Rev. Rul. 54-24

Advice is requested whether the exemption provided by section 1701(a)(1)(A)(ii) of the Internal Revenue Code from the tax on admissions applies to the proceeds from an affair conducted by an educational institution which inure to a language group.

In the instant case, a language group maintains a house on the campus of an educational institution which qualifies for exemption under section 1701(a)(1)(A)(ii) of the Internal Revenue Code. The house is open to the student body of the institution. The language group is a nonprofit organization. Its purpose is to furnish to the student body an opportunity to acquire a practical knowledge of a foreign language and to acquaint the students with the life and customs of the country in which the language is spoken. Residence or meals in the house, in which only the foreign language is spoken, may replace credits in courses of conversation and a part of the prescribed training necessary for a teacher's certificate. While the language group is not embraced strictly within the curriculum of the educational institution, it is maintained by the department of foreign languages of the institution and teachers are assigned and paid by the institution to aid in directing conversation in the house.

Section 1701 of the Code provides in part as follows:

No tax shall be levied * * * in respect of-

(a) CERTAIN RELIGIOUS, EDUCATIONAL, OR CHARITABLE ENTERTAINMENTS, ETC.-

(1) IN GENERAL.-* * * any admissions all the proceeds of which inure-

(A) exclusively to the benefit of-

*

(ii) an educational institution which is exempt under section 101(6) or which is an educational institution of a government or political subdivision thereof, if such organization normally maintains a regular faculty and curriculum and normally has a regularly organized body of pupils or students in attendance at the place where its educational activities are regularly carried on;

* if no part of the net earnings thereof inures to the benefit of any private stockholder or individual;

*

(2) NONEXEMPT ADMISSIONS.-The exemption provided under paragraph (1) shall not apply in the case of admissions to (A) any athletic game or exhibition unless the proceeds inure exclusively to the benefit of an elementary or secondary school or unless in the case of an athletic game between two elementary or secondary schools, the entire gross proceeds from such game inure to the benefit of a hospital for crippled children, (B) wrestling matches or exhibitions, (C) carnivals, rodeos, or circuses in which any professional performer or operator participates for compensation, or (D) any motion picture exhibition.

The exemption from the tax on admissions provided by section 1701(a)(1)(A)(ii) of the Code, relating to educational institutions, extends to any organization sponsored and administered by an educational institution as part of its educational program, and in which membership is open to any of the members thereof. Examples of such organizations are student governing bodies, athletic associations, dramatic clubs, language clubs, science clubs, and similar groups. See section 101.15, Regulations 43, as amended by T.D. 6007, C.B. 1953-1, 412. Conversely, the exemption does not extend to or apply to fraternities, sororities, purely social clubs, or other such organizations.

Since the activities of the language group are a part of the services offered by the institution, it is held that the proceeds from an affair conducted by the educational institution which inure to the language group inure, in effect, to the educational institution, and are exempt from the tax on admissions imposed by section 1700 of the Code, except as otherwise provided by section 1701(a)(2) of the Code.