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to the Supreme Court's decision in HCSC-Laundry v. United States,
450 U.S. 1 (1981), petitioners cannot qualify under section
501(c)(3).
As a preliminary matter, we note that, in this case, section
501(e) does not preclude an analysis under section 501(c)(3). In
HCSC-Laundry v. United States, supra, the Supreme Court held that
section 501(e) is the exclusive provision for hospital
cooperatives to qualify under section 501(c)(3) and that a
hospital cooperative that does not satisfy section 501(e) cannot
qualify independently under section 501(c)(3). To qualify as a
hospital cooperative under section 501(e), the organization must
provide services “solely for two or more hospitals”. Petitioners
serve schools in addition to hospitals. Thus, they are not
hospital cooperatives, and section 501(e) does not preclude
petitioners from qualifying under section 501(c)(3).
To qualify under section 501(c)(3), petitioners must
establish that they are both “organized and operated” exclusively
for exempt purposes. Sec. 1.501(c)(3)-1(a)(1), Income Tax Regs.
Respondent concedes that petitioners are organized exclusively
for exempt purposes but argues that petitioners are not operated
exclusively for such purposes. An organization will be regarded
as operated exclusively for exempt purposes only if it engages
primarily in activities that accomplish one or more exempt
purposes listed in section 501(c)(3). Sec. 1.501(c)(3)-1(c)(1),
Income Tax Regs. Whether an organization is operated exclusively
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