Internal Revenue Service
Revenue Ruling
Rev. Rul. 67-217
1967-2 C.B. 181
Sec. 501
IRS Headnote
A nonprofit organization may be exempt from Federal income tax under
section 501(c)(3) of the Internal Revenue Code of 1954 where it is formed
to provide housing and food service exclusively for students and faculty of
a university in accordance with the rules and regulations of the university
and offers the university an option to acquire the property at any time
upon payment of an amount equal to the outstanding indebtedness.
Full Text
Rev. Rul. 67-217
Advice has been requested whether under the circumstances described below
an organization qualifies for exemption from Federal income tax under
section 501(c)(3) of the Internal Revenue Code of 1954.
A nonprofit organization was formed to provide housing and food service
exclusively for students and faculty of a university which lacks adequate
student and faculty housing. The organization acquired land near the
university and constructed the necessary facility. The facility is managed
by a commercial firm in accordance with the rules and regulations of the
university. It is made available to the student body generally at rates
comparable to those charged by the university for similar facilities. Each
room is equipped with an outlet for the university-sponsored educational
television series. Counselling, tutoring, and special courses are also
provided as a supplement to the university's activities. The university is
an organization described in section 501(c)(3) of the Code.
Income is derived from rents and charges for food. Funds are expended for
operating expenses and debt retirement. Any surplus from operations is
donated, annually, to the university. The university has an option to
purchase the facility at any time for an amount equal to the outstanding
indebtedness.
Section 501(c)(3) of the Code provides that an organization organized and
operated exclusively for charitable or educational purposes is exempt from
Federal income tax.
Section 1.501(c)(3)-1(d)(2) of the Income Tax Regulations defines the term
`charitable' as used in section 501(c)(3) of the Code as including the
advancement of education.
By providing a housing facility under the circumstances described the
organization is advancing education. Accordingly, the organization
qualifies for exemption from Federal income tax under section 501(c)(3) 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)(3) of the
Code, file 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 regulations.
