## Facts

- The Nationalist Movement (TNM) was a Mississippi nonprofit corporation that applied for federal income tax exemption under I.R.C. § 501(c)(3), claiming charitable and educational purposes.
- TNM advocated social, economic, and political change tied to a “pro-majority” conception of American nationality.
- TNM’s activities included publishing and distributing a monthly newsletter, producing a cable television program, operating a telephone counseling service, participating in rallies and speeches, and engaging in litigation, including First Amendment-related matters.
- The IRS issued a final adverse ruling denying exemption, finding TNM was not operated exclusively for exempt purposes and was operated in furtherance of a substantial nonexempt purpose.
- TNM sought declaratory relief in the Tax Court under I.R.C. § 7428(a), also challenging the constitutionality of the IRS’s “educational” standards.
- The monthly newsletter was central to TNM’s exemption claim; it frequently presented strongly stated positions with little or no factual development, employed inflammatory labels for opponents, and referenced historical events without explanatory context.

## Issues

1. Whether TNM more than incidentally served private interests rather than public interests, contrary to Treas. Reg. § 1.501(c)(3)-1(d)(1)(ii).
2. Whether TNM was operated “exclusively” for charitable or educational purposes under I.R.C. § 501(c)(3) and Treas. Reg. § 1.501(c)(3)-1, considering its overall activities.
3. Whether TNM proved its telephone counseling service furthered charitable or educational purposes.
4. Whether TNM’s monthly newsletter qualified as “educational” under the IRS’s methodology-based standard in Rev. Proc. 86-43.
5. Whether Rev. Proc. 86-43 and the IRS’s denial of exemption violated the First Amendment, due process, or equal protection.

## Decision

- The Tax Court entered declaratory judgment for the Commissioner, sustaining the denial of § 501(c)(3) recognition.
- TNM did not fail solely on “private benefit” grounds; the court found TNM did not serve private interests more than incidentally.
- TNM failed the operational test because it did not show it was operated exclusively for exempt purposes.
- TNM did not establish that its telephone counseling service furthered charitable or educational purposes.
- TNM’s monthly newsletter was not educational because it lacked a factual foundation and reasoned exposition, relied on inflammatory labeling, and used historical references without sufficient context.
- Rev. Proc. 86-43 was not unconstitutionally vague or overbroad on its face or as applied, and TNM did not prove due process or equal protection violations.

## Legal Principles

- To qualify under § 501(c)(3), an organization must be organized and operated exclusively for exempt purposes; more than an insubstantial nonexempt purpose defeats exemption.
- A § 501(c)(3) organization must serve public interests rather than private interests, and any private benefit must be incidental. Absence of disqualifying private benefit does not establish exemption if the operational test is not met.
- Advocacy may be “educational” if presented through a methodology that supplies a factual foundation and a sufficiently reasoned exposition enabling an audience to form an independent conclusion.
- The IRS may apply a methodology-based standard for “educational” activity that focuses on manner of presentation rather than viewpoint, consistent with the First Amendment.
- An applicant bears the burden to substantiate that claimed programs (such as counseling services) further charitable or educational purposes with concrete evidence of content and operations.
- Denial of tax-exempt status, when based on neutral eligibility criteria, does not itself establish viewpoint discrimination or violations of due process or equal protection.

## Conclusion

The Tax Court upheld the IRS’s denial of § 501(c)(3) status because TNM did not prove it was operated exclusively for charitable or educational purposes; its principal communications failed the educational methodology standard, and the governing IRS guidance was constitutionally applied.


The Nationalist Movement v. Commissioner, 102 T.C. 558 (1994)