It’s always wonderful when Congress includes in a statute a word that practically no one – except maybe tax attorneys – might use in their lifetime, much less in day-to-day parlance:
Inure.
When was the last time you used the word “inure” in an everyday conversation?
Never, I predict.
However, the word “inure” is one of the most critical words in the nonprofit or tax-exempt space. In this regard, section 501(c)(3) of Title 26 of the Internal Revenue Code (“Code”) affords exemption from federal income tax to “Corporations [and others] . . . organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, . . . no part of the net earnings of which inures to the benefit of any private shareholder or individual . . . [.]. See 26 U.S.C. § 501(c)(3).
In common usage, “inure” means, basically, to vest or granting a right of enjoyment. And, “private shareholder or individual,” as used in section 501(c)(3) of the Code, means, basically, control persons – officers, directors, and those in managerial control of the organization.
Under section 501(c)(3) of the Code, the prohibition of “inurement” to any private shareholder is absolute.
Recent Comments