T.C. M em o . 2 0 2 1 -9 1

UNITED STATES TAX COURT

NEW W ORLD INFRASTRUCTURE ORGANIZATION, Pet i t io n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 2 4 57 -1 7 X. Fi l edJ u l y 2 0, 2 0 21
.

Sco t t J o hn s to n (an o ffi cer), fo r p et i ti o n er. M arkA. W ei n er, Eu gen e Ki m , an d Pat ri ci a P. W an g, fo r res p o n d en t
.

M EM ORANDUM FINDINGS OF FACT AND OPINION CARLUZZO, Ch i ef Sp eci al Tri al J u d g e: Ina fi n al ad v ers e d et erm i n at i o n l et t er d at edAp ri l 7 , 2 0 1 7, res p o n d en td en i edp et i t i o n er’ s ap p l i cat i o nt o b e ex em p t fro m Fed eral i nco m e t ax u n d er s ect i o n 5 0 1 (a). 1 Acco rd i n g t o p et i t i o n er, i t i s

1 Un l es s o th erwi s e i nd i cat ed , s ect io nreferen ces are t o t h e In t ern al Rev en u e (co n ti n u ed ...) Served 07/20/21- 2
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[* 2 ] en t i t l edt o ex em

p ts t atu s b ecau s e i t i s an o rg an i zat i o nd es cri bed i ns ect i o n 5 0 1 (c)(3 ); acco rd in g t o res po n d en t, p et it io n er i s n o t s o d es cri bed
. Wh en th e p et i t i o n was fi l ed , p et i t i o n er’ s p ri n ci p al o ffi ce was i nCal i fo rn i a.

FINDINGS OF FACT I. Pet i t i o n er, Th e Pi p e M an Co rp o rat i o n , an dth e J o hn s to n s Acco rd i ng t o p et it i on er, i ti s “ a s u cces s or t o a fo r-p ro fi tb u s i n es s th atn ev er
m ad e an y p ro fi t ”. Th e referen ce t o th e “ fo r-p ro fi tb u s i n es s ” i s t o Th e Pi p e M an Co rp . (TPM C), a co rp o rat i o n o wn edb y Sco t t J oh n s t o nan d Pam

J o h n st on . Sco t t J o h n st o n i s o n th e b o ardo f d i rect o rs o f TPM C an d s erv es as i t s p res i d en t. Pam J o h n st o n i s al s o o n th e b o ardo f d i rect o rs o f TPM C; s he s erv es as i t s v i ce p res i den t . Acco rd i n g to i t s art i cl es o f i n co rp o rat i o n, TPM C was o rg an i zedi n
o rd er t o d ev el o p a “ Po rt ab l e Pi p e M an ufact u ri n g Sy s t em * * * [as wel l as ] an Arch i n g M ach i n e, u t i l i zedt o res h ap e p i pe * * * [t o p ro du ce] co rru g at ed m et al p i p e
* * * i n m u ch l arg er s i zes th an h av e ev er b een p ro du cedb efo re”. TPM C fo cu s ed i t s “ b u s i n es s act i vi ti es * * * o n s eek i n g cap i t al .” Becau s e i t was n ev er ab le t o d o
s o , TPM C ab an do n edi t s effo rt s t o d ev el o p an d/ or m ark etan y p ro du ct s b efo re

1 (...co n t in u ed ) Co d e o f 1 9 8 6 , as am en d edan di n effect fo r t h e rel ev an tp eri o d . Ru l e referen ces are t o the Tax Co urtRu l es o f Pract i ce an dPro cedure.- 3
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[* 3 ] p et i t i o n er was o rg an i zed . Befo re TPM C was i n co rp o rat ed , th e J o hn s t o n s
o wn edan do p erat eda s al es an den g i n eeri n g co n s u l ti n g b us i n es s . Th e J o h n st o n s cau s edth e i n co rp orat i o n o f p et it i o n er as a n onp ro fi t
co rp o rat i o n u n der t h e l aws o f Nev ad a o n J anu ary 5 , 2 0 1 5 . Atal l t i m es rel ev an t , th ey were p et i t i o n er’ s o n l y o ffi cers an dd i rect ors . No th i n g i nth e reco rds h o ws th atp et i t i o n er ad o p t edan y b y laws o r t hatp et i t i o n er i s affi l i at edwi th an y Go v ern m en to r p ub l i c i n s ti tu t i o n . Wh en p et i t i o ner was o rg an i zed , o r s h o rt l y th ereaft er, TPM C g ran t ed p et i ti o n er p erm i s s i o nt o u s e TPM C’ s co p yri g h t ed
m at eri al s an dcert ai n p at en t s rel at i n g t o th e p o rt ab l e p i p e m an u fact u ri n g s y s t em
an d arch in g m ach in e. Pet i t i o ner’ s art i cl es o f i n co rp o rat i o np ro v i de: “ It ’ s [s i c] p u rp o s es s h al l , at al l t i m es , co n fo rm

t o o n e o r m ore o f t h e fo l l o wi ng p u rp o s es : ch ari t ab l e, rel i g i o u s, edu cat i o n al , s ci en t i fi c, l i t erary , t es ti n g fo r p ub l i c s afet y , fo s t eri n g n at i o n al o r i n t ern at i o n al am at eu r s p o rt s co m p et i ti o n, an d p rev en t i n g cru el ty t o ch il dren o r
an i m al s .” II. Ad m i n i s trat i ve Pro ceed in g s A. Pet i t i o n er’ s Ap p l i cat i o nfo r Ex em pt i o n OnJ an u ary

2 8 , 2 0 1 5 , p et i t i o n er s ub m i tt ed t o res po n den t Fo rm 1 0 2 3 , Ap p l i cat i o n fo r Reco g ni t i o n o f Ex em pt i o n Un d er Sect i o n5 0 1 (c)(3 ) o f t he In t ern al- 4
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[* 4 ] Rev enu e Co de, s i g nedb y Sco t tJ o hn s to n . Pet i t i on er i n cl u deda n arrat i v e d es cri p t io n o f i t s act i v i t i es wi th t h e fo rm . Acco rd i ng t o th atd es cri p t i o n , p et i t i o n er’ s “ ul t i m at e p u rp o s e an dco re fo cu s wi l l b e ch ari t ab l e, wi th * * * [i t s ]
m ai n b en efi ci ary

b ei n g Fed eral , St at e an dLo cal Go v ern m en tAg en ci es . ” Pet i t i o ner ex p lai n edi t s m i s s i o nas fo l l o ws : Du ri n g o u r fi rs ttwo y ears we co n s id er o u r p u rp os e t o fi t wi th i nth e “ Sci en t i fi c” cat eg o ry , as p ro t o ty p e m ach i n ery

m u s t b e b u i l tan dt es ted b efo re we can p u rs ue o u r “ Ch ari t ab l e” p u rp o s es . Fo r t h e s ci en t i fi c en d eav o r, o u r res earch wi l l res u l ti nen co u rag i n g Eco n o m i c Dev el o p m en tth ro u g h ou tth e Un i t edSt at es . Itwi l l s av e t i m e, m on ey an dl es s enth e b u rd en o f g o v ern m en t . Th e p ro t o ty p e m ach i n ery , aft er t es t i n g , wi ll b e p l aced i n t o s erv i ce m ak i n g v ery l arg e co rru g at ed m et al p i p e. Th e p i p es n eed edt o m ak e a Hi g hway Ov erp as s can b e m ad e an d arch edi n l es s th an o n e week . Th e co s to f t hes e p i p es rep res en ta fract i o n o f t h e co s t o f t rad i t i o n al m et h o ds . St an d ard i zed d es i gn an d i n s t al l at i o n m et h o d s wi l l g reat l y redu ce en g i neeri n g req u irem en ts . Th i s s ho u l dres ul t i n m o re p ro ject s g et t i n g t h e g reen l i gh t, thu s em

p l oy i n g m ore wo rk ers . W o rko nthes e p ro ject s wi l l b e far l es s d i s rupt i v e t o th e en v i ro n m en tan d l o cal eco no m i es . Pro ject s wi l l b e s ch edu l edt o t ak e fu l l ad van t ag e o f th e t i m e s av i n g s . W e wo u ldco ns i d er an i d eal fi rs t t es tp ro jectt o i n cl ud e wo rk in g wi th the Fed eral Hi g h way Ad m i n i s trat i o no r Fed eral Em erg en cy M an ag em en t Ag en cy t o b u i ldan actu al Bri d g e, Ov erp as s o r Di s as ter Rel i ef St ru ctu re. Th e res u l t s o f t h i s res earch an dm ach i n ery d ev el o p edwi l l o f co u rs e b e d ed i cat edt o p ub li c p u rp o s es as req u i redb y o u r Art i cl es o f In co rp orat i o n . W it h th i s i nm i n d , NW IO wi l l ret ai no wn ers hi p an d co n tro l o v er an y

p at en ts , co p yri g h t s , p ro ces s es , et c., res u l ti n g fro m th i s res earch an d fu rt h er co n s i d ers th e n am e “New W orl d In fras tru cture Org an i zat i o n ”, an d “N W IO” as i tp ert ai n s t o th e fu tu re o f t h i s o rg an i zat io n t o b e Trad em ark s an d Serv i cem ark s fo r t h i s o rg an i zat i o n as ap p ro p ri at e.- 5
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[* 5 ] Pet i t i o ner res p on d ed i n th e affi rm at i ve t o th e fo l l o wi ng qu es t i o ni nth e Fo rm 1 0 2 3 : “ Do y o uo r wi l l y o u p ubl i s h , o wn , o r h av e ri g h t s i n m u s i c, l i t erat u re, t ap es , art wo rk s , ch o reo g rap h y , s ci en ti fi c d i s co v eri es , o r o th er i n t el l ectu al p ro pert y ? ” Th e n arrat i v e d es cri p t i o n fu rt h er cl ari fi ed th atp et it i on er “ wi l l ret ai no wn ers h i p
an d co n tro l o v er an y

p at en ts , co p yri g h ts , p ro ces s es , et c., res u l t i n g fro m th i s
res earch ” an dd ev el o p m en t
. Acco rd i ng t o th e n arrat i ve d es cri p t i o n, aft er p et i t i o n er b u i l d s an d t es t s th e p ro t o ty pe m ach i n ery referen cedab o v e, an ds u ch m ach i n ery i s read y fo r
co m m erci al u s e, i ti n t en d s t o fu l fi l l i t s ch ari tab l e p u rp os e b y wo rk i n g wi th g o v ern m en t al ag en ci es , en g i n eeri n g fi rm s , an db u s i n es ses t o redu ce t h e co s to f i n fras tru cture p ro

ject s t o “ as l i tt l e as o n e fo u rt h cu rren tco s t s ”. Pet it i o n er s t at edan i n t en t i o n t o s el l th e “ l arg e co rru g at edm et al p ip e” at fai r m ark etv al u e t o g o v ern m en t al ag en ci es an d p ri v at e co m pan i es . Pet i t io n er es t i m at es th at i ts co s tt o
m an u fact u re t h e fi n i s h edp ro du ctwo u l db e 3 0 % o f i t s fai r m ark etv al u e. B. Res p o n d en t ’ s Req u es tfo r Ad d i t i o nal In fo rm at i o n In res p o n s e t o req u es t s fo r ad di t io n al i n fo rm at i o n fro m res p on d en t , th e p art i es ex ch an gedco rres p o n den ce an di n fo rm at i o nfro m M arch 1 1 th ro u g h M ay

7 , 2 0 1 5
.- 6
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[* 6 ] C. Th e Fi n al Advers e Det erm i n at i o nLet t er As n o ted , res p o nd en ti ss u edp et it i o n er a fi n al ad v ers e d et erm i n at i o nl et t er d at edAp ri l 7 , 2 0 1 7 , d en y i n g p et i t i o ner’ s ap pl i cat io n . Th e d et erm i n at i o n l et t er
s t at edi n p ert in en tp art : Th i s i s a fi n al ad v ers e d et erm i n at i o nth at y o ud o n o t qu al i fy fo r ex em p t i o n fro m

Fed eral i n co m e t ax u n d er In t ern al Rev en u e Co d e (t h e “ Co d e”) s ect io n 5 01 (a) as an o rg an izat i o n d es cri b ed i nCo d e s ect io n 5 0 1 (c)(3 ). Th e ad v ers e d et erm in at i o ni s m ad e fo r t h e fo l l o wi ng reas o n (s ): Yo uare a s u cces s o r o rg an izat i o nt o a fo r-p ro fi tb u s i n es s . Yo u p ro p o s e t h aty ou r p ri n ci p al act i v i ty wi l l i n v o l v e t h e p ro du ct io n an ds al e o f p i p es at m ark etrat es fo r co n s tru ct i o np ro ject s . Yo uh av e n o td em o ns trat edth aty o uwi l l b e o p erat edex cl u s i v el y fo r ch ari tab l e, s ci en t i fi c, o r o th er ex em

ptp u rp o s es s etfo rt h i ns ect i o n5 0 1(c)(3 ) o f th e In tern al Rev en u e Co d e. Sp eci fi cal l y , y o uh av e n o ts h o wn h o w y o u r p ro p o s edact i v i t i es wi l l l es sen th e b u rd en s o f g o v ern m en t o r o th erwi se fu rth er ch ari t ab l e p u rp o s es . M ore t h an an i n s ub s tan t ial p art o f y ou r act iv i t i es was n o ti nfu rt h eran ce o f an ex em p tp u rp o s e. OPINION Sect io n 7 4 2 8 (a)(1 )(A) co n fers juri sd i ct i o no nth e Co u rtt o m ak e a d ecl arat io n i n a cas e o f actu al co n tro v ers y i n v o l v i n g a d et erm i n at i o nb y th e Co m m i s s i o n er wi th res p ectt o t h e i n i ti al qu al i fi cat io no r co n t i n u in g qual i fi cat i o n
o f an o rg an i zat i o n as an o rg an i zat i o nd es cri b edi ns ect i o n 5 0 1(c)(3 ) wh i ch i s
ex em p tfro m t ax u n d er s ect i o n 5 0 1 (a). Th e t ax p ay er b ears th e b u rd en o f p ro v in g th atth e Co m m i s s io n er’ s d et erm i n at i o n i n s u ch s i tu at i o n s i s erro n eo u s. See Ch ri s ti an M an n er In t’ l , In c. v .- 7
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[* 7 ] Co m m i s s i o n er, 7 1 T.C. 6 61 , 6 6 4 -6 6 5 (1 9 7 9 ). Th e p art i es s ub m it t edth i s cas e wi th o u ta t ri al , s ee Ru le 1 2 2 , an dth e ev i d en ce co ns i s t s s o l el y o f t h e ad m in i s trat i v e
reco rd , s ee Ru l e 2 1 7 (b )(2 ). 2 Sect io n 5 0 1 (a) g en eral l y

ex em p t s fro m t ax at i o nan o rg an i zat i o nd es cri b edi n
s ub s ect i o n (c). Sect i o n 5 0 1 (c)(3 ) d es cri bes a qu al i fy i n g o rg an izat i o n i nrel ev an t p artt o i ncl u d e “ [c] o rp o rat i o n s * * * o rg an i zedan do p erat edex cl u s i v el y fo r rel i g io u s, ch ari t ab l e, s ci en t i fi c, t es t i n g fo r p ub l i c s afet y , l i t erary , o r educat i o n al p u rp os es ”. Ano rg an i zat i on th atqu al i fi es u n d er s ect i o n5 0 1(c)(3 ) n o to n l y i s
ex em p tfro m Fed eral i n co m e t ax b u tal s o m ay s o l i ci tan daccep td o n at i o ns wh i ch
are n o rm al ly

d edu ct i bl e b y

th e d o n o r. See s ec. 1 7 0 (a), (c)(2 ). Res p o n d en td et erm i n edth at p et i t i o n er d i d n o to p erat e ex cl u si v el y fo r
ex em p tp u rp o s es (o p erat i o n al tes t ). As res p on d en ts ees i t , “ Sco t tan d Pam J o h n st o n fo rm edp et it i on er as a Nev ad a n o npro fi t co rp o rat i o nt o co n du ctth e s am e act i vi t i es wh i ch th ey

h adp rev io u s ly

at t em p t edt o co n ducti nthei r cl o s el y h el d fo r-p ro fi tco rp orat i o n , Th e Pi p e M an Co rp o rat i o n . ” Pet i t i o ner d o es n o to ffer an yth i n g i n o p p o si t io nt o res p o n d en t ’ s p o i n t
. Nev erth el es s , acco rd in g t o p et i t i o n er, t h e d ev el o p m en to f t h e p ro t o ty p e m ach i n ery

2 In res p o n s e t o th e p art i es ’ m ot i o nt o s ub m itth e cas e u n der Ru l e 1 2 2 , th e cas e was as s i g nedfo r d is p os i t i o np u rs u an tt o Ru l e 2 1 8 (a).- 8
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[* 8 ] wi l l fu rt h er a s ci en ti fi c p u rp o s e an du l t im at el y “ res u lti nen co u rag i n g
eco n om i c d ev el op m en t th ro u g h o u t th e Un i t edSt at es .” Acco rd i n g t o p et i t i o n er, aft er i tb u i ld s an dt es t s the p ro t o ty p e m ach i n ery

an ds u ch m ach in ery

i s read y fo r
co m m erci al u s e, i ti n t en d s t o fu l fi l l i t s ch ari tab l e p u rp os e b y wo rk i n g wi th g o v ern m en t al ag en ci es , en g i n eeri n g fi rm s , an db u s i n es ses t o redu ce t h e co s to f i n fras tru cture p ro

ject s t o “ as l i tt l e as o n e fo u rt h cu rren tco s t s ”, t hereb y “ l es s en i n g th e b u rd en s o f g o v ern m en t ”. Th e s t an d ardfo r t ax -ex em p ts t atu s p res cri bedi ns ect i o n5 0 1(c)(3 ) requ i res th atan o rg an i zat i o n b e “ o p erat edex cl u si v el y ” fo r an ex em p tp u rp o s e. Sect i o n 1 .5 01 (c)(3 )-1 (c)(1 ), In co m e Tax Reg s ., d es cri b es th e o perat i o nal t es t as fo l l o ws : (c) Op erat i o n al t es t --(1 ) Pri m ary act i v i ti es . Ano rg an i zat i o n wi l l b e reg ard edas o p erat edex cl u s i v el y fo r o n e o r m o re ex em

p tp u rp o s es o n l y i f i t en g ag es p ri m ari l y

i nact i v i t i es wh i ch acco m p l i s h o ne o r m o re o f s u ch ex em

p tp u rp o s es s p eci fi edi ns ect i on 5 0 1 (c)(3 ). An o rg an i zat i o n wi l l n otb e s o reg ard edi f m ore t h an an i n s ub s tan t i al p art o f i t s act i v i t i es i s n o ti n fu rt h eran ce o f anex em p tp u rp os e. In th i s reg ardth e p res en ce o f a s i n g l e s ub st an t i al p u rp os e t h ati s n o t d es cri b edi n s ect i o n 5 0 1 (c)(3 ) p recl u d es ex em p ti o nfro m

t ax u n d er s ect i o n5 0 1 (a) reg ard l es s o f th e n um

b er o r t h e i m

p o rt an ce o f t h e p u rp o s es th atare p res en tan d d es cri b edi n s ect i o n 5 0 1 (c)(3 ). See Bet t er Bu s . Bu reau o f W as h ., D.C., In c. v . Un i ted St at es , 3 2 6 U
. S. 2 79 , 2 8 3 (1 9 4 5 ).- 9
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[* 9 ] “ Un d er t h e o p erat i o n al t es t , th e p u rp o s e t o w ard s wh i ch an o rg an i zat i o n ’ s act i vi t i es are d i rect ed , an dn o t th e n atu re o f t h e act i v i t i es th em sel v es , i s u l t i m at el y d i s p o s i t i ve o f t h e o rg an izat i o n ’ s ri g h tt o b e cl as s i fi edas a s ect i on 5 0 1 (c)(3 )
o rg an i zat i o n ex em

p tfro m t ax un d er s ect i o n5 0 1 (a).” B.S.W . Grp ., In c. v . Co m m i s s i o n er, 7 0 T.C. 3 52 , 3 5 6 -3 5 7 (1 9 7 8 ). As th e Co u rt n o t edi n Part n ers i n Ch ari ty , In c. v . Co m

m i s si o n er, 1 4 1 T.C. 1 5 1 , 1 6 4 (2 0 13 ): “ Ev en i na co m m erci al , p ro fi t m o t i v at edco n tex t , s uch act i v i t i es m ay b e wh o les o m e an dco m m en d ab l e; b u t th ey wi l l n o ts upp o rt t ax -ex em pts t atu s u nl es s th ey

are u n d ert ak en t o fu rt her an
ex em p tp u rp o s e.” I. Sci en t ifi c Pu rp os e Sect io n 5 0 1 (c)(3 ) d es cri b es a qu al i fy i ng o rg an i zat i o n i n rel ev an tp artt o i n cl u d e “ [c] o rp o rat i o n s * * * o rg an i zedan d o p erat edex cl u s i v el y fo r * * *
s ci en t i fi c * * * p u rp o s es ”. Th e reg u l at i o n s p ro vi d e th at th e t erm “ s ci en t i fi c” as
u s ed in s ect i o n 5 0 1 (c)(3 ) “ in cl u d es th e carry i n g o no f s ci en t i fi c res earch i nth e p ub l i c i n t eres t
. ” Sec. 1 .5 01 (c)(3 )-1 (d )(5 )(i ), In co m e Tax Reg s. Sect i o n 1 .5 01 (c)(3 )-1 (d )(5 )(i i), In co m e Tax Reg s ., th en p ro v i d es :

(i i ) Sci en ti fi c res earch d o es n o ti n cl u d e act i v i t i es o f a ty pe o rd i nari l y carri edo n as an i n ci d en tt o co m m erci al o r i n du s tri al o p erat i o n s , as , fo r ex am

p l e, t h e o rd in ary

t es ti n g o r i n s p ect io n o f m at eri al s o r p ro du ct s o r t h e d es i g n in g o r co n st ru ct i o n o f eq u i p m en t , b u i l di n g s , et c.- 1 0 -

[* 1 0 ] Pet i t i o ner’ s i n t en dedact i v i ti es t o d es i g nan d t o co n s tru ctp ro t o ty pe
m ach i n ery

are, as res p o n d en tp o i n t s o u t , the t y p e o f act iv i t i es ex cl u d edfro m th e d efi n i t i o n o f s ci en t i fi c res earch b y th e ab o v e-q u ot eds ubd i v i s i o n . Acco rd i n g l y , th es e act i v i t i es d o n o tfu rt h er s ci en t i fi c p u rp o s es fo r p u rp o s es o f s ect i on 5 0 1
. II. Ch ari t ab l e Pu rp o s e Th e t erm ch ari t ab l e i s u s edi ns ect i o n 5 0 1 (c)(3 ) i n i t s g en eral l y accep t edl eg al s en s e an di s , th erefo re, n o t t o b e co n s tru edas l i m i ted b y th e s ep arat e en u m erat i o n i ns ect i o n 5 0 1 (c)(3 ) o f o th er t ax -ex em p t p u rp o s es wh i ch m ay

fal l wi th i nth e b ro ado u t l i n es o f ch ari ty as d ev el o p edb y

ju d i ci al d eci s i o n s . Su ch t erm i ncl u d es : Rel i ef o f th e p o o r an d di s tres s edo r o f t h e u n d erp ri vi l eg ed ; ad v an cem en t o f rel i g i o n; ad van cem en to f edu cat i on o r s ci en ce; erect io no r m ai n t en an ce o f p ub l i c b u i l d i n g s , m o n u m en t s , o r wo rk s ; l es sen i n g o f th e b u rd en s o f Go v ern m en t* * * Sec. 1 .5 0 1 (c)(3 )-1 (d )(2 ), In co m e Tax Reg s . Pet i t i o ner co n ten d s i tfu rth ers th e ch ari t ab l e p u rp o s es i d en t i fi edi n t h e rel ev an t reg u l at i o n wi th res pect t o th e “ erect i o n o r m ai n ten an ce o f p ub l i c b u i l d i n g s , m o n u m en ts , o r wo rk s * * * [an d th e] l es sen i n g o f t h e b u rd en s o f Go v ern m en t ”. See i d . Acco rd i n g t o p et it i o n er, t h e l arg e co rru g at edm et al p i p e i t i n t en d s o n p ro du ci ng “ wi l l dram at i cal l y redu ce t i m e, co st , en v i ro n m en t al i m p act
an d d i srup t i o n t o l o cal eco n o m i es ”, u lt i m at el y l es sen i n g “ th e b u rd en s o f g o v ern m en t .”- 1 1 -

[* 1 1 ] Pet i t i o ner h as n otes t ab l is h edth ati ti n t en d s o nco n s tru ct i n g o r m ai n t ai n i n g p ub l i c b u i l d i n gs , m o n u m en t s , o r wo rk s. In s t ead , i tap p ears as th o u g h p et i t i o n er p ro p os es t o m an u factu re an d th en s el l l arg e co rru g at edm et al p i p e t o co n tract o rs fo r u s e i n i n fras tru cture p ro ject s s u ch as ro ad s an db ri d g es . An d , wh i l e p et i t i o n er h as s u gg es t edo n b ri ef as wel l as i n l et ters t o res p o n d en ti n cl u d edi nth e ad m i n is trat i v e reco rdth ati t wo u l db e wi l l i n g t o en t er i n t o an ex cl us i v it y ag reem en twi th th e Go v ern m en tt o s el l i t s p ro du ctatco s t , i t h as n o t es tab l i s h ed th ro u g h i t s b y l aws o r o th erwi s e t hati two u ld i n fact d o s o . Fu rt herm o re, t he ad m i n i s trat i v e reco rdd oes n o t es t ab l i sh th atp et it i o n er
wo u l dl es s en th e Go v ern m en t’ s b u rd en . See Qu al i ty Au d it i ng Co . v . Co m m i s s i o n er, 1 1 4 T.C. 4 9 8 , 5 0 7 -5 0 8 (2 0 0 0) (n on -p ro fi tco rp o rat i o np erfo rm i ng qu al i ty au d i t s o f s t eel fab ri cat o rs fai l edt o s h o w i t s act i v i ti es l es sen edth e b u rd en s
o f Go vern m en tb ecau se n o ev i den ce s h o wedth e Go v ern m en tco n si d eredth e
co rp o rat i o n’ s act i vi t i es i t s b u rd en ). III. Pri v at e In urem en t Sect io n 1 .5 0 1 (c)(3 )-1 (d )(1 )(i i ), In co m e Tax Reg s . , p ro v i d es th atan
o rg an i zat i o n i s n o t o p erat edex cl u s i v el y fo r ex em p tp u rp o s es u n l es s i ti s o p erat ed fo r t h e b en efi to f t h e p ub l i c rat h er t han fo r th e b en efi to f a p ri v at e i n t eres t
. Pet i t io n er m

u s tth erefo re es t ab l i s h th ati t i s n oto rg an i zedo r o p erat edfo r t he- 1 2 -

[* 1 2 ] b en efi t o f p ri v at e i n teres t s s u ch as th o se o f i ts fo u n d er. See Bas i c Bi b l e Ch u rch v . Co m

m is s i o n er, 7 4 T.C. 8 4 6 (1 9 8 0 ), aff’ dp er cu ri am s ub n o m . Ki l e v . Co m m i s s i o n er, 7 3 9 F.2 d2 6 5 (7 th Ci r. 1 9 84 ). In s h o rt , p et it i on er ap p ears t o b e a facad e fo r TPM C. See B.S.W . Grp ., In c.
v . Co m m i s s i o n er, 7 0 T.C. at3 5 8 (s t at i n g th atth e rel ev an t co n s u lt i ng act i v it i es were “ o f t h e s ortwh i ch * * * [were] o rd i n ari l y carri edo n b y

co m m erci al v en tu res
o rg an i zedfo r p ro fi t ”). As b es twe can t el l fro m th e ad m i n i st rat i v e reco rd , th e J o h n st o n s i n co rp o rat ed pet i t i o ner an dth ereaft er fi l edfo r ex em pt i o nu n d er s ect i o n 5 0 1 (c)(3 ) t o as s i s ti n s ol i ci t i n g t ax d edu ct ib l e d o nat i o n s t o s ecu re t h e fu n d in g th at TPM C was u n ab l e t o o b tai n . Pet i t i o n er an dTPM C h ads ub s t an t i al l y th e s am e b u s i n es s p u rp o s e o f d ev el o p i n g m ach i n ery cap ab l e o f p ro duci n g l arg e co rru g at ed
m et al p i p e fo r s al e i n i n fras tru ctu re p ro j ect s . Th e J o h n s t on s o wn edTPM C an d
s erv edas i ts o ffi cers an dd i rect o rs . Li k ewi s e, th ey s erv edas th e o n l y

o ffi cers , d i rect o rs , an d pai dem

p l o y ees o f p et i t i o n er. Pet i t i o n er i s o wn edan dco n tro l l ed
ex cl u s i v el y

b y th e J o h ns t on s ; co n seq u en t l y , th e b en efi ts rel at i n g t o p et i t i o n er
wo u l di n u re t o th e J o h n s t o n s . If o n l y fo r t h atreas o n, p et i t i o n er fai l s t o qu al i fy as
an ex em p t o rg an i zat i o n fo r p u rp o s es o f s ect io n5 0 1 (c)(3 ). It fo l l ows an d we h o l dthatp et i t io n er d o es n o tqu al i fy fo r t ax ex em

p ts t atu s
u n d er s ect i o n 5 0 1 (a).- 1 3 -

[* 1 3 ] To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t
.