ing, is not a business league. An association engaged in furnishing information to prospective investors, to enable them to make sound investments, is not a business league, since its activities do not further any common business interest, even though all of its income is devoted to the purpose stated. A stock or commodity exchange is not a business league, a chamber of commerce, or a board of trade within the meaning of section 501 (c) (6) and is not exempt from tax. Organizations otherwise exempt from tax under this section are taxable upon their unrelated business taxable income. See part II (section 511 and following), subchapter F, chapter 1 of the Code, and the regulations thereunder.

§ 1.501 (c) (7) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; social clubs.

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

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

(a) The exemption provided by section 501(a) for organizations described in section 501(c) (7) applies only to clubs which are organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, but does not apply to any club if any part of its net earnings inures to the benefit of any private shareholder. In general, this exemption extends to social and recreation clubs which are supported solely by membership fees, dues, and assessments. However, a club otherwise entitled to exemption will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities.

(b) A club which engages in business, such as making its social and recreational facilities available to the general public or by selling real estate, timber, or other products, is not organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, and is not exempt under section 501 (a). Solicitation by advertisement or otherwise for public patronage of its facilities is prima facie evidence that the club is engaging

in business and is not being operated exclusively for pleasure, recreation, or social purposes. However, an incidental sale of property will not deprive a club of its exemption.

§ 1.501(c)(8) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; fraternal beneficiary societies.

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

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

(a) A fraternal beneficiary society is exempt from tax only if operated under the "lodge system" or for the exclusive benefit of the members so operating. "Operating under the lodge system" means carrying on its activities under a form of organization that comprises local branches, chartered by a parent organization and largely selfgoverning, called lodges, chapters, or the like. In order to be exempt it is also necessary that the society have an established system for the payment to its members or their dependents of life, sick, accident, or other benefits.

[T.D. 6500, 25 F.R. 11787, Nov. 26, 1960, as amended by T.D. 7061, 35 FR. 14770, Sept. 23, 1970]

§ 1.501(c)(9) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; voluntary employees' beneficiary associations.

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

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

(9) Voluntary employees' beneficiary associations providing for the payment of life, sick, accident, or other benefits to the members of such association or their dependents, Lf

(A) No part of their net earnings inures (other than through such payments) to the

benefit of any private shareholder or individual, and

(B) 85 percent or more of the income consists of amounts collected from members and amounts contributed to the association by the employer of the members for the sole purpose of making such payments and meeting expenses.

§ 1.501 (c) (10) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; certain fraternal beneficiary societies.

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

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

(10) Domestic fraternal societies, orders, or associations, operating under the lodge system

(A) The net earnings of which are devoted exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and

(B) Which do not provide for the payment of life, sick, accident, or other benefits.

[Sec. 501 (c) (10) as amended by section 121, Tax Reform Act, 1969 (83 Stat. 541)] [T.D. 7172, 87 F.R. 5618, Mar. 17, 1972] § 1.501 (c) (10)-1

Certain fraternal beneficiary societies.

(a) For taxable years beginning after December 31, 1969, an organization will qualify for exemption under section 501(c) (10) if it

(1) Is a domestic fraternal beneficiary society order, or association, described in section 501 (c) (8) and the regulations thereunder except that it does not provide for the payment of life, sick, accident, or other benefits to its members, and

(2) Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes.

Any organization described in section 501(c) (7), such as, for example, a national college fraternity, is not described in section 501(c) (10) and this section. [T.D. 7172, 37 F.R. 5618, Mar. 17, 1972] § 1.501 (c) (11) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; teachers' retirement fund associations.

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

*

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

(11) Teachers' retirement funds associations of a purely local character, if—

(A) No part of their net earnings inures (other than through payment of retirement benefits) to the benefit of any private shareholder or individual, and

(B) The income consists solely of amounts received from public taxation, amounts received from assessments on the teaching salaries of members, and income in respect of investments.

§ 1.501 (c) (12) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; local benevolent life insurance associations, mutual irrigation and telephone companies, and like 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):

(12) Benevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooperative telephone companies, or like organizations; but only if 85 percent or more of the income consists of amounts collected from members for the sole purpose of meeting losses and expenses.

§ 1.501 (c) (12)-1 Local benevolent life insurance associations, mutual irrigation and telephone companies, and like organizations.

(a) An organization described in section 501(c) (12) must receive at least 85 percent of its income from amounts collected from members for the sole purpose of meeting losses and expenses. If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15 percent of its income is derived, it is not entitled to exemption. On the other hand, an organization may be entitled to exemption, although it makes advance assessments for the sole purpose of meeting future losses and expenses, provided that the balance of such assessments remaining on hand at the end of the year is retained to meet losses and expenses or is returned to members.

(b) The phrase "of a purely local character" applies to benevolent life insurance associations, and not to the other organizations specified in section 501 (c) (12). It also applies to any organization seeking exemption on the ground that it is an organization similar to a benevolent life insurance association. An organization of a purely local

character is one whose business activities are confined to a particular community, place, or district, irrespective, however, of political subdivisions. If the activities of an organization are limited only by the borders of a State it cannot be considered to be purely local in character.

§ 1.501 (c) (13) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; cemetery companies.

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

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

§ 1.501 (c) (13)-1

Cemetery companies.

(a) A cemetery company may be entitled to exemption

(1) If it is owned by and operated exclusively for the benefit of its lot owners who hold such lots for bona fide burial purposes and not for purpose of resale, or

(2) If it is not operated for profit. (b) Any cemetery corporation chartered solely for burial purposes and not permitted by its charter to engage in any business not necessarily incident to that purpose is exempt from income tax, provided that no part of its net earnings inures to the benefit of any private shareholder or individual. A cemetery company which fulfills the other requirements of section 501 (c) (13) may be exempt, even though it issues preferred stock entitling the holders to dividends at a fixed rate, not exceeding the legal rate of interest in the State of incorporation or 8 percent per annum, whichever is greater, on the value of the consideration for which the stock was issued, provided that its articles of incorporation require:

(1) That the preferred stock shall be retired at par as soon as sufficient funds available therefor are realized from sales, and

(2) That all funds not required for the payment of dividends upon or for the retirement of preferred stock shall be used by the company for the care and improvement of the cemetery property. § 1.501 (c) (14) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; credit unions. SEC. 501. Exemption from tax on corporations, certain trusts, etc. • • •

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

(14) Credit unions without capital stock organized and operated for mutual purposes and without profit; and corporations or associations without capital stock organized before September 1, 1957, and operated for mutual purposes and without proît for the purpose of providing reserve funds for, and insurance of, shares or deposits in

(A) Domestic building and loan associations,

(B) Cooperative banks without capital stock organized and operated for mutual purposes and without profit, or

(C) Mutual savings banks not having capital stock represented by shares.

[Sec. 501 (c) (14) as amended by Act of April 22, 1960 (Pub. Law 86-428, 74 Stat. 54)] [T.D. 6500, 25 F.R. 11737, Nov. 26, 1960, as amended by T.D. 6498, 25 F.R. 9219, Sept. 27, 1960]

§ 1.501 (c) (14)-1 Credit unions and mutual insurance funds.

Credit unions (other than Federal credit unions described in section 501(c) (1)) without capital stock, organized and operated for mutual purposes and without profit, are exempt from tax under section 501 (a). Corporations or associations without capital stock organized before September 1, 1951, and operated for mutual purposes and without profit for the purpose of providing reserve funds for, and insurance of, shares or deposits in:

(a) Domestic building and loan associations as defined in section 7701(a) (19),

(b) Cooperative banks without capital stock organized and operated for mutual purposes and without profit, or

(c) Mutual savings banks not having capital stock represented by shares, are also exempt from tax under section 501(a). In addition, corporations or associations of the type described in the preceding sentence which were organized on or after September 1, 1951, but before

(15) Mutual insurance companies or associations other than life or marine (including interinsurers and reciprocal underwriters) if the gross amount received during the taxable year from the items described in section 822(b) (other than paragraph (1) (D) thereof) and premiums (including deposits and assessments) does not exceed $150,000. [Sec. 501 (c) (15) as amended by sec. 5(2) of the Life Insurance Company Tax Act for 1955 (70 Stat. 49); sec. 8(d), Rev. Act 1962 (76 Stat. 997)]

[T.D. 6662, 28 F.R. 6972, July 9, 1963] § 1.501 (c) (15)-1 Mutual insurance companies or associations.

(a) Taxable years beginning after December 31, 1962. An insurance company or association described in section 501 (c) (15) is exempt under section 501(a) if it is a mutual company or association (other than life or marine) or if it is a mutual interinsurer or reciprocal underwriter (other than life or marine) and if the gross amount received during the taxable year from the sum of the following items does not exceed $150,000:

(1) The gross amount of income during the taxable year from

(1) Interest (including tax-exempt interest and partially tax-exempt interest), as described in § 1.61-7. Interest shall be adjusted for amortization of premium and accrual of discount in accordance with the rules prescribed in section 822 (d) (2) and the regulations thereunder.

(ii) Dividends, as described in § 1.61–9. (iii) Rents and royalties, as described in § 1.61-8.

(iv) The entering into of any lease, mortgage, or other instrument or agreement from which the company may derive interest, rents, or royalties.

(v) The alteration or termination of any instrument or agreement described in subdivision (iv) of this subparagraph.

(2) The gross income from any trade or business (other than an insurance business) carried on by the company or association, or by a partnership of which the company or association is a partner. (3) Premiums (including deposits and assessments).

(b) Taxable years beginning after December 31, 1954, and before January 1, 1963. An insurance company or association described in section 501 (c) (15) and paragraph (a) of this section is exempt under section 501(a) if the gross amount received during the taxable year from the sum of the items described in paragraph (a) (1), (2), and (3) of this section does not exceed $75,000.

(c) No double inclusion of income. In computing the gross income from any trade or business (other than an insurance business) carried on by the company or association, or by a partnership of which the company or association is a partner, any item described in section 822(b)(1) (A), (B), or (C) and paragraph (a)(1) of this section shall not be considered as gross income arising from the conduct of such trade or business, but shall be taken into account under section 822(b)(1) (A), (B), or (C) and paragraph (a) (1) of this section.

(d) Taxable years beginning after December 31, 1953, and before January 1, 1955. An insurance company or association described in section 501(c) (15) is exempt under section 501(a) if it is a mutual company or association (other than life or marine) or if it is a mutual interinsurer or reciprocal underwriter (other than life or marine) and if the gross amount received during the taxable year from the sum of the following items does not exceed $75,000:

(1) The gross amount of income during the taxable year from

(1) Interest (including tax-exempt interest and partially tax-exempt interest), as described in § 1.61-7. Interest shall be adjusted for amortization of premium and accrual of discount in accordance with the rules prescribed in section 822(d) (2) and § 1.822-3.

(ii) Dividends, as described in § 1.61-9. (iii) Rents (but excluding royalties), as described in § 1.61-8.

(2) Premiums (including deposits and assessments).

(e) Exclusion of capital gains. Gains from sales or exchanges of capital assets to the extent provided in subchapter P (section 1201 and following, relating to

capital gains and losses), chapter 1 of the Code, shall be excluded from the amounts described in this section. [TD. 6662, 28 F.R. 6972, July 29, 1963] § 1.501(c) (16) Statutory provisions; exemption from tax on corporations, certain trusts, etc.; corporations organized to finance crop operations. SEC. 501. Exemption from tax on corporations, certain trusts, etc. ...

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

(16) Corporations organized by an assoclation subject to part III of this subchapter or members thereof, for the purpose of flnancing the ordinary crop operations of such members or other producers, and operated in conjunction with such association. Exemption shall not be denied any such corporation because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation or 8 percent per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other than nonvoting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the corporation, on dissolution or otherwise, beyond the fixed dividends) is owned by such association, or members thereof; nor shall exemption be denied any such corporation because there is accumulated and maintained by it a reserve required by State law or a reasonable reserve for any necessary purpose.

§ 1.501 (c) (16)-1 Corporations

nized to finance crop operations.

orga

A corporation organized by a farmers' cooperative marketing or purchasing association, or the members thereof, for the purpose of financing the ordinary crop operations of such members or other producers is exempt, provided the marketing or purchasing association is exempt under section 521 and the financing corporation is operated in conjunction with the marketing or purchasing association. The provisions of § 1.521-1 relating to a reserve or surplus and to capital stock shall also apply to corporations coming under this section.

§ 1.501 (c) (17) Statutory

provisions;

exemption from tax on corporations, certain trusts, etc.; supplemental unemployment benefit trusts.

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

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

(17) (A) A trust or trusts forming part of a plan providing for the payment of supplemental unemployment compensation benefits, if—

(1) Under the plan, it is impossible, at any time prior to the satisfaction of all liabilities with respect to employees under the plan, for any part of the corpus or income to be (within the taxable year or thereafter) used for, or diverted to, any purpose other than the providing of supplemental unemployment compensation benefits,

(1) Such benefits are payable to employees under a classification which is set forth in the plan and which is found by the Secretary or his delegate not to be discriminatory in favor of employees who are officers, shareholders, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees, and

(iii) Such benefits do not discriminate in favor of employees who are officers, shareholders, persons whose principal duties consist of supervising the work of other employees, or highly compensated employees. A plan shall not be considered discriminatory within the meaning of this clause merely because the benefits received under the plan bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of the employees covered by the plan.

(B) In determining whether a plan meets the requirements of subparagraph (A), any benefits provided under any other plan shall not be taken into consideration, except that & plan shall not be considered discriminatory

(1) Merely because the benefits under the plan which are first determined in a nondiscriminatory manner within the meaning of subparagraph (A) are then reduced by any sick, accident, or unemployment compensation benefits received under State or Federal law (or reduced by a portion of such benefits if determined in a nondiscriminatory manner), or

(11) Merely because the plan provides only for employees who are not eligible to receive sick, accident, or unemployment compensation benefits under State or Federal law the same benefits (or a portion of such benefits if determined in a nondiscriminatory manner) which such employees would receive under such laws if such employees were eligible for such benefits, or

(111) Merely because the plan provides only for employees who are not eligible under another plan (which meets the requirements of subparagraph (A)) of supplemental unemployment compensation benefits provided wholly by the employer the same benefits (or a portion of such benefits if determined in a nondiscriminatory manner) which such