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1. Whether Petitioner Is Organized Exclusively for Exempt
Purposes
Whether an organization is organized exclusively for exempt
purposes is sometimes known as the organizational test. To
satisfy the organizational test, the articles of organization (1)
must limit the organization’s purposes to one or more exempt
purposes; (2) may not expressly authorize the organization to
engage in activities that do not further one or more exempt
purposes except to an insubstantial degree; and (3) must contain
an express or implied provision dedicating its assets to an
exempt purpose upon dissolution. Sec. 1.501(c)(3)-1(b)(1)
through (4), Income Tax Regs.
a. Educational Purposes
Petitioner contends that it satisfies the organizational
test because it was organized for educational purposes and that
use of DMPs was only a minimal part of its revenue. However, the
administrative record clearly demonstrates otherwise.
Petitioner’s articles of incorporation do not limit its
activities to those related to education because the articles
empower petitioner to engage in activities that are not purely
charitable or educational. For example, petitioner could operate
an investment business and offer products and services with
respect to a customer’s individual needs. Those activities stand
in stark contrast to educational purposes acceptable under
section 501(c)(3), which include activities that instruct or
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Last modified: March 27, 2008