- 110 - tax-exempt status. We conclude, and we have found, that the compensation that W&H received under the Contract by way of direct payment by petitioner and by way of the value of W&H’s use of names generated by the fundraising efforts that petitioner already paid for, exceeded reasonable compensation. As a result, we conclude that, as of the June 11, 1984, date on which the Contract started, the Contract was not a reasonable contingent compensation arrangement, that W&H’s compensation under the Contract exceeded reasonable compensation, and that thus there was an inurement to an insider, in violation of the restrictions in sections 501(c)(3) and 170(c)(2)(C). It is suggested that the $2� million that petitioner cleared during the course of the Contract may justify such high compensation. However: (1) The $2� million is so small in comparison to the amounts of contributions, of W&H compensation, of postage and shipping costs, of printing and publications costs, and of mailing list rental costs, as to be almost an incidental product of the fundraising campaign; and (2) W&H was supposed to provide a substantial asset to petitioner--a housefile that petitioner could exploit in future fundraising (see supra findings under Direct Mail Fundraising)--but W&H’s services were a practical failure in this regard. Thus, the magnitude of W&H’s compensation is not justified by adequacy of results. We hold for respondent on this issue.Page: Previous 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 Next
Last modified: May 25, 2011