Union League Club of Chicago v. United States

• Decision Date: 06 November 1933
• Docket Number: No. M-123.,M-123.
• Citation: 4 F. Supp. 929
• Parties: UNION LEAGUE CLUB OF CHICAGO v. UNITED STATES.
• Court: U.S. Claims Court

4 F. Supp. 929

UNION LEAGUE CLUB OF CHICAGO v. UNITED STATES.

No. M-123.

Court of Claims.

November 6, 1933.

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William P. Sidley, of Chicago, Ill. (J. Dwight Dickerson, of Chicago, Ill., on the brief), for plaintiff.

Fred K. Dyar, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

GREEN, Judge.

As the name of the plaintiff indicates, it is a club, and during the period from August 26, 1924, to and including July 23, 1928, paid taxes on dues and initiation fees collected from its members in the amount of $178,916.24. It now brings suit for this amount with interest, alleging that these taxes were unlawfully collected. The issue in the case is whether the plaintiff was subject to tax as a social or athletic club, the determination of which depends partly upon the construction of the statute imposing taxes on social or athletic clubs and partly upon whether the facts in the case bring it within the proper construction of the statute.

It is insisted on behalf of the plaintiff that the evidence shows that the predominant purpose of the club is not social but civic and philanthropic, and that this fact is sufficient to show that it is exempt from the tax. This contention is in effect that the regulations laid down by the Bureau of Internal Revenue stating under what circumstances a club may be regarded as subject to the tax are not authorized by the statute which imposes it.

We think it is too late now to raise this objection. These regulations were promulgated in 1917 when the statute first went into force. Ever since they have been applied by the courts as laid down and no court has even intimated that they were not authorized under a proper construction of the statute. More than fifteen years have elapsed since the regulations were first announced. During all this period the regulations have remained substantially the same, and Congress, although well aware of the construction which was being placed on the statute by the bureau and by the courts, has several times re-enacted the law imposing the tax. It is well settled that where there has been a long-continued construction of a statute by an executive department charged with its administration which has been approved by the courts, repeated re-enactment of a statute without substantial change may be treated as implied approval of this construction and purpose on the part of Congress to continue the law in force as so construed. The authorities directly or indirectly supporting this rule are so numerous that without citing the decisions we shall hold that the rule applies to the case at bar.

Article 36 of the regulations states: "The tax does not attach to dues or fees * * * merely because it the club has incidental social features, but, if the social features are a material purpose of the organization, then it is a `social * * * club or organization' within the meaning of the act."

This court has taken this regulation for its guidance in all of the cases which come before it and for the reasons stated above we shall continue to apply it as a correct construction of the statute. The effect of its application is to make the decision in the cases which have come before the court turn on the question of whether the social features of the club involved were merely incidental or whether, on the other hand, they are a material purpose of the organization. This is largely a question of fact although it depends to some extent upon the construction of the word "incidental" as used in the regulations.

We doubt whether there is much to be gained by attempting to define the word "incidental," especially when under some definitions we come back to the original word. For example, one of the dictionary definitions of "incidental" is "casual" and one of the dictionary definitions of "casual" is "incidental." Nevertheless, we think the meaning of the word "incidental" as used in the regulations is well understood and not difficult to apply. An examination of the cases which we have decided will show that in all instances where the social features were few and insignificant, or immaterial to its purposes, as shown by its activities, the social features have been held to be merely incidental and the club not subject to the tax. In cases where it appeared that the club did not conduct, promote, or facilitate any activities of a social nature, or for social purposes, it would seem manifest that the organization could not be held to be a social club and the court so ruled. On the other hand, where the social features were numerous and important to the club and especially where they were necessary to its existence or prosperity, we have uniformly held the club to be taxable as a social club. As often happens, it is possible to cite instances where expressions contained in the opinions of this court detached from the body of the opinion might seem not to be uniform, but when the case as a whole is considered, and especially the facts upon which the judgment was rendered, a consistent application of the rule laid down in the regulations will always be found.

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