Cleveland Creative Arts Guild v. Commissioner



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U.S. Tax Court

U.S. Tax Court

1985



Cleveland Creative Arts Guild v. Commissioner ...

Cleveland Creative Arts Guild v. Commissioner (July 1, 1985)




United States Tax Court

CLEVELAND CREATIVE ARTS GUILD,


Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent



Docket No. 25281-83X

Doc 1985-5933

Decided: July 01, 1985

Cite(s): T.C. Memo. 1985-316

Judge(s): Jacobs, Judge, opinion

Principal Code Section Reference(s): Section 501
Summary

Provided by Tax Analysts. Copyright 2003 Tax Analysts. All rights reserved.



TAX COURT ADJUDGES TENNESSEE ARTS GUILD TO BE EXEMPT ORGANIZATION

The Cleveland Creative Arts Guild, a Tennessee nonprofit corporation, sought a declaratory judgment under section 7428 that it qualified as an exempt organization under section 501(c)(3). The guild was organized in 1965 for the purpose of promoting the arts. Through its component groups, the guild sponsors a creative writing contest, plays, art education programs, and several art exhibitions and craft shows annually. The guild raises funds through membership dues; admissions charges from plays and art exhibits; entry fees and sales commissions charged to exhibitors at art exhibits; concession fees from an art festival, and interest earned on bank accounts.

Tax Court Judge Jacobs has held that the guild qualifies as an exempt organization under section 501(c)(3) of the Code. Relying on Goldsboro Art League, Inc. v. Commissioner, 75 T.C. 337 (1980), Judge Jacobs found that promotion of the arts constitutes both a charitable and an educational purpose and is therefore an exempt purpose. The court rejected the government's argument that the art exhibitions and craft sales furthered a substantial commercial purpose and disqualified the guild. According to the court, the sales activities were incidental to the primary purpose of the festivals and shows, which was to educate the public. The court also rejected the argument that the guild serves the private interests of its members rather than the public interest and found that, based on all the facts and circumstances, the guild serves the public interest.

Full Text

Provided by Tax Analysts. Copyright 2003 Tax Analysts. All rights reserved.

Filed July 1, 1985.

Petitioner, a non-profit corporation under Tennessee law, was organized for the purpose of promoting the arts. Petitioner sponsors a broad range of activities, including seasonal art festivals and craft shows. Participation in the festivals and shows is generally not restricted to members, and exhibitors have included non-members as well as members. The spring art festival features an art competition. Sales by the artists and craftsmen are a feature of all of the festivals and shows. Petitioner retains 10 percent of the sales proceeds to defray the expenses of operating the shows and festivals. HELD: (1) Petitioner qualifies as an exempt organization under section 501(c)(3), I.R.C. 1954, as amended, because it is operated exclusively for the exempt purpose of promoting the arts. The art festivals and craft shows conducted by petitioner serve the exempt purpose of art education and any sales activities in connection with the festivals and shows are secondary and incidental to advancing its exempt purpose. (2) Petitioner serves public rather than private interests, and is not therefore disqualified from exemption under section 501(c)(3), I.R.C. 1954.

LESLIE SHIELDS, for the petitioner.

HENRY G. SALAMY and ROBERT P. RUWE, for the respondent.



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