Rev. Rul. 70-583

Advice has been requested whether the nonprofit organization described below qualifies for exemption from Federal income tax under section 501(c)(3) of the Internal Revenue Code of 1954.

The organization was formed to develop, manage, and operate community correctional centers for prisoners selected by the courts or government custodial agencies. By contract these agencies arrange with the organization to provide detention facilities and a program of rehabilitation for prisoners assigned to the centers. Prisoners live at the centers and work in the community. The duration of an assignment is determined by the staff of the center in cooperation with the responsible authorities.

The rehabilitation program is structured to meet the psychological and sociological needs of both adult and juvenile offenders. It includes teaching the prisoners constructive social behavior, counseling them in psychological needs, and furnishing assistance in securing employment. Receipts are from government contracts, foundation grants, and public contributions. Disbursements are for the programs of the organization and miscellaneous administrative expenses.

Section 501(c)(3) of the Code provides for the exemption from Federal income tax of organizations organized and operated exclusively for charitable or educational purposes.

Section 1.501(c)(3)-1(d)(2) of the Income Tax Regulations defines the term "charitable" to include advancement of education and lessening of the burdens of Government.

Section 1.501(c)(3)-1(d)(3) of the regulations defines the term "educational" to include the instruction or training of the individual for the purpose of improving or developing his capabilities.

Revenue Ruling 67-150, C.B. 1967-1, 133, holds an organization to be exempt under section 501(c)(3) where it furthers the rehabilitation of ex-convicts and parolees.

By training and rehabilitating prisoners, the organization is improving and developing their capabilities to become useful citizens. By providing detention facilities for state and local governments, it is also lessening the burdens of government. See Rev. Rul. 70-79, C.B. 1970-1, 127.

Accordingly, it is held that the organization is exempt from Federal income tax under section 501(c)(3) of the Code.

Even though an organization considers itself within the scope of this Revenue Ruling, it must file an application on Form 1023, Exemption Application, in order to be recognized by the Service as exempt under section 501(c)(3) of the Code. The application should be filed with the District Director of Internal Revenue for the district in which is located the principal place of business or principal office of the organization. See section 1.501(a)-1 of the regulations.