Opinion
No. 41857.
November 5, 1934.
Harvey L. Rabbitt, of Washington, D.C. (Lawrence P. Mattingly, of Washington, D.C., on the brief), for plaintiff.
Fred K. Dyar, 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.
Suit by The Lambs against the United States.
Petition dismissed.
This is a suit for the recovery of $101,121, with interest, taxes alleged to have been erroneously and illegally assessed and collected, on the basis that plaintiff was not a social, athletic, or sporting club within the meaning of section 501 of the Revenue Acts of 1924 and 1926 ( 26 USCA § 872 note) and section 413 of the Revenue Act of 1928 ( 26 USCA § 872 and note).
The court upon the evidence and report of a commissioner makes the following special findings of fact:
1. Plaintiff was incorporated in 1877 under the laws of the state of New York. It is located in the city of New York.
2. Beginning May 28, 1920, and ending February 28, 1929, plaintiff paid to the appropriate collector of internal revenue, as more particularly set out in Exhibits A, B, and C of the petition and made a part hereof by reference, $101,121 by way of taxes on dues and fees of its members.
3. October 14, 1925, plaintiff filed with the collector claim for refund of $31,423.49, being so much of said taxes as had been paid May 28, 1920, to March 29, 1923, both dates inclusive, on the specified ground that 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), and section 501 of the Revenue Act of 1924," and on the same day on the same ground, a claim for refund of $2,578.23, so paid April 28, 1923, to August 15, 1925, both dates inclusive.
Both claims were formally rejected by the Commissioner of Internal Revenue July 27, 1928, as follows: $14,940, "taxes paid during the period April 1920 to August 1921 for the reason that this amount is barred from recovery by the four-year statute of limitations"; and $44,061.72, "taxes paid during the period September 1921 to July 1925 for the reason that it has been held that the club qualifies as a social club or organization within the meaning of section 501 of the Revenue Act of 1926 and corresponding sections of previous revenue acts. * * *"
March 11, 1930, plaintiff filed with the collector a claim for refund of $42,129.28, covering the remainder of the taxes paid as aforesaid, on the ground that plaintiff was "not a social, athletic, or sporting club within the meaning of Revenue Acts of 1924, 1926, and 1928. * * *" June 18, 1930, the Commissioner rejected the claim as follows: $8,363.51, "tax paid for the period August 1925 to March 1926, inclusive, for the reason that the amount is barred from recovery by the four-year statute of limitations"; $10, representing an error in addition; and $33,755.77, on the ground that the plaintiff qualified "as a social club or organization within the meaning of section 413 of the Revenue Act of 1928 and corresponding sections of previous revenue acts. * * *"
4. Plaintiff's certificate of incorporation states: "The particular business and object of such society or club is the bringing together of its members for the purpose of social recreation and the cultivation of musical, literary, and artistic talent."
Section III, article I, of its constitution, provides: "The object of this club shall be the promotion of social intercourse among persons engaged professionally in the drama, music, authorship, and the fine arts, as well as friends of those professions, and the collection and preservation of objects of interest thereto."
The membership is divided into seven classes, viz.: (1) Honorary members; (2) honorary life members; (3) life members; (4) professional members; (5) nonprofessional members; (6) nonresident members; and (7) United States Army and Navy members.
The by-laws define the classes of members more particularly and designate their numerical limitations. Section 32 of the by-laws provides as follows: "Professional members shall include only such actors, authors, singers, musicians, architects, business managers, business agents, stage directors, stage managers, and all persons practicing the graphic and plastic arts, as are strictly professional; also such moving-picture actors and directors as have been recognized actors on the speaking stage."
The limitation of members by classes is as follows, the professional class being subject to variation under prescribed conditions:
Maximum Class: number Professional .............................. 800 Nonprofessional ........................... 400 Nonresident ............................... 500 Life ...................................... 200 Army and Navy ............................. 300
The annual fees and entrance dues per member are as follows:
=================================================== Class | Annual | Entrance ---------------------------|----------|------------ Professional ............. | $ 60 | $200 Nonprofessional .......... | 100 | 400 Nonresident .............. | 50 | 150 Army and Navy ............ | 25 | 100 ---------------------------------------------------
Remission of dues is provided for nonresident members recorded in the "Book of Absent Members" under conditions specified.
Provision is made for the introduction of guests by members or the house committee, under restrictions, and for the enjoyment of privileges by members of other clubs having reciprocal relations with the plaintiff.
No women are in fact members of The Lambs nor are they allowed any of the privileges of the club.
5. Plaintiff owns its quarters, which is a building located in the center of the theatrical district, at 130 West Forty-Fourth street, New York City. The building occupies a space 76 by 100 feet, and the property has an assessed value of $600,000 and a book value of $800,000.
The building consists of a subbasement, basement, and six stories. In the subbasement are the heating and refrigerating plants. The basement contains a barber shop operated by one barber, water closet, tailor or valet shop, storeroom for food, steward's office, locker room for members, storeroom, and kitchen.
On the first floor are the lobby, with offices, coatroom, a small waiting room, and ten telephone booths. There are also cigar counter, lavatory, and pantry. The rest of the floor is given over to a grillroom and the billiard room. Along one entire side of the grillroom is a bar served by day and night bartenders. There are also serving tables and the usual equipment in the way of tables and chairs. There are two pool tables, two billiard tables, and one combination pool and billiard table.
The second floor is given over entirely to the club lounge, except for space taken by the club post office.
On the third floor are the theater, seating 400, library, secretary's office, and a bedroom and bath occupied by the shepherd of the club.
On the fourth floor are a balcony to the theater, seating about 200, linen room, employees' rest room, six bedrooms, and two baths.
On the fifth floor are closets, twenty-three bedrooms, and nine baths.
On the sixth floor are closets, twenty-five bedrooms, and nine baths.
A representative furnishing of the bedrooms is a bed, a dresser, mirror, table, and chair.
In the lounge are twenty-eight armchairs, twenty-two davenports, seven writing desks, a piano, floor lamps, radio, and tables containing magazines. The floor is carpeted, and the walls are decorated with oil paintings. The rear of the lounge is screened off and contains six card tables. A wide variety of weekly and monthly magazines and periodicals and numerous copies of representative New York daily papers are provided.
The library contains about 1,500 volumes, consisting of fiction, poetry, drama, memoirs, essays, sketches, and books of reference. Playwrights use it for purposes of reference.
6. The average membership by classes during the taxable years in question was as follows:
Professional ................................ 834 Nonprofessional ............................. 245 Nonresident ................................. 234 Army and Navy ............................... 132 Life ........................................ 119 Honorary .................................... 7 _____ Total .................................... 1,571
All of the nonresident members of the club are nonprofessionals. The professional members, through the club, make contacts which result in contracts of employment and the nonprofessionals like the atmosphere of this type of club or enjoy the "gambols" which the club holds. Doctors and lawyers develop clienteles in the club.
7. The plaintiff derived a moderate revenue from sales over its cigar stand, the sale of playing cards, the use of billiard and pool tables, rent of letter boxes, from laundry and barber shop, and from other sources, and its main revenue from rent of bedrooms, public gambols, and membership dues and entrance fees. Its grill, or restaurant, was not self-sustaining.
8. Regular meals were served in the grillroom averaging 20 to 25 breakfasts, 60 to 90 luncheons, 20 to 25 dinners, daily. On gambol nights dinner was served in the lounge on the second floor after the gambol.
The club has so-called private "gambols" in its theater on five or six Sunday nights during the winter. These were sketches or small plays written and performed invariably by members of the club, interspersed with songs, speeches, musical numbers, vaudeville, and are run at a loss. The only outside talent is a paid orchestra. The private gambol is a permanent institution of the club, and gives members of the club, especially the younger ones, an opportunity to try out plays or sketches written by them, and to demonstrate their histrionic abilities. The charge for admission includes the dinner. The members are charged $2.50, guests $10.
The private gambols are attended by producers, casting managers, and others who, intensely interested in the theater, give financial backing to the plays. Many of those thus attending are in search both of good plays for public production and actors, and are often successful in their quest. Some of the most successful plays had their origin in these gambols, and many successful playwrights and actors got their start in The Lambs.
The private gambols are well attended. Many big contracts have been signed in the clubrooms at night. The club serves as an actors' exchange or clearing house, is equivalent in fact to an employment agency, and most of the actors and members become habitués of the club for the reason that it is a place where producers and managers can secure suitable actors. Artists use the club as their place of business for that purpose, and the telephone and postal service there available make contact between employer and employee ideal.
The facilities afforded by lounge, library, billiard room, restaurant, etc., make it possible for members to be diverted while waiting for employment, or in the intervals between periods of employment.
The library is not used extensively. Playwrights use it occasionally for purposes of reference.
Card and pool and billiard tables are used to while away the time and not by more than 30 or 40 men a day.
The bedrooms are rented to members or their guests for varying periods of time. The rent averages around $2 per room per day, and the bedrooms are in good demand.
9. Plaintiff administers some charitable funds, one of them a fund for indigent actors, derived by gifts from members, augmented by proceeds from entertainments. There are other individual funds so administered, made up from time to time by subscriptions of members, as necessity demands.
10. Annually plaintiff gives a public gambol, or play, for profit. A public theater is used, which is rented, sometimes at cost only. These gambols consist of sketches selected from the private gambols, are well attended, and result in a substantial profit, which goes into the general funds of the club. The actors are restricted to members of the club and they give their services free of charge.
11. The purpose which binds the members of the club together as an organization is the advancement in professional life of those classified as professionals. This purpose is substantially fulfilled, and without its fulfillment the club could not continue in existence. The activities and facilities of the club are adapted to the furtherance of that purpose and actually contribute thereto. Social features necessarily attend the club's activities and form a material part thereof. They are not merely incidental to the plaintiff's other activities, but constitute an essential element in the club's life and a material factor in its continued existence.
This case involves the same principles as those decided in the following cases: Wichita Commercial Social Club Association v. United States, 2 F. Supp. 476, 77 Ct. Cl. 80; Quinnipiack Club v. United States, 4 F. Supp. 996, 78 Ct. Cl. 833; Union League Club of Chicago v. United States, 4 F. Supp. 929, 78 Ct. Cl. 351; Phi Gamma Delta Club v. United States, 5 F. Supp. 140, 78 Ct. Cl. 834; Union League Club of New York v. United States, 78 Ct. Cl. 834; The University Club, City of Washington, v. United States (Ct.Cl.) 6 F. Supp. 129, decided March 5, 1934, and the Saginaw Club v. United States (Ct.Cl.) 7 F. Supp. 302, decided June 4, 1934.
No written opinion filed.