Rev. Rul. 55-487

Advice has been requested whether the exemption provided by section 3469(f)(1) of the Internal Revenue Code of 1939 applies to payments for transportation of persons made by the California Association of the Future Farmers of America and its local chapters. Advice also has been requested whether that exemption extends to payments for transportation made by any other State or Territory Future Farmers of America Association and its local chapters, to such payments made by the National Organization, or to such payments made by an association organized in a possession of the United States.

The Future Farmers of America is a nonprofit national organization of, by, and for boys studying vocational agriculture in public schools under the provisions of the national vocational education acts. It is composed of chartered state associations which, in turn, are made up of local chapters situated in schools having departments of vocational agriculture. The Future Farmers of America on a national level is legally constituted through an Act of Congress incorporating it as a part of the national program of education and the program of the organization is administered under the direction of the public school systems of the various States and the Federal Office of Education in the Department of Health, Education and Welfare.

In the case of the California Association of the Future Farmers of America, the administration of its activities of a state-wide nature is the responsibility of the State Bureau of Agricultural Education. The State Advisor, who is also the State Supervisor of Agricultural Education, handles all the funds of the state organization and the expenditure of funds in connection with the activities of the Association.

Administration of each local chapter of the California Association is vested in the public school system in which the local chapter is located. The governing board of any school district may authorize any organization composed entirely of pupils attending the schools of the district to maintain such activities as may be approved by the governing board. Each Future Farmers of America chapter in California is required to be established as a student organization using the name of the school. Therefore, the funds of each local chapter in California are under the control of the local board of trustees of the school district. The teacher of vocational agriculture is the chapter advisor.

Section 3469 of the Code imposes a tax upon the amount paid for the transportation of persons by rail, motor vehicle, water or air, except in cases specifically exempt by the Code. Under the provisions of section 3469(f)(1) of the Code, the tax does not apply to the payment for transportation or facilities furnished to any State, Territory of the United States, or political subdivision thereof, or the District of Columbia.

It is held that payments for transportation of persons made by the California Association of Future Farmers of America and its local chapters are payments for transportation furnished to a State or political subdivision thereof within the meaning of section 3469(f)(1) of the Code and, therefore, such payments are exempt from the tax on transportation of persons. Such exemption likewise extends to payments for transportation furnished to any other State or Territory Future Farmers of America Association and its local chapters if its activities constitute an integral part of the State (or Territorial) Vocational Education program under conditions substantially similar to those in the State of California. The right to the exemption in all cases must be established by the use of Form 731, Exemption Certificate, which must be modified to show that the exemption is claimed on behalf of the state association or local chapter involved.

Payments for transportation of persons made by the National Organization of Future Farmers of America are not exempt from tax since they do not come within the scope of the exemption provided by section 3469(f)(1) of the Code and since the statute contains no provision for the exemption of amounts paid for transportation by other nonprofit educational organizations, as such. Furthermore, since the statute contains no provision for the exemption from tax of payments made for transportation furnished to a possession of the United States, there is no basis on which exemption may be granted to a Future Farmers of America association organized in a possession of the United States