## Facts

- American Campaign Academy (ACA) was a Virginia nonprofit formed to operate a school training individuals for jobs such as campaign managers, communications directors, and finance directors.
- ACA’s organizing documents described educational activities, including publishing instructional materials and research on political campaigns and public attitudes toward issues.
- ACA had a scheduled curriculum, faculty, and a full-time student body; it did not train political candidates.
- ACA was created as an outgrowth of training programs associated with the National Republican Congressional Committee and was primarily funded by a Republican-affiliated trust.
- ACA’s directors and leadership had significant ties to the Republican Party.
- In a documented graduating class, about 80% of graduates worked on Republican congressional and senatorial campaigns, and none were known to affiliate with another political party.
- The IRS conceded ACA was organized for exempt purposes, had no prohibited inurement, and did not engage in prohibited campaign intervention or lobbying under § 501(c)(3).
- The IRS nonetheless issued a final adverse ruling denying exemption, concluding ACA operated for a substantial nonexempt private purpose by more than incidentally benefiting Republican candidates and entities.
- ACA sought a declaratory judgment in the U.S. Tax Court under I.R.C. § 7428; the case was submitted on the stipulated administrative record.

## Issues

1. Whether ACA was operated “exclusively” for exempt purposes under I.R.C. § 501(c)(3), or instead for a substantial nonexempt purpose because it conferred more than incidental private benefit on Republican Party entities and candidates.
2. If ACA qualified under § 501(c)(3), whether it should be classified as other than a private foundation under I.R.C. §§ 509(a)(1) and 170(b)(1)(A)(ii).

## Decision

- The Tax Court held ACA did not qualify for exemption under § 501(c)(3).
- The court concluded ACA operated for a substantial nonexempt purpose: providing more-than-incidental private benefit to Republican Party entities and candidates.
- Because ACA failed § 501(c)(3), the court did not reach whether it was other than a private foundation under §§ 509(a)(1) and 170(b)(1)(A)(ii).
- ACA’s request for declaratory judgment recognizing § 501(c)(3) status was denied.

## Legal Principles

- Under the § 501(c)(3) operational test, an organization must be operated primarily for exempt purposes; the presence of a substantial nonexempt purpose defeats exemption even if the organization also conducts educational activities.
- Exemption may be denied where operations serve private interests more than incidentally, including the private interests of identified political-party entities and candidates.
- Compliance with § 501(c)(3)’s explicit prohibitions on campaign intervention and lobbying does not, by itself, establish exemption if the organization’s activities confer substantial, non-incidental private benefit.
- Generalized public benefits (e.g., improving professionalism in campaigns) do not cure a disqualifying pattern of systematic and preferential benefits to a partisan constituency.

## Conclusion

The Tax Court denied § 501(c)(3) status to an organization structured as a campaign-training school because its creation, funding, governance, and graduate placement showed a substantial nonexempt private purpose: furnishing a predictable, non-incidental advantage to Republican Party entities and candidates, despite educational form and the absence of direct campaign intervention or lobbying.


Am. Campaign Acad. v. Comm'r, 92 T.C. 1053 (1989)