PLR 201147035 – Foundation Can Operate Community Center and Retain Exempt Status

Society created a tax-exempt 501(c)(3) organization – Foundation. Foundation wanted to operate a community center that would be open to all members of the community and affordable to a large segment of the community, so it amended its articles of incorporation to acquire this community center.

In PLR 201147035, the IRS ruled that the operation of the center did not affect Foundation’s exempt status because the activities planned at the center are related to the Foundation’s exempt purpose. The Service also held that the income derived from rent would not be taxed as unrelated business income or classified as acquisition indebtedness because the combined use of Society and Foundation exceeds 85% of the property.

See PLR 201147035 – Exempt Status Not Jeopardized by Operation of Community Center, The Community Foundation of Northwest Connecticut, Dec. 2011.

Special thanks to Jim Hillhouse (Professional Legal Marketing  (PLM, Inc.)) for bringing this article to my attention.