## Facts

- St. Louis Science Fiction Limited, a Missouri not-for-profit corporation formed in 1979, sought recognition of exemption under I.R.C. § 501(a) as an organization described in § 501(c)(3).
- After IRS requests for clarification, the organization amended its articles in 1982 to state § 501(c)(3)-style purposes (charitable, educational, literary, scientific) and to “promote and stimulate interest” in speculative fiction and related art.
- The organization’s principal activity was producing an annual science-fiction convention in the St. Louis area, advertised broadly and open to the general public.
- Convention activities included substantial recreational and social programming, including (among other events) a masquerade party, pool party, 24-hour video room, 24-hour gaming room, expanded gaming tournaments, and a 24-hour hospitality room.
- The conventions also included panel discussions and presentations; while some topics were literary or critical, the record showed many were recreational.
- Film programming included some well-known science-fiction works, but much of it was oriented toward amusement (including parody content).
- The conventions generated revenue through registration/admission fees, rentals of dealer (“huckster”) tables to vendors selling merchandise, and art auctions on which the organization retained a 15% commission.
- The Commissioner issued a final determination denying exemption, finding the organization operated for substantial nonexempt commercial, social, and entertainment purposes.
- The organization petitioned the Tax Court for declaratory judgment under I.R.C. § 7428 on a stipulated administrative record.

## Issues

1. Whether the organization was organized and operated exclusively (i.e., primarily) for exempt purposes under I.R.C. § 501(c)(3).
2. Whether the organization’s convention-related entertainment, social, and commercial activities constituted substantial nonexempt purposes that barred § 501(c)(3) status.

## Decision

- The Tax Court upheld the Commissioner’s denial of recognition under § 501(c)(3).
- The court concluded the organization was not operated primarily for exempt educational or charitable purposes.
- The court found the organization furthered substantial nonexempt commercial, social, and entertainment purposes through the character of its conventions and related revenue activities.
- The court entered declaratory judgment that the organization did not qualify for exemption under § 501(a) as a § 501(c)(3) organization.

## Legal Principles

- To qualify under § 501(c)(3), an organization must satisfy the organizational and operational tests; actual operations control over stated purposes.
- “Operated exclusively” is applied as a “primarily” standard; the presence of a substantial nonexempt purpose defeats exemption even if some exempt activities occur.
- Activities that are principally entertainment or social in character, even if related to a subject with educational potential, may fail the operational test when structured public instruction is not the organization’s primary function.
- Commercial features (e.g., vendor table rentals, commissions on sales, admission fees) may evidence a substantial nonexempt commercial purpose when they are central rather than incidental to an exempt program.
- Amending governing documents to mirror § 501(c)(3) language does not cure a failure to operate primarily for exempt purposes.

## Conclusion

The Tax Court denied § 501(c)(3) status because the organization’s dominant activity—running a fan-oriented convention with extensive entertainment, social events, and commercial transactions—showed substantial nonexempt purposes that outweighed its limited educational components.


St. Louis Sci. Fiction Ltd. v. Comm’r, 49 T.C.M. (CCH) 1126 (Tax Ct. 1985)