (2)
reports periodically to its members any new developments in horticultural
products, and (3) encourages the development of better horticultural
products through a system of awards. The membership of the organization is
mainly composed of individuals and firms engaged in the business of
horticulture and related fields. No part of its net earnings inures to the
benefit of any officer or member. 

Section 501(c)(5) of the Code provides that a horticultural organization is
exempt from Federal income tax. 

Section 1.501(c)(5)-1 of the regulations provides that organizations
contemplated by section 501(c)(5) of the Code are those which have no net
earnings inuring to the benefit of any member, and have as their objectives
the betterment of the conditions of those engaged in such pursuits, the
improvement of the grade of their products, and the development of a higher
degree of efficiency in thier respective occupations. 

This organization, in carrying out its purposes in the manner described
above, is being operated to improve the conditions of its members and the
grade of their products and to develop a higher degree of efficiency in
their occupations. Accordingly, the organization qualifies for exemption
under section 501(c)(5) of the Code. 

Situation 4 .-Garden club qualifying under section 501(c)(7) of the Code. 

The organization was incorporated by amateur gardeners to promote their
common interest in gardening. The organization (1) holds flower shows and
exhibits to display members' achievements in home gardening, (2) schedules
weekly meetings devoted primarily to informal social hours during which
matters related to gardening are discussed, and (3) issues a publication
containing news about members' social activities and achievements in home
gardening. Its funds are derived from membership dues, fees, and
assessments. No part of the net earnings of the organization inures to the
benefit of any officer or member. 

Section 501(c)(7) of the Code provides that a club organized and operated
exclusively for pleasure, recreation, and other nonprofitable purposes is
exempt from Federal income tax, provided no part of its net earnings inures
to the benefit of any private shareholder. 

This organization, in carrying out its purposes in the manner described
above, is being operated exclusively for pleasure and recreation of its
members. Accordingly, it qualifies for exemption under section 501(c)(7) of
the Code. 

An organization which considers itself within the scope of this Revenue
Ruling must, in order to establish exemption, file an application on an
appropriate form with the District Director of Internal Revenue for the
internal revenue district in which is located the principal office of the
organization. An organization claiming exemption under section 501(c)(3) of
the Code must file an application on Form 1023, Exemption Application. An
organization claiming exemption under section 501(c)(4) or section
501(c)(5) of the Code must file an application on Form 1024. An
organization claiming exemption under section 501(c)(7) of the Code must
file application on Form 1025. See section 1.501(a)-1 of the regulations.