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Trade Associations and Business Leagues | IRS Issues Technical
Guidance for 501(c)(6) Organizations
On September 16, 2022, the IRS published its Exempt Organizations Technical Guide TG 6 IRC
501(c)(6) Business League (“TG6”). TG6
discusses tax exemption of business leagues, chambers of commerce,
real estate boards, and boards of trade described under Internal
Revenue Code section 501(c)(6). The 42-page TG6 provides guidance
and information on exemption requirements of IRC 501(c)(6) and
related Treasury Regulations. See Treas. Reg. § 1.501(c)(6)-1. TG6
addresses core concepts such as associations defined, bona fide
membership, authorized business lines, and
application of inurement principles to trade associations and
business leagues. The IRS dedicates several pages on the
subject of business lines that may be engaged by trade
associations, chambers of commerce, and business leagues. TG6 also
provides a brief comparison of 501(c)(6) organizations to
organizations described in, for example, 501(c)(3) and 501(c)(5).
At page 33 of TG6, the IRS provides guidance on unrelated business
income tax relevant to trade associations, including for revenue
generated from trade shows and publications. See also
Freeman Law’s Tax Exemption and Unrelated Business Income
Rules (an in-depth three-part series dedicated to UBIT
tax concepts; authored by Freeman Law attorney Cory Halliburton).
TG6 concludes with audit examination techniques that field
agents are expected to take when examining 501(c)(6) organizations.
The techniques include: A. Membership Examination Techniques; B.
Inurement Examination Techniques; C. Unrelated Business Income
Examination Techniques; D. Compensation Examination Techniques; E.
Legislative Activities Examination Techniques; and F. Political
Activities Examination Techniques. Each category contains a list of
organizational and operational focus areas that the IRS will
investigate with respect to the particular subject.
Insights: For over 15 years I have represented
and served as outside general counsel to many trade associations.
Most have thousands of members, complex governance, creative and
international business relationships, and unique and
industry-specific business lines. TG6 is an excellent resource for
this industry and provides an inside look at the IRS’s
prerogatives and organizational and operational focus points to
consider if or when an examination ever befalls upon a trade
association, business league, or chamber of commerce.
Freeman Law International Tax Symposium
Readers may be interested in the Freeman Law International Tax
Symposium scheduled to take place virtually on
October 20 and 21, 2022. Attendees will qualify
for CLE, CPE, and CE and the slate of presenters includes
well-recognized speakers and panelists, such as the IRS
Commissioner, a prior Chief Counsel of the IRS, a former Acting
Assistant Attorney General of the U.S. Department of Justice Tax
Division, and many others in government and private practice.
To Register for the Freeman Law International Tax Symposium,
please visit www.its2022.freemanlaw.com.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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