Background

• Polm Family Foundation, a Maryland non‑stock corporation, sought §501(c)(3) exemption and §509(a)(3) public charity status, with articles stating support for public health and Christian objectives and broad powers to receive gifts.
• Foundation amended its articles and bylaws after a year of IRS correspondence and reorganized its board, but IRS did not issue a final §509(a)(3) determination.
• Foundation filed a §7428 declaratory judgment action in the U.S. District Court for the District of Columbia seeking exemption and public charity status, while IRS did not dispute §501(c)(3) status.
• District Court granted summary judgment to the government on the §509(a)(3) claim, holding that the Foundation failed the relationship and control tests under §509(a)(3).
• The Court of Appeals agreed to rule on the organizational test, determining that the Foundation failed to satisfy the requirements to be a Type II supporting organization because its beneficiary class was not readily identifiable in its articles of incorporation.
• Court affirmed the district court’s judgment, holding the organizational test not satisfied and thus the Foundation not a public charity under §509(a)(3).

Issues

Key Cases Cited

• Quarrie v. Comm'r of Internal Revenue, 603 F.2d 1274 (7th Cir.1979) (public scrutiny as a rationale for public charities' exemption)
• Auer v. Robbins, 519 U.S. 452 (1997) (agency interpretation controlling unless plainly erroneous)
• Chase Bank USA, N.A. v. McCoy, 131 S. Ct. 871 (2011) (administrative interpretation given deference when consistent with regulation)
• Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989) (prevailing party may defend judgment on any properly raised ground)
• Wash.-Balt. Newspaper Guild, Local 35 v. Wash. Post, 959 F.2d 288 (D.C. Cir.1992) (treatment of grounds not relied upon in district court)