How does a court determine the tax-exempt purposes of an organization?

Authors

University of Washington School of Law, University of Washington School of Law

Document Type

Research Report

Publication Date

5-2025

Abstract

To determine the tax-exempt purposes of an organization, courts and tax authorities primarily examine whether the organization is both "organized" and "operated" exclusively for exempt purposes, as required under 26 U.S.C § 501.

This involves a two-part test: the "organizational test" and the "operational test." The organizational test assesses whether the organization's foundational documents, such as its charter or articles of incorporation, limit its purposes to one or more exempt purposes and do not authorize substantial non-exempt activities.

Recommended Citation

University of Washington School of Law, How does a court determine the tax-exempt purposes of an organization? (2025), https://digitalcommons.law.uw.edu/ruleoflawinitiative/10