Opinion
[Copyrighted Material Omitted] [Copyrighted Material Omitted] Maurice D. Rosenberg and Harvey D. Jacob, both of Washington, D. C., for plaintiff.
Joseph H. Sheppard, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges. This case having been heard by the Court of Claims, the court, upon the report of a commissioner and the evidence, makes the following special findings of fact:
1. Plaintiff, Merritt O. Chance, is a citizen of the United States. On June 21, 1930, he was appointed as, and now is, the duly qualified receiver of the City Club of Washington, D. C.
2. On April 30, 1909, the Commercial Club of Washington, D. C., was incorporated under the laws of the District of Columbia. On October 27, 1919, its name was changed to the City Club. The City Club is now in process of liquidation.
3. From June, 1924, to and including March, 1928, said City Club paid to the collector of internal revenue the sum of $30,290.59, as tax on initiation fees and dues, as a social, athletic, or sporting club, and from April, 1928, to April, 1930, the club paid to the collector, for the same purpose, the sum of $9,724.66.
On May 11, 1928, and March 17, 1931, claims for refunds of the two sums so paid were filed by the club. On January 30, 1929, and on April 23, 1931, respectively, the claims for refund were rejected by the Commissioner of Internal Revenue. Plaintiff in both of its claims for refunds asserted:
'(a) It was not a social, athletic, or sporting club within the meaning of section 801 of the Revenue Acts of 1918 and 1921 [40 Stat. 1121, 42 Stat. 291] or of section 501 of the Revenue Acts of 1924 and 1926 [26 USCA § 872 note]; and '(b) The predominant object of the club was and always has been the civic betterment and advancement of the city of Washington, its membership being composed principally of men of the commercial and professional life of Washington. That the clubhouse was always a place for the discussion and development of civic and economic questions. That the club had its art and literary committee, which was charged with the care and development of the club's library, as well as arranging for art exhibits or other functions at the club calculated to stimulate an interest in and expression of art. That it had its civic and forum committee to initiate and develop activities along civic lines, to coordinate the civic work of the club with that of the other organizations having for their purpose the betterment of Washington, to strengthen in every way the civic spirit of Washington, and to make the club a true expression of civic and national life. That the club had always taken an active interest in public affairs, being particularly concerned with the civic and economic development and betterment of the city of Washington.'
4. The purposes of the City Club, as set forth in the third paragraph of its charter, were: 'The particular business and objects of the society are, and are hereby declared to be, the mutual improvement of its members, and to associate themselves together for literary and educational purposes, and to acquire and maintain a library and a clubhouse, or clubrooms, and to take, receive, hold, and convey real and personal estate necessary for these purposes, objects, and business.'
Section 2 of the by-laws set forth the objects of the club, as follows: 'The objects for which the corporation is formed are: (a) To bring together persons socially congenial for mutual improvement; (b) to provide a clubhouse suitable to the needs and comfort of such persons; (c) to make the clubhouse a place for the discussion and development of civic, literary, artistic, social, economic, and all other matters calculated to advance the welfare of Washington and the Nation at large; (d) to encourage athletics among its members and provide facilities for that purpose; and (e) for such other purposes, not herein specified, as may be provided by the certificate of incorporation.'
5. Its membership was divided into seven classes--active, nonresident, honorary, clergymen, life, special, and junior. Its by-laws provided for standing committees--civic and forum, literature and art, athletics, house, membership, admissions, and entertainment.
The by-laws also provided that: 'Groups of 25 or more members may organize for the promotion of any civic, scientific, literary, economic, artistic, musical, or other cause not out of harmony with the purposes of the club, as set forth in section 2 of these by-laws.'
6. Section 54 of its by-laws, referring to the civic and forum committee, provided: 'This committee shall initiate and develop activities along civic lines; it shall have charge of the forum of the club and coordinate the civic work of the City Club with that of other organizations which have for their object the betterment of Washington; it shall seek to strengthen in every worthy way the civic spirit of Washington, and shall aim at making the club a true expression of civic and national life. It shall, through the civic secretary, provide for the compilation and distribution of a club publication, the subscription of which shall be fixed by the board of governors.'
During much of the life of the club its civic and forum committee was very active. It arranged for weekly forum lunches from September to July, which were largely attended. Many prominent persons addressed such meetings. Members were permitted to invite guests. Many of these addresses were broadcast.
7. The club building was located at 1320 G Street Northwest, Washington, D. C., and was erected at a cost of approximately $800,000. It was a four-story structure, including spacious mezzanines on each club floor. The street floor had a commodious main lobby from which two elevators and a marble staircase gave access to the first club floor. A large main dining room was located on the second floor, 64 by 66 feet and two stories in height; a well-equipped kitchen; a men's grill, with a wide fireplace; private dining room C, two stories in height, with a domed ceiling, accommodating 30 persons; private dining room A; and general club offices, with cigar counters, cashier's desk, lavatory, and service office. About 600 persons, members and guests, lunch or dine in the main dining room daily, and it was a center of good fellowship. All the dining rooms were always available for afternoon teas for the wives of members, for luncheon or dinner parties of outside organizations to which club members belonged, and for banquets, conference dinners, family parties, guest dinners, and after-theater gatherings.
The second-floor mezzanine had two private dining or conference rooms, available for luncheons, dinners, meetings, and conferences of organizations with which the City Club membership was affiliated. The west side of the mezzanine was devoted exclu sively to women visitors. This section had private access both from the stairs and the elevators, and was composed of a women's waiting room overlooking the entire main dining room, a women's parlor, dressing room, and lavatory, well furnished and equipped. The rear section of this mezzanine was devoted to servants' facilities.
On the third floor there was a lounge, which was described in the club's literature as a 'pillared social hall.' This room was 64 by 66 feet, had lofty ceilings and a wide fireplace. It was furnished with easy chairs, lounges, and rich hangings. From the northeast corner of the lounge the library was located, well stocked with the latest magazines, newspapers, and other periodicals. Off the southeast corner of the lounge was a billiard salon. The room was 16 feet in height and accommodated seven pool or billiard tables. Forward from the billiard salon there was a large conference room. The largest private dining or meeting room in the club was located back of the lounge. It was a high-ceilinged hall, 1,800 square feet of floor space, and accommodated about 200 diners. Separate access was gained to this room from the elevator lobby, without passing through any other part of the club. Meetings, conferences, and private dances kept this room in use a great part of the time. At the northwest corner of this floor the executive offices were located, containing desks for the club officers, executive secretary, and manager. Card rooms were also located at the southeast corner of the main lounge.
On the east third-floor mezzanine two commodious card rooms were located, one 17 by 21 feet, the other being 23 by 21 feet. On the west mezzanine of this floor was located a modern three-chair barber shop, a telephone room, and the private rooms of the club's manager.
On the fourth floor was the large combination ballroom and auditorium, 24 feet high, 62 feet wide, and 113 feet long. It was equipped for large mass meetings, conventions, balls, and other entertainments. In this hall were held big dancing parties, 'family nights,' entertainments, concerts, lectures, smokers, and buffet suppers.
The east mezzanine of the fourth floor was a large balcony overlooking the auditorium and adding 2,000 feet of floor space to the facilities of that hall when used for meetings.
The west mezzanine was given over completely to athletic facilities. At the front there was a large room 21 feet square, equipped with rowing machines, chest weights, punching bags, and other exercise equipment, supplementing the gymnastic facilities of the main hall. In the rear was the shower room, with one tub and four shower baths. The two rooms were connected by the locker room.
8. The club entered into a contract with the Beaver Dam Country Club under the terms of which members, by paying only green fees, had the right to play golf, tennis, and other open-air games, as well as the use of its dining rooms. The club, for a time, held golf tournaments there, and it was advertised by the club as 'The City Club's beautiful country home.'
9. The club held frequent stag nights, being smokers, boxing matches, midnight frolics, and annual beefsteak dinners. During the summers months the club held boxing bouts and other athletic events at its 'country home.' The club was a member of the South Atlantic Association and Amateur Athletic Union.
The club held 'major dances' in its auditorium. Dances were held each Saturday night throughout the year. During the winter they were held in its main dining room, while during the summer they were held at its country home, music for the dances being furnished by the 'City Club Syncopators,' which was organized by the club.
The club gave musicales twice monthly from October to May, which were planned and directed by the club's music director, assisted by outside talent.
10. The club had reciprocal relations with other similar clubs in many cities, such as Atlanta, Baltimore, Boston, Buffalo, Chicago, Cleveland, Kansas City, Los Angeles, Milwaukee, Philadelphia, San Francisco, Seattle, St. Louis, Toronto, and others.
11. The gymnasium was located on the fourth floor. It was well equipped with modern apparatus, with showers and bath. Its gym classes were, during the winter, held on Tuesdays and Fridays. This class worked out in the large auditorium under the direction of Professor Beckett. The club had basket-ball teams which competed three times weekly. The club had a physical and boxing instructor, who specialized on members who were either underweight or overweight.
12. Each member received a ladies' guest card which extended the privileges of the club to all women in the family of members, who, in turn, were permitted to bring guests to the club. The dining room, lounge, library, and ladies' private quarters were all open to such guests. Maids were in attendance in ladies' quarters.
13. Games could be played only in designated rooms, members only being permitted in the card room. A charge was made of 50 cents per person for cards and 60 cents per hour for playing pool or billiards.
Club members could obtain private dining rooms with special menus, as well as the blue room or ballroom for special functions. The blue room and the ballroom were rented to outside groups, provided they included several club members.
14. The club published a weekly paper called 'The City Club Tribune,' the purpose of which was 'to reflect faithfully and interpret truly the spirit and purpose of the club.'
On the reverse side of the application card for associate membership the following appeared:
'The City Club '1320 G Street, Northwest 'A Social Club with a Civic Purpose 'What Your Dues Give You---- 'A Convenient and Inexpensive Place to Lunch or Dine--Best Surroundings and Service. 'Absence of the Tipping Nuisance and Expense--whether for Meals, Wrap Checking, or Barber Shop. 'Weekly Forum Address from September to June by World-Famous Authorities--a Liberal Educator in Current Affairs. 'Frequent Entertainments--Dances, 'Stag Nights', Family Parties--Many Without Extra Charge. 'Pool, Billiard, Chess, Card, and Writing Rooms--Always at Your Service. 'Five Private Dining Rooms--Available without Charge for your Club or Business Meetings. (Or for your Wife or Daughter's Teas, Card Parties, etc.) 'Well-Equipped Exercise Room--Lockers, Tub and Shower Baths--A place to Change and Get a Cooling Shower. Gym Classes in Season. 'Seventy-five Leading Newspapers and Magazines on File--Fiction, Business, or Current History. 'Opportunity to Broaden your Acquaintanceship; Association with the Leading Men of the Community in Business, Social, and Civic Life. 'A Pleasant Place to Bring Your Business or Social Guests--for Luncheon, Dinner, or an Evening Visit. 'A Downtown Club Home for the Entire Family--Your Ladies Are Always welcome. 'A Country Club with 18 holes of Golf and other privileges. 'Similar Privileges when You are Traveling, in the 22 Other Clubs with which We Maintain Reciprocal Relations. (See List on Back of Membership Card.)'
15. The club, during its latter years, gave more time and attention to boxing, and paid an experienced boxing coach to train its team. Its boxers were required to register with the Amateur Athletic Union. Its boxing team competed with local other boxing teams.
16. The social activities of the club formed a material part of its life. Its social activities were more than merely incidental and constituted an important and substantial feature of the club's existence.
WILLIAMS, Judge.
The plaintiff, receiver of the City Club of Washington, D. C., sues to recover taxes paid on dues and admission fees of the club's members for the period from June, 1924, to April, 1930, amounting to $40,015.25. The taxes involved were collected under the provisions of section 801 of the Revenue Acts of 1918 and 1921, 40 Stat. 1121, 42 Stat. 291, section 501 of the Revenue Acts of 1924 and 1926 (26 USCA § 872 note), or section 413(a) of the Revenue Act of 1928 (26 USCA § 872). These acts and the applicable Treasury Regulations have been considered by the court in numerous cases. We do not deem it necessary to review the decisions in these cases at length. The rule by which it must be determined whether a club seeking exemption from the tax is or is not a social club within the meaning of the taxing acts is clearly stated in the case of Army & Navy Club of America v. United States, 53 F. (2d) 277, 282, 72 Ct. Cl. 684:
'It is contended on behalf of the plaintiff that the predominant purpose of the club is patriotic and professional and not social. This may be conceded, but this fact is not necessarily controlling. We think it quite clear that the numerous and varied social features of the club show that they are a material part of its activities and not merely incidental to the patriotic work of the club, which could be carried on without them. The evidence shows that they are made an inducement to bring additional members into an organization that needs their financial aid in order to continue its existence, and in this way have become an essential part of those elements which go to determine whether or not a club is a social organization within the meaning of the law. * * * 'It appears that the predominant purpose of the club was to further the interests of the Army and Navy and to advocate and create a public sentiment in favor of 'preparedness.' Had the social element been merely incidental to this purpose, the club would have been exempt from the tax. But, as we have already shown, the social features became an essential element of its activities for the purpose of increasing its membership, aiding in its financial support, and thus helping to carry out its purposes. When the social features are numerous and so used, we think they are not merely incidental, and the club is subject to the tax.'
Measured by this rule, the City Club, under the facts disclosed in the findings, must be held to be a 'social club' within the meaning of the applicable statutes. Conceding that the predominant purpose of the club was the civic improvement and advancement of the city of Washington, and that its major activities were in the furtherance of that purpose, the many and varied social activities were such as to bring it within the definition of a social club or organization. These activities were not merely incidental to the predominant nonsocial purposes of the club but became and were a material element of its existence. On the reverse side of the application card for associate membership under the caption, 'What your dues gives you,' various activities of the club are listed, among which are: 'Frequent Entertainments--Dances, 'Stag Night,' Family Parties--Many Without Extra Charge;' 'Pool, Billiard, Chess, Cards, and Writing Rooms--Always at Your Service;' 'A Pleasant Place to Bring Your Business or Social Guests--for Luncheon, Dinner, or an Evening Visit;' 'Opportunity to Broaden your Acquaintanceship; Association with the Leading Men of the Community in Business, Social, and Civic Life;' and 'A Country Club with 18 holes of Golf and other privileges.' The evidence shows that all these social features and activities were regularly utilized by the club's membership. The club also as a regular feature, from October to May in each year, gave musicales which were planned and directed by the club's music director. The club also sponsored and frequently held golf tournaments, boxing matches, midnight frolics, smokers, and basket ball contests. Each member received a ladies' guest card which extended the privileges of the club to all ladies of the family, who, in turn, were permitted to bring guests to the club.
It is clear that the plaintiff is not entitled to recover. The petition is therefore dismissed. It is so ordered.