PubLedge

An organization fails §501(c)(3) exemption where its Articles of Incorporation neither limit purposes to exempt activities nor dedicate assets to exempt purposes on dissolution, and where a substantial portion of its activities consists of unrestricted commercial leasing coupled with fundraising that benefits a for-profit entity controlled by one of its own Directors. Bylaws containing the required provisions do not cure deficient Articles; a single substantial non-exempt purpose is disqualifying regardless of any exempt purposes present.

What Counts

• Articles of Incorporation limit purposes to §501(c)(3) activities
• Articles dedicate assets to exempt purposes upon dissolution
• Absence of substantial commercial leasing activity to unrestricted parties
• Absence of fundraising that benefits a for-profit entity controlled by insiders
• Documented charitable restrictions on any facility-use or employment arrangements

What Does Not Count

• Bylaws containing required language when Articles are silent
• Stated exempt purposes when one substantial non-exempt purpose predominates
• Below-market benefits to residents absent charitable restriction on the underlying activity (*B.S.W. Group*, *Airlie Foundation*)
• Claimed alignment with prior revenue rulings (74-587, 76-419) without matching charitable restriction structure

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