Opinion
No. L-224.
June 1, 1931.
Suit by the Women's University Club against the United States.
Judgment of dismissal.
This suit is brought to recover taxes paid on dues of the plaintiff's members for the years 1923, 1924, 1925, 1926, 1927, and 1928, in the sum of $17,414.25. This claim is based upon the contention that the taxes were improperly assessed and collected, and that the plaintiff club was not a social, sporting, or athletic club, within the meaning of section 801, Revenue Act of 1921 ( 42 Stat. 291) section 501, Revenue Acts of 1924 and 1926 ( 26 USCA § 872 note), and section 413(a), Revenue Act of 1928 ( 26 USCA § 872).
This case having been heard by the Court of Claims, the court, upon the evidence and the report of the commissioner, makes the following special findings of fact:
1. The plaintiff, a New York corporation, was incorporated October 14, 1891. The articles of incorporation set forth the plaintiff's particular object and business as follows: "The business and object of the club is the promotion of literature and art, and the social welfare of college-bred women by the establishment and maintenance of a clubhouse in the city of New York, and by such other means as shall be suitable and expedient for such purposes."
2. The plaintiff paid to the collector of internal revenue located at New York, N.Y., a total of $12,896.75 for the period September 30, 1924, to July 31, 1928, inclusive, representing taxes imposed on dues and fees of members of social, athletic, or sporting clubs, under the provisions of section 801 of the Revenue Act of 1921 ( 42 Stat. 291), 501 of the Revenue Acts of 1924 and 1926 ( 26 USCA § 872 note), and 413(a) of the Revenue Act of 1928 ( 26 USCA § 872).
Claims for the refund of these taxes were duly filed, and the claims were rejected by the Commissioner of Internal Revenue December 5, 1928, holding that plaintiff was a social club, within the meaning of the statutes. The difference between $17,414.25, the amount sued for, and $12,896.75 is barred by the statute of limitations.
3. During the taxable period involved herein the constitution and by-laws of the club provided the qualifications of members, as follows:
"1. Qualifications. — Any woman is eligible to membership in the club who has received from any one of the universities or colleges accepted by the board of managers a degree, to obtain which in regular course at least four years' residence and study are required.
"The managers shall also determine what foreign, higher, or honorary degree or certificate shall qualify the holder for membership in the club."
The accepted list of colleges and universities was a restricted one. Four classes of membership were provided — resident, nonresident, honorary, and life. The first two classes paid an initiation fee of $25 and annual dues of $30 and $20, respectively, prior to 1925.
These latter amounts were increased to $40 and $25 during 1925. Honorary members did not pay either initiation fees or dues, and life members paid $500, but no annual dues. As an inducement to young college graduates to join, a reduction in dues was offered them for the first time in 1925. Approximately sixty-five of the total membership of one thousand were young college graduates.
The following list shows the number of members during the years 1924 to 1928:
====================================================== | Resident, | | | honnorary, | Nonresident | Total | and life | | ----------------|-------------|--------------|-------- 1924 ......... | 707 | 378 | 1,085 1925 ......... | 707 | 378 | 1,085 1926 ......... | 640 | 363 | 1,003 1927 ......... | 647 | 343 | 995 1928 ......... | 655 | 358 | 1,013 ------------------------------------------------------
4. The plaintiff, as lessee, occupied a nine-story building situated upon a lot 38 by 100 feet, located at 106 East Fifty-Second street, in New York City. The basement contained kitchen rooms, pantries, storerooms, heating plant, manservants' rooms, and maids' rooms. On the first floor were located the office, drawing-rooms, one dining room seating seventy-two persons, and a smaller room, seating twenty persons. The second floor comprised the assembly hall, which contained a small balcony, lounging room, and foyer. The third floor consisted of the library, two reading rooms, and administrative offices. The fourth, fifth, sixth, seventh, and eighth floors were composed of bedrooms. The seventh floor also contained a locker and rest room for guests and members not living in the clubhouse, and, in addition to the bedrooms, there was a lounging room on the eighth floor. The ninth floor comprised a reading room and two small roof gardens.
5. Members and their accredited guests were permitted to use the bedrooms, at rates ranging from $1.75 for a single room to $5 per day for a double room with bath. The club rules provided a limit of one month for the occupancy of rooms, but this was not often enforced, and members might remain there any length of time, at the discretion of the house committee. Guests paid an excess charge of 25 per cent, and during their stay might enjoy all of the privileges of the club. From August, 1924, to June, 1928, there was a daily average of 46 persons occupying sleeping rooms. By special arrangements rooms might be leased for a period of nine months, covering the winter season, and during the period mentioned there were approximately 8 or 10 members who occupied rooms under leases. These leases might be renewed so that it was possible for members to make the club their winter home from year to year.
6. The dining rooms of the club were open from 7:30 a.m. until 9 p.m., for breakfast, luncheon, afternoon tea, and dinner. Their use was restricted to members of the club and their guests. A special fee had to be paid for the use of the smaller private dining room. During the period August, 1924, to June, 1928, inclusive, the daily average of meals served was: Breakfast, 36; Luncheon, 31; tea, 8; dinner, 46.
7. The club maintained a staff of approximately 46 employees, of which 12 were men and the balance women. The men employees included three housemen, two pages, one night man, an engineer, an assistant engineer, one pantryman, one dishwasher, one vegetable washer, and one other man whose duties were not described. Four women employees were assigned to administration, the remaining number being divided between the restaurant and the house department, which latter had charge of the bedrooms and of the public rooms. No valet or laundry service was provided by the club, but the club offered telephone service, maid service for the maintenance of bedrooms, and room service. Pages were available for duties similar to those of bellboys.
8. The club had a library of approximately 1,800 volumes, including biography, history, travel, foreign literature, poetry, drama, and reference books. An average of about 90 volumes of current fiction were kept in the library each year. There were also available leading American and foreign periodical publications, and New York daily newspapers. Additions to the library were made annually, both by purchase and gifts.
9. The principal activities of the club were determined by the "Interest committee," according to the demands of the majority of the club members.
On every Friday afternoon the club held a tea, 40 to 60 persons being present. It was usual on such occasions to have a speaker on some academic subject of interest to college-bred women, the speech followed by an open discussion between speaker and audience. The purpose was to enable members to come in contact with each other and to receive the intellectual stimulus afforded when a speaker was provided. Teas were also given to college graduates at which time they were introduced to the club members. There were also "mothers' and daughters'" teas, when members and their daughters of high school or college age were special guests. Receptions for new members were also provided at teas.
The club held very few dances, not more than four a year. The attendance was usually small.
Bridge parties were held infrequently, at which occasionally small prizes were offered. The attendance was not great, and they were not a financial success.
Once a month the club had a dinner, the date depending upon the availability of one or more to make addresses. The dinners were well attended, about 120 persons could be accommodated, and they were concluded by an open forum for discussion of the speaker's subject.
Art exhibits were held in the club almost monthly during the winter season, consisting of works of prominent artists, or sometimes young artists whom it was desired to encourage. Exhibitions of old French books and fine editions published during the year were held annually.
Once a month during the season the club held a poetry evening, when poets read and discussed their poems.
Each year the club extended the use of its facilities to a lecturer on psychology. Members of the club might attend the lectures if they subscribed to the course.
With the exception of the psychology course, the club did not sponsor any lecture programs, as the members showed no interest. An attempt was made, but only a handful attended. Speakers, poets, or lecturers who appeared did so either at one of the weekly teas or one of the monthly dinners.
The "Interest committee" expended from $400 to $600 a year for teas, which were gratis to the members, for stationery, printing the bulletin, and dinners for poets and other guests of honor. It was the committee's policy not to pay any of the artists, lecturers, or speakers, and this rule was quite rigidly adhered to.
10. The club devoted considerable effort toward improving the social welfare of college-bred women, both among its members and among college women who were not members. The work was local in New York, national and international.
The Women's University Glee Club of New York, composed of graduates of women's colleges, an organization, not a part of plaintiff club, had its headquarters at plaintiff's address, and, upon the payment of a nominal fee, conducted its weekly meetings there. Many of its members were also members of the Women's University Club, and invitations to join, as well as the announcements of the Glee Club's activities, were printed in the club's bulletin.
The club acted as hostess to out-of-town college graduates who came to New York to study at the School of Philanthrophy. Undergraduates of colleges and universities located outside of New York City were permitted to stay at the club when visiting in New York, where they were properly sponsored and cared for. An official list of sponsors comprising club members was registered in the club offices, and these members were always available for this work. The club received and answered a great many requests from young girls contemplating a college education, asking for information concerning the selection of a college or university most adequate to their needs. The parents of girls seeking this information wrote to the club for advice as to what college or university they should permit their daughter to attend. College graduates, upon their request, were advised as to the possibility of jobs and living conditions in New York City. Many university or college organizations located in New York City received co-operation from the plaintiff club by being permitted to hold their meetings, dinners, teas, dances, etc., in the plaintiff's clubhouse, a small charge being made in each instance for the use of the club facilities.
The American Association of University Women also had their permanent headquarters and held their meetings in the club building. The same is true of the Headmistresses Association, an organization of the principals of girls' schools, and the National Federation of University Women, an organization of university women of thirty-four countries. The club made a charge for all meetings held by these organizations. The plaintiff club offered its facilities for entertaining to university women from foreign countries who visited this country for the purpose of initiating or continuing their educational work while here.
The exchange students who came to this country from foreign countries, particularly those from France, England, Austria, and Germany, who entered at New York City, were offered the hospitality of the club while they stayed in New York. The American Exchange students going abroad were also extended the privileges of the club while they were in New York preparatory to their departure. This work was performed by the members of the club serving on the international committee. The club made no appropriation for this work.
11. The facilities of the club were always available to the club members for impromptu entertainment. Bridge tables were available upon request. A grand piano was available in the assembly hall, although seldom if ever used by the members. There was no provision against ordinary proper entertainment or games so long as they did not annoy the other members of the club. Committee rooms were available free to the members for the purpose of entertaining, provided refreshments were served by the club.
12. The club did not have any facilities for athletic or sporting events, nor did it foster or sponsor them. No theatrical performances were engaged in by the club. The club maintained no scholarships, charities, or beneficences.
13. The club derived its income chiefly from membership dues, room rent, and food sales in its restaurant.
The receipts for the fiscal year ending March 31, 1925, were:
Dues ............................. $34,037.05 Miscellaneous (including telephone income and interest on securities, and bank balance) .. 2,020.25 Room rents ....................... 39,052.57 Restaurant ....................... 42,255.63 And the disbursements were: Administration expenses (including $321.42 expended on the library and $488.66 expended by the interests committee) ....... $37,523.84 House department (maintenance of rooms, etc.) ................ 37,485.19 Restaurant (food costs, restaurant pay roll, etc.) ................ 55,262.18
The receipts and disbursements for the fiscal year ending March 31, 1925, are typical of the succeeding years, except that the receipts from room rent gradually increased from $39,052.57 in 1925 to $44,377.79 in 1928, the net profit from rooms in 1925 being $2,020.48 as against $4,676.09 in 1928.
14. The social activities of the club are extensive and form a material part of the furtherance of the life of the organization. These social activities are not merely "incidental" to the artistic work of the club, but are so essentially a part of its activities as to constitute them the moving force in its maintenance.
Allen G. Gartner, of Washington, D.C., for plaintiff.
Charles B. Rugg, Asst. Atty. Gen. (Fred K. Dyan, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
This case is controlled by the decisions of this court in William M. Abbott v. United States, 66 Ct. Cl. 603; John Fisler v. United States, 66 Ct. Cl. 220; Faculty Club of the University of California v. United States, 65 Ct. Cl. 754.