Also known as: charitable purposes · charitable intent
Written by attorneys — see sources below.
A purpose that qualifies a trust or other disposition of property as charitable.
Marie transferred farmland and cash to Dakota as trustee with directions to make low-interest loans to local farms and care for working animals. Horizon Livestock objected that the loans would benefit only selected private operators. The court determined that the arrangement qualified as created for a charitable purpose because it advanced community-wide agricultural interests rather than private gain.
A settlor transferred two million dollars to Stone Trade to subsidize retail leases for artisans on Main Street. After online commerce emptied the corridor, South Commerce asked the court to redirect funds to online platforms. Because the trust instrument stated no particular charitable purpose or beneficiary, the court selected a purpose consistent with the settlor's intent to sustain artisan enterprise in the community.
Highland Builders held construction assets in trust to subsidize low-cost housing in one Boston neighborhood. New zoning barred that housing type and left only thirty-five thousand dollars after redevelopment. The court found the original purpose impossible to achieve and terminated the trust without reversion to the settlor.
Stone Trade continued paying one hundred eighty thousand dollars annually to subsidize empty Main Street stores. South Commerce petitioned to redirect the remaining corpus to online artisan support. The court applied cy pres and directed the assets in a manner consistent with the settlor's charitable purposes after finding the original purpose wasteful.
Bob Jones University maintained racially discriminatory policies while claiming tax-exempt status as an educational institution. The IRS revoked the exemption. The Supreme Court held that an organization must serve a valid charitable purpose in addition to falling within a statutory category to qualify for tax benefits.
Until 1970 the Internal Revenue Service granted tax-exempt status to private schools without regard to their racial admissions policies under section 501(c)(3) of the Internal Revenue Code. On January 12, 1970, a three-judge district court issued a preliminary injunction in Green v. Kennedy prohibiting the IRS from according tax-exempt status to private schools in Mississippi that discriminated on the basis of race. In July 1970 the IRS concluded it could no longer legally justify allowing tax-exempt status to private schools practicing racial discrimination and announced it would not treat gifts to such schools as charitable deductions. The IRS formalized its revised policy in Revenue Ruling 71-447, stating that a school not having a racially nondiscriminatory policy as to students is not charitable within the common-law concepts reflected in sections 170 and 501(c)(3). Bob Jones University is a nonprofit corporation located in Greenville, South Carolina, whose purpose is to conduct an institution of learning giving special emphasis to the Christian religion and the ethics revealed in the Holy Scriptures. The university operates a school with an enrollment of approximately 5,000 students from kindergarten through college and graduate school and requires its teachers to be devout Christians while teaching all courses according to the Bible. Until 1971 the university completely excluded Negroes. From 1971 to May 1975 it accepted no applications from unmarried Negroes but did accept applications from Negroes married within their race. Following the Fourth Circuit decision in McCrary v. Runyon, the university revised its policy. Since May 1975 the university has permitted unmarried Negroes to enroll while maintaining a disciplinary rule that prohibits interracial dating and marriage and expels students who violate it. The university continues to deny admission to applicants engaged in an interracial marriage or known to advocate interracial marriage or dating. Until 1970 the IRS extended tax-exempt status to Bob Jones University under section 501(c)(3). On January 19, 1976, the IRS officially revoked the university's tax-exempt status effective December 1, 1970. The university paid a $21 federal unemployment tax for 1975, had its refund request denied, and filed suit in the United States District Court for the District of South Carolina seeking recovery of that amount while the government counterclaimed for $489,675.59 in unpaid taxes for 1971 through 1975. The district court ordered the IRS to pay the refund and rejected the counterclaim, but the Fourth Circuit reversed. Goldsboro Christian Schools is a nonprofit corporation located in Goldsboro, North Carolina, established to conduct an institution of learning giving special emphasis to the Christian religion and the ethics revealed in the Holy Scriptures. Since its incorporation in 1963 the school has maintained a racially discriminatory admissions policy based upon its interpretation of the Bible. Goldsboro has for the most part accepted only Caucasians. On occasion, however, the school has accepted children from racially mixed marriages in which one of the parents is Caucasian. Upon audit the IRS determined that Goldsboro was not an organization described in section 501(c)(3) and required it to pay taxes under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act. Goldsboro paid the IRS $3,459.93 in taxes for one employee for the years 1969 through 1972 and filed suit in the United States District Court for the Eastern District of North Carolina seeking a refund while the government counterclaimed for $160,073.96 in unpaid taxes. The district court granted summary judgment to the IRS on its counterclaim, and the Fourth Circuit affirmed per curiam. The Supreme Court granted certiorari in both cases. The cases were argued on October 12, 1982. The Court decided the cases on May 24, 1983.
View caseSenator Bacon devised land for a park limited to white children only, with an express statement that the property could never be used for any other purpose. After the racial restriction was held invalid, the Supreme Court refused to apply cy pres because the will showed the testator had no general charitable intent beyond the specific unlawful purpose.
In 1911, United States Senator Augustus O. Bacon executed a will that devised a tract of land to the Mayor and Council of the City of Macon for use as a park and pleasure ground exclusively for white people, with control vested in a Board of Managers composed entirely of white persons, and the will expressed the Senator's view that the two races should be forever separate while providing that the property under no circumstances was to be devoted to any other purpose. The city accepted the trust and initially operated the park on a segregated basis, but after it began allowing Negroes to use the park, members of the Board of Managers sued in state court to remove the city as trustee and appoint new trustees, prompting Negro citizens to intervene in the proceedings. Following the city's resignation as trustee, the Georgia courts appointed private trustees, but in Evans v. Newton the United States Supreme Court held that the park must be operated without racial discrimination, leading the Georgia Supreme Court to determine that the purpose of the trust had become impossible to fulfill and to remand the case for further proceedings. The trial court declined to apply the cy pres doctrine, ruled that the trust had failed, and determined that the property had reverted to Senator Bacon's heirs, a decision affirmed by the Supreme Court of Georgia; petitioners, the Negro citizens of Macon who had sought integration of the park, challenged the termination of the trust, and the United States Supreme Court granted certiorari to review the case.
View caseA charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.
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If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one or more charitable purposes or beneficiaries consistent with the settlor's intention to the extent it can be ascertained.
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If a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful, the trust does not fail and the property does not revert to the settlor. The court may instead apply cy pres to modify or terminate the trust by directing the property in a manner consistent with the settlor's charitable purposes.
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The settlor of a charitable trust, among others, may maintain a proceeding to enforce the trust.
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