- 7 - deductions, produced from (1) any trade or business (2) regularly carried on by the organization (3) which is not substantially related (aside from generating revenue) to the organization's tax-exempt purposes. Secs. 512(a)(1) and 513(a); United States v. Am. Bar Endowment, 477 U.S. 105, 109-110 (1986); United States v. Am. Coll. of Physicians, 475 U.S. 834, 838-839 (1986). This tax is designed to restrain unfair competition by otherwise tax- exempt organizations engaged in profit-making activities without unnecessarily discouraging benevolent enterprise. United States v. Am. Coll. of Physicians, supra at 837-838. Where an activity does not possess the characteristics of a trade or business within the meaning of section 162, such as when an organization sends out low-cost articles incidental to the solicitation of charitable contributions, the unrelated business income tax does not apply since the organization is not in competition with taxable organizations. Sec. 1.513-1(b), Income Tax Regs. On the record before us, we can find no activity performed by petitioner that competes with taxable organizations. One section 501(c)(5) organization, such as petitioner, levying a “per capita tax” on another section 501(c)(5) organization so that the first organization may perform its exempt functions simply is not conducting a trade or business as that term is defined for the purposes of section 162. Petitioner does not provide insurance or services in competition with taxable entities.Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011