At Cost Services, Inc. - Page 8

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               To come within the terms of section 501(c)(3), an                      
          organization must be both “organized” and “operated” exclusively            
          for tax-exempt purposes.  Sec. 1.501(c)(3)-1(a)(1), Income Tax              
          Regs.  The presence of a single substantial nonexempt purpose               
          precludes exempt status for the organization, regardless of the             
          number or importance of exempt purposes.  See Better Bus. Bureau            
          v. United States, 326 U.S. 279, 283 (1945).  The actual purposes            
          of the organization, not necessarily limited to those purposes              
          stated in the organizing documents, are the appropriate focus.              
          See American Campaign Academy v. Commissioner, 92 T.C. 1053, 1064           
               As stated in the regulations, the “operational test” is as             
               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.  [Sec.                        
               1.501(c)(3)-1(c)(1), Income Tax Regs.]                                 
          Of the exempt purposes listed in section 501(c)(3), petitioner              
          maintains that it operates for charitable purposes.                         
               The term “charitable” is used in section 501(c)(3) in its              
          generally accepted legal sense and includes, but is not limited             
               Relief of the poor and distressed or of the                            
               underprivileged; advancement of religion; advancement                  

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Last modified: May 25, 2011