Brief Case

Treas. Reg. § 1.501(c)(12)-1

Local benevolent life insurance associations, mutual irrigation and telephone companies, and like organizations.
eCFR amendment effective 2016-07-12 · current · last amended by 44 FR 59523, Oct. 16, 1979
Amended effective Jul 12, 2016 by 44 FR 59523, Oct. 16, 1979. See what changed
(a) An organization described in section 501(c)(12) must receive at least 85 percent of its income from amounts collected from members for the sole purpose of meeting losses and expenses. If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15 percent of its income is derived, it is not entitled to exemption. On the other hand, an organization may be entitled to exemption, although it makes advance assessments for the sole purpose of meeting future losses and expenses, provided that the balance of such assessments remaining on hand at the end of the year is retained to meet losses and expenses or is returned to members.
(b) The phrase of a purely local character applies to benevolent life insurance associations, and not to the other organizations specified in section 501(c)(12). It also applies to any organization seeking exemption on the ground that it is an organization similar to a benevolent life insurance association. An organization of a purely local character is one whose business activities are confined to a particular community, place, or district, irrespective, however, of political subdivisions. If the activities of an organization are limited only by the borders of a State it cannot be considered to be purely local in character.
(c) For taxable years of a mutual or cooperative telephone company beginning after December 31, 1974, the 85 percent member-income test described in paragraph (a) of this section is applied without taking into account income received or accrued from another telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company. For example, if, in one year, a cooperative telephone company receives $85x from its members for telephone calls, $15x as interest income, and $20x as credits under long distance interconnection agreements with other telephone companies for the performance of communication services involving the completion of long distance calls to, from, or between the cooperative's members (whether or not the credits may be offset, in whole or in part, by amounts due the other companies under the interconnection agreements), the member-income fraction is calculated without taking into account, either in the numerator or denominator, the $20x credits received from the other telephone companies. In this example, the 85 percent member-income test is satisfied because at least 85 percent
of the cooperative's total income is derived from member income.
Source credit, amendments & notes

[T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as amended at 44 FR 59523, Oct. 16, 1979]

Treas. Reg. § 1.501(c)(12)-1 — Local benevolent life insurance associations, mutual irrigation and telephone companies, and like organizations. · eCFR amendment effective 2016-07-12 · https://pensionresource.website/EAMain?content=EAMain.Law&id=cfr26-1.501%28c%29%2812%29-1 · printed Oct 16, 2026
On this page
  • (a) (a) An organization described in section 501(c)(12) must re…
  • (b) (b) The phrase of a purely local character applies to benev…
  • (c) (c) For taxable years of a mutual or cooperative telephone …
Implements
I.R.C. § 501 Exemption from tax on corporations, certain trusts, etc.
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Each row is a version of the text as published by the official source. Code dates are the edition/release point that first reflected the change; regulation dates are eCFR effective dates. The library checks the official sources automatically, so new versions appear here on their own; “run” opens the sync that recorded a version.

EffectiveThroughSourceAmended by
Apr 1, 1997Mar 31, 1998CFR 1997 annual edition (revised as of 1997-04-01) run 12744 FR 59523, Oct. 16, 1979View
Apr 1, 1998Jul 11, 2016CFR 2016 annual edition (revised as of 2016-04-01) run 12744 FR 59523, Oct. 16, 1979View · Redline (sign in)
Jul 12, 2016currenteCFR amendment effective 2016-07-12 run 244 FR 59523, Oct. 16, 1979View · Redline (sign in)
Provision-level history (blame)