Guide Intern. Corp. v. U.S.

• Decision Date: 21 November 1991
• Docket Number: No. 90-2441,90-2441
• Citation: 948 F.2d 360
• Parties: -5907, 91-2 USTC P 50,573 GUIDE INTERNATIONAL CORPORATION, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 360

948 F.2d 360

68 A.F.T.R.2d 91-5907, 91-2 USTC P 50,573

GUIDE INTERNATIONAL CORPORATION, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 90-2441.

United States Court of Appeals, Seventh Circuit.

Argued April 11, 1991.

Decided Nov. 21, 1991.

David J. Duez (argued), James M. Roche, and Ethel R. Kaplan, McDermott, Will & Emery, Chicago, Ill., for plaintiff-appellant.

Elizabeth M. Landes, Asst. U.S. Atty., Office of the U.S. Atty., Crim. Div., Chicago, Ill., Gary R. Allen, Charles Bricken, Robert S. Pomerance (argued), Janet Bradley, and Alexandra E. Nicholaides, Dept. of Justice, Tax Div., Appellate Section, Washington, D.C., for defendant-appellee.

Before CUMMINGS, CUDAHY and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Guide International Corporation is a nonprofit organization whose purpose is to develop data processing products and services, and to provide a forum for the exchange and dissemination of information concerning data processing equipment and systems. In 1971, the Internal Revenue Service determined that Guide was exempt from tax as a nonprofit business league under § 501(c)(6) of the Internal Revenue Code, 26 U.S.C. § 501(c)(6). ¹ However Revenue Ruling 83-164, 1983-2 C.B. 95 put Guide's tax-exempt status into question. ² To obtain a binding determination of its tax-exempt status, Guide filed income tax returns for the years 1984, 1985, and 1986, and, thereafter, filed for refund of taxes paid with those returns. No action was taken on Guide's claim and Guide brought suit. On cross-motions for summary judgment, the district court found that Guide failed to qualify as a business league and granted summary judgment in favor of the government. Guide appeals and we affirm.

A number of circuits have held that the determination whether an association is a business league under § 501(c)(6) is a mixed question of fact and law, which is reviewed de novo. See Engineers Club of San Francisco v. United States, 791 F.2d 686, 688-89 (9th Cir.1986); MIB, Inc. v. Commissioner, 734 F.2d 71, 76 (1st Cir.1984). We adopt this standard of review. Accordingly, the district court's grant of summary judgment in favor of the government is appropriate under Rule 56 of the Federal Rules of Civil Procedure only if there is no genuine issue as to any material fact and the government is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

The facts are undisputed. Guide was formed in 1956 and incorporated in Missouri in 1969 as a nonprofit association. Guide's purposes, as set forth in its Articles of Incorporation, are the following:

(a) The promotion of sound professional practices with respect to the uses of data processing equipment and systems.

(b) The exchange and dissemination of information concerning data processing equipment and systems.

(c) The participation with manufacturers of data processing equipment (including hardware, software and peripheral equipment) in the improvement and development of products, standards, and education.

Guide's By-laws state that its primary purposes include "communicat[ing] to the IBM Corporation user needs in all technical areas of interest" and "review[ing], comment[ing] and exchang[ing] information on products and services related to the equipment needed to qualify for GUIDE membership." The By-laws restrict membership to organizations who own large-scale computer equipment manufactured by International Business Machines (IBM mainframes). ³

Guide's membership includes major corporations from diverse fields, as well as educational and governmental organizations. Many of the members compete against each other, and some compete against IBM. Guide is managed by a board of directors, who are members of the organization. Guide's principal activity is the sponsorship of week-long conferences that are held three times a year and focus on data processing matters. Representatives of IBM and other persons are invited to speak at the conferences on topics chosen by Guide's management. Although IBM and manufacturers of compatible peripheral equipment present data processing products at the conferences, all sales and recruitment activities are prohibited. IBM provides administrative personnel, a personal computer, copiers and refreshments at the meetings. The information presented and discussed at the conferences is communicated to IBM.

Guide also conducts research involving data processing equipment manufactured by IBM and other companies. Project papers and other resource materials prepared by Guide are maintained in a library and are generally available to all interested parties, including non-members.

Guide argues that the district court erred in determining it was not a business league under § 501(c)(6). The principal issue before the district court was whether Guide satisfies the requirement of Treasury Regulation § 1.501(c)(6)-1 (26 C.F.R. § 1.501(c)(6)-1) that its activities "be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons."

Relying on National Muffler Dealers Ass'n, Inc. v. United States, 440 U.S. 472, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979), the district court found that Guide fails to meet the line of business test because it primarily serves the interests of IBM and the users of IBM...