Rev. Rul. 54-442

Advice is requested whether a corporation organized and operated primarily for the purposes of promoting a common business interest and bettering the conditions of independent business, whose activities include the furtherance of a legislative program in carrying out those purposes, is exempt from Federal income taxation under the provisions of section 101(7) of the Internal Revenue Code of 1939.

Section 101(7) of the Code provides for the exemption of:

(7) Business leagues, chambers of commerce, real estate boards, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual;

There is no prohibition in the statute or regulations relating to section 101(7) which disqualifies a corporation from exemption for legislative activities so long as such activities are only incidental and the purposes of the organization are to promote a common business interest and to improve business conditions of one or more lines of business, and it is shown by its actual activities that it is operating for those purposes.

Accordingly, it is held that a corporation organized and operated primarily for the purposes of promoting a common business interest and bettering the conditions of independent business, whose activities include the furtherance of a legislative program in connection therewith, is exempt from Federal income taxation under the provisions of section 101(7) of the Code.

However, with respect to dues, assessments or other payments to organizations such as the foregoing, it should be noted that section 39.23(o)-1(f) and 39.23(q)-1(a) of Regulations 118 provide that `sums of money expended for lobbying purposes, the promotion or defeat of legislation,' etc., are not deductible from gross income. This provision is also applicable to deductions for business expenses under section 23(a) of the Code. Textile Mills Securities Corp. v. Commissioner , 314 U.S. 326, Ct. D . 1532, C.B. 1941-2, 200; Roberts Dairy Co. v. Commissioner , 195 F.2d 948, cert. den. 344 U.S. 865. It accordingly follows that all payments made to such organizations are not necessarily deductible. Whether or not any portion of such payments is deductible must be determined on the facts of each case.