Internal Revenue Service
Rev. Rul. 74-147
1974-1 C.B. 136
Caution: Distinguished by Rev. Rul. 83-164
Business leagues; digital computer users. A nonprofit organization, whose
members represent diversified businesses that own, rent, or lease digital
computers produced by various manufacturers, organized to improve the
efficiency of its members' use of computers, qualifies for exemption under
section 501(c)(6) of the Code.
Rev. Rul. 74-147
Advice has been requested whether the nonprofit organization described
below qualifies for exemption from Federal income tax under section
501(c)(6) of the Internal Revenue Code of 1954.
The organization was formed to stimulate the development of, with free
interchange of information pertaining to, systems and programming of
electronic data processing equipment. Its membership is made up of
representatives of diversified businesses who own, rent, or lease one or
more digital computers, produced by various manufacturers, without regard
to identity of the manufacturer of any such computer.
The organization holds semi-annual conferences, lasting from two to four
days, at which operational and technical problems relating to computer use
are discussed. Nonmembers are invited to attend the conferences and are
encouraged to join as members. The organization does not provide counseling
or other services to its members with respect to specific individual
The speakers at the conferences typically include both members as well as
recognized professionals in the computer industry. Also, manufacturers of
computer equipment are invited to attend and disseminate current
information relative to their equipment.
Income is from conference registration fees. Expenditures are made for
meeting expenses, and miscellaneous administrative costs.
Section 501(c)(6) of the Code provides for the exemption from Federal
income tax of business leagues not organized for profit, no part of the net
earnings of which inures to the benefit of any private shareholder or
Section 1.501(c)(6)-1 of the Income Tax Regulations defines a business
league as an association of persons having some common business interest,
the purpose of which is to promote such common interest. Its activities
should be directed towards the improvement of business conditions in one or
more lines of business as distinguished from the performance of particular
services for individual persons.
Rev. Rul. 65-164, 1965-1 C.B. 238, and the decision in the case of
Associated Industries of Cleveland v. Commissioner, 7 T.C. 1449 (1946),
acq. 1947 C.B. 1, cited therein, hold that organizations dealing with
common business interests which are the business problems the members have
in common qualify for exemption under section 501(c)(6) of the Code.
Here, the common business interest of the members of the organization is
their common business problem concerning the use of digital computers. The
primary objective of the organization is to provide a forum for the
exchange of information which will lead to the more efficient utilization
of computers by its members and other interested users, and thus improve
the overall efficiency of the business operations of each. Accordingly, the
organization qualifies for exemption from Federal income tax under section
501(c)(6) of the Code.
Even though an organization considers itself within the scope of this
Revenue Ruling, it must file an application on Form 1024, Exemption
Application, in order to be recognized by the Service as exempt under
section 501(c)(6) of the Code. The application should be filed with the
District Director of Internal Revenue for the district in which is located
the principal place of business or principal office of the organization.
See section 1.501(a)-1 of the regulations.