What many in the nonprofit community would have expected to be a direct road for tax exemption for a new 501(c)(3) nonprofit organization has suffered a significant set-back. On October 9th, the Internal Revenue Service released Private Letter Ruling 202041009 (the “Ruling”), concluding that a nonprofit organization (the “Nonprofit”) that manages impact investment funds at below market fees is not a charitable organization. The ruling states that the Nonprofit was formed “exclusively for charitable purposes, including, for such purposes, increasing the capital available to organizations that develop and/or operate (i) long term affordable housing for the economically and physically disadvantaged, (ii) community facilitates such as schools and community health centers, (iii) businesses providing access to healthy foods, (iv) sustainable energy projects, (v) commercial real estate, and (vi) other projects that may increase social welfare”. Despite the stated purposes for which the Nonprofit was formed, IRS determined that it did not operate in a manner consistent with these stated purposes and for that reason it was not a tax exempt organization.