Rev. Rul. 56-377

Advice has been requested whether a subgroup, separately formed within its parent group or organization for the purpose of presenting and performing in amateur theatricals, may qualify as a `civic or community theater group or organization' for the purpose of the exemption from admissions tax provided by section 4233(a)(7) of the Internal Revenue Code of 1954.

In the instant case, an organization is engaged in various civic and community activities not related to the theater arts. A subgroup of the organization is devoted to the presentation of theatricals in which only the members perform. The performers receive no compensation. However, an individual is engaged on a compensated basis to direct the performances. The net earnings of the group inure to the benefit of the organization.

Section 4233(a)(7) of the Code provides that the tax on admissions shall not apply to any admission to an amateur performance presented and performed by a civic or community theater group or organization, if no part of the net earnings thereof inures to the benefit of any private stockholder or individual. Section 101.15(d)(8) of Regulations 43, as amended by Treasury Decision 6147, C.B. 1955-2, 624, at 635, made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47, provides that an amateur performance occurs when none of the performers having a part therein receive any compensation for their participation.

The exemption provided by section 4233(a)(7) of the Code is intended mainly to benefit and encourage the presentation and performance of amateur theatricals on a local or community scale. Any group or organization engaged in such activity, being devoted to the community welfare, constitutes a civic or community theater group or organization within the meaning of the statute. The term `theater group or organization' includes less formal associations of persons, as well as formally organized clubs, incorporated associations, etc.

Pursuant to the foregoing, subgroups of other organizations, separately formed for the purpose of presenting and performing in amateur theatricals, or even committees or independent groups formed for a single performance, are entitled to the benefits of the exemption to the same extent as formal organizations devoted exclusively to that purpose. The test is that a separate group of individuals is formed, identifiable as such, with the common purpose of presenting and performing in amateur theatricals.

Under the circumstances in the instant case, the subgroup of the community organization, separately formed for the purpose of presenting and performing in amateur performances, is entitled to the exemption from the collection of tax on admissions provided by section 4233(a)(7) of the Code. The engagement of an individual by the group on a compensated basis to direct the performances does not defeat its right to exemption.