The opinion
T.C. Memo. 1997-220
UNITED STATES TAX COURT
OLIVER FAMILY FOUNDATION, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8346-96X. Filed May 8, 1997.
William J. Tully (an officer), for petitioner.
Kirk M. Paxson and Irene S. Carroll, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Petitioner, pursuant to section 7428,1 asks
for a declaratory judgment that it is entitled to an exemption
from Federal income taxes under section 501(c)(3). Respondent
filed a motion to dismiss for lack of jurisdiction upon the
1
All section references are to the Internal Revenue Code
in effect for the years in issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
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ground that the petition for declaratory judgment was not filed
by a person authorized to institute suit on behalf of petitioner.
The sole issue for decision is whether Dr. William J. Tully
(Dr. Tully) was a person authorized to institute suit on behalf
of petitioner.
FINDINGS OF FACT
A hearing was held on respondent's motion to dismiss for
lack of jurisdiction. At that hearing, the parties presented
witnesses, submitted exhibits, and argued the motion. Subsequent
to the hearing, both parties submitted briefs.
On February 1, 1996, respondent issued a final adverse
determination as to the exempt status under section 501(c)(3) of
the Oliver Family Foundation (petitioner or the foundation). On
May 2, 1996, Dr. Tully, purporting to act on behalf of
petitioner, timely filed a petition for declaratory judgment
(petition).2 Dr. Tully signed the petition as vice president of
the foundation.
At the time the petition was filed, petitioner's principal
place of business was in Borrego Springs, California.
Petitioner was formed with the intent to provide a professorship
and several scholarships to Oberlin College. Dr. William Shelby
Oliver (Dr. Oliver) was the president and a director of the
foundation when it was formed. Dr. Oliver hired Dr. Tully to
2
The petition was incorrectly entitled “Petition for
Redetermination of Deficiency”.
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organize and to acquire exempt organization status for
petitioner. Dr. Oliver paid Dr. Tully $10,000 for this service.
On December 14, 1993, Dr. Tully filed petitioner's articles of
incorporation (articles) with the State of Nevada's secretary of
state. Petitioner was established as a Nevada nonprofit
corporation. Dr. Tully was one of the original five directors of
petitioner. For each of the years 1994 through 1996, petitioner
filed required documents with the Nevada secretary of state
listing its directors and officers. On each of the documents,
Dr. Tully signed as petitioner's vice president.
Dr. Tully filed the necessary forms seeking to obtain
section 501(c)(3) exempt organization status for petitioner. The
Internal Revenue Service (IRS) did not grant petitioner's request
for exempt organization status.
As petitioner failed to receive exempt organization status,
Dr. Oliver asked Dr. Tully to return his $10,000 fee. As
payment, Dr. Oliver received a note from Dr. Tully in the amount
of $10,000. To secure the note, Dr. Tully also executed a grant
deed in favor of Dr. Oliver for a house in Michigan.
When the foundation was originally formed, each of the
directors prepared and signed undated resignation letters that
were kept with the corporate books. In October 1995, Dr. Oliver
dated Dr. Tully's resignation letter October 13, 1995, and
forwarded it to the IRS. Also in October 1995, Dr. Tully sent
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the foundation his conditional letter of resignation as a
director of the foundation.
On December 15, 1995, petitioner's board of directors voted
to transfer ownership of petitioner to Dr. Tully.
OPINION
Respondent, pursuant to Rule 53, has moved to dismiss this
case for lack of jurisdiction on the ground that the petition for
declaratory judgment was filed by a person not authorized to
institute suit on behalf of petitioner. Respondent contends the
following: On May 2, 1996, Dr. Tully filed a petition on behalf
of petitioner and signed the petition as its vice president; Dr.
Tully had resigned from the board of directors and as a trustee
of petitioner as of October 13, 1995; and, therefore, Dr. Tully
is not authorized to institute suit on behalf of petitioner.
Petitioner answers the following: Dr. Tully has been an
officer and director of petitioner at all times since its
inception; in October 1995, Dr. Tully offered to resign from his
position as a director of petitioner if petitioner was approved
as a tax-exempt organization by the IRS; Dr. Tully submitted a
conditional letter of resignation to petitioner's board of
directors but never resigned; on or about December 15, 1995, all
rights in petitioner were transferred to Dr. Tully; and,
therefore, Dr. Tully is a proper person to bring this action.
The burden of proof is upon petitioner to establish that it meets
the jurisdictional requirements of section 7428. Rule 217(c);
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American New Covenant Church v. Commissioner, 74 T.C. 293, 304
(1980).
We must decide whether this Court has jurisdiction to make a
determination with respect to petitioner's status. Section
7428(a) confers jurisdiction on this Court to “make a
declaration” with respect to the “initial qualification” of an
organization as an organization described in section 501(c)(3)
which is exempt from tax under section 501(a). Subsection (b) of
section 7428 provides certain limitations on our jurisdiction for
declaratory judgments relating to section 501(c)(3) status, as
follows:
SEC. 7428(b). Limitations.--
(1) Petitioner.--A pleading may be filed under this
section only by the organization the qualification or
classification of which is at issue.
Thus, under section 7428(b), this Court's jurisdiction is limited
to actions filed by the organization, the qualification or
classification of which is at issue. Petitioner in this case,
the Oliver Family Foundation, is the appropriate petitioner.
However, if as respondent contends, Dr. Tully was not authorized
to file a petition on behalf of petitioner, section 7428(b)(1)
and Rules 60(a)(2) and 210(b)(11) would require this Court to
dismiss the instant case.
The record indicates that at the time the instant petition
was filed, Dr. Tully was the vice president of petitioner. For
each year petitioner was in existence, Nevada law required a list
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of directors and officers to be filed with the Nevada secretary
of state; these lists were signed by Dr. Tully as vice president
every year that they were filed, which included the year in which
the petition for this case was filed. The purported resignation
letters of Dr. Tully, if valid, involved his position only as a
director and not as an officer. The evidence shows that at the
time he signed the instant petition Dr. Tully was an authorized
officer of petitioner. Therefore, we find that Dr. Tully was a
person authorized to institute suit on behalf of petitioner. See
Rule 24(b).
To reflect the foregoing,
An order denying
respondent's motion will
be issued.