March 25, 2011 | Read Time: 1 minute
The Internal Revenue Service has denied a request for tax-exempt status from a company that hoped to take rainwater from an island outside the United States and sell it as bottled water because the organization and operations looked too much like a business that benefited the president and his family.
The IRS ruling does not identify the organization that sought tax-exempt status.
While the company’s primary activity would be to collect and filter the water to be sold in bulk, it also planned to lease land for a bottling facility to generate hydropower through its water-collection system. It planned to sell surplus power to the island’s power company and give the net profits from its operations to charitable causes on the island.
The company said it also deserved charity status because its operations would create employment and business training opportunities for island residents and would “reduce poverty and dependence on U.S. economic aid and promote community development, education, and achievement.”
But the IRS took note of the organization’s ownership of a for-profit company that negotiated the lease to the land that the bottling company would occupy. The IRS said the applicant could not prove that it was serving a public interest and that any aid it gave the community would not make up for the fact that its primary activities were to act as a business.
The organization did not appeal the decision.
