1. (a) All organizations desiring exemption under Section 23701f (except a local association of employees) must provide in their articles of incorporation that their assets are irrevocably dedicated to social welfare purposes. The dedication must cover any income of the organization (including dues, fees or assessments or services) or assets purchased with such income. That in case of dissolution the assets of the organization will be distributed to an organization organized and operated for social welfare purposes and exempt under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code. A sample irrevocable dedication-dissolution clause is as follows:

   “The assets of this corporation are irrevocably dedicated to social welfare purposes and no part of the profits shall ever inure to the benefit of a director, officer member or the benefit of any private shareholder or individual. On the dissolution or winding up of this corporation, its assets remaining after payment of, or provision for the payment of, all debts and liabilities of this corporation shall be distributed to a nonprofit organization that is organized and operated exclusively for social welfare purposes and that has established its tax exempt status under Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code.”

2. (b) A local association of employees must provide in their articles of incorporation that in case of dissolution their assets will be distributed for charitable, educational or “public recreational purposes.” The deduction should normally be to an organization which has established its exempt status under Section 501(c)(3) of the Internal Revenue Code.
3. (c) Lack of a dedication clause in the articles will not be made the sole basis for revocation of an exempt determination made by the Franchise Tax Board prior to 1972.

The assets of organizations desiring exemption under Section 23701f must be irrevocably dedicated to an exempt purpose. The dedication must be in the articles of incorporation.

Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 23701(f), Revenue and Taxation Code.

History

1. Amendment filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).