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organization must meet all of the following criteria: (1) it
must be both (a) organized and (b) operated, exclusively23 for
certain specified exempt purposes, including charitable,
educational, and scientific purposes; (2) no part of its net
earnings may inure to the benefit of any private shareholder or
22(...continued)
SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN
TRUSTS, ETC.
* * * * * * *
(c) List Of Exempt Organizations.--The following
organizations are referred to in subsection (a):
* * * * * * *
(3) Corporations * * * organized and operated
exclusively for * * * charitable, scientific, * * * or
educational purposes * * *, no part of the net earnings
of which inures to the benefit of any private
shareholder or individual, no substantial part of the
activities of which is carrying on propaganda, or
otherwise attempting, to influence legislation, * * *
and which does not participate in, or intervene in
(including the publishing or distribution of
statements), any political campaign on behalf of (or in
opposition to) any candidate for public office.
The text includes an amendment made by sec. 10711(a)(2) of the
Omnibus Budget Reconciliation Act of 1987 (OBRA 87), Pub. L. 100-
203, 101 Stat. 1330, 1330-464. This amendment applies to
activities after Dec. 22, 1987, the date of the enactment of the
Act. This amendment relates only to political campaigns, and so
does not affect the instant case.
23 “Exclusively”, in this context, means that there is no
nonexempt purpose that is “substantial in nature”. Better
Business Bureau v. United States, 326 U.S. 279, 283 (1945);
Living Faith, Inc. v. Commissioner, 950 F.2d 365, 370 (7th Cir.
1991), affg. T.C. Memo. 1990-484; Stevens Bros. Foundation, Inc.
v. Commissioner, 324 F.2d 633, 638 (8th Cir. 1963), affg. on this
issue 39 T.C. 93, 109 n.10 (1962).
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