                       T.C. Memo. 2008-21



                     UNITED STATES TAX COURT



               SOLUTION PLUS, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23774-06X.              Filed February 5, 2008.



     Charles Theodore Henry Dennis III (an officer), for

petitioner.

     Don R. Spellman, for respondent.




                       MEMORANDUM OPINION


     ARMEN, Special Trial Judge:   Respondent denied petitioner’s

request for tax-exempt status under section 501(c)(3)1 on the


     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
                                                   (continued...)
                                - 2 -

grounds that:   (1) Petitioner was not organized exclusively for

exempt purposes; (2) petitioner was not operated exclusively for

exempt purposes; and (3) petitioner failed to establish that it

did not operate for a substantial nonexempt purpose.    Pursuant to

section 7428, petitioner seeks a declaratory judgment that

respondent’s denial of its request for tax-exempt status was

erroneous and that petitioner qualifies for tax-exempt status

under section 501(c)(3).   The matter is now before us on

respondent’s Motion For Summary Judgment.

                              Background

     Petitioner’s only involvement in this case has been to file

the petition and a designation of place of submission.      See Rules

211(a) and 212.   Thereafter, petitioner did not, or would not,

participate in stipulating to the administrative record, as

defined in Rule 210(b)(12).    See Rule 217(a).   As a consequence,

respondent filed the entire administrative record, appropriately

certified as to its genuineness by an official authorized to act

for the Commissioner.   See Rule 217(b)(1).   The following is

drawn from that record.




     1
     (...continued)
references are to the Tax Court Rules of Practice and Procedure.
                                 - 3 -

A.   Charles Theodore Henry Dennis III

      Charles Theodore Henry Dennis III (Mr. Dennis) formed

petitioner as a Maryland corporation on February 15, 2005.

Petitioner has not yet begun to operate.

      Mr. Dennis’s experience and expertise involve debt

management programs (DMPs).   A DMP is a program, often run by a

credit counseling agency, in which a debtor enrolls to

consolidate or restructure and repay unsecured debt.   Creditors

pay the entity that runs a DMP a percentage of the debt collected

through the DMP.   The financial criteria for qualification of a

debtor in a DMP are established by the debtor’s creditors.

      Before forming petitioner, Mr. Dennis sold DMPs, developed

plans to increase his company’s DMP portfolio, managed a “high

performance call center” for 7 years, and served as a senior loan

officer at a mortgage company.    Mr. Dennis has also been a vice

president of operations and a call center manager for two

companies that provided financial counseling and DMPs.

B.   Articles of Incorporation and Bylaws

      Petitioner’s articles of incorporation state that its

purpose is to “promote financial literacy to highly leveraged

consumers who want to become debt free” and “Offer products and

services to assist the consumers in reaching their financial

goals.”
                                - 4 -

      Petitioner’s bylaws provide that its specific objectives and

purposes are:

      1.    Establish Solution-PLUS as a viable and beneficial
            entity in the credit counseling industry through
            expanded financial services and diversification of
            revenue.

      2.    Provide a financial literacy model that focuses on
            increasing consumer financial awareness and preventing
            financial distress.

      3.    Provide a structured debt repayment plan (debt
            management program) for the immediate and long-term
            relief of financially overburdened consumers.

      4.    Establish Solution-PLUS as a reliable corporate
            community support mechanism for those in need.

C.   Board of Directors and Officers

      Petitioner’s articles of incorporation and bylaws provide

that petitioner shall have two directors.    Petitioner’s articles

of incorporation named Mr. Dennis and his wife as the only

directors.

      Mr. Dennis is petitioner’s president, chief executive

officer (CEO), and only employee.    Mr. Dennis’s compensation is

determined, in part, by the growth of petitioner’s portfolio of

DMPs.

D.   Petitioner’s Application for Exemption and Followup
     Correspondence

      1.   Application for Recognition of Exemption

      Mr. Dennis signed petitioner’s Form 1023, Application for

Recognition of Exemption Under Section 501(c)(3) of the Internal

Revenue Code, and dated it February 25, 2005, a date 10 days
                                  - 5 -

after petitioner’s incorporation.     An exempt organization

specialist for respondent reviewed the Form 1023 and wrote to

petitioner seeking additional information under penalties of

perjury about (a) entities (such as banks and lending

institutions) to which petitioner planned to refer individuals,

(b) whether petitioner would advertise or promote its products or

services in any way, (c) whether petitioner would receive any

benefit for referring individuals to companies, and (d) whether

petitioner had agreements with any such companies.

     2.   Petitioner’s Response to the Request for Additional
          Information

          a.   General Response

     In response to respondent’s request for additional

information, Mr. Dennis wrote that before petitioner began to

actually operate, petitioner wished to obtain exemption under

section 501(c)(3) so that it “can launch [its] DMP operating

platform and begin the process of originating and servicing DMP

Candidates” and begin offering “DMP services on a National

scale.”   Mr. Dennis stated that petitioner’s “goal is to focus

initially on offering the best DMP platform in the marketplace”

and “strictly put full emphasis on DMP Origination and Servicing”

and that petitioner “want[s] to fully concentrate on offering the

DMP” and “keep the DMP Service in the forefront.”     Mr. Dennis

explained that petitioner would be the “sole Service Provider of

DMP Origination and Customer Servicing for potential Customers”
                                - 6 -

and would provide all necessary DMP services, including

origination, customer servicing, document processing, research,

payment distribution, account reconciliation, and marketing

materials.   Mr. Dennis stated that petitioner’s “goal is to build

relationships with participating Creditors of the DMP by ensuring

Customer payments are made in a timely fashion and also reaching

out to the Creditors for continuous feedback as to how [it] can

maintain operational efficiency.”

     Mr. Dennis explained that petitioner’s DMP services would be

available to anyone who inquired, as long as they qualified for

the DMP, and that petitioner planned to track on a monthly basis

how many customers are originated on DMPs.    Once petitioner has

launched its DMP platform, it will use “traditional advertising

that has led to maximum lead generation for the Credit Counseling

Industry” and use advertising to “enable further brand

recognition”.    Petitioner could purchase leads for customers as

might be necessary to meet its revenue goals.    Additionally,

petitioner’s “goal is to network with organizations that offer

Homebuyer Certification Programs” as a “great platform to offer

DMP services.”

     Further, petitioner contemplated having a call center to

primarily handle inquiries for DMPs.    Petitioner’s goal is to

have each of its employees answer one new DMP inquiry per hour
                                - 7 -

and to take approximately eight new DMP inquiries on an average

business day.

     Petitioner’s training materials inform its anticipated

future employees that its goal is to provide them with the

necessary resources to ensure the success of its clients on DMPs.

Petitioner may adopt a bonus structure for its call center

employees “in accordance with industry norms.”    Mr. Dennis made

clear that petitioner would identify and service DMP candidates,

screen third-party vendors that offer appropriate products and

services, and expand the DMP portfolio before referring its

customers to such vendors.    Mr. Dennis also acknowledged that

petitioner might receive referral and marketing fees for

generating leads for outside vendors.

     Mr. Dennis stated that as petitioner’s DMP operation

“evolves and becomes more viable,” petitioner will begin

screening vendors that offer services that complement

petitioner’s “growing Portfolio of DMP Customers”.    Petitioner

will expose its customers to “various Products and Services -

that will complement their short- and long-term financial goals”

such as mortgage and insurance products.    Petitioner might

receive referral fees for marketing these products and services

to its potential customers.

     Mr. Dennis stated that petitioner also plans to provide

information to callers on credit report analysis, properly
                                 - 8 -

utilizing credit, homebuyer certification programs, and financial

planning.    Petitioner plans to develop a program of services

after identifying the caller’s “short-term and long-term

financial goals.”    Petitioner will tell callers that it provides

DMPs and these other programs to improve their overall “Credit

Profile”.

            b.   Telephone Call Center Script and Training Materials

     Mr. Dennis attached to his response:    (1) An “origination

script” to be used by petitioner’s employees who would operate a

telephone call center to screen potential DMP applicants; and (2)

a training manual.

     The script spells out the DMP origination process to

prospective customers.    Petitioner first tells callers that it

needs to ask them several questions before it can determine their

qualification for the DMP.    It then asks if the caller is

employed, the type and amount of debts, and whether the debts are

current.

     Next, petitioner explains that it is a “nonprofit

organization providing a free debt management program.”

Petitioner applies the qualifications for a DMP that the industry

and participating creditors establish.    To qualify for a DMP,

petitioner tells callers that they must have at least $2,000 in

unsecured debts and at least two accounts with creditors

participating in petitioner’s DMP program.    If a caller meets
                                - 9 -

these requirements, petitioner tells the caller “we can

definitely assist you right away”.      Petitioner advises that it

will consolidate the caller’s unsecured debts, give the caller

one place to make payments, and can typically reduce monthly

payments.    Petitioner also advises callers that they will receive

benefits from their creditors that the callers cannot receive

individually.

     Next, petitioner requests personal and debt information in

order to calculate the caller’s monthly payment on the DMP.

Then, petitioner advises the caller that there are no fees to

join the program, but asks for a contribution of $5 per creditor

per month.   Petitioner tells the caller that the contribution is

tax deductible and that petitioner has already included the

contribution in the caller’s monthly payment amount.

     Petitioner then completes a budget worksheet that the

“creditors require”.   If petitioner determines from the worksheet

that the caller has positive disposable income, and the caller

says that he or she needs the program because of delinquency,

reduction in income, or increase in expenses, petitioner enrolls

the caller in a DMP.   If a caller has positive disposable income,

but does not cite one of these reasons for needing the program,

petitioner tells the caller that creditors may not offer

benefits, says that it cannot assist the caller, suggests that
                                  - 10 -

the caller contact his or her creditors directly, and then ends

the call.

     If petitioner determines that the caller has negative

disposable income, but the caller says that he or she thinks the

DMP payment is affordable, petitioner enrolls the caller.      If the

caller has positive disposable income, but does not think the DMP

payment is affordable for some reason, petitioner tells the

caller that the program is not right for him or her, to call back

if something changes that would enable the caller to afford the

program, to call the creditors directly, and then ends the call.

     For qualifying callers, the origination script then

completes the enrollment process, which includes setting the

payment date, account activation, automatic checking account

debiting, client agreement, and “keys to success on the DMP”.

Petitioner ends each call by asking the caller if he or she knows

anyone else who might be interested in a DMP and, if so, to have

that person call petitioner and seek its assistance.

            c.     Educational Materials and Goals

     Mr. Dennis stated that petitioner plans to “educate high

school and college students on developing and maintaining sound

financial management skills” through free seminars and workshops.

The planned curriculum will include principles of financial

management, debt-to-income ratios, managing credit ratings, and

investing.       Petitioner also contemplated a seminar topic and
                                 - 11 -

presentation entitled “On the Right Track”, which includes

material on understanding credit reports and credit scores,

establishing credit, and borrowing techniques.    Petitioner

received two invitations in 2006 to make presentations on

financial management to students.

     3.   Petitioner’s Protest

     After considering Mr. Dennis’s response, respondent advised

petitioner that it had been identified as an organization

engaging in at least one of the following activities:     Credit

counseling, credit repair, debt consolidation, financial

education, money management, budgeting, or a related financial

activity.    Respondent provided petitioner with a copy of a

comprehensive analysis as to whether entities engaged in these

activities can qualify as organizations described in section

501(c)(3).   Respondent also provided petitioner with a detailed

statement of facts and law as to why it appeared that petitioner

did not qualify for tax-exempt status under section 501(c)(3) and

gave petitioner 30 days to file a protest.

     Petitioner then submitted to respondent a protest stating

that its activities would mirror those in Consumer Credit

Counseling Serv. of Ala., Inc. v. United States, 44 AFTR 2d

79-5122, 78-2 USTC par. 9660 (D.D.C. 1978), because petitioner’s

activities contemplated education of the public and its DMP

activity was merely incidental.     Petitioner attached to its
                               - 12 -

protest a copy of a one-page handout entitled “Educational

Solutions” stating that petitioner has developed an educational

curriculum.   Petitioner also attached a copy of “Articles of

Amendment” purporting to amend its bylaws by removing Mr.

Dennis’s wife as a director and adding two other individuals as

directors.

E.   Denial of Petitioner’s Application for Exemption

      Ultimately, on September 15, 2006, respondent issued a final

adverse determination letter, upon which the instant declaratory

judgment action is based.    In the letter, respondent determined

that petitioner did not qualify for exemption under section

501(a) as an organization described under section 501(c)(3)

because petitioner:   (1) Was not organized exclusively for exempt

purposes; (2) was not operated exclusively for exempt purposes;

and (3) failed to establish that it did not operate for a

substantial nonexempt purpose.

      Respondent stated that petitioner’s origination script was

entirely devoted to selling DMPs and obtaining information about

the caller’s unsecured debt and that the script did not provide

for determining the caller’s broader financial situation,

assisting the caller in making a budget, or proposing any

alternatives to the DMP.    Respondent noted petitioner did not

provide any of the meaningful educational materials that

petitioner claimed to be developing.    Respondent further noted
                              - 13 -

the information provided by petitioner shows that it expected

revenue from payments by creditors and from customers who would

be attracted to petitioner by traditional advertisements through

networks of organizations having members with credit issues.    In

addition, respondent stated that petitioner had researched

companies that would purchase credit counseling leads supplied by

petitioner.

F.   Proceedings in the Tax Court

      Petitioner timely filed the petition seeking a declaratory

judgment under section 7428 with respect to its initial

qualification for exemption as an organization described under

section 501(c)(3).   In the petition, petitioner states:

      Solution Plus Inc. is requesting tax exemption status
      under 501(c)(3) of the Internal Revenue Code. Solution
      Plus filed form 1023 on February 25, 2005 and did not
      receive a response until November 11, 2005. In the IRS
      letter dated November 11, 2005 there was a request for
      additional information inwhich detailed questions were
      raised and answered in reference to Solution Plus
      operations. Solution Plus primary goal is to educate
      individuals about the pit-falls of improper debt
      management. Solution Plus was formed to give the
      general public a fair opportunity to educated [sic] and
      counsel individuals who are going through hard
      financial distress. On September 19, 2006, the IRS
      sent Solution Plus a final denial of tax-exempt status
      without providing adequate reasons for their denial.
      Its appears that the IRS is focusing on our use of Debt
      Management Plans, but the DMP is only a minimal part of
      Solution Plus revenue. [Reproduced literally.]

As stated above, the petition and designation of place of

submission were the last documents that petitioner submitted to

the Court in the instant proceeding.
                                - 14 -

     Respondent filed an answer in which he denied the

allegations in the petition and to which he attached a complete

index to the administrative record.       Respondent did not allege in

the answer any new or additional grounds for denying petitioner’s

exemption application beyond those grounds identified in the

final adverse determination letter.

     Petitioner did not file a reply or move with respect to the

answer.   The Court ordered the parties to submit the case on the

administrative record or to file a written report as to the then

present status of the case.   As stated above, because petitioner

did not respond to respondent’s written request to stipulate to

the administrative record, respondent filed with the Court the

entire administrative record, together with the certificate

attesting to its genuineness.

     Subsequently, respondent filed his Motion For Summary

Judgment.   Petitioner was ordered to file a response to

respondent’s motion, but no response was received by the Court.

     Thereafter, the Court issued an Order, placing respondent’s

Motion For Summary Judgment on a motions calendar assigned to

Special Trial Judge Armen, who was authorized to hear the matter

and make the decision of the Court.       See sec. 7443A(b)(1), (c);

Rule 218(a); Deleg. Order No. 45, 126 T.C. VI (June 1, 2006).

     At the hearing, counsel for respondent appeared and argued

in support of respondent’s motion.       In contrast, there was no
                                - 15 -

appearance on behalf of petitioner, nor did petitioner file a

written statement pursuant to Rule 50(c) in lieu of appearance.

                              Discussion

A.   Declaratory Judgment

        In a declaratory judgment action brought under section 7428,

the Court decides whether the Commissioner’s determination was

erroneous.     See Church in Boston v. Commissioner, 71 T.C. 102,

105 (1978); Houston Lawyer Referral Serv., Inc. v. Commissioner,

69 T.C. 570, 573, (1978); see also Note to Rule 217(a), 68 T.C.

1048.

     Disposition of a declaratory judgment action concerning the

initial qualification of an exempt organization is ordinarily

made on the basis of the administrative record.     Church in Boston

v. Commissioner, supra at 105; Houston Lawyer Referral Serv.,

Inc. v. Commissioner, supra at 573.

        An action for declaratory judgment may be decided by summary

judgment.     Rule 217(b)(2); see, e.g., Church in Boston v.

Commissioner, supra.

B.   Summary Judgment

        Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.     Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).     Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy “if the pleadings, answers to interrogatories,
                                - 16 -

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law.”    Rule 121(a) and (b); Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965

(7th Cir. 1994).   The moving party bears the burden of proving

that there is no genuine issue of material fact, and factual

inferences will be made in a manner most favorable to the party

opposing summary judgment.   See Dahlstrom v. Commissioner, 85

T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344

(1982).   The party opposing summary judgment must set forth

specific facts showing that a genuine question of material fact

exists and may not rely merely on allegations or denials in the

pleadings.   Rule 121(d); Celotex Corp. v. Catrett, 477 U.S. 317,

324 (1986); Grant Creek Water Works, Ltd. v. Commissioner, 91

T.C. 322, 325 (1988); King v. Commissioner, 87 T.C. 1213, 1217

(1986).

     The Court’s decision in an action involving the initial

qualification of an exempt organization is ordinarily based on

the administrative record.   Rule 217(b)(1).   In the instant case,

neither party has asked the Court to admit evidence outside the

administrative record as filed and certified by respondent.

     After careful review, we are satisfied that there is no

genuine issue as to any material fact, and a decision may be
                               - 17 -

rendered as a matter of law.   Accordingly, we shall grant

respondent’s Motion For Summary Judgment.

C.   Whether Petitioner Is Entitled to Exempt Status

      A corporation that is organized and operated exclusively for

charitable purposes, as described in section 501(c)(3), is exempt

from Federal income tax unless exemption is denied under section

502 or 503.   Sec. 501(a).

      To qualify as an exempt organization under section

501(c)(3), a corporation must satisfy all of the requirements

stated therein, specifically including the requirements that the

corporation must be both organized and operated exclusively for

one or more exempt purposes specified therein and must not

operate for a substantial nonexempt purpose.   Exempt purposes

include both charitable and educational purposes.      A failure to

satisfy any one of the requirements is fatal to qualification.

Columbia Park & Recreation Association v. Commissioner, 88 T.C.

1, 13 (1987), affd. without published opinion 838 F.2d 465 (4th

Cir. 1988); see sec. 1.501(c)(3)-1(a)(1), Income Tax Regs.

      In a declaratory judgment action commenced under section

7428 to review the Commissioner’s denial of an organization’s

application for initial qualification for tax-exempt status under

section 501(c)(3), we ordinarily review only the administrative

record.   Rule 217(a); Natl. Association of Am. Churches v.

Commissioner, 82 T.C. 18, 19-20 (1984).
                                - 18 -

     1.   Whether Petitioner Is Organized Exclusively for Exempt
          Purposes

     Whether an organization is organized exclusively for exempt

purposes is sometimes known as the organizational test.    To

satisfy the organizational test, the articles of organization (1)

must limit the organization’s purposes to one or more exempt

purposes; (2) may not expressly authorize the organization to

engage in activities that do not further one or more exempt

purposes except to an insubstantial degree; and (3) must contain

an express or implied provision dedicating its assets to an

exempt purpose upon dissolution.    Sec. 1.501(c)(3)-1(b)(1)

through (4), Income Tax Regs.

           a.   Educational Purposes

     Petitioner contends that it satisfies the organizational

test because it was organized for educational purposes and that

use of DMPs was only a minimal part of its revenue.    However, the

administrative record clearly demonstrates otherwise.

     Petitioner’s articles of incorporation do not limit its

activities to those related to education because the articles

empower petitioner to engage in activities that are not purely

charitable or educational.    For example, petitioner could operate

an investment business and offer products and services with

respect to a customer’s individual needs.    Those activities stand

in stark contrast to educational purposes acceptable under

section 501(c)(3), which include activities that instruct or
                               - 19 -

train individuals to improve or develop their capabilities or

instruct the public on subjects useful to individuals and that

are beneficial to the community.   See Am. Campaign Acad. v.

Commissioner, 92 T.C. 1053, 1064 (1989); sec. 1.501(c)(3)-

1(d)(3)(i), Income Tax Regs.

     Petitioner stated that it was in the process of developing

free educational pamphlets for its DMP clients that would focus

on financial literacy and financial soundness.      However, other

than a one-page handout, petitioner did not provide respondent

with copies of the actual materials that it professed would be

provided to consumers, nor did petitioner describe in any detail

the content of any such materials.      Petitioner’s origination

script does not mention, describe, or offer to send any

educational materials to a caller.      The only information that

petitioner’s script discusses is the sending of literature about

petitioner’s DMP and associated programs, such as its credit

report analysis service.   In short, the administrative record

does not contain copies of any meaningful educational program or

educational materials that petitioner might send to a caller.

     Petitioner also stated that it plans to provide seminars and

workshops to high school and college students on developing and

maintaining sound financial management skills, and it provided

outlines of the planned curricula.      The invitations indicate that

the student audience needs education on financial management and
                                - 20 -

will benefit from petitioner’s program.    However, these student

programs are an insignificant part of petitioner’s overall

activities.

     Rather, petitioner’s activities are primarily structured to

market, determine eligibility for, and enroll individuals in

DMPs.   Petitioner plans to inform consumers about the range of

financial services it provides, not about understanding the cause

of, and devising personal solutions to, consumers’ financial

problems. Further, petitioner does not plan to consider the

particular knowledge of individual callers about managing their

personal finances.    Instead, petitioner simply plans to collect

data on the callers’ debts as necessary to qualify them for a DMP

or to determine whether they need other services that petitioner

provides.

     In short, the record shows that petitioner would not operate

primarily for educational purposes and that educational purposes

were to be a minimal part of petitioner’s proposed activities.

            b.   Charitable Purposes

     Respondent contends that petitioner was not organized

exclusively for charitable purposes.     We agree.

     The term “charitable” is used in section 501(c)(3) in its

generally accepted sense and includes relief of the poor

and distressed or of the underprivileged.     However, primarily

providing services for a fee ordinarily does not further
                                - 21 -

charitable purposes.    See I.H.C. Health Plans, Inc. v.

Commissioner, 325 F.3d l188, 1201 (10th Cir. 2003) (“Offering

products and services to a broad segment of the population is as

consistent with self promotion and profit maximization as it is

with any ‘charitable’ purpose”), affg. T.C. Memos. 2001-246,

2001-247, and 2001-248; Am. Campaign Acad. v. Commissioner, supra

at 1076-1077 (beneficiaries must possess “charitable

characteristics”); Aid to Artisans, Inc. v. Commissioner, 71 T.C.

202, 215-216 (1978) (disadvantaged artisans constitute a

charitable class).     A charitable organization’s programs must

also benefit the members of a recognized charitable class in a

“nonselect manner”.     See Am. Campaign Acad. v. Commissioner,

supra at 1077; Aid to Artisans, Inc. v. Commissioner, supra at

215-216; sec. 1.501(c)(3)-1(d)(1)(ii), Income Tax Regs. (must

serve public rather than private interests).    In short,

petitioner’s potential customers are not members of a class that

is benefited in a “nonselect manner”; indeed, petitioner’s

potential customers are likely to be treated in a “select”

manner, because they will be turned away unless they meet the

criteria of the participating creditors.2


     2
        We note that in Rev. Rul. 69-441, 1969-2 C.B. 115, the
Commissioner indicated that individuals with financial problems
are not on that account necessarily in need of assistance as
“proper recipients of charity”. We note further that the
Commissioner has ruled that an organization formed to help reduce
the incidence of personal bankruptcy by informing the public on
                                                   (continued...)
                              - 22 -

     2.   Whether Petitioner Is Operated Exclusively for
          Charitable Purposes

     We focus now on petitioner’s operations to decide whether

petitioner satisfies the operational test.   Petitioner has not

begun to actually operate.   However, its plans make clear:   (a)

Petitioner’s primary activity would be to provide DMPs to the

general public for a fee that it hopes to collect from its

customers and from its customers’ creditors; (b) petitioner would

conduct this activity in a self-promotional and profit-maximizing

manner; (c) petitioner would not limit its DMP services to low-

income individuals; and (d) petitioner has not established that

its proposed DMP fee structure is reasonable.   Thus, the

administrative record establishes that petitioner does not, or,

more accurately, would not, operate exclusively for charitable

purposes.




     2
     (...continued)
personal money management and aiding low-income persons with
financial problems by providing free counseling and, if
necessary, establishing a budget plan for the orderly discharge
of indebtedness, was considered to have furthered charitable
purposes. Id. In contrast, the Commissioner has indicated that an
organization assisting persons with financial problems by
analyzing their specific problems, counseling them on the payment
of their debts, and setting up payment plans based on their
ability to pay was not exempt under sec. 501(c)(3), because the
organization was not engaged in educational activities and did
not limit its program to persons who were in need of such
assistance as proper recipients of charity. Id.; Rev. Rul. 65-
299, 1965-2 C.B. 165.
                                - 23 -

     3.   Whether Petitioner Would Not Operate for a Substantial
          Nonexempt Purpose

     An organization is not organized or operated exclusively for

exempt purposes under section 501(c)(3) unless it serves a public

interest, rather than a private one.     Bob Jones Univ. v. United

States, 461 U.S. 574, 592 (1983); sec. 1.501(c)(3)-1(d)(1)(ii),

Income Tax Regs.     To satisfy this requirement, the organization

must not be organized and operated for the benefit of private

interests, such as those of its creator or the creator’s family.

Am. Campaign Acad. v. Commissioner, 92 T.C. at 1065-1067.

            a.   Private Interests of Mr. Dennis

     Mr. Dennis controls petitioner.     He and his wife were

petitioner’s only directors at formation and listed on its

application for exemption.     Mr. Dennis is petitioner’s president

and CEO, and a full-time employee, indeed, petitioner’s only

employee.    Mr. Dennis’s compensation will be based, at least in

part, on the growth of petitioner’s portfolio of DMPs.     Thereby,

his pay incentive parallels petitioner’s immediate goal to launch

its DMP operations to focus initially on offering the best DMP

platform in the marketplace, to offer DMP services nationally, to

strictly emphasize DMP origination and servicing, to fully

concentrate on offering the DMP, to keep the DMP service in the

forefront, and to use advertising to enable further brand

recognition.     The record thus indicates that Mr. Dennis formed

petitioner to be a family-controlled business that he personally
                                - 24 -

would run for financial gain, using his past professional

experience marketing DMPs and managing a DMP call center.

     Petitioner did not identify any changes to the board in its

early submissions to respondent.    However, petitioner later

represented, as part of its protest, that the board had added two

new members to replace Mrs. Dennis.      However, petitioner did not

provide a date for such change, nor did petitioner provide board

minutes or other documentation, such as certification of amended

articles, to establish the formal change in petitioner’s board.

Even if two additional members replaced Mrs. Dennis, Mr. Dennis

still would benefit from the organization and operation of

petitioner.

          b.     Private Interests of Creditors

     Petitioner only provides its DMP services to callers who

satisfy the qualifications established by participating

creditors.     Petitioner completes a budget worksheet that the

creditors require for each of petitioner’s clients.     In sum, the

administrative record establishes that petitioner would operate

for the benefit of private interests.
                                - 25 -

           c.   Conclusion as to Operation of Substantial Nonexempt
                Purpose

     Based on undisputed facts in the administrative record, we

conclude that petitioner would operate for a substantial

nonexempt purpose.

     4.   Petitioner’s Other Contentions

     Petitioner contends that the facts of this case are

substantially similar to those in Consumer Credit Counseling

Serv. of Ala., Inc. v. United States, 44 AFTR 2d 79-5122, 78-2

USTC par. 9660 (D.D.C. 1978).    We disagree.

     In Consumer Credit Counseling Serv. of Ala., Inc., the

District Court held that community education and counseling

assistance programs were the primary activities, that the

plaintiff-agencies were organized and operated exclusively for

charitable and educational purposes, and that the DMP activity

was minimal.    In the instant case, the sale of DMPs is the

primary reason for petitioner’s existence, and its charitable and

educational purposes are, at best, minimal.     The facts in

Consumer Credit Counseling Serv. of Ala., Inc. stand in stark

contrast to the facts in the instant case.

     5.   Conclusion As To Denial of Petitioner’s Exempt Status

     Respondent’s denial of petitioner’s tax-exempt status must

be upheld and respondent’s motion granted if respondent prevails

on any one of the three grounds for disqualification identified

in respondent’s final adverse determination letter.     See Columbia
                             - 26 -

Park and Recreation Association v. Commissioner, 88 T.C. at 13;

sec. 1.501(c)(3)-1(a)(1), Income Tax Regs.    Respondent has

prevailed on all three grounds for disqualification.    Thus, we

hold that respondent’s determination that petitioner does not

qualify for tax-exempt status under section 501(c)(3) was not

erroneous and that respondent is entitled to summary judgment.

     To reflect the foregoing,


                                      An order granting respondent’s

                                 Motion For Summary Judgment and

                                 decision for respondent will be

                                 entered.
