(1) Section 501(a) provides
an exemption from income taxes for organizations which are
described in section 501(c) or (d) and section 401(a), unless
such organization is a "feeder organization" (see
section 502), or unless it engages in a transaction described
in section 503. However, the exemption does not extend to
"unrelated business taxable income" of such an organization
(see part III (Section 511 and following), subchapter F, chapter
1 of the Code).
(2) An organization, other
than an employees' trust described in section 401(a), is not
exempt from tax merely because it is not organized and operated
for profit. In order to establish its exemption, it is necessary
that every such organization claiming exemption file an application
form as set forth below with the district director for the
internal revenue district in which is located the principal
place of business or principal office of the organization.
Subject only to the Commissioner's inherent power to revoke
rulings because of a change in the law or regulations or for
other good cause, an organization that has been determined
by the Commissioner or the district director to be exempt
under section 501(a) or the corresponding provision of prior
law may rely upon such determination so long as there are
no substantial changes in the organization's character, purposes,
or methods of operation. An organization which has been determined
to be exempt under the provisions of the Internal Revenue
Code of 1939 or prior law is not required to secure a new
determination of exemption merely because of the enactment
of the Internal Revenue Code of 1954 unless affected by substantive
changes in law made by such Code.
(3) An organization claiming
exemption under section 501(a) and described in any paragraph
of section 501(c) (other than section 501(c)(1)) shall file
the form of application prescribed by the Commissioner and
shall include thereon such information as required by such
form and the instructions issued with respect thereto. For
rules relating to the obtaining of a determination of exempt
status by an employees' trust described in section 401(a),
see the regulations under section 401.
(1) Organizations mentioned
below shall submit with and as a part of their applications
the following information:
(i) Mutual insurance companies
shall submit copies of the policies or certificates of membership
issued by them.
(ii) In the case of title
holding companies described in section 501(c)(2), if the
organization for which title is held has not been specifically
notified in writing by the Internal Revenue Service that
it is held to be exempt under section 501(a), the title
holding company shall submit the information indicated herein
as necessary for a determination of the status of the organization
for which title is held.
(iii) An organization described
in section 501(c)(3) shall submit with, and as a part of,
an application filed after July 26, 1959, a detailed statement
of its proposed activities.
(2) In addition to the information
specifically called for by this section, the Commissioner
may require any additional information deemed necessary for
a proper determination of whether a particular organization
is exempt under section 501(a), and when deemed advisable
in the interest of an efficient administration of the internal
revenue laws, he may in the cases of particular types of organizations
prescribe the form in which the proof of exemption shall be
furnished.
(3) An organization claiming
to be specifically exempted by section 6033(a) from filing
annual returns shall submit with and as a part of its application
a statement of all the facts on which it bases its claim.
(c) "Private shareholder
or individual" defined. --The words "private shareholder
or individual" in section 501 refer to persons having
a personal and private interest in the activities of the organization.
(d) Requirement of annual
returns. --For the annual return requirements of organizations
exempt under section 501(a), see section 6033 and §1.6033-1.
(e) Certain Puerto Rican
pension, etc., trusts. --Effective for taxable years beginning
after December 31, 1973, section 1022(i)(1) of the Employee
Retirement Income Security Act of 1974 (ERISA) (88 Stat. 942)
provides that trusts under certain Puerto Rican pension, etc.,
plans (as defined under P.R. Laws Ann. tit. 13, §3165,
and the articles thereunder), all of the participants of which
are residents of the Commonwealth of Puerto Rico, are to be
treated only for purposes of section 501(a) as trusts described
in section 401(a). The practical effect of section 1022(i)(1)
is to exempt these trusts from U.S. income tax on income from
their U.S. investments. For purposes of section 1022(i)(1),
the term "residents of the Commonwealth of Puerto Rico"
means bona fide residents of Puerto Rico, and persons who
perform labor or services primarily within the Commonwealth
of Puerto Rico, regardless of residence for other purposes,
and the term "participants" is restricted to current
employees who are not excluded under the eligibility provisions
of the plan. [Reg. §1.501(a)-1.]