## Facts

- Hutchinson Baseball Enterprises, Inc. was incorporated in Kansas in 1970 as a not-for-profit corporation.
- Its governing documents stated purposes including to “promote, advance and sponsor baseball,” including Little League and amateur baseball in the Hutchinson, Kansas area.
- The IRS initially recognized the organization as exempt under I.R.C. § 501(c)(3), but later issued a final adverse determination revoking exemption in 1978.
- Hutchinson owned and operated the Hutchinson Broncos team; the Tax Court found the Broncos was an amateur team, and that characterization was not challenged on appeal.
- Hutchinson leased and maintained Bud Detter Field from the City of Hutchinson, including related facilities (bleachers and concession areas).
- The field and related support were used for the Broncos and for community amateur baseball, including American Legion teams and a baseball camp.
- Hutchinson provided instructors and coaches for Little League and the baseball camp and leased the field to a junior college for a nominal fee.
- Hutchinson’s structure barred distribution of net earnings to private shareholders or individuals.

## Issues

1. Whether Hutchinson was “organized and operated exclusively” for exempt purposes under I.R.C. § 501(c)(3), specifically the promotion of recreational and amateur athletics.
2. Whether operating the Broncos team and engaging in related revenue-producing activities caused Hutchinson to fail the operational test or confer impermissible private benefit.

## Decision

- The Tenth Circuit affirmed the Tax Court’s judgment in favor of Hutchinson.
- The court held Hutchinson qualified as a charitable organization under § 501(c)(3) because it was organized for the promotion, advancement, and sponsorship of recreational and amateur athletics.
- The court upheld the Tax Court’s findings that Hutchinson’s primary purpose was promoting amateur and youth baseball and that the Broncos was an amateur team.
- The court concluded the Commissioner’s revocation of exempt status was improper.

## Legal Principles

- Qualification under § 501(c)(3) requires satisfaction of both the organizational and operational tests; net earnings may not inure to private individuals.
- An organization may qualify as charitable where its primary purpose and operations promote community recreational and amateur athletics, including youth sports.
- Revenue-producing activities (e.g., admissions or concessions) do not defeat exemption when they are incidental to and in furtherance of exempt purposes and do not involve private inurement or impermissible private benefit.
- Appellate review gives weight to the Tax Court’s factual determinations on the organization’s primary purpose and the nature of its athletic program, absent clear error.

## Conclusion

The court sustained § 501(c)(3) status for a nonprofit that promoted community amateur baseball through facilities, coaching, and youth programs, and that operated an amateur team as part of that mission, because its primary purpose was exempt and its activities did not result in prohibited private inurement.


Hutchinson Baseball Enters., Inc. v. Comm’r, 696 F.2d 757 (10th Cir. 1982)