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Sec. 1.614-4 Treatment under the Internal Revenue Code of 1939 with respect to sepa

rate operating mineral interests for taxable years beginning before January 1,

1964, in the case of oil and gas wells. 1.61445 Special rules as to aggregating nonoperating mineral interests. 1.614–6 Rules applicable to basis, holding period, and abandonment losses where

mineral interests have been aggregated or combined. 1.614_7 Extension of time for performing certain acts. 1.614-8 Elections with respect to separate operating mineral interests for taxable

years beginning after December 31, 1963, in the case of oil and gas wells. 1.615 Statutory provisions; pre-1970 exploration expenditures. 1.615–1 Pre-1970 exploration expenditures. 1.615–2 Deduction of pre-1970 exploration expenditures in the year paid or in

curred. 1.615–3 Election to defer pre-1970 exploration expenditures. 1.615-4 Limitation of amount deductible. 1.615-5 Time for making election with respect to returns due on or before May 2,

1960. 1.615-6 Election to deduct under section 615. 1.615–7 Effect of transfer of mineral property. 1.615–8 Termination of section 615. 1.615-9 Notification under Tax Reform Act of 1969. 1.616 Statutory provisions; development expenditures. 1.616–1 Development expenditures. 1.616-2 Election to defer. 1.616–3 Time for making election with respect to returns due on or before May 2,

1960. 1.617 Statutory provisions; deduction and recapture of certain mining exploration

expenditures. 1.617-1 Exploration expenditures. 1.617-2 Limitation on amount deductible. 1.617-3 Recapture of exploration expenditures. 1.617-4 Treatment of gain from disposition of certain mining property.

EXCLUSIONS FROM GROSS INCOME 1.621 Statutory provisions; payments to encourage exploration, development, and

mining for defense purposes. 1.621-1 Payments to encourage exploration, development, and mining for defense purposes.

SALES AND EXCHANGES 1.631 Statutory provisions; gain or loss in the case of timber or coal. 1.631-1 Election to consider cutting as sale or exchange. 1.631-2 Gain or loss upon the disposal of timber under cutting contract. 1.631-3 Gain or loss upon the disposal of coal or domestic iron ore with a retained

economic interest. 1.632 Statutory provisions; sale of oil or gas properties. 1.632–1 Tax on sale of oil or gas properties.

MINERAL PRODUCTION PAYMENTS 1.636 Statutory provisions; income tax treatment of mineral production payments. 1.636–1 Treatment of production payments as loans. 1.636—2 Production payments retained in leasing transactions. 1.636-3 Definitions. 1.636-4 Effective dates of section 636.

CONTINENTAL SHELF AREAS 1.638 Statutory provisions; continental shelf areas. 1.638-1 Continental Shelf areas. 1.638-2 Effective date.

AUTHORITY: Part 1 (8$ 1.501 to 1.640) Issued under sec, 7808, 68A Stat. 917; 26 U.S.C. 7808, unless otherwise noted.

SOURCE: Part 1 (8$ 1.501 to 1.640), Treasury Decision 6500, 25 FR. 11737, Nov. 26, 1900; 25 FR. 14021, Dec. 31, 1960, unless otherwise noted.

EXEMPT ORGANIZATIONS

scribed in section 501(c) (2), (3), (4),

(5), (6), (7), (8), (9), (12), (13), (15), GENERAL RULE

or (17) shall file the form of application $ 1.501(a) Statutory provisions; exemp- appropriate to its activities, filled out in

tion from tax on corporations; cer- accordance with the instructions on the tain trusts, etc.

form or issued therewith. The following SEC. 501. Exemption from tax on corpora- forms shall be filed: For organizations tions, certain trusts, etc.—(a) Exemption described in section 501(c)(3), Form from taration. An organization described

1023; in section 501(c) (4), (5), (6), or in subsection (c) or (d) or section 401 (a)

(8), Form 1024; in section 501(C) (7), shall be exempt from taxation under this

Form 1025; in section 501(c) (2), (12), subtitle unless such exemption is denied under section 502, 503, or 504.

(13), or (15), Form 1026; and in sec

tion 501(c) (9), or (17), Form 1027. State $ 1.501(a)-1 Exemption from taxation.

chartered credit unions described in sec(a) In general; proof of exemption.

tion 501(c) (14) shall submit an applia (1) Section 501(a) provides an exemp- cation for exemption showing the State tion from income taxes for organiza

and date of incorporation. The applitions which are described in section cation should show that the State credit 501 (c) or (d) and section 401 (a), un- union law with respect to loans, investless such organization is a "feeder or- ments, and dividends, if any, is being ganization" (see section 502), or unless complied with. All other organizations it engages in a transaction described in claiming exemption, other than emsection 503 or in an activity described in ployees' trusts described in section section 504. However, the exemption 401(a), shall file an application for does not extend to "unrelated business exemption showing the character of taxable income" of such an organization the organization, the purpose for which (see part II (section 511 and following), it was organized, its actual activities, subchapter F, chapter 1 of the Code). the sources of its income and re

(2) An organization, other than an ceipts and the disposition thereof, er rees' trust described in section 401 whether or not any of its income or re(a), is not exempt from tax merely be- ceipts is credited to surplus or may inure cause it is not organized and operated to the benefit of any private shareholder for profit. In order to establish its ex- or individual, and in general all facts emption, it is necessary that every such relating to its operations which may aforganization claiming exemption file an fect its right to exemption. To each such application form as set forth below with form or application shall be attached the district director for the internal a conformed copy of the articles of inrevenue district in which is located the corporation, declaration of trust, or other principal place of business or principal Instrument of similar import, setting office of the organization. Subject only forth the permitted powers or activities to the Commissioner's inherent power of the organization, the bylaws or other to revoke rulings because of a change code of regulations, and the latest finanin the law or regulations or for other cial statement showing the assets, liagood cause, an organization that has bilities, receipts, and disbursements of been determined by the Commissioner the organization. In the case of a trust or the district director to be exempt claiming an exemption under section under section 501(a) or the corre- 501(c) (17) a conformed copy of any plan sponding provision of prior law may of which it forms a part shall be attached rely upon such determination so long as to the form or application for exempthere are no substantial changes in the tion. Each such form or application shall organization's character, purposes, or contain or be verified by a written decmethods of operation. An organization laration that it is made under the penwhich has been determined to be exempt alties of perjury. under the provisions of the Internal Rev- (ii) For the rules relating to obtaining enue Code of 1939 or prior law is not re- a determination of exempt status by an quired to secure a new determination of employees' trust described in section 401 exemption merely because of the enact- (a), see paragraph (e) of $ 1.401-1. ment of the Internal Revenue Code of (b) Additional proof by particular 1954 unless affected by substantive classes of organizations. (1) Organizachanges in law made by such code. tions mentioned below shall submit with

(3) (1) An organization claiming ex- and as a part of their applications the emption under section 501(a) and de- following information:

notwithstanding part II, shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. $ 1.501(c)(1) Statutory provisions; ex

emption from tax on corporations, certain trusts, etc.; instrumentalities

of the United States. SEC. 501. Exemption from tax on corpora. tions, certain trusts, etc. ...

(c) List of exempt organizations. The following organizations are referred to in subsection (a):

(1) Corporations organized under Act of Congress, if such corporations are instrumentalities of the United States and 11, under such Act, as amended and supplemented, such corporations are exempt from Federal income taxes. $ 1.501(c)(2) Statutory provisions; ex

emption from tax on corporations, certain trusts, etc.; corporations organized to hold title to property for

exempt organizations. SEC. 501. Exemption from tax on corporations, certain trusts, etc.

(c) List of exempt organizations. The following organizations are referred to in subsection (a):

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(1) Mutual insurance companies shall submit copies of the policies or certificates of membership issued by them.

(4) 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 eficient 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. Por the annual return requirements of organizations exempt under section 501 (a), see section 6033 and $ 1.6033-1. [T.D. 6500, 25 F.R. 11737, Nov. 26, 1980, as amended by T.D. 6972, 33 FR. 12899, Sept. 12, 1968] 1.501(b) Statutory provisions; exemp

tion from tax on corporations, certain trusts, etc.; tax on unrelated business

income. SEC. 501. Exemption from tax on corporations, certain trusts, etc. * * *

(b) Tax on unrelated business income. An organization exempt from taxation under subsection (a) shall be subject to tax to the extent provided in part II of this subchapter (relating to tax on unrelated income), but,

(2) Corporations organized for the exclusive purpose of holding title to property. collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt under this section. § 1.501(c)(2)-1 Corporations organized

to hold title to property for exempt

organizations. (a) A corporation described in section 501(c) (2) and otherwise exempt from tax under section 501(a) is taxablo upon its unrelated business taxable income if the income is payable to an organization which is itself subject to the tax imposed by section 511 or I the income is payable to a church or to & convention or association of churches. See part II (section 511 and following), subchapter F, chapter 1 of the Code, and the regulations thereunder. Since & corporation described in section 501(c) (2) cannot be exempt under section 501(a) if it engages in any business other than that of holding title to property and collecting income therefrom, it cannot have unrelated business taxable income as defined in section 512 other than un. related busiress rental income described in section 514.

(b) A corporation described in section 501 (c) (2) cannot accumulate income and retain its exemption, but it must turn over the entire amount of such income, less expenses, to an organization which is itself exempt from tax under section 501 (a). § 1.501(c)(3) Statutory provisions; ex

emption from tax on corporations, certain trusts, etc.; corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, Literary, or educational purposes, or for the prevention of cruelty to chil

dren or animals. SEC. 501. Exemption from tax on corporations, certain trusts, etc.

(c) List of exempt organizations. The following organizations are referred to in subsection (a):

"articles") as defined in subparagraph (2) of this paragraph:

(a) Limit the purposes of such organization to one or more exempt purposes; and

(b) Do not expressly empower the organization to engage, otherwise than as an insubstantial part of its activities, in activities which in themselves are not in furtherance of one or more exempt purposes.

(ii) In meeting the organizational test, the organization's purposes, as stated in its articles, may be as broad as, or more specific than, the purposes stated in section 501(c) (3). Therefore, an organization which, by the terms of its articles, is formed "for literary and scientific purposes within the meaning of section 501(c)(3) of the Code" shall, if it otherwise meets the requirements in this paragraph, be considered to have met the organizational test. Similarly, articles stating that the organization is created solely “to receive contributions and pay them over to organizations which are described in section 501(c)(3) and exempt from taxation: under section 501(a)" are sufficient for purposes of the organizational test. Moreover, it is sufficient if the articles set forth the purpose of the organization to be the operation of a school for adult education and describe in detail the manner of the operation of such school. In addition, if the articles state that the organization is formed for "charitable purposes”, such articles ordinarily shall be sufficient for purposes of the organizational test (see subparagraph (5) of this paragraph for rules relating to construction of terms).

(iii) An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it to carry on, otherwise than as an insubstantial part of its activities, activities which are not in furtherance of one or more exempt purposes, even though such organization is, by the terms of such articles, created for a purpose that is no broader than the purposes specified in section 501(c)(3). Thus, an organization that is empowered by its articles “to engage in a manufacturing business", or "to engage in the operation of a social club" does not meet the organizational test regardless of the fact that its articles may state that such organization is created "for charitable purposes within the meaning of section 501(c)(3) of the Code.”

(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office. 8 1.501(c)(3)-1 Organizations orga

nized and operated for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of

cruelty to children or animals. (a) Organizational and operational tests. (1) In order to be exempt as an organization described in section 501(c) (3), an organization must be both organized and operated exclusively for one or more of the purposes specified in such section. If an organization fails to meet either the organizational test or the operational test, it is not exempt.

(2) The term “exempt purpose or purposes”, as used in this section, means any purpose or purposes specified in section 501(c)(3), as defined and elaborated in paragraph (d) of this section.

(b) Organizational test-(1) In general. (1) An organization is organized exclusively for one or more exempt purposes only if its articles of organization (referred to in this section as its

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(iv) In no case shall an organization be considered to be organized exclusively for one or more exempt purposes, if, by the terms of its articles, the purposes for which such organization is created are broader than the purposes specified in section 501(C) (3). The fact that the actual operations of such an organization have been exclusively in furtherance of one or more exempt purposes shall not be sufficient to permit the organization to meet the organizational test. Similarly, such an organization will not meet the organizational test as a result of statements or other evidence that the members thereof intend to operate only in furtherance of one or more exempt purposes.

(v) An organization must, in order to establish its exemption, submit a detailed statement of its proposed activities with and as a part of its application for exemption (see paragraph (b) of $ 1.501(a)-1).

(2) Articles of organization. For purposes of this section, the term "articles of organization" or "articles" includes the trust instrument, the corporate charter, the articles of association, or any other written instrument by which an organization is created.

(3) Authorization of legislative or political activities. An organization is not organized exclusively for one or more exempt purposes if its articles expressly empower it

(1) To devote more than an insubstantial part of its activities to attempting to influence legislation by propaganda or otherwise; or

(ii) Directly or indirectly to participate in, or intervene in (including the publishing

or

distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office; or

(iii) To have objectives and to engage in activities which characterize it as an "action" organization as defined in paragraph (c)(3) of this section. The terms used in subdivisions (i), (ii), and (iii) of this subparagraph shall have the meanings provided in paragraph (C) (3) of this section.

(4) Distribution of assets on dissolution. An organization is not organized exclusively for one or more exempt purposes unless its assets are dedicated to an exempt purpose. An organization's assets will be considered dedicated to an exempt purpose, for example, if, upon

dissolution, such assets would, by reason of a provision in the organization's articles or by operation of law, be distributed for one or more exempt purposes, or to the Federal government, or to a State or local government, for a public purpose, or would be distributed by a court to another organization to be used in such manner as in the judgment of the court will best accomplish the general purposes for which the dissolved organization was organized. However, an organization does not meet the organizational test if its articles or the law of the State in which it was created provide that its assets would, upon dissolution, be distributed to its members or shareholders.

(5) Construction of terms. The law of the State in which an organization is created shall be controlling in construing the terms of its articles. However, any organization which contends that such terms have under State law a different meaning from their generally accepted meaning must establish such special meaning by clear and convincing reference to relevant court decisions, opinions of the State attorney-general, or other evidence of applicable State law.

(6) Applicability of the organizational test. A determination by the Commissioner or a district director that an organization is described in section 501(c) (3) and exempt under section 501(a) will not be granted after July 26, 1959 (regardless of when the application is filed), unless such organization meets the organizational test prescribed by this paragraph. If, before July 27, 1959, an organization has been determined by the Commissioner or district director to be exempt as an organization described in section 501(c)(3) or in a corresponding provision of prior law and such determination has not been revoked before such date, the fact that such organization does not meet the organizational test prescribed by this paragraph shall not be a basis for revoking such determination. Accordingly, organization which has been determined to be exempt before July 27, 1959, and which does not seek a new determination of exemption is not required to amend its articles of organization to conform to the rules of this paragraph, but any organization which seeks a determination of exemption after July 26, 1959, must have articles of organization which meet the rules of this paragraph. For the rules relating to whether an organization de

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