Windsor Foundation v. United States

Quincy Cole devised his family home, known as Windsor, to the Windsor Foundation (the foundation) (plaintiff), a § 501(c)(3) organization created under the terms of the will. As specified in the will, the home was open for public use and enjoyment after Cole’s death. A trust, also created under Cole’s will, funded the maintenance and operation of Windsor. Pursuant to guidelines specified in Cole’s will and the foundation’s articles of incorporation, the trustee disbursed the trust income not used for maintenance of the house to whatever religious, scientific, educational, medical, charitable, or artistic endeavors in the city of Richmond, Virginia, that the foundation’s board directed. The foundation distributed as much as $115,000 annually to such causes. Neither the will nor the foundation’s articles specifically identified any organization as a beneficiary of the surplus income, and there was no historical link between the foundation and the organizations it chose to benefit. The beneficiaries included publicly supported and private organizations, and the beneficiaries exercised no control over the trust’s investments. Likewise, the foundation was not involved in any of the beneficiaries’ operations. The Internal Revenue Service (IRS) (defendant) determined that the foundation and trust, as a single functional entity, constituted a private foundation as defined in Internal Revenue Code § 509. The IRS assessed federal excise taxes pursuant to § 4940 for the years 1971 through 1976. The foundation paid those taxes under protest and brought an action for a refund.