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501(c)(3). You have failed to establish that your
operation will not result in more than incidental
private benefit. Furthermore, for the period prior to
July 1, 1994, you have failed to establish that your
net earnings will not inure to the benefit of private
individuals.
Petitioner seeks a declaratory ruling that, as of July 1, 1994,
petitioner is exempt from taxation under section 501(c)(3).
Section 501(a) provides that "An organization described in
subsection (c) * * * shall be exempt from taxation under this
subtitle". Subsection (c)(3) includes "Corporations * * *
organized and operated exclusively for * * * charitable * * *
purposes * * * no part of the net earnings of which inures to the
benefit of any private shareholder or individual".
Section 1.501(c)(3)-1(a)(1), Income Tax Regs., requires that
for an entity to have exempt status it "must be both organized
and operated exclusively for one or more of the purposes
specified" in section 501(c)(3). Respondent has conceded that
petitioner meets the organizational test. Petitioner must
demonstrate that it operates exclusively for exempt purposes.
Sec. 1.501(c)(3)-1(c)(1), Income Tax Regs., provides:
An organization will be regarded as "operated
exclusively" for one or more exempt purposes only if it
engages primarily in activities which accomplish one or
more of such exempt purposes specified in section
501(c)(3). An organization will not be so regarded if
more than an insubstantial part of its activities is
not in furtherance of an exempt purpose.
An organization is not operated exclusively for exempt purposes
unless it serves "a public rather than a private interest."
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Last modified: May 25, 2011