Bob Jones University Museum and Gallery, Inc. - Page 7

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               Section 1.501(c)(3)-1(d)(3), Income Tax Regs., expressly               
          includes museums within the scope of section 501(c)(3).  Museums,           
          of course, must also satisfy all other requirements of section              
          501(c)(3) to qualify for exemption.  In her final adverse ruling,           
          respondent provided the following explanation for denying                   
          petitioner’s application for exempt status:                                 
               This ruling is made for the following reasons.  You are                
               not operated exclusively for exempt purposes.  Your                    
               operation results in substantial private benefit to Bob                
               Jones University, which is not exempt from income tax                  
               under � 501(c)(3) of the Code because of its racially                  
               discriminatory policies.  Your earnings inure to                       
               private shareholders or individuals.  Furthermore, you                 
               are operated for a substantial non-exempt purpose.                     
               This explanation appears to set forth four separate                    
          justifications for denying petitioner’s application for                     
          exemption.  In substance, however, it sets forth a single                   
          justification.  Respondent contends that the University derives             
          an impermissible benefit from petitioner’s operation and that               
          petitioner, by providing such benefit, furthers a substantial               
          nonexempt purpose.  Respondent argues that the University                   
          receives an impermissible benefit based on:  (1) Petitioner’s               
          payment of rent to the University; (2) petitioner’s payment of              
          salaries to employees formerly employed by the University;                  
          (3) petitioner’s exhibition of artwork on loan from the                     
          University; (4) the University’s influence on petitioner’s board;           
          (5) petitioner's location on the campus of the University; and              
          (6) the reputational benefit that the University will derive from           





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Last modified: May 25, 2011