7 T.C. 1449 (1946)
ASSOCIATED INDUSTRIES OF CLEVELAND, PETITIONER,
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Docket No. 7264.
United States Tax Court.
December 31, 1946
Petitioner is an association of employers. Its primary purpose was to advance and maintain the ‘ open shop‘ principle in industry. Held, under the facts, petitioner is a business league and, as such, is exempt from paying income taxes by virtue of section 101(7) of the Internal Revenue Code.
H. Walter Stewart, Esq., and David A. Gaskill, Esq., for the petitioner.
W. W. Kerr, Esq., for the respondent.
This proceeding involves deficiencies asserted against Associated Industries of Cleveland for income taxes, declared value excess profits taxes, and excess profits taxes, plus penalties thereon, for the years and in the amounts as follows:
|| Excess profits tax
|| Declared value excess profits tax
Page 1450 The petitioner did not file returns for taxable years ended December 31, 1921, to December 31, 1935, inclusive. Under date of September 28, 1939, the petitioner was informed by the collector of internal revenue for the eighteenth district of Ohio that it was not exempt from taxation and was instructed to file returns for the years 1936, 1937, and 1938. The petitioner, on June 27, 1940, filed income and excess profits tax returns for the taxable years ended December 31, 1936, 1937, and 1938. The income and declared value excess profits tax return for the taxable year ended December 31, 1941, was filed on March 16, 1942. All of these returns were filed with that collector under protest. The principal question for determination is whether petitioner is a business league within the meaning of section 101(7) of the Internal Revenue Code and corresponding sections of prior revenue acts and, therefore, entitled to exemption from these taxes. If petitioner is found not to be entitled to the exemption, there is no dispute as to the amounts of tax due, but it will be necessary to determine whether respondent erred in asserting delinquency penalties for failure to file returns for the years here involved within the times prescribed by law. The facts have been presented by written stipulation of the parties, oral testimony, and documentary exhibits. The facts stipulated are found to be as stipulated. FINDINGS OF FACT. Petitioner is, and at all times material to this proceeding was, an unincorporated association of persons, firms, and corporations, with its offices at Cleveland, Ohio. It was organized on or about May 17, 1920, under the name of ‘ The American Plan Association of Cleveland,‘ and it continued to operate under that name until June 25, 1930, when its name was changed to ‘ The Associated Industries of Cleveland.‘ In 1919 various groups of men in Cleveland met to consider the critical labor problems and difficulties confronting industry in that city in the period immediately following the First World War. Industrial operations in Cleveland were being seriously disrupted by strikes. A committee of the Cleveland Chamber of Commerce was among the groups working on the problem. Many employer members of the chamber were not satisfied with the way in which that committee was handling the matter, and this was one of the reasons for the formation of the petitioner organization in 1920. Its original name was the American Plan Association. The original founders and members of the association consisted of about 20 persons, firms, and corporations in the community, including some of the principal industrial concerns. The number of members rapidly increased to about Page 1451 200, and eventually reached 500 to 600. Petitioner's members employ a large part of the industrial workers of the community, including about 75 per cent of the workers employed in metal trades. Virtually every phase of Cleveland industry is represented in petitioner's membership, which included, among others, steel producers, metal fabricators, laundries, bakeries, dairies, meat packers, and service trades. Petitioner is primarily an employers' association. Its regular membership is available only to employers of 5 or more persons. A few persons who are not employers hold associate membership in petitioner association. At the time of its organization petitioner adopted a constitution, the material provisions of which 4ere: ARTICLE II Principles Sec. 1.— The principles of this Association are to secure and perpetuate for employers and employees freedom of contract, irrespective of religious, political, industrial or labor organization; to perpetuate justice and liberty for all who live within our community, and to uphold the right under the Constitution of the United States of every individual in the enjoyment of life, liberty and property. Sec. 2.— The purpose of this Association is to provide the means whereby the executive heads of the industries engaged in Cleveland and vicinity may meet to discuss, for the benefit of all engaged in industry, the various problems of common interest; thereby promoting a better understanding among its members, concerning industrial subjects of mutual interest, particularly those relating to labor, production and finance, and through cooperation to improve employment, industrial and community conditions for both employer and employee. ARTICLE III Active Members Sec. 1.— Active members of the Association shall be firms, corporations, partnerships, or individual employers, within the limits of Cuyahoga County, employing five or more persons, and shall be represented by one or more executives. Each firm, corporation, partnership, or individual employer shall have one vote. Sec. 3.— Any firm, corporation, partnership, or individual employer, elected as a member of this Association, shall be governed by the Constitution and By-Laws of said Association. ARTICLE IV Governing Board Sec. 1.— The Association shall be managed by a Governing Board, elected annually, consisting of nine members, who shall choose from among their number a Chairman and Vice-Chairman, who, together with the Officers of the Association, shall have the right to vote on all matters coming before the Governing Board. Officers Page 1452 Sec. 2.— The officers of the Association shall be a President, two Vice-Presidents, and a Treasurer, who shall be elected by the members for a term of one year, at the annual meeting of the Association. Authority of Governing Board Sec. 8.— The Governing Board shall be vested with full power to interpret the Constitution, and to put into effect the resolutions and decisions of the Association, and by a two-thirds vote of all of its members to make or change By-Laws for its o4n government, which shall not conflict with the Constitution; to appoint standing and special committees; to fill vacancies which may occur in offices, in the committees and in its own body (unexpired terms); exercise supervision over receipts and expenditures; to fix the terms, conditions and compensation of employees, to authorize the expenditure of the Association's funds and exercise supervision over all receipts and disbursements; to take such action and to do all acts and things on behalf of the Association and its members which it may deem to be for the interest of the Association. Sec. 9.— The Governing Board shall hold regular monthly meetings at such time and place as it may arrange, and may be subject to call for special meetings by the President, or upon the written request of three members of the Board, the Secretary shall call a special meeting. The constitution also set forth, inter alia, the method for the election of new members to the association, the terms under which members might be expelled or withdraw from the association, the dues to be paid by members, and the procedure to be followed in the election of officers and members of the governing board. Provision was made for meetings of the governing board and of the association as a whole and for the amendment of the constitution. The bylaws of the association defined the duties of the various officers and provided for the employment of a secretary. The original constitution was amended from time to time in various respects and the subject matter of the bylaws was incorporated into the constitution. The constitution was last amended on June 25, 1930, and it provides, inter alia, as follows: ARTICLE II Purposes Sec. 2.— The purposes of this association are: First, to provide a means whereby the active executives in the business of any person, firm or corporation eligible for membership in this Association may meet to discuss industrial problems of common interest to...