B.S.W. Group v. Commissioner

70 T.C. 352 (1978)

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B.S.W. Group v. Commissioner

United States Tax Court
70 T.C. 352 (1978)

Facts

B.S.W. Group (BSW) (plaintiff) was organized to provide consulting services to nonprofits, including both exempt and nonexempt entities, that were involved in rural policy and program development. BSW planned to hire contractors who would provide substantive research work to BSW’s clients on such topics as alternative housing, financing for small-scale entrepreneurs, and solid-waste management. These services would essentially function as a substitute for full-time staffing of BSW’s client organizations. BSW applied for tax-exempt status under § 501(c)(3) of the Internal Revenue Code. At the time of the application, BSW did not yet have any clients, but BSW planned to charge fees that would represent the cost of hiring the researchers plus an administrative charge. The commissioner of internal revenue (commissioner) (defendant) denied BSW’s application, finding that BSW did not satisfy the operational test for the § 501(c)(3) exemption. BSW then sought declaratory relief to the effect that it was entitled to the tax exemption.

Rule of Law

Issue

Holding and Reasoning (Raum, J.)

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