- 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