## Facts

- Amend16RobertWirengard (Amend16) applied to the IRS for recognition of exemption under I.R.C. § 501(c)(3), describing itself as a free Internet-based “school.”
- Amend16’s organizing materials stated charitable aims that included providing economic and financial education and other assistance, particularly for low-income individuals.
- Amend16’s materials and website described instruction on personal-finance topics (including microloans and other financial planning subjects).
- Amend16’s governing documents created multiple internal divisions, including a “United Bank” division.
- According to Amend16’s website and related materials, United Bank would offer banking-type products and services to individuals and businesses, including microloans intended to assist low-income borrowers.
- A sample microloan note in the administrative record charged interest at a 6% rate.
- United Bank was described as neither incorporated nor a member of the Federal Deposit Insurance Corporation (FDIC).
- Amend16’s materials also reflected a focus on educating the public about perceived “fundamental flaws” in the Sixteenth Amendment and “ways to correct these,” framing that effort as part of its educational mission.
- The IRS issued a final adverse determination denying recognition of exemption, concluding that Amend16 had not established that it was organized and operated exclusively for § 501(c)(3) purposes, including because its planned “United Bank” activities did not further an exempt purpose.
- Amend16 filed a petition for declaratory judgment under I.R.C. § 7428, and the case was submitted to the Tax Court on the administrative record.

## Issues

1. Whether Amend16 qualified for recognition of exemption as an organization described in I.R.C. § 501(c)(3) (and therefore exempt under § 501(a)) based on the purposes and activities shown in the administrative record.
2. Whether Amend16’s planned United Bank operations and its advocacy-oriented content reflected substantial non-exempt purposes inconsistent with § 501(c)(3).

## Decision

- The Tax Court sustained the Commissioner’s adverse determination and denied declaratory relief.
- The court held that, on the administrative record, Amend16 did not establish that it was organized and operated exclusively for exempt purposes within the meaning of § 501(c)(3).
- The court concluded that the planned banking-style activity (including making microloans at interest through United Bank) and the advocacy-oriented objectives reflected substantial non-exempt purposes that prevented qualification for exemption.

## Legal Principles

- To qualify under I.R.C. § 501(c)(3), an organization must satisfy both the organizational test and the operational test: it must be organized and operated exclusively for one or more exempt purposes (such as charitable or educational purposes), and it may not have a substantial non-exempt purpose.
- An organization is not “operated exclusively” for exempt purposes if more than an insubstantial part of its activities serves non-exempt ends; a single substantial non-exempt purpose can defeat exemption even if the organization also conducts some exempt-type activities.
- Activities that resemble commercial financial services—such as a lending or “bank” function charging interest—require a clear showing that they primarily serve an exempt aim rather than a business objective; absent that showing, commerciality concerns weigh against § 501(c)(3) status.
- For “educational” status under § 501(c)(3), materials and programming must reflect instruction or training rather than one-sided advocacy or propaganda; content aimed at changing laws or constitutional provisions may indicate a non-exempt purpose.
- In a declaratory judgment action under I.R.C. § 7428 submitted on the administrative record, the court evaluates qualification based on what the record shows about the applicant’s stated purposes and planned operations.

## Conclusion

Amend16RobertWirengard did not qualify for § 501(c)(3) recognition because the administrative record showed substantial non-exempt purposes, including a planned banking-style microloan program charging interest and advocacy-centered objectives tied to changing views about the Sixteenth Amendment, so the Tax Court upheld the IRS’s denial of exemption.


Amend16RobertWirengard v. Commissioner, T.C. Memo 2005-30 (2005)