-21-
In order to be described in section 501(c)(3),8 an
organization must meet all of the following criteria: (1) it
must be both (a) organized and (b) operated, exclusively9 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
individual; (3) no substantial part of its activities may consist
8 Sec. 501(c)(3) provides, in pertinent part, as follows:
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 * * * 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
distributing of statements), any political campaign on
behalf of any candidate for public office.
The later amendment of this provision by sec. 10711(a)(2) of the
Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203, 101
Stat. 1330, 1330-464, does not affect the instant case.
9 “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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