## Facts

- World Family Corporation (WFC) was incorporated as a Utah nonprofit in 1977, with its principal office in Salt Lake City.
- WFC primarily raised and distributed funds by making grants and interest-free loans to missionaries serving for the Church of Jesus Christ of Latter-Day Saints.
- Missionaries were called through church authority and typically served for fixed full-time terms; WFC’s purpose was to reduce the financial burden of missionary service for individuals and families.
- WFC used a contingent-fee fundraising model, paying commissions to fundraisers (up to about 20% of amounts raised) rather than employing salaried fundraisers.
- WFC’s president, who acted as a principal fundraiser, became entitled to a $20,000 commission from a significant contributed asset; WFC recorded the amount as an account payable.
- WFC applied to the IRS for recognition of exemption under I.R.C. § 501(c)(3); after extended administrative exchanges, the IRS did not issue a final determination.
- After exhausting administrative remedies, WFC petitioned the Tax Court for declaratory judgment under I.R.C. § 7428; the case was submitted on the stipulated administrative record, assumed true for purposes of decision.

## Issues

1. Whether WFC was operated exclusively for religious or charitable purposes under I.R.C. § 501(c)(3) and § 501(a).
2. Whether any part of WFC’s net earnings inured to the benefit of private individuals, particularly through contingent fundraising commissions to insiders.
3. Whether WFC was entitled, on the administrative record, to declaratory judgment recognizing § 501(c)(3) status under I.R.C. § 7428.

## Decision

- The Tax Court entered decision for WFC.
- The court held WFC was operated exclusively for exempt purposes within § 501(c)(3).
- The court held the record did not establish disqualifying private inurement from the contingent-fee fundraising arrangement, including the president’s commission obligation.
- The court granted declaratory relief recognizing WFC as exempt under § 501(c)(3).

## Legal Principles

- An organization satisfies § 501(c)(3)’s operational test when its activities are directed to exempt religious or charitable ends and nonexempt features are incidental rather than primary.
- Supporting religious missionary service through grants and interest-free loans can constitute an exempt religious/charitable purpose when structured to further the religious mission rather than private gain.
- The private inurement prohibition bars diversion of an organization’s net earnings to insiders, but does not forbid reasonable compensation for services actually rendered.
- Contingent-fee fundraising compensation is not automatically private inurement; disqualification requires a showing, on the record, of excessive or improper insider benefit.
- In a § 7428 declaratory judgment action, the Tax Court decides the exemption question on the administrative record presented.

## Conclusion

The Tax Court concluded that a nonprofit formed to fund religious missionary service through grants and interest-free loans qualified for § 501(c)(3) exemption, and that the IRS had not shown, on the stipulated administrative record, that contingent fundraising commissions resulted in prohibited private inurement.


World Family Corp. v. Commissioner, 81 T.C. 958 (1983)