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IRS Revenue Ruling

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Revenue Ruling


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 Rev. Rul. 70-324

1970-1 C.B. 215

IRS Headnote

The aviation education program of the Civil Air Patrol qualifies as a "nonprofit educational organization" for purposes of the exemption from retailers, manufacturers, communications, and transportation taxes.

Full Text

Rev. Rul. 70-324

The Internal Revenue Service has been asked whether the excise tax exemptions relating to "nonprofit educational organizations" apply to sales of articles subject to retailers or manufacturers excise taxes and to amounts paid for communication or transportation services or facilities furnished to the Civil Air Patrol for use exclusively in the operation of its aviation education program.

The Civil Air Patrol is exempt from Federal income tax under section 501(a) of the Internal Revenue Code of 1954 as an organization described in section 501(c)(3) of the Code, and maintains, as a substantial part of its activities, a regular faculty and curriculum to provide aviation education and normally has a regularly enrolled body of students.

Sections 4057(a) and 4221(a)(5) of the Code provide that, under regulations prescribed by the Secretary of the Treasury or his delegate, no retailers excise taxes or manufacturers excise taxes shall be imposed with respect to the sale of taxable articles to a nonprofit educational organization for its exclusive use or, in the case of a tax imposed by section 4041 of the Code, with respect to the use by a nonprofit educational organization of any liquid as a fuel.

Section 4294(a) of the Code provides that, under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under section 4251 or 4261 of the Code on any amount paid by a nonprofit educational organization for services or facilities furnished to such organization.

Under the provisions of sections 4057(b), 4221(d)(5), and 4294(b) of the Code, the term "nonprofit educational organization" means an educational organization which is exempt from income tax under section 501(a) of the Code and which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. The term also includes a school operated as an activity of an organization described in section 501(c)(3) which is exempt from income tax under section 501(a), if such school normally maintains a regular faulty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on.

The fact that the Civil Air Patrol in this case has been granted exemption from Federal income tax as an organization described in section 501(c)(3) of the Code does not, of itself, determine the applicability of the exemption from the aforementioned excise taxes. However, it is concluded that the aviation education program of the Civil Air Patrol meets the requirements relating to faculty, curriculum, and enrolled student body prescribed in the statute and, thus, constitutes a "school operated as an activity" of an exempt charitable and educational organization so as to be considered a "nonprofit educational organization" within the meaning of the statute.

Accordingly, it is held that articles which would otherwise be subject to the retailers excise taxes and the manufacturers excise taxes may be sold on a tax-exempt basis to the Civil Air Patrol for use exclusively in the operation of its aviation education program, subject to the requirements of section 148.1-4(c) and 148.1-4(d) of the temporary rules relating to the exemption for nonprofit educational organizations, Treasury Decision 6344, C.B. 1959-1, 776. Likewise, communication and transportation services and facilities may be furnished on a tax-exempt basis to the Civil Air Patrol for such use, subject to the requirements of sections 148.1-4(e) and 148.1-4(f) of the temporary rules.

It should be noted the exemptions do not apply to the sale of taxable articles or the furnishing of communication or transportation services or facilities to the Civil Air Patrol for use in its general or noneducational activities.

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