Court to Shed Light on Jurisdiction Over Thomas Kinkade Foundation

PGDC Summary:

The United States District Court for the District of Columbia has ruled that it has jurisdiction to rule on the tax-exempt status of the Thomas Kinkade Foundation Charitable Trust, a supporting organization described in IRC §509(a)(3). In response to the Foundation's request for declaratory judgment, the Court held the IRS failed to provide a timely determination of the Foundation's tax-exempt status as required by U.S.C. §7428(b)(2), stating "the IRS ignores the unfortunate impact its glacial pace has had on the Foundation's development."

The statute provides that an organization shall be deemed to have exhausted its administrative remedies when the Secretary fails to make a determination of tax-exempt status within 270 days of the request for such determination, provided the organization has taken, in a timely manner, all reasonable steps to secure such determination.

In this case, the Foundation filed its petition with Form 1023 on October 4, 2000. During the following 665 days, the Service requested additional information and received timely responses from the Foundation. Also during that period, the petition was handed off to at least four different IRS agents, each of whom appeared to have started from scratch. According to the Foundation's Complaint, the Service issued a proposed adverse determination letter after verbal assurances from the IRS that tax-exempt status would be granted.

According to the Complaint, the Service gave two reasons for its proposed denial: first, it found the primary purpose of the Foundation is to provide substantial and direct personal benefit to the Foundation's settlors. Second, it concluded the Foundation failed to meet the control test contained in Section 509(a)(3)(C) because the settlors appointed all Trustees.

At the heart of the matter is Thomas Kinkade, a world renowned artist known as the "The Painter of Light" for his warm portrayal of landscapes and Americana. Forbes reported the Service denied tax-exempt status because the Foundation planned on buying "copies of Kinkade¿s artwork from his publicly traded company, Media Arts Group, thus constituting illegal personal gain to the California-based Kinkade..." The Foundation contends it buys prints from Media Arts Group "for cost" and that there is no benefit whatsoever to the settlors, just to charity.

According to the Complaint, "These justifications for denial of tax exempt status are incorrect, not factually supportable, contrary to IRS regulations and governing case law, and otherwise arbitrary and erroneous."

Full Texts:

The full texts of the complaint and ruling are can be accessed via the following links:

Complaint: Thomas Kinkade Foundation Charitable Trust v. United States

Ruling:Kinkade Memorandum Opinion.pdf (225k)