holder or individual in his private capacity as distinguished from a public capacity. The payment of dividends to directors who constitute all the stockholders of an educational corporation will prevent exemption. (C. B. 1, 199; T. B. R. 33.)

The Treasury has issued many rulings dealing with the exemption of particular charitable, religious and educational organizations. These rulings are digested here to give an indication of the Treasury's attitude, but reference should be made to the full rulings in any specific case which may arise.

The following organizations have been held to be exempt: a branch of the Y. W. C. A. marketing needlework for its members (C. B. 2, 209; O. D. 509); a publishing house operated by a religious denomination, doing no business with the general public;16 a day nursery deriving its income from subscriptions and donations (C. B. 1, 202; O. D. 340); Community Service, Inc. (C. B. 2, 148; O. D. 389); a corporation distributing its income to institutions. organized and operated exclusively for purposes enumerated in section 231 (6);17 an association for the relief of the families of clergymen (Art. 517, Regs. 45 and 62); an association furnishing trained nurses to the poor (Art. 517, Regs. 45 and 62); an association for the promotion of musical art by concerts, etc.;18 the Woodrow Wilson Foundation (C. B. II-1, 155; I. T. 1579); a league for consideration of social, industrial and international questions (C. B. I-1, 256; I. T. 1224); an educational corporation using its surplus earnings as a loan fund for students (C. B. 5, 204; O. D. 1102); an association for cultivating the science of jurisprudence, promoting reforms in law and elevating standards in the legal profession (C. B. II-2, 201; I. T. 1882); an association to promote acquaintance with Spanish language and literature (Art. 517, Regs. 45 and 62); a corporation for the prevention of the employment of children in injurious occupations; 19 a corporation under the control of a state organized to develop a sanctuary for wild birds and animals (C. B. IV-1, 214; I. T. 2134); a corporation without capital stock organized and operated for the purpose of furnishing employment to deserving women and providing a place where they may exhibit for sale articles of their preparation and 'making, the income of which is derived

10

17

C. B. 2, 209; O. D. 510; but cf. C. B. 5, 204; O. D. 1142.

C. B. III-1, 273; I. T. 1945; but cf. A. R. R. 2166 and A. R. M. 104.

18 C. B. I-2, 184; I. T. 1475; see also C. B. 1, 147; S. 1176.

19 C. B. 3, 249; O. D. 705. C. B. IV-1, 214; I. T. 2143.

from gifts, commissions and articles sold and the profits of a lunch room (V-24-2794; S. M. 5516); the New England Grouse Fund, an organization formed for the scientific study of the life history of the ruffed grouse and the diseases affecting it (V-18-2731; I. T. 2282); a club having as its object the teaching, practicing and encouragement of all kinds of artistic handicraft work, and maintaining a sales department in which commissions are charged for the sale of articles made by members and non-members (V-292832; I. T. 2296); and the National Rifle Association, an organization which has for its purpose the fostering of an interest, and the training of citizens, in the use of firearms (V-41-2930; G. C. M. 443).

The following organizations have been held not entitled to exemption: a publishing house primarily, but not exclusively, religious (C. B. 5, 204; O. D. 1142); an incorporated pension organization of a corporation receiving compulsory contributions from members (C. B. 4, 264; A. R. R. 477); a hospital association treating employees of corporations under contract but with no free patients (C. B. 5, 203; O. D. 993); an association affording relief to the sick and injured employees of a corporation, collecting fees and dues. from its members (C. B. III-2, 224; I. T. 2109); a memorial fund, in trust form, distributing income to needy persons and charitable institutions; 20 a trust fund for erecting and maintaining schools; 21 an educational institution investing profits in new buildings and equipment; 22 a military school, all the stock of which was owned by officers, directors and teachers;23 an association to educate or to furnish aid to needy members of a certain family (C. B. III-1, 273; S. M. 1836); a corporation erecting and maintaining monuments ;24 a Citizens Club which was not exclusively educational, but primarily civic (C. B. 4, 203; A. R. R. 379); a Chautauqua association organized to acquire land and buildings for use in connection with its. activities (C. B. 2, 208; A. R. M. 36); and one which created a surplus from its earnings (C. B. 5, 203; O. D. 1077); an association

20 C. B. II-1, 155; A. R. R. 2166; but cf. C. B. III-1, 273; I. T. 1945.

" C. B. 4, 262; A. R. M. 104; but cf. I. T. 1945 and A. R. R. 2166.

22 C. B. 1, 201; O. D. 293; but see C. B. III-1, 270; I. T. 1906, holding that the possibility that stockholders may share in assets at dissolution will not prevent exemption.

23

3 Kemper Military School v. Crutchley, 274 Fed. 125.

C. B. 2, 149; S. M. 1246; even if buildings used for educational purposes. C. B. 3, 188; A. R. R. 301.

for furthering prohibition (C. B. 3, 240; O. D. 704); an association for effectuating beneficial labor legislation (C. B. 2, 152; S. M. 1362); an association administering a fund used for the benefit of those who made regular contributions thereto, or their dependents;25 a religious organization holding property in common whose operations and income were not exclusively for religious purposes (Hutterische's Appeal, 1 B. T. A. 1208); an association whose income is derived from monthly contributions from its members. (Philadelphia & Reading Relief Association's Appeal, 4 B. T. A. 713).

The above cases were decided under prior acts and it is possible that a reconsideration under the 1926 Act might, in some cases, result in a different decision. The author is of opinion that when a doubt exists the courts will resolve it in favor of exemption. The Treasury takes the opposite view. The general rule of interpretation is to limit exemption; but when no gain accrues to members any doubt should be resolved in favor of exemption.

CHAMBERS OF COMMERCE, ETC.

LAW. Section 231. .... (7) Business leagues, chambers of commerce, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual;

20

REGULATION. A business league is an association of persons having some common business interest, which limits its activities to work for such common interest and does not engage in a regular business of a kind ordinarily carried on for profit. Its work need not be similar to that of a chamber of commerce or board of trade. If it engages in a regular business of a kind ordinarily carried on for profit, the fact that the business is conducted on a cooperative basis or produces only sufficient income to be self-sustaining, is not ground for exemption. An association engaged in furnishing information to prospective investors, to enable them to make sound investments, is not exempt, since its members have no common business interest, even though all of its income is devoted to the purpose stated. A clearing house association, not organized for profit, no part of the net income of which inures to any private shareholder or individual, is exempt provided its activities are limited to the exchange of checks and similar work for the common benefit of its members. An association of persons who are engaged in the business of carrying freight and passengers by boats propelled by steam, which is designed to promote the legitimate objects of such business, and all of the income of which is derived from membership dues and is expended for office expenses and the salary of a secretary

C. B. IV-1, 215; S. M., 3028. This ruling declares to be erroneous the ruling exempting the Teacher's Insurance and Annuity Association of America (C. B. 3, 238; A. R. R. 218).

29

See C. B. III-2, 225; S. M. 2368, and C. B. IV-1, 50; S. M. 3413.

treasurer is exempt from tax. An incorporated cotton exchange whose shares carry the right to dividends is organized for profit and is not exempt. A stock exchange is not a business league, a chamber of commerce, or a board of trade within the meaning of the law and is not exempt from tax. (Art. 518.)

In Waynesboro Mfrs. Assn.'s Appeal [1 B. T. A. 911 (A)], the Commissioner had denied exemption to a business league on the ground that it sold coal at a profit which inured to the benefit of its members. The Board overruled the Commissioner and held that it might acquire a working capital which was solely for the purpose of fulfilling its non-profit functions. It was admitted that the taxpayer retained all of its earnings for its own use.

A chamber of commerce, conducting a traffic department, was held to be taxable because in so doing it engaged "in a regular business of a kind ordinarily carried on for profit," the fact that such activity was financed on a cooperative basis or so as to produce only sufficient income to be self-sustaining being held to be irrelevant.27

An association which held patents for and issued licenses to its members, which charged fees for the use of patents, and which acted as a receiver or trustee for insolvent members, was held not to be a business league even though it issued no stock, paid no dividends, and no part of its net income inured to any of its members.28

CIVIC LEAGUES.—

LAW. Section 231. . . . . (8) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare.

The American Legion and the Military Training Camps Association are classed as civic organizations under this section.29

An association created by agreement between employers and employees, each contributing to a fund to be used in paying unemploy ment benefits, has been held not to be exempt because "the organization is personal or private." (V-25-2804; I. T. 2291.)

LOCAL ASSOCIATIONS OF EMPLOYEES.

LAW. Section 231.

ployees, the membership of which is limited to the employees of a

27

"C. B. IV-1, 50; S. M. 3413. For similar cases relating to credit organizations see V-28-2821; G. C. M. 159, and V-2-2537; I. T. 2251.

designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes;

SOCIAL CLUBS.

....

LAW. Section 231. .. (9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder;

REGULATION. The exemption granted by paragrah (9) of section 231 applies to practically all social and recreation clubs which are supported by membership fees, dues, and assessments. If a club, by reason of the comprehensive powers granted in its charter, engages in traffic,. in agriculture or horticulture, or in the sale of real estate, timber, etc., for profit, such club is not organized and operated exclusively for pleasure, recreation, or social purposes, and any profit realized from such activities is subject to tax. (Art. 520.)

The Treasury has ruled as exempt under this section a chapter of a college fraternity maintaining a chapter home (C. B. I-2, 187; I. T. 1427); a club providing a meeting place and dining room for members (C. B. 1, 203; O. D. 108); a political club (C. B. 1, 203; O. D. 280) and an automobile club organized for the purpose of promoting the improvement of roads and otherwise benefiting automobile owners in general.30 In none of these cases did any earnings inure to the benefit of members. In another case it was held that a provision in the by-laws of a country club under which life members would share in the distribution of assets of the club on dissolution would not prevent exemption (C. B. 1, 202; S. M. 958). Furthermore, it has been held that payments to resigned members of a society or to heirs of deceased members, when such payments are in effect repurchases by the society of their interests in the property of the society, do not operate to disqualify the exemption of the society (C. B. III-2, 230; S. M. 2710). An association of clubs composed of employees of a single company was held not to be "operated exclusively for social welfare, or pleasure, recreation, or other non-profitable purposes," because it engaged in operating two stores and had an established system of relief or insurance benefits (C. B. III-2, 229; I. T. 2117).

C. B. 3, 241, O. D. 643. However such an organization receiving income from advertising in its magazine, from the sale of supplies and from garage rent is held not to be exempt. (C. B. III-2, 228; I. T. 2106.)