National Muffler Dealers Ass'n, Inc. v. U.S., No. 252

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtBefore KAUFMAN, Chief Judge, SMITH and MULLIGAN; IRVING R. KAUFMAN
Citation565 F.2d 845
Parties77-2 USTC P 9756 NATIONAL MUFFLER DEALERS ASSOCIATION, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. ocket 77-6106.
Decision Date21 November 1977
Docket NumberD,No. 252

Page 845

565 F.2d 845
77-2 USTC P 9756
NATIONAL MUFFLER DEALERS ASSOCIATION, INC., Plaintiff-Appellant,
v.
UNITED STATES of America, Defendant-Appellee.
No. 252, Docket 77-6106.
United States Court of Appeals,
Second Circuit.
Argued Nov. 10, 1977.
Decided Nov. 21, 1977.

Myron P. Gordon, New York City (Monte Engler and Hoffberg, Gordon, Rabin & Engler, New York City, of counsel), for plaintiff-appellant.

Peter C. Salerno, Asst. U. S. Atty., New York City (Robert B. Fiske, Jr., U. S. Atty. for the Southern District of New York, Kent T. Stauffer, Patrick H. Barth, Asst. U. S. Attys., New York City, of counsel), for defendant-appellee.

Before KAUFMAN, Chief Judge, SMITH and MULLIGAN, Circuit Judges.

IRVING R. KAUFMAN, Chief Judge:

In addition to its enormous complexity, the Internal Revenue Code often speaks in generalities, and its contours and boundaries are frequently left to be filled by administrative and judicial interpretation. We are called upon to add yet another detail to the Code's broad canvas in determining whether the National Muffler Dealers Association, Inc. ("Association") is qualified to take a tax exemption for the years 1971-73 as a "business league" under § 501(c)(6) of the Internal Revenue Code. We agree with the district court that the Association does not benefit an entire "line of business" as required by the treasury regulations, and, accordingly, does not merit an exemption. We therefore affirm the dismissal of the Association's complaint.

I.

The National Muffler Dealers Association was organized in 1971, under the New York Not-For-Profit Corporation Law, as a trade association of "Midas Muffler" dealers. At the time, an internal struggle was taking place within Midas International Corporation ("Midas"), the franchisor of all Midas Muffler dealers, and many of Midas's franchisees were concerned that they might suffer from the pending corporate shake-up. As a consequence of this, they formed the Association to secure themselves against the whims of a new Midas management.

Although the Association's Certificate of Incorporation described its purpose as the promotion of the best interests of muffler dealers generally, its first set of by-laws restricted membership to muffler dealers holding a valid Midas franchise. On October 23, 1972, in an apparent effort to obtain the tax benefits it now seeks, the by-laws were amended to allow any muffler franchisee

Page 846

to join. Since its inception, however, the Association's members have apparently all been Midas Muffler franchisees. During the tax years in question, approximately 50% of all Midas dealers were members, and although, through the Association's efforts, that figure now stands at 80%, there has never been any attempt to recruit outside of the Midas chain.

The Association first attempted to deal with a specific problem, but it soon decided to extend the scope of its activities. In its endeavors, the Association sought generally to redress the inequality of bargaining power existing between its members and Midas, and has been a formidable force at the negotiating table. As a result of its dealings with Midas, franchisees now conduct their businesses under a twenty-year franchise agreement, providing, inter alia, that specific cause must exist to terminate a franchise and that disputes must be submitted to arbitration. The group also succeeded in persuading Midas to eliminate its requirement that customers pay a service charge when they seek to replace a guaranteed Midas Muffler. The Association, in addition, provides a number of supplemental services inuring only to the benefit of its members. For example, it sponsors insurance programs, and publishes a newsletter. And, the Association holds an annual convention at which issues of concern to Midas dealers are discussed.

II.

In evaluating the Association's claim to tax-exempt status, our inquiry must first focus on Section 501(c)(6) of the Internal Revenue Code, which provides an...

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4 practice notes
  • International Salt Co. v. Geostow, No. Civ. 87-1501L.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Western District of New York
    • 12 Octubre 1988
    ...a sociis. Harris v. Allstate Ins. Co., 309 N.Y. 72, 76, 127 N.E.2d 816 (1955); see National Muffler Dealers Ass'n v. United States, 565 F.2d 845, 846 (2d Cir. 1977), aff'd, 440 U.S. 472, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979); see e.g., California v. Brown, 479 U.S. 538, 107 S.Ct. 837, 840, 9......
  • Anesthesia Serv. Med. Grp., Inc. Emp. Protective Trust v. Comm'r of Internal Revenue, Docket Nos. 13935-83
    • United States
    • U.S. Tax Court
    • 24 Diciembre 1985
    ...in defining the term as benefits similar to life, sick, or accident benefits. See National Muffler Dealers Ass'n, Inc. v. United States, 565 F.2d 845, 846 (2d Cir. 1977), affd. 440 U.S. 472 (1979). Petitioners cite Grange Insurance Association of California v. Commissioner, 317 F.2d 222 (9t......
  • National Muffler Dealers Association, Inc v. United States, No. 77-1172
    • United States
    • United States Supreme Court
    • 20 Marzo 1979
    ...Held: Petitioner is not entitled to the tax exemption as a "business league" within the meaning of § 501(c)(6). Pp. 1306-1313. 2nd Cir., 565 F.2d 845, affirmed. Myron P. Gordon, New York City, for petitioner. Stuart A. Smith, Washington, D. C., for respondent. Page 473 Mr. Justice BLACKMUN ......
  • ABA Ret. Funds v. United States, No. 09 C 6993
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • 25 Abril 2013
    ...of the general economic welfare" of the groups for which they are organized. See National Muffler Dealers Ass'n, Inc. v. United States, 565 F.2d 845, 846 (2d Cir. 1977) aff'd, 440 U.S. 472 (1979) (explaining requirement that organizations be of the same general class as a chamber of commerc......
4 cases
  • International Salt Co. v. Geostow, No. Civ. 87-1501L.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court of Western District of New York
    • 12 Octubre 1988
    ...a sociis. Harris v. Allstate Ins. Co., 309 N.Y. 72, 76, 127 N.E.2d 816 (1955); see National Muffler Dealers Ass'n v. United States, 565 F.2d 845, 846 (2d Cir. 1977), aff'd, 440 U.S. 472, 99 S.Ct. 1304, 59 L.Ed.2d 519 (1979); see e.g., California v. Brown, 479 U.S. 538, 107 S.Ct. 837, 840, 9......
  • Anesthesia Serv. Med. Grp., Inc. Emp. Protective Trust v. Comm'r of Internal Revenue, Docket Nos. 13935-83
    • United States
    • U.S. Tax Court
    • 24 Diciembre 1985
    ...in defining the term as benefits similar to life, sick, or accident benefits. See National Muffler Dealers Ass'n, Inc. v. United States, 565 F.2d 845, 846 (2d Cir. 1977), affd. 440 U.S. 472 (1979). Petitioners cite Grange Insurance Association of California v. Commissioner, 317 F.2d 222 (9t......
  • National Muffler Dealers Association, Inc v. United States, No. 77-1172
    • United States
    • United States Supreme Court
    • 20 Marzo 1979
    ...Held: Petitioner is not entitled to the tax exemption as a "business league" within the meaning of § 501(c)(6). Pp. 1306-1313. 2nd Cir., 565 F.2d 845, affirmed. Myron P. Gordon, New York City, for petitioner. Stuart A. Smith, Washington, D. C., for respondent. Page 473 Mr. Justice BLACKMUN ......
  • ABA Ret. Funds v. United States, No. 09 C 6993
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • 25 Abril 2013
    ...of the general economic welfare" of the groups for which they are organized. See National Muffler Dealers Ass'n, Inc. v. United States, 565 F.2d 845, 846 (2d Cir. 1977) aff'd, 440 U.S. 472 (1979) (explaining requirement that organizations be of the same general class as a chamber of commerc......

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