Letter on IRS Ruling on Five Flags Center Fund Contributions and Exemptions_01.12.1972T H E C I T Y O F
DUBUQUE
GI L B E R T D. C H A V EN E L LE
CITY MANAGER
January 12, 1972
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COMMUNITY
Mr. Gilbert D. Chavenelle
City Manager
City of Dubuque
City Hall
Dubuque, Iowa
Dear Gil:
DEPARTMEN T OF URBAN RENEWAL
G E N T M. W I T T E N B E R G 0 D I R E C T O R
SUITE 10-B FISCHER BUILDING
PHONE 9I9 588-0017
D UB UO UE. 10 WA 52001
Yesterday I met with Elmer R. Johnson, Group Supervisor for Exempt Organiza-
tions of the St, Louis Regional Office of the Internal Revenue Service, in
connection with the status of the Five Flags Civic Center organization.
The Internal Revenue Service has made two rulings: (1) entitling donations to
the Five Flags Center Fund to be tax exempt contributions for the use of a
political subdivision for public purposes, and (2) the Five Flags Civic Center
Fund is exempt from Federal Income Taxes under the provisions of
Section 501 (c) (4) as an organization operated exclusively for the promotion
of Social Welfare.
The original application for exemption filed under another Section of the Code
(outlined in blue on the attached sheet) was found not to be appropriate, and
presented considerable problem to the Internal Revenue Service.
As I understand the procedure, a letter will be issued within the next week by
the Internal Revenue Service indicating the tax status of the organization and the
status of the donations as well as to advise that a Federal audit will be made
after the second year of existence. This is apparently to ascertain whether or
not the Five Flags is truly a non-profit organization in the light of the Internal
Revenue Code.
Sin4Eerely yourslip
Gent M. Wittenbe
GMW/vt
cc: Mr. R. N. Russo
City Attorney
t'
{ so1.1 314
(Also Section 17o.)
Rey. Ru1.67 408 i
•:
A corporation organ [zed to build a stadlunt and lease 1t to a
school district, a pnlitltal Subdivision,
. y
whlcb w111 eventually get
title to Much stadium, is not entitled to exemption from F decal -
Income tax under the
_
provisions of section rol(c) (3) of he Internal
Revenue Code of 19bf, The corporation, however, is entitled to
exemption from Federal Income
rye
-
tax ender the provisions of secdoo
501(c)(4) of the Code as an organlxatlon not organlzed for profit
but operattvl exclusively for
-"
(
the promotion of social welfare.
Contributloua to It are deductible by donors to the extent provided
by section 170
_
as contributions for the use of a polldeal sub.
dirt eIon for exclusively public
;
purposes,
Advice has been requested whether It corporation, which was or-
ganized to build
a stadium and lease it to a school district, under the
circumstances set forth below, is entitled to exemption from
Federal'
income tax ubdvr the previsions of section 501(c) (;) of the It, real
1Zevenue('vde.:f "k-A
Tile instant cnrlwnttldn Yea, organized for the purpose of building
a stadium and lensing it
i
to It school district, a political subdivision
Its activities consist of making
collections of rent, paying off debts,
and malting distributions in retirement of its
capital stock with no
profit to the stockholders. The articles of incorporation
the
prohibit
payment of dividends to stockholders and provide for the trans.
fer to the school district title
..
of to the stadium upon the retirement
of the ea )ital stock at rnr ant }ho n nent of nil indvhtcdnnre
a i i i ,, ro , a r---------
Cnrlwrn trans, • • • ,r ant,enl suA�".--•' -
charitable, selentlfic, testis fur l,4�nted exclusively for religion,,
purls,", • • • no port of the net earrnings of " litewhich Inor ures to he benefit
onal
of any private shareholder or individual, • • •,
use of a public school district, title to Whichwilleventual y j-e hn
such school district, it is held that the corporation is not organized
and operated exclusively for any one or more of the purlx,.-,- .(a,- fled
in section 501(c) (3) of the Code, and that it, therefore, i1 ':nl o-:rifled
to exem lion from Federal income tax under t 1'Al, iirovisioll�f v
Federal a 1e instant co )o xti pt from
1 on is esem
income tax under lire provisions of se•<dien 501(c) ("1) of the
,ode a8 to 41I ,Mn:ratilw not ork.lno/".�,t f,u' 1) ,t 5Ut Operated ex.
CI lsively for the t,rumolium „f ..,,.i.__-
the term use oft;able contribution" means a contribution or gifthto
or for the use of—
(1) A State, a Territory, a possession of the United Stntea or any
Political subdivision of any of the foregoing, or the United SWtes or the
District of Columbia, but only if the contribution or gift Is made for ex -
elusively public purposes,
Contributions made to the instant eorpolation are deductible by
the donors in computing tbeir taxable income in the manner and to
the extent provided by section 170 of the (Ode as contributions to
or for the use of a political subdivision for exclusively public
purposes.