- 10 - Section 1.501(c)(3)-1(c), Income Tax Regs., provides as follows as to the operational test: (c) Operational test.--(1) Primary activities. 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. (2) Distribution of earnings. An organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. * * * From the text of these regulations, we understand that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. See sec. 1.501(c)(3)-1(c)(2), Income Tax Regs. The concept of private inurement as expressed therein ensures that the organization serves public rather than private interests. See Church of Scientology v. Commissioner, supra at 491. Tax exemption is a matter of legislative grace; it is not a matter of right. See Christian Echoes Natl. Ministry, Inc. v. United States, 470 F.2d 849, 857 (10th Cir. 1972). We have previously observed that the opportunity for abuse is present when the affairs of an organization are controlled by its creators who belong to the same family. See Bubbling WellPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011