
    ALDINE CLUB v. THE UNITED STATES
    [No. H-216.
    Decided April 2, 1928]
    
      On the Proofs
    
    
      Taxes; social, athletic, or sportinff club; membership dues. — A club whose only facility afforded its members is that of furnishing a business men’s lunch at moderate cost, and whose rooms are not used otherwise for social intercourse, is not a social club within the meaning of the statutes which impose a tax upon the initiation fees and annual dues of a “ social, athletic, or sporting club or organization.”
    
      The Reporter's statement of the case:
    
      Mr. Benjamin B. PetPus for the plaintiff. Mr. E. F. Col-lada^/, and Golladay, Clifford <& Pettus and Otterbourg, Steindhr <& Houston were on the brief.
    
      Mr. McGlu/re Kelley, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant. Mr. Alexander H. McGormick was on the brief.
    The court made special findings of fact, as follows:
    I. Plaintiff is a corporation incorporated under the laws of the State of New York in the year 1889, and its membership was composed originally of persons engaged in the printing and publishing trades. In 1899 the-Aldine Club was merged with an organization known as the Up Town Association, by an order of the Supreme Court of New York, under the name of Aldine Association. On November 25, 1910, the club resumed its original name of Aldine Club.
    II. Under sections 801 of the revenue act of 1921, and 501 of the revenue acta of 1924 and 1926, respectively, plaintiff collected from its various members as taxes amounts equal to ten per cent (10%) of their annual membership dues, and periodically from February 1, 1923, to February 28, 1927, paid the amount so collected, under protest, a total of $11,141.14 to the collectors of internal revenue for the second and third districts of New York. A schedule shoAV-ing the amount collected from each member and the date of payment to the collector of internal revenue is attached to the petition, marked “ Exhibit A,” and is made part hereof by reference.
    III. On or about December 9, 1926, January 31, March 28, and April 21, 1927, respectively, there were duly filed by plaintiff claims for refund, with interest, of the amount of the taxes so paid. The basis of the claims for refund set forth that plaintiff was not a social, athletic, or sporting club or organization within the meaning of the revenue acts referred to. The said claims were denied by the Commissioner of Internal Revenue prior to the institution of this suit upon the ground that the plaintiff was a social club or organization, and he refused to refund the taxes paid, as aforesaid.
    IY. The purpose and only function of the Aldine Club during the years in question has been to furnish to its members a luncheon between the hours of 12 and 3 p. m. on business days only.
    V. The Aldine Club occupies as its quarters rooms on the fourteenth floor of an office building known as 200 Fifth Avenue, New York City. It has retained this location since about 1909. Situated in the club are main dining room, ladies’ dining room, two small lunch rooms, kitchen, coat room, ladies’ wash room, gentlemen’s wash room, reading room, and directors’ room." The main dining room seats about 350 people; the ladies’ dining room from 50 to 75 people.
    VI. The membership of the club is not confined to any class, but is constituted for the most part of merchants whose business is located in the vicinity of the club. As soon as their business, locations move, the members usually resign. The present membership of the club is, resident 511, nonresident 81. There are about 90 to 125 resignations per year.
    VII. The luncheon furnished to the members of the club on weekdays is provided by a caterer, who pays to the club 5 per cent of the turnover on the restaurant business. Included in his contract the caterer has the right to rent the rooms of the club after 5 p. m., and the club uses the rooms only during the hours 12 to 3 p. m. Three of the club’s seven employees are employed only between these hours: A telephone operator from 12.30 to 2, a girl attendant in the ladies’ wash room from 12 to 2, and a hall boy from 12 to 3. Its other employees are three boys, who are in the coat room during, luncheon and who clean the place before and after, and a bookkeeper. The annual dues for resident members are $60.00, nonresident $25.00. The club has sustained a deficit in each of the years from 1923 to 1927, inclusive. To overcome this continued deficit the club has imposed a cover charge, which has lessened the loss for the fiscal year 1927.
    VIII. The clubrooms have not been used for a dance, card party, theatrical performance, tournament, or athletic performance by the club at any time; no entertainments have been given during the period 1923 to 1927, except lectures on instructional topics by distinguished public men, and such lectures have not been given more than two or three times a year during said period. When given, these addresses were made during the regular lunch hour in the main dining room. There are no outdoor entertainments given under the auspices of the club. The club does not maintain a tennis court, golf course, swimming pool, or similar social, athletic, or sporting facilities.
    IX. The original Aldine Club, organized in 1889, was formed for the encouragement of literature and art and social intercourse and enjoyment, and in its time was famous for its dinners for prominent authors and publishers. Subsequent to the amalgamation of the club with the Up Town Association the social features were abandoned and the original membership withdrew, being succeeded by manufacturers and jobbers who had moved into the district and who did not care for social features. Since 1911 or 1912 no dinners or other social features have been given, and since 1920 or 1921 the serving of breakfasts has been discontinued. About the same time the club gave up the large room which had been used for social purposes and sold its library to one of its members. The only facility which the club now affords its members is that of furnishing a business men’s lunch at moderate cost.
    The court decided that plaintiff was entitled to recover $10,979.14, with interest in the sum of $1,415.65, together aggregating $12,394.79.
   Campbell, Chief Justice,

delivered the opinion of the court:

By this suit the Aldine Club seeks to recover taxes paid on membership dues under the revenue acts of 1921, 1924, and 1926, 42 Stat. 291, 43 Stat. 321, 44 Stat. 92.' The taxes were paid under protest, and the application duly made to the Commissioner of Internal Revenue for a refund of them was denied. There is no dispute about the facts. The sole question is whether the Aldine Club was a social club, within the meaning of the statutes, for the several years. These are in all material respects the same as section 801 of the revenue act of 1921, reading as follows:

“ That from and after January 1, 1922, there shall be levied, assessed, collected, and paid * * * a tax equivalent to 10 per centum of any amount paid on or after such date, for any period after such date, (a) as dues or membership fees (where the dues or fees of an active resident annual member are in excess of $10 per year) to any social, athletic, or sporting club or organization; * * *.”

The duly authorized regulations of the commissioner m article 3 of Regulations 43, par,t 2, provide, among other things, that the “ purposes and activities of a club and not its name determine its character for the purpose of the tax on dues,” and further the regulation admits, practically, that every club does not come within the statute. But article 3 of these regulations furnished a definition of “ social clubs,” as follows:

“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 tax does not attach to dues or fees of a religious organization, singing society, chamber of commerce, commercial club, trade organization, or the like, merely because it has incidental social features, but if the social features are a material purpose of the organization, then it is a ‘ social * * * club or organization ’ within the meaning of the act. An organization that has for its exclusive or predominant purpose religious or philanthropic social service (or the advancement of the business or commercial interests of a city or community) is so clearly not a social * * * club or organization ’ that its possession and use of a building furnished with social-club facilities does not render taxable dues or fees paid to it. Most fraternal organizations are in effect social clubs, but if they are operating under the lodge-system payments to them are expressly exempt.”

Accepting the regulations as embodying the construction of the taxing act given by the Treasury Department, it appears that not its name and inferentially not its charter declarations but its “ purposes and activities ” determine its character for taxation purposes.’ And though there may be social features incident to its general activities, yet if the social feature is a subordinate and merely incidental feature to the “ predominant ” purpose of the organization, it is not a social club. This must be true unless all clubs where people congregate are social clubs, “because practically all clubs may be said to have a feature of the social, using the term as having to do with human intercourse.” Chemists’ Club, decided June 6, 1927, 64 C. Cls. 156. The Aldine Club was organized under the laws of New York in 1889. About ten years thereafter it was merged with an organization known as the Up Town Association under the name of Aldine Association. In November, 1910, it resumed its original name of Aldine Club.

The findings show that the purpose and only function of this club during the years in question has been to furnish to its members a luncheon between stated hours on business days only, and at a moderate cost. It does not furnish breakfasts. The luncheon is provided by a caterer who pays to the club 5 per cent of the turnover on the restaurant business. The club uses the rooms only during the hours 12 m. to 3 p. m. The caterer has the right to rent the rooms after 5 p. m. It occupies, as its quarters, rooms on the fourteenth floor of an office building known as 200 Fifth Avenue. These have never been used for a dance, card party, or theatrical performance. During the period 1923 to 1927 some entertainments have been given in the form of lectures on instructional topics by public men, made during the lunch hour in the main dining room three or four times a year. Manifestly the predominant purpose of this organization is not the cultivation of companionable relations. It furnishes a convenient place where business men may get their luncheons. The facilities provided were adapted to that purpose. Its social features were incidental, and remotely so, to its general or “ predominant purpose.” Its brief characterizes it as “ an exalted lunch room which a certain number of individuals maintain because it is in a convenient neighborhood.” The facts sustain this description. We think it is not a social club within the purview of the statutes and regulations. See City Club of St. Louis v. United States, decided January 3, 1928, 24 Fed. (2d) 743; Chemists’ Club, supra. The plaintiff should have judgment. And it is so ordered.

Moss, Judge; GRAham, Judge: and Booth, Judge, concur.  