246 F.2d 751 (9th Cir. 1957), 15350, Cammarano v. United States

Docket Nº:15350.
Citation:246 F.2d 751
Party Name:William B. CAMMARANO and Louise Cammarano, His Wife, Appellants, v. UNITED STATES of America, Appellee.
Case Date:July 08, 1957
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 751

246 F.2d 751 (9th Cir. 1957)

William B. CAMMARANO and Louise Cammarano, His Wife, Appellants,

v.

UNITED STATES of America, Appellee.

No. 15350.

United States Court of Appeals, Ninth Circuit.

July 8, 1957

Rehearing Denied Oct. 15, 1957.

Jones & Grey, A. R. Kehoe and Hargrave A. Garrison, Seattle, Wash., Athearn, Chandler & Hoffman, Walter Hoffman, and Clark W. Maser, San Francisco, Cal., for appellants.

Charles K. Rice, Asst. Atty. Gen., Hilbert P. Zarky, Earl Schmeidler and Ellis N. Slack, Attys., Dept. of Justice, Washington, D.C., Charles P. Moriarty, U.S. Atty., Seattle, Wash., and Guy A. B. Dovell, Asst. U.S. Atty., Tacoma, Wash., for appellee.

Before ORR, POPE and FEE, Circuit Judges.

ORR, Circuit Judge.

Appellants, partners in a wholesale beer distributing concern in Tacoma, Washington, made a contribution to the Washington Beer Wholesalers Association, Inc., Trust Fund. The Trust Fund had been established December 17, 1947, to carry on an extensive state-wide publicity program, directed by an Industry Advisory Committee, on behalf of wholesale and retail beer and wine dealers to defeat proposed initiative legislation in the State of Washington. The measure, if enacted into law, would have placed the retail sale of wine and beer exclusively in state owned and operated stores. 1

Page 752

The Association assessed its members amounts based upon their volume of business. The funds received from the contributions, appellants' contribution included, were used in an effort to defeat the initiative legislation.

On their income tax returns appellants claimed a deduction for the contribution made as an ordinary and necessary business expense within the meaning of § 23(a)(1)(A), Internal Revenue Code of 1939. 2 The Commissioner of Internal Revenue disallowed this deduction on the ground that the contribution was used for lobbying purposes and the promotion or defeat of legislation, and therefore within the prohibition contained in Treasury Regulations 111, § 29.23(o)-1, in force and effect at the time the payment was made. Following payment of the assessed deficiency and a claim for refund, this suit for refund followed.

The regulation reads:

'Sec. 29.23(o)-1. Contributions or Gifts by Individuals.--

'Sums of money expended for lobbying purposes, the promotion or defeat of legislation, the exploitation of propaganda, including advertising other than trade advertising, and contributions for campaign expenses, are not deductible from gross income. * * *'

The field encompassing the force and effect of the lobbying regulation set out above has often been plowed; but there exists no straight furrow which leads unerringly to the proper solution of all cases. The regulation has quite often been held to preclude deductions made for moneys spent to defeat legislation. 3 Of course, the particular facts of each case govern.

Unquestionably the regulation is broad enough to exclude deductions for any and all sums spent for lobbying and the promotion or defeat of legislation, and the Government insists that the courts have sustained the validity of the regulation in...

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