Town Club of St. Louis v. United States

• Decision Date: 22 January 1934
• Docket Number: 9712.,No. 9711,9711
• Citation: 68 F.2d 620
• Parties: TOWN CLUB OF ST. LOUIS v. UNITED STATES. SAME v. BECKER, Collector of Internal Revenue.
• Court: U.S. Court of Appeals — Eighth Circuit

68 F.2d 620 (1934)

TOWN CLUB OF ST. LOUIS v. UNITED STATES.

SAME v. BECKER, Collector of Internal Revenue.

Nos. 9711, 9712.

Circuit Court of Appeals, Eighth Circuit.

January 22, 1934.

Marion C. Early, Waller Edwards, and Myrtle B. Wood, all of St. Louis, Mo., for appellant.

Louis H. Breuer, U. S. Atty., of Rolla, Mo., Bryan Purteet, Asst. U. S. Atty., of St. Louis, Mo., and E. Barrett Prettyman, Gen. Counsel, Bureau of Internal Revenue, and L. H. Baylies, Atty., Bureau of Internal Revenue, both of Washington, D. C., for appellees.

Before STONE, SANBORN, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

Appellant in cause No. 9711 sues the United States at law to recover the sum of $6,281.84 for taxes alleged to have been illegally paid during a period from April 9, 1924, to December 19, 1925. In cause No. 9712 the suit is against the Collector of Internal Revenue to recover the sum of $10,522.14 for taxes alleged to have been illegally paid during the period beginning January 16, 1926, and ending March 31, 1928. Demand for refund was made and refused. A jury was waived and the two cases were by consent consolidated for trial and submitted to the court upon pleadings and proofs. The legal effect of the facts in the two cases is the same.

The taxes involved were assessed and collected under the provisions of section 801 of the Revenue Act of 1921 (42 Stat. 291), which provides:

"That from and after January 1, 1922, there shall be levied, assessed, collected, and paid, in lieu of the taxes imposed by section 801 of the Revenue Act of 1918, a tax equivalent to 10 per centum of any amount paid on or after such date, for any period after such date, (a) as dues or membership fees (where the dues or fees of an active resident annual member are in excess of $10 per year) to any social, athletic, or sporting club or organization; or (b) as initiation fees to such a club or organization, if such fees amount to more than $10, or if the dues or membership fees (not including initiation fees) of an active resident annual member are in excess of $10 per year; such taxes to be paid by the person paying such dues or fees: Provided, That there shall be exempted from the provisions of this section all amounts paid as dues or fees to a fraternal society, order, or association, operating under the lodge system. In the case of life memberships a life member shall pay annually, at the time for the payment of dues by active resident annual members, a tax equivalent to the tax upon the amount paid by such a member, but shall pay no tax upon the amount paid for life membership."

This section was carried, without material change, into section 501 of the Revenue Acts of 1924 and 1926 (26 USCA § 872 note), and may be referred to as the statutory law applicable to the cases under consideration. The appellant is an organization of St. Louis, Mo., women. It has approximately 2,000 members — perhaps more. As alleged in its petition, the club was organized under article 10, of chapter 33, Revised Statutes of Missouri 1909, and amendments thereto (Mo. St. Ann. c. 32, art. 10, § 4996 et seq., p. 2288 et seq.), which provide for the organization of benevolent, religious, scientific, fraternal-beneficial, educational, and miscellaneous associations.

The articles of association, article 4, state the object and purpose of the club as follows:

"Article 4. The object and purpose of the Association shall be for the discussion of questions of commercial, industrial, civic, and social interest; for the encouragement of good reading and the cultivation of art and literature and rational social amusement; to aid and assist the industrial, commercial, civic and social development of the City of Saint Louis, and more especially as they pertain to women; to provide, establish, and maintain a clubhouse or club rooms with library and other facilities appropriate and convenient for the entertainment of its members and their guests; and for the conduct of lawful and rational out-of-door play games and exercises; provided, however, that the Association as such shall have no connection with partisan politics or partisan organizations, nor shall it ever be committed to the endorsement of any particular measure or measures."

The club's constitution, article 2, provides:

"The objects of this Association shall be to provide and maintain an organized center for the investigation, discussion and improvement of the civic, business and social affairs of the City of Saint Louis, and more especially as they pertain to women, and to provide club room, library and other conveniences for its members; provided that the organization as such shall never be committed to the endorsement of any particular measure."

Regulation No. 43, part. 2, article 5, of the Treasury Department which gives the departmental construction of section 801 of the Revenue Act of 1921, reads as follows:

"Article 5. Social Clubs. — Any organization which maintains quarters, 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, singing society, 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 `social * * * club or organization' within the meaning of the act. An organization that has for its exclusive or predominant purpose religion or philanthropic social service (or the advancement of the business or commercial interests of a city or community) is so clearly not a `social * * * club or organization' that its possession and use of the building furnished with social club facilities does not render taxable dues or fees paid to it. Most fraternal organizations are in effect social clubs, but if they are operating under the lodge system or are local fraternal organizations among the students of a college or university payments to them are expressly exempt."

This law was long administered by the department in accordance with the foregoing definition, and "the substantial re-enactment in later acts of the provision theretofore construed by the Department is persuasive evidence of legislative approval of the regulation" (Brewster v. Gage, 280 U. S. 327, 337, 50 S. Ct. 115, 117, 74 L. Ed. 457); "for Congress is presumed to have legislated with knowledge of such an established usage of an executive department of the government." National Lead Co. v. United States, 252 U. S. 140, 147, 40 S. Ct. 237, 239, 64 L. Ed. 496; United States v. Bailey, 9 Pet. 238, 256, 9 L. Ed. 113.

The question presented, then, is whether appellant was, during the periods when the taxes sued for were assessed and exacted, a "social, athletic, or sporting club or organization" within the meaning of said section 801 of the applicable Revenue Act, and so subject to the taxes levied, or whether its functions were civic and/or educational, and so exempt. The court found the issues in favor of the government. Appellant requested neither findings of fact nor conclusions of law, contenting itself with motions to modify those made by the court and for a new trial. As a strict matter of procedure, the court made no specific findings. It discussed in its...