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    Internal Revenue Service
 Revenue Ruling

Rev. Rul. 59-310

1959-2 C.B. 146

Sec. 501

IRS Headnote

A nonprofit corporation organized for the purpose of establishing,
maintaining and operating a public swimming pool, playground and other
recreation facilities for the children and other residents of a community
is exempt from Federal income tax under section 501(a) of the Internal
Revenue Code of 1954 as a charitable organization described in section
501(c)(3) thereof. 

Acquiescence in the holding in Isabel Peters v. Commissioner , 21 T.C. 55,
which action replaces a previous nonacquiescence, C.B. 1955-1, 8, does not
constitute agreement with all the reasons given for such holding. 

Full Text

Rev. Rul. 59-310 

Advice has been requested whether a nonprofit corporation organized for the
purpose of establishing, maintaining and operating a public swimming pool,
playground and other recreation facilities for the children and other
residents of a particular community may be exempt from Federal income tax
under Section 501(a) of the Internal Revenue Code of 1954 as a charitable
organization described in section 501(c)(3) thereof. Advice also has been
requested as to the effect of the decision of the Tax Court of the United
States in Isabel Peters v. Commissioner , 21 T.C. 55, nonacquiescence, C.B.
1955-1, 8, on the position of the Service with respect to the
classification of nonprofit social welfare organizations for exemption
under section 501(a) of the Code. 

The bylaws of the instant organization provide that the swimming pool and
other recreation facilities shall be operated as a public undertaking for
the benefit of the residents of the community. Residents taking for the
benefit of the residents of the community making use of such facilities
consist principally of low-income groups who are unable to pay the cost of
privately sponsored recreation facilities for themselves and their
children. The funds of the association are raised by public subscription
with the exception of small amounts derived from nominal charges made for
admission to the swimming pool. Funds are used to pay for the cost of
construction of facilities and for operating expenses. No part of the net
income of the association inures to the benefit of any private individual.
In the event of dissolution, the assets of the organization will be turned
over to one or more recognized charitable organizations. 

Section 501(c)(3) of the 1954 Code, which corresponds to section 101(6) of
the 1939 Code, provides for the exemption of `Corporations, * * * or
foundations, organized and operated exclusively for * * * charitable * * *
purposes * * * no part of the net earnings of which inures to the benefit
of any private shareholder or individual * * *.' 

In the instant case, the organization was formed to establish, maintain and
operate a public swimming pool, playground and other recreation facilities
for the children and other residents of the community. Its funds are
principally raised by public subscription. It appears that the income
derived from charges for admission to the swimming pool is minor in amount
and that such charges are purely incidental to the orderly operation of the
pool. No part of the net income inures to the benefit of any private
individual. Its assets upon dissolution will be turned over to recognized
charitable organizations. Accordingly, since the property and its uses are
dedicated to members of the general public of the community and are
charitable in that they serve a generally recognized public purpose which
tends to lessen the burdens of government, it is concluded that the instant
organization is exclusively charitable within the meaning of section
501(c)(3) of the Code and is entitled to exemption from Federal income tax
under section 501(a) of the Code. 

In the case of Isabel Peters v. Commissioner, supra , the Tax Court of the
United States held that the Eagle Dock Foundation, Inc., a nonprofit
organization formed specifically to operate a public beach, playground and
bathing facilities and generally to promote the general welfare of the
community, should be classified as charitable within the meaning of section
101(6) of the Internal Revenue Code of 1939 rather than as a social welfare
organization under section 101(8) which, like section 501(c)(4) of the 1954
Code provides exemption for `organizations not organized for profit but
operated exclusively for the promotion of social welfare.' Although the
Service does not agree with the implication in that decision that every
nonprofit organization dedicated solely `to the promotion of social
welfare' should be classified as charitable, the Service believes that the
foundation referred to therein was shown by the record to be exempt as a
charitable organization within the meaning of section 101(6) of the 1939
Code, and that contributions to such foundation are deductible under
section 23(o) and 23(q) of the 1939 Code. 

The controlling stated purpose of the foundation, and the only purpose
stated with any degree of particularity, is to `establish, equip, maintain
and operate a public beach, playground and bathing facilities for the
children and other residents of Cold Spring Harbor School District Number
8.' Residents of this district are permitted to use the beach free of
charge, the funds necessary for the operation of the beach being obtained
by contributions. In the event the foundation is dissolved, its property is
to be distributed to a trustee to be held for public benefit. 

The foundation's certificate of incorporation also stated a purpose `to
create and promote better understanding and sympathy between the people of
the community and to further the general welfare and health of all of the
people in the said school district.' This statement however does not
specify even in a general way that action is contemplated by it. It appears
to be too general and vague to give validity to any activity except perhaps
that which is incidental to the operation of the beach. 

According to the generally accepted definition, `charity' in the legal
sense of the term includes benefits which are for an indefinite number of
persons and are for the relief of the poor, the advancement of religion,
the advancement of education, or `erecting or maintaining public buildings
or works or otherwise lessening the burdens of government.' Jackson v.
Phillips , 14 Allen (Mass.) 539, 556. In view of this and in the light of
what is said above, it is believed that the foundation is dedicated to a
charitable purpose, namely, to `establish, equip, maintain and operate a
public beach, playground and bathing facilities;' that its assets are
impressed with a trust for such purpose; and that the trust may be enforced
by the state or any interested person. 

There is no indication that the foundation engages in any substantial
activity not incidental to operating the beach. 

For these reasons, the Internal Revenue Service acquiesces in the holding
in the case of Isabel Peters v. Commissioner, supra , but not in all the
reasons given for such holding, and, accordingly, has substituted an action
of acquiescence, page 6, this Bulletin, for the outstanding action of
nonacquiescence in that case. 

An organization may not consider itself exempt merely because it falls
within the scope of this Revenue Ruling. In order to establish its
exemption under section 501(c)(3), it is necessary to file an application
on Form 1023, Exemption Application, with the District Director of Internal
Revenue for the internal revenue district in which is located the principal
place of business or principal office of the organization. See section
1.501(a)-1 of the Income Tax Regulations.