Rev. Rul. 69-175

Advice has been requested whether under the circumstances described below a nonprofit organization created to provide bus transportation for certain school children is exempt from Federal income tax under section 501(c)(3) of the Internal Revenue Code of 1954.

The organization was formed by the parents of pupils attending a private school exempt from Federal income tax under section 501(c)(3) of the Code. All control over the organization rests in the parents. The organization provides bus transportation to and from the school for those children whose parents belong to the organization. Parents must pay an initial family fee and an additional annual charge for each child. The organization's income approximately equals the expenses involved in its operations.

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)(1)(ii) of the Income Tax Regulations provides that an organization is not organized or operated exclusively for any exempt purpose set forth in section 501(c)(3) of the Code unless it serves a public rather than a private interest.

When a group of individuals associate to provide a cooperative service for themselves, they are serving a private interest. By providing bus transportation for school children, under the circumstances described, the organization enables the participating parents to fulfill their individual responsibility of transporting their children to school. Thus, the organization serves a private rather than a public interest. Accordingly, it is not exempt from Federal income tax under section 501(c)(3) of the Code.