Quadrangle Club v. United States, 4866.

• Citation: 64 F.2d 80
• Decision Date: 24 March 1933
• Docket Number: No. 4866.,4866.
• Parties: QUADRANGLE CLUB v. UNITED STATES.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

64 F.2d 80 (1933)

QUADRANGLE CLUB v. UNITED STATES.

No. 4866.

Circuit Court of Appeals, Seventh Circuit.

March 24, 1933.

Richard S. Folsom, of Chicago, Ill., and John F. McCarron, of Washington, D. C., for appellant.

Dwight H. Green and John Potts Barnes, both of Chicago, Ill., for the United States.

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

ALSCHULER, Circuit Judge.

Appellant sued to recover taxes collected on the dues of its members. Trial was by the court, and judgment went for appellee.

The section of the Revenue Act (See 26 USCA § 872) whereunder the tax was levied specifies that there shall be paid a tax of ten per cent. of any amount paid "as dues or membership fees to any social, athletic, or sporting club or organization * * *." The applicable Treasury Regulation is: "Any organization which maintains quarters or arranges periodical dinners or meetings, for the purpose of affording its members an opportunity of congregating for social intercourse, is a `social * * * club or organization' within the meaning of the Act, unless its social features are not a material purpose of the organization but are subordinate and merely incidental to the active furtherance of a different and predominant purpose, such as, for example, religion, the arts, or business. The tax does not attach to dues or fees of a religious organization, * * * chamber of commerce, commercial club, trade organization, or the like, merely because it 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."

Whether or not the social features of this club are "a material purpose of the organization," or are merely subordinate and incidental to a predominant purpose, must determine this appeal.

The club was chartered in 1895, for the object stated in the application of "the association of members of the Faculties of the University of Chicago and other persons interested in literature, science, or art, for the purpose of mutual improvement and social recreation * * *." Provision was made for six classes of membership: "Life, active, associate, non-resident, alumni, and quarterly" members. Active membership was limited to selected members of the faculties of the University of Chicago, and these only were entitled to vote and to hold office, except that certain life members, limited in number, might have the privileges of active members; but all classes of members are entitled to the club privileges. The initiation fee for active members is $50, and the annual dues are $40. There are differing rates for the other classes of membership.

The club was located with convenient access to the University buildings. In 1916 the club deeded its club property to the University, and the University agreed to and did expend $100,000 in the erection of a new clubhouse on University property, which was leased to the club for one hundred years at one dollar per annum, with heat and hot water to be supplied at cost by the University.

The building there so constructed by the University and occupied by the club is a three-storied brick structure, containing a card room, billiard room (having six tables), library, writing room, chess room, sun porch, a main and a private dining room, stage, kitchen, help's dining room, seventeen bed rooms, linen room, trunk room, offices, employees' bed rooms, store rooms, toilets, two lounges and dressing rooms, and gymnasium. There are also tennis courts on the premises for use of members.

Men eminent in their profession and high in the University faculty testified that the club was but an...