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    Internal Revenue Service
 Revenue Ruling

Rev. Rul. 65-299

1965-2 C.B. 165

Sec. 501

IRS Headnote

A nonprofit organization formed to advise, counsel, and assist individuals
in solving their financial difficulties, by budgeting their income and
expenses and effecting an orderly program for the payment of their
obligations, is entitled to exemption from Federal income tax as a social
welfare organization described in section 501(c)(4) of the Internal Revenue
Code of 1954. 

Full Text

Rev. Rul. 65-299 

Advice has been requested whether an organization organized to provide a
consumer credit counseling service for the general public qualifies for
exemption from Federal income tax under section 501(c)(4) of the Internal
Revenue Code of 1954. 

The organization was incorporated as a nonprofit corporation, to assist
families and individuals with financial problems and to help reduce the
incidence of personal bankruptcy. It employs specialists to interview
applicants who are in financial difficulty, analyze the specific problems
involved, and counsel on the payment of their debts. In addition, the
organization may advise the applicants as to proration and payment of
debts. In this connection the organization may work out a monthly
distribution to creditors based on the debtor's ability to pay. It
communicates with creditors and, with the creditors' consent, sets up plans
which applicants agree to follow. The organization makes facilities
available through which the applicants can each month make pro rata
distributions to their creditors. No loans are made by the organization to
the applicants or negotiated in their behalf. The individuals and families
eligible for assistance are not limited to those who are in need of such
assistance as proper recipients of charity. No charge is made for the
counseling service.  However, a nominal charge is made for monthly
prorating services, to cover postage and supplies. 

The organization relies upon voluntary contributions from local businesses,
lending agencies, and labor unions to cover its cost of operations. 

Section 501(c)(4) of the Code provides, in part, for the exemption of civic
leagues or organizations not organized for profit but operated exclusively
for the promotion of social welfare. An organization is operated
exclusively for the promotion of social welfare if it is primarily engaged
in promoting in some way the common good and general welfare of the people
of the community. An organization embraced within this section is one which
is operated to bring about civic betterment and social improvements. See
section 1.501(c)(4)-1 of the Income Tax Regulations. 

The instant organization was formed to assist individuals and families with
financial problems to work out those problems and to check the rising
incidence of personal bankruptcy in the community. The objectives and
activities of the organization contribute to the betterment of the
community as a whole. Accordingly, it is held that the organization is
entitled to exemption from Federal income tax as an organization described
in section 501(c)(4) of the Code. 

An organization which considers itself within the scope of this Revenue
Ruling must, in order to establish exemption under section 501(c)(4) of the
Code, file an application on Form 1024, 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 regulations.