
    FACULTY CLUB OF THE UNIVERSITY OF CALIFORNIA v. THE UNITED STATES
    [No. H-426.
    Decided May 28, 1928]
    
      On the Proofs
    
    
      Taxes; initiation fees; social, athletic, or sporting olvib. — Where the material purpose of a club- is to promote mutual acquaintance and fellowship among the officers of instruction of a university and the club is not an. essential adjunct of the university, it is a social club within the meaning of the revenue laws, whose initiation fees are taxable.
    
      The Reporter’s statement of the case:
    
      Mr. John F. McCarron for the plaintiff. Mr. George E. Hamilton was on the brief.
    
      Mr. Fred K. Dyar, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The Faculty Club of the University of California, plaintiff herein, was founded and its constitution was adopted in 1902 as the outgrowth of a dining association. Article I of the constitution of the Faculty Club of the University of California provides:
    “ The name of this organization shall be the Faculty Club of the University of California. Its object shall be to promote mutual acquaintance and fellowship among the officers of instruction and government of the university.”
    Article II of the constitution provides who shall be members of the club and divides them into five classes: Active, associate, nonresident, transient, and honorary. The following classes of men are made eligible for active membership:
    Members of the board of regents of the university.
    Officers of administration at Berkeley.
    Officers of instruction or research in the colleges and schools at Berkeley.
    Officers of administration and instruction in the university extension division at Berkeley.
    
      Officers of the agricultural experiment station at Berkeley.
    Officers of the agricultural extension service at Berkeley.
    Officers of other branches of the university who are resident in Berkeley. Teaching fellows and other fellows and graduate scholars are made eligible for transient membership. The board of directors • may invite to associate membership certain persons not exceeding in number 200 and “ may also elect to associate membership persons who would be of assistance in club entertainments by virtue of their special talents,” to be exempt from payment of dues and not to exceed 25 in number.
    II. During the period from October, 1921, to and including September, 1925, plaintiff paid a total of $5,322.87 to the collector of internal revenue at San Francisco, California, as taxes on dues of its members.
    III. Under date of April 24, 1926, plaintiff filed a claim for refund on the proper form of the Bureau of Internal Revenue (Form 848) with the collector of internal revenue at San Francisco, California, in which it requested refund of the said amount of $5,322.87 paid by it as taxes on dues of its members, and contended that its application for refund should be allowed on the ground that it was not a social, sporting, or athletic club within the meaning of section 801 of the 1918 and 1921 revenue acts and section 501 of the 1924 internal revenue act and article 5 of part 2 of Regulations 43 of the Bureau of Internal Revenue under the 1924 revenue act.
    IY. The Commissioner of Internal Revenue, under date of March 26, 1927, rejected the said refund claim filed by plaintiff on April 24, 1926, for the recovery of $5,322.87 paid by it as taxes on dues of its members, and held “ that the social features form a material purpose of the organization, and that it qualifies as a social club or organization within the meaning of section 801 of the revenue acts of 1918 and 1921, and section 501 of the revenue act of 1924,” and the taxes paid as aforesaid are still retained by the defendant.
    Y. The club furnishes a medium for a wide range of academic activities. Important committees of the Academic Senate of the university meet regularly at the club for the conduct of university business and include the committee on courses, which formulate many university policies dealing with instruction; the editorial committee; the board of research, which considers the allotment of university funds for scientific purposes; the committee on admissions; the university council; the committee on music and drama. The Cosmos Club and the Berkeley Club, composed of members of the teaching staff of the university, meet regularly at the club and the purposes of their meeting are scientific or literary.
    At the Faculty Club of the University of California, teaching fellows, assistants and graduate scholars working for higher degrees have an opportunity to come into closer contact with their professors. To encourage such contacts, these classes of applicants for membership have been exempted from the payment of an initiation fee, w,ith the result that the more formal instruction of the classroom and laboratory are usually continued informally at the Faculty Club of the University of California. Officers of administration very often entertain at the Faculty Club of the University of California official guests of the university.
    The Faculty Club of the University of California permits its quarters to be used without charge as a meeting place of the above various educational groups, faculty meetings, and other bodies involving extra curriculum activities.
    The club furthers the educational interests of the university by furnishing a gathering place for members of the faculty, who there find an opportunity for the discussion of educational problems and matters affecting the university welfare. The club is regarded as a vital and essential factor in the life of the university.
    YI. The building occupied by the club stands on land which is a part of the university campus, though the building was erected from funds raised by club members. No rent is charged by the university for the use of the land, which is the most beautiful section of the campus and one particularly accessible as a gathering place. No rental is charged and no taxes are paid, since the building occupies ground belonging to the university. The university furnishes half of the steam used free.
    
      In the clubhouse are comfortable lounging and reading rooms, din,ing rooms, kitchen, billiard room, with two billiard and two pool tables, cigar stand and office, servants’ quarters, and about twenty bed rooms, which are rented chiefly by bachelor members of the faculty. The dining rooms are used by members and their guests, women being admitted to three of them, and a lounge is provided for the use of women. Facilities are afforded for cards and chess, and a tennis court is at the exclusive disposal of members of the club. There is a library of less than one hundred volumes, but periodicals are supplied. Tennis and billiard tournaments are held, as are occasional dances, musicales, and lectures. Dinners are given from time to time to guests deemed worthy of being entertained.
    The club serves as a meeting place and a lounging place for members of the faculty and such other members of the club as are eligible under the rules, and it is possible for some club members to eat, sleep, and find as much of their social diversion as they see fit in the clubhouse.
    The social features of the club are a material purpose of the organization.
    The court decided that plaintiff was not entitled to recover.
   Moss, Judge,

delivered the opinion of the court:

The question for determination in this case is whether or not the Faculty Club of the University of California is a social club within the intent and meaning of section 801 of the revenue act of 1921, 42 Stat. 291, and section 501 of the act of 1924, 43 Stat. 253. The pertinent provision of each of said acts imposes a tax on the amount paid as initiation fees, or dues, “ to any social, athletic, or sporting club or organization.” It is provided in article 4 of Treasury Regulation 43, that “ every club or organization having social, athletic, or sporting features, is presumed to be included within the meaning of the phrase ‘ any social, athletic, or sporting club or organization,’ until the contrary has been proved, and the burden of proof is upon it.” Article 5 of the same regulation provides that “ any organization which maintains quarters, or 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 Faculty Club of the University of California was organized in 1902; it was an outgrowth of a dining association. Its charter provides as follows: “ The name of this organization shall be the Faculty Club of the University of California. Its object shall be to promote mutual acquaintance and fellowship among the officers of instruction of the university.” The building occupied by the club is situated .on land which is a part of the university campus. It was erected from funds provided by its members. There are lounges and reading rooms, dining rooms, a billiard room with two billiard and two pool tables, a kitchen, cigar stand, and office, servants’ quarters, and twenty bedrooms, which are rented and occupied by bachelor members. The dining rooms are used by members and their guests. A lounge is provided for women who are occasional guests; facilities are provided for card games and chess games; periodicals are available, and a tennis court is provided for the exclusive use of members. Tennis and billiard tournaments are held, as well as dances, musicales, and lectures. Special dinners are given for guests who are deemed worthy of being entertained. The club serves as a convenient and comfortable meeting place for members of the faculty and such other members of the club as are eligible under the rules. The active membership consists of members and officers of the board of regents and of the faculty of the university. There are also associate, nonresident, transient, and honorary members. The predominant purpose of this club as described in its constitution is to 'promote mutual acquaintance and fellowship among the officers of instmoction of the wiiversity. This is plainly the expression of a purely social purpose. It should be noted also that article 2 of the constitution provides: “ By unanimous vote the board of directors may elect to associate membership persons who would be of assistance in club entertainments by virtue of their special talents.” While this club undoubtedly serves an important administrative use by members of the faculty and officers of the university, and furnishes a medium for a wide range of academic activities, it is not an essential adjunct to the university. It is shown in the evidence that all the work now performed in the club could be done without such a club. However, a social club of this nature must unquestionably have a very definite value in the promotion of the general welfare of this great university. To hold that “ its social features .are not a material purpose of the organimticm,” or that its purposes and activities are “merely incidental to the active furtherance of a different and predominant purpose,” would be contrary to the declared purposes of its organization and to the usual and customary social activities of the club throughout the twenty-sis years of its existence. The court has reached the conclusion that the Faculty Club of the University of California is a social club within the meaning of the taxing statutes. It is adjudged and ordered that plaintiff’s petition be dismissed.

GkeeN, Judge; Geaham, Judge; and Booth, Chief Justice, concur.  