White v. Winchester Country Club

• Court: United States Supreme Court
• Citation: 86 L.Ed. 619,62 S.Ct. 425,315 U.S. 32
• Docket Number: No. 63,63
• Parties: WHITE, et al., Former Collectors of Internal Revenue, v. WINCHESTER COUNTRY CLUB
• Decision Date: 12 January 1942

315 U.S. 32 62 S.Ct. 425 86 L.Ed. 619 WHITE, et al., Former Collectors of Internal Revenue,

v.

WINCHESTER COUNTRY CLUB.

No. 63. Argued Dec. 12, 1941. Decided Jan. 12, 1942.

Messrs. Francis Biddle, Atty. Gen., and J. Louis Monarch, of Washington, D.C., for petitioners.

Mr. Charles W. Mulcahy, of Boston, Mass., for respondent.

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Mr. Justice JACKSON delivered the opinion of the Court.

We must decide whether members' payments to the Winchester Country Club for certain 'privileges' constituted 'dues or membership fees' subject to the tax imposed by § 501 of the Revenue Act of 1926, 44 Stat. 9, 92, as amended by § 413 of the Revenue Act of 1928, 45 Stat. 791, 864, 26 U.S.C.A. Int.Rev.Acts, page 441, on amounts 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 $25 per year.'

Since 1929 and during the period here in question the Club's by-laws provided for 'Annual Dues' of $50, which entitled a member to all the privileges of the Club except golf. By paying $35 more, for 'Limited Privileges,' a member became entitled to play golf during the year, except on specified days; by paying $50, for 'Full Privileges,' he got the privilege of playing at any time during the

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year. All but a small portion of the members acquired golf privileges of one sort or the other.

Various forms of 'Family Privileges,' entitling one or more of a member's family to use the club house and to play tennis and golf, could be had by a member upon payment of specified additional sums, which were less if he had golf privileges than if he did not.

The club year began January first, and, according to the by-laws, 'dues and fees' were payable on March first. The practice was to bill members during March for 'dues' and 'privileges' for the year. Privileges were acquired informally, the practice being to let the Club's officers know either orally or in writing what privileges were desired. A member was billed for the privileges he had previously held if he had not indicated that he no longer desired them, but if he later gave notice that he did not desire a given privilege, no attempt was made to collect the amount billed for it. If a member requested privileges prior to August first, he was billed for the full year; for privileges thereafter requested he was billed for only half a year. Suitable adjustment was also made if privileges were dropped in the middle of the year.

During the period from November 27, 1931, to January 9, 1935, taxes in the amount of $9,211.25 were exacted on account of payments to the Club for the various 'privileges' mentioned above. On November 16, 1935, the Club duly filed claims for refund on behalf of its members, and after the Commissioner of Internal Revenue had rejected them, it instituted suits in the United States District Court for the District of Massachusetts against the three Collectors of Internal Revenue to whom the taxes had been paid. The District Court entered judgments for the Club, and the Circuit Court of Appeals for the First Circuit affirmed them upon consolidated appeal. 117 F.2d 146. Certiorari was granted in this

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case and in Merion Cricket Club v. United States, decided by the Court of Appeals for the Third Circuit, 119 F.2d 578, because of an asserted conflict between the two decisions. White v. Winchester Country Club, 313 U.S. 555, 61 S.Ct. 1104, 85 L.Ed. 1517; Merion Cricket Club v. United States, 314 U.S. 589, 62 S.Ct. 59, 85 L.Ed. —-.

The generality of 'dues or membership fees,' the words by which the governing statute designates the payments upon which the tax is laid, necessitates consideration of their legislative background. Earlier Revenue Acts—those of 1917, 1918, 1921, and 1924—had laid a tax in the same terms upon payments to clubs such as the respondent.¹

The Treasury construed these words on several occasions not long after they were first employed in these Revenue Acts. Treasury Regulations 43 (Part 2), Art. 12, issued under the Revenue Act of 1918, and approved March 28, 1919, gave as examples of their applicability the following: '(5) A certain golf club's dues are $15 per year. Of this amount $10 is expended in the purchase for the member of a season ticket to a municipal golf course. The whole $15 is, nevertheless, taxable as dues. (6) A certain golf club charges a 'green' fee of $1 for each guest that uses the course. Such a fee is not paid 'as dues or membership fees,' and is, therefore, not taxable as such. (7) The members of a certain curling club pay annual dues of $20. By the payment of $10 extra per year the privilege of skating on the club's rink can be secured for the member's family. A payment of this extra $10 is taxable as a membership fee.' The same examples are given in this Article as revised on December 3, 1920, with the addition of the following example: '(13) A certain golf club the dues and fees of which are taxable issues to

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wives of members cards entitling them to the use of the course for one year, making a charge of $10 therefor. The amounts paid for such cards are taxable.'

These examples were retained in three subsequent editions of the Regulations, issued under the Revenue Acts of 1921 and 1924, which also added the generalized statements that subject to the tax 'are extra charges which are imposed upon members for the privilege of using certain additional facilities for a period of time, as, for example, an additional charge of $60 per annum imposed upon members of a country club for the privilege of using the golf links. A 'greens fee' charged to a guest is not taxable, unless the right or privilege granted in return is for a period of time, such as a season.'²

Further, albeit slight, evidence of the Treasury's view is found in S.T. 357, Cum. Bul. I-1, p. 434, as follows: 'Where a payment for the use of golf links or similar privilege afforded by a club * * * covers a period of time, such as a season, it is subject to the tax on dues * * *. This applies alike to payments made by members and nonmembers.'

On December 30, 1925, the United States District Court for the District of Massachusetts held, however, that a charge to a member for the use of a club's golf course for a period of six months was not included within the words 'dues or membership fees,' on the ground that they 'were meant to cover only fixed and definite charges applicable to all members of each particular class of membership.' Weld v. Nichols, 9 F.2d 977.

No appeal from this decision was perfected, a bill of exceptions being withdrawn by the Government on March 23, 1926....