## Facts

- An association was formed to support and regulate the International E22 one-design sailboat class used in competitive yacht racing.
- Its stated purposes included maintaining one-design specifications and promoting national and international E22 competition.
- The association monitored and approved boat construction to ensure compliance with class specifications and required strict conformity to design standards.
- It formulated and enforced technical rules for hulls and equipment (including size, materials, rigging, and measurement requirements).
- It coordinated and sanctioned E22 regattas and published class rules, technical guidance, schedules, and race results.
- The association owned essential production tooling: a precisely measured master plug (full-size hull model) and measurement templates for components (e.g., rudder, keel, spars).
- Builders could use the master plug and templates without charge only if approved by the association, giving it effective control over who could produce compliant E22 boats and how they were made.
- The organization functioned as a membership group centered on E22 owners and racers; revenues came primarily from dues and race-related fees rather than broad public fundraising.
- The IRS denied the organization’s application for recognition as tax-exempt under IRC § 501(c)(3), including the “fostering national or international amateur sports competition” clause, and the organization sought Tax Court review in a declaratory judgment proceeding.

## Issues

1. Whether the organization was organized and operated exclusively for exempt purposes under IRC § 501(c)(3).
2. Whether its activities qualified as “fostering national or international amateur sports competition” within IRC § 501(c)(3).
3. Whether the organization conferred more than incidental private benefit on a limited group of owners, racers, and approved builders, defeating § 501(c)(3) status.

## Decision

- The Tax Court sustained the Commissioner’s denial of recognition of exemption.
- The court held the organization was not organized and operated exclusively for charitable or educational purposes.
- The court held the organization did not qualify under the § 501(c)(3) amateur sports competition language because its operations primarily served a narrow class group rather than a public-oriented charitable objective.

## Legal Principles

- An organization must satisfy both the organizational and operational tests for IRC § 501(c)(3); a substantial nonexempt purpose defeats exemption even if the organization also pursues some exempt aims.
- The § 501(c)(3) clause concerning “fostering national or international amateur sports competition” requires activities directed toward a public-oriented charitable objective, not primarily toward servicing a limited membership group.
- Technical regulation of equipment standards and coordination of events for a specialized competitive class, without substantial public-facing programs or access, is generally insufficient to establish § 501(c)(3) purposes.
- Educational activity must be more than incidental; publications aimed chiefly at participants and devoted to class rules, specifications, and race news do not, without more, establish an exempt educational purpose.
- More-than-incidental private benefit to a limited group (such as owners and approved builders benefitting from class-controlled tooling and standardized production) is inconsistent with operation exclusively for § 501(c)(3) purposes.

## Conclusion

The Tax Court denied § 501(c)(3) status because the organization’s primary function was regulating and supporting a particular one-design racing class for the benefit of E22 participants and related private interests, rather than pursuing a sufficiently public, charitable program of fostering amateur sports competition.


Int’l E22 Class Ass’n v. Comm’r, 78 T.C. 93 (1982)