## Facts

- Church of Modern Enlightenment applied for recognition of exemption under I.R.C. § 501(c)(3) by filing Form 1023.
- The IRS denied the application, concluding the organization was not operated exclusively for exempt purposes.
- The church sought declaratory relief in the Tax Court under I.R.C. § 7428.
- The church promoted a doctrine described as “Christian-Buddhism” and was founded and controlled by Richard Engert.
- Engert served as a trustee; the other trustees were his sister and a coworker, Sanford Kleinman.
- Engert and Kleinman were the only “clergymen,” with no formal theological training and no ordination by a recognized religious body.
- Engert worked full-time elsewhere and donated his salary to the church while controlling its finances.
- The church’s reported expenditures were almost entirely Engert’s personal living expenses (including rent, food, and clothing).
- The church had no dedicated building; services were held at another institution’s facilities, and Engert’s apartment served as the office.
- Although membership was nominally open, the only congregation members shown were Engert’s sister and Kleinman.
- The church showed no meaningful outreach, recruitment, or youth religious instruction programs.

## Issues

1. Whether the organization qualified as a “church” or other organization operated exclusively for religious purposes within I.R.C. § 501(c)(3).
2. Whether the organization’s operations showed impermissible private inurement or a substantial nonexempt purpose inconsistent with § 501(c)(3).

## Decision

- The Tax Court upheld the Commissioner’s denial of recognition of exemption.
- The court held the organization failed to show it was operated exclusively for exempt purposes as required by § 501(c)(3).
- Declaratory relief under § 7428 was denied.

## Legal Principles

- To qualify under I.R.C. § 501(c)(3), an organization must be organized and operated exclusively (i.e., primarily) for exempt purposes, and no part of its net earnings may inure to the benefit of a private individual.
- An organization’s self-description as a church is insufficient; its actual operations and characteristics (including a functioning congregation and religious activities) are relevant to the analysis.
- Use of organizational funds to pay a founder’s personal living expenses indicates private inurement and supports a finding that the organization serves a nonexempt purpose.

## Conclusion

The Tax Court sustained the IRS’s denial of § 501(c)(3) status because the organization lacked evidence of a genuine public religious ministry or congregation and its funds largely paid the founder’s personal living expenses, showing private inurement and failure of the operational test.


Church of Modern Enlightenment v. Commissioner, 55 T.C.M. (CCH) 1304 (T.C. 1988)