Easter House v. United States

Easter House (plaintiff) was a nonprofit organization that provided services for unmarried mothers, including adoption placement. Easter House’s sole source of revenue was the substantial fees it charged adoptive parents. The fees were set at a level to exceed Easter House’s operating costs; Easter House enjoyed a profit margin of approximately 25 percent. Seymour Kurtz held the titles of president and sole life member of Easter House. As the sole life member, Kurtz had the power to enter Easter House into contracts, elect Easter House’s board of directors, and decide the scope of the board’s purview. In 1983, Easter House paid Kurtz a salary of over $45,000. At the time, Kurtz earned additional income from his work with other, unaffiliated organizations engaged in work similar to that of Easter House. Easter House also provided loans to organizations either that employed Kurtz or in which Kurtz had an ownership interest. Easter House applied to the Internal Revenue Service (IRS) for tax-exempt status under § 501 of the Internal Revenue Code (code) as a charitable organization. The IRS denied Easter House’s application. One of the grounds on which the IRS based its decision was a finding that Easter House had failed to prove that its net earnings did not inure to the benefit of a private individual. Easter House filed an action in the United States Court of Claims challenging the IRS’s denial of tax-exempt status.