Louisville Country Club, Inc. v. Gray, Civ. No. 3692.
Citation | 178 F. Supp. 915 |
Decision Date | 29 October 1959 |
Docket Number | Civ. No. 3692. |
Parties | LOUISVILLE COUNTRY CLUB, INC., Plaintiff, v. William M. GRAY, District Director of Internal Revenue, Defendant. |
Court | U.S. District Court — Western District of Kentucky |
E. J. Wells, Louisville, Ky., for plaintiff.
William B. Jones, U. S. Atty., Louisville, Ky., Herbert L. Awe, Dept. of Justice, Tax Division, Washington, D. C., for defendant.
The Louisville Country Club, hereafter referred to as the taxpayer, is a nonprofit Kentucky corporation without capital stock and is organized for social purposes. It brings this suit on behalf of individual members seeking to recover excise taxes paid on a 1956 assessment levied to provide funds for capital improvement of club property.
The question involved is whether the 1956 assessment levied by the taxpayer's board of governors against each active voting member is subject to the 20 percent excise tax imposed on club dues by Section 4241(a)(1) of the Internal Revenue Code of 1954, 26 U.S.C.A. § 4241(a) (1). Both parties have filed a motion for summary judgment.
The facts have been stipulated. A special meeting of the voting members of the taxpayer was held to discuss the question of raising funds to remodel their clubhouse. At this meeting it was voted to authorize the board of governors of the taxpayer to levy an assessment and pursuant to this authority the board of governors subsequently adopted the following resolution:
The taxing statute involved imposes a "tax equivalent to 20 percent of any amount paid as dues or membership fees to any social, athletic, or sporting club or organization, if the dues or fees of an active resident annual member are in excess of $10 per year." Title 26 U.S. C.A. § 4241(a)(1). The term "dues" as defined "includes any assessment, irrespective of the purpose for which made, * * *." Title 26 U.S.C.A. § 4242(a). Similar provisions were contained in Sec. 1712 of the 1939 Internal Revenue Code and in prior acts dating from the Act of 1917, c. 63, § 701, 40 Stat. 319.
The taxpayer contends that since it admittedly had no legal right under Kentucky law to levy an assessment and enforce its collection, payments made by the members, and no member refused to pay, were voluntary contributions or gifts and not taxable as "dues", citing Pendennis Club v. United States, D.C. W.D.Ky., 20 F.Supp. 758. This case was decided by this Court in 1937 and is one of three cases so holding, the others being Fresh Meadow Country Club v. United States, D.C.E.D.N.Y.1937, 17 F.Supp. 400, and Garden City Golf Club v. Corwin, 2 Cir., 62 F.2d 246, decided in 1932 and cited and relied upon in both of the district court opinions. In 1957, however, the Second Circuit in City Athletic Club v. United States, 242 F.2d 43, 44, rejected its earlier opinion in Garden City Golf Club v. Corwin as unsound, stating as follows:
The holding of this case that the meaning of the word "assessment" as used in the taxing statute is a matter of federal rather than local law is clearly correct. The Supreme Court lays down the rule of supremacy of federal law in Burnet v. Harmel, supra.
287 U.S. 103, at page 110, 53 S.Ct. 77.
The application of this rule compels the conclusion as it did in City Athletic Club v. United States, supra,...
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