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of athletic facilities or equipment), or for the
prevention of cruelty to children or animals, 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 * * *, any
political campaign on behalf of any candidate for
public office.
The theory behind the exemption is that the Government is
compensated for the loss of revenue by its relief from the
financial burden that would otherwise have to be met from public
funds and that the Government realizes benefits resulting from
private promotion of the general welfare. See H. Rept. 1860,
75th Cong., 3d Sess. (1938), 1939-1 C.B. (Part 2) 728, 742.
Section 501(c)(3) sets forth three requirements for an
organization to be exempt: (1) The corporation must be organized
and operated exclusively for exempt purposes, (2) no part of the
net earnings of the corporation may inure to the benefit of any
shareholder or individual, and (3) the corporation must not
engage in political campaigns or, to a substantial extent, in
lobbying activities. See Hutchinson Baseball Enters., Inc. v.
Commissioner, 73 T.C. 144, 151 (1979), affd. 696 F.2d 757 (10th
Cir. 1982). Only the first requirement is at issue in this case.
Respondent concedes that petitioner is organized exclusively
for exempt purposes within the meaning of section 501(c)(3).
Therefore, the only remaining question is whether petitioner is
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