The Internal Revenue Service has blackballed two organizations that want the IRS to classify them as tax-exempt fraternal benefit societies.
The IRS acknowledges in private letter rulings that both groups provide benefits for their members, but it says that neither group meets the federal standards for fraternal benefits societies.
Neither group operates a lodge system, performs ceremonies or rituals at its meetings, or has regalia, officials write in the rulings.
“Thus, you are not fraternal in nature,” IRS officials conclude.
- The latest IRS private letter ruling rejecting a would-be fraternal benefit society is available here.
- A similar letter ruling that was issued to another would-be fraternal benefit society back in December is available here.
Taxpayers ask for private letter rulings to get the IRS view on a specific matter. The IRS posts anonymized versions of the rulings on its website.
One of the two groups applied for fraternal benefit society status July 25. That group offers its members social activities, a banquet hall, and sick benefits and death benefits.
The IRS issued a letter to that group Sept. 25 and posted the letter on the web Dec. 20.
The second group applied Aug. 26. The second group serves police officers. The group sponsors civic events. It also provides some retirement benefits for its members, and death benefits for members’ survivors.
The IRS issued a letter ruling on the second group’s application Oct. 21 and posted the ruling on the web Jan. 17.
Fraternal Benefit Societies Basics
Some of the earliest stable sources of life insurance and disability insurance were nonprofit mutual assistance societies.