                               T.C. Memo. 2018-57



                         UNITED STATES TAX COURT



               ABOVO FOUNDATION, INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 18673-15X.                         Filed April 30, 2018.



      Emmanuel C. Okonkwo (an officer), for petitioner.

      Marissa R. Lenius, for respondent.



                           MEMORANDUM OPINION


      FOLEY, Judge: Pursuant to section 7428(a), petitioner seeks a declaratory

judgment that it meets the requirements of section 501(c)(3) and is exempt from

Federal income taxation. Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect at all relevant times, and all Rule references

are to the Tax Court Rules of Practice and Procedure. This case was submitted for
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[*2] decision based on the stipulated administrative record as defined in Rule

210(b)(12). See Rule 217. Petitioner exhausted its administrative remedies as

required by section 7428(b)(2) and Rule 210(c)(4); received a final adverse

determination letter dated June 5, 2015, relating to its initial application for tax-

exempt status; and filed its petition and amended petition with the Court on July

21 and August 26, 2015, respectively.

                                     Background

      Emmanuel C. Okonkwo is a military veteran, medical doctor, and board

certified expert in patient safety and risk management. He holds doctor of

medicine, master of science in quality systems management, and bachelor of

individual studies in hospital management degrees. On May 27, 2011, Dr.

Okonkwo incorporated petitioner, Abovo Foundation, Inc. (Abovo), as a Texas

domestic nonprofit corporation. Abovo’s primary purpose would be to deliver

quality management consulting services to medical providers and advance

Government programs through patient safety initiatives. Its quality management

services would include “defining, identifying, analyzing, measuring and

controlling systems and processes to ensure desirable outcomes”. In addition,

Abovo would provide “uplifting services for the elderly and veterans”, housing for

low-income individuals, and internal auditing services.
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[*3] Abovo would solicit donations and receive fees relating to its services. Dr.

Okonkwo, Abovo’s president, chief executive officer, and sole employee, would

perform services provided to clients (i.e., at an hourly rate of $350), receive a

$217,000 salary, and be eligible for an annual performance-based bonus (i.e., not

to exceed $100,000). While Abovo has not entered into any service contracts, its

fee structure would be market based and dependent on the nature of the project

and the expertise required to complete it.

      On April 23, 2012, respondent received Abovo’s incomplete Form 1023,

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

Revenue Code. On September 4, 2012, at respondent’s request, Abovo sent

respondent an updated Form 1023, and on December 10, 2013, amended its

certificate of formation to provide that Abovo was organized exclusively for

charitable, religious, educational, and scientific purposes pursuant to section

501(c)(3).

                                      Discussion

      Pursuant to section 501(a), organizations described in section 501(c)

generally are exempt from Federal income taxation. Section 501(c)(3) requires

that an organization be organized and operated exclusively for exempt purposes,

and that “no part of * * * [its] net earnings * * * inure[] to the benefit of any
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[*4] private shareholder or individual” (i.e., the organizational and operational

tests). Sec. 501(c)(3); sec. 1.501(c)(3)-1(a) to (c)(2), Income Tax Regs. Only the

operational test is at issue.

       Abovo contends and bears the burden of establishing that its services would

advance Government programs pursuant to Federal patient safety laws and lessen

the Government’s burden. See Rule 142(a). To the contrary, Abovo’s services

would not serve an exempt purpose, would be commercial in nature, and would

serve Dr. Okonkwo’s, rather than the public’s, interest. See sec. 501(c)(3); Better

Bus. Bureau v. United States, 326 U.S. 279, 283 (1945); sec. 1.501(c)(3)-1(c)(1)

and (2), Income Tax Regs. The administrative record does not establish that

Abovo would act on the Government’s behalf or that Abovo’s consulting services

would lessen the Government’s burden. See Quality Auditing Co. v.

Commissioner, 114 T.C. 498, 507-508 (2000) (citing Columbia Park & Recreation

Ass’n v. Commissioner, 88 T.C. 1, 21 & n.45 (1987), aff’d, 838 F.2d 465 (4th Cir.

1988)); cf. Ind. Crop Improvement Ass’n v. Commissioner, 76 T.C. 394 (1981)

(holding that a taxpayer’s testing and certification of agricultural products

lessened the Government’s burden).

       In short, Abovo is a facade for Dr. Okonkwo’s consulting activities. See

B.S.W. Grp., Inc. v. Commissioner, 70 T.C. 352, 358 (1978) (stating that the
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[*5] relevant consulting activities were “of the sort which * * * [were] ordinarily

carried on by commercial ventures organized for profit”). Abovo would develop

Dr. Okonkwo’s business relationships, further his consulting career as a board

certified expert in patient safety and risk management, and potentially pay him

annual compensation in excess of $300,000. See sec. 501(c)(3); B.S.W. Grp., Inc.

v. Commissioner, 70 T.C. at 359; sec. 1.501(c)(3)-1(c)(2), Income Tax Regs. The

benefits relating to Abovo would inure to Dr. Okonkwo, Abovo’s sole employee,

service provider, and primary source of funding. Because Abovo would be

operated for commercial purposes and for the benefit of Dr. Okonkwo, it does not

qualify for tax exemption.

      Contentions we have not addressed are irrelevant, moot, or meritless.

      To reflect the foregoing,


                                              Decision will be entered

                                       for respondent.
