World Family Corp. v. Commissioner

The Church of Jesus Christ of Latter-Day Saints (LDS Church) had a practice of sending its young male congregants on 18-month mission trips. The LDS Church did not fund these missions, generally relying on missionaries’ families for financing. The World Family Corporation (WFC) (plaintiff) was a nonprofit entity organized to provide grants and interest-free loans to missionaries who would otherwise be unable to fund their missions. Rather than hiring salaried fundraisers, the WFC used a contingent-fee structure whereby fundraisers could earn commissions of up to 20 percent of the funds they raised. The WFC’s president secured a substantial stock contribution to the WFC, entitling him to a $20,000 commission, a liability that the WFC carried as an account payable. The WFC applied to the Internal Revenue Service (IRS) (defendant) for tax-exempt status. The WFC justified its contingent-fee structure by citing its belief that this structure was more cost-effective and efficacious than hiring fundraisers at fixed salaries. After a two-year delay, the WFC petitioned the United States Tax Court to order the IRS to determine whether the WFC was entitled to tax-exempt status. Before the Tax Court, the IRS argued that the WFC was ineligible for tax-exempt status because some of the WFC’s earnings would inure to the benefit of the WFC’s president through his commission payments.