#### CHEMISTS’ CLUB v. THE UNITED STATES

[No. E-495]

*On the Proofs*

*Taxes; social, athletic, „,or sporting club; initiation fees and, annual dues.*— A club which advances the science of chemistry and promotes the interests of chemists, and whose social features are remotely incidental thereto, is not a social club within the meanihg 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. Joh/n W. Drye,*jr., for the plaintiff. *Messrs. Hersey Egginton*and *Richard M.*Hamilton, and Larkin, *RatKbone (& Perry*were on the brief.

*Mr. Alexander H.*McCormick, with whom was *Mr. Assistant Attorney General Hermxm J.*Galloway, for the defendant.

Decided June 6, 1927.

Order correcting judgment nunc pro tunc filed February 6, 1928.

The court made special findings of fact, as follows:

I. Plaintiff is a corporation and was duly incorporated under the membership corporation law of the State of New York on the 9th day of December, 1898.

II. Under the stated authority of section 801 of the revenue acts of 1918 and 1921 plaintiff collected from its various members as taxes amounts equal to ten per cent (10%) of their initiation fees and annual dues, and periodically paid *157the amounts so collected, a total of $24,862.82, to the collectors of internal revenue for the second and third districts of New York for. the account of the defendant.

III. On or about October 31, 1923, plaintiff filed with the collector of internal revenue for the second district of New York a claim for the refund with interest, of $24,862.82, the amount paid to the defendant as aforesaid as taxes on the dues and initiation fees collected by it from its members; and as the basis of said claim, plaintiff set forth that it was not a social, athletic, or sporting club or organization within the provisions of the section of the revenue acts referred to above.

IY. The said claim was denied by the Commissioner of Internal Revenue prior to the institution of this action on the ground that plaintiff was a social club or organization within the provisions of the section of the acts referred to above, and ¡the taxes paid as aforesaid are still retained by the defendant.

V. The certificate of incorporation of the plaintiff declares that the particular objects for which it is to be formed are to promote the interests of chemists and those interested in the science and application of chemistry and to this end to provide a place in which the members may come together for social intercourse and meetings, to equip the same with books and periodicals relating to the science of chemistry and to general literature. The objects of the club are stated in its constitution to be “the promotion of good fellowship among its members and the advancement of the science and application of chemistry.”

YI. The membership of the Chemists’ Club is confined exclusively to persons interested in the science or practice of chemistry. Honorary memberships are awarded only to ¡those who have distinguished themselves in the field of chemical industry. Junior memberships are only awarded to those who are advanced students of chemistry. The membership of the Chemists’ Club is distributed throughout most of the States of the Union, the District of Columbia, and many foreign countries. The presidents of the club have *158been without exception chemists who have distinguished themselves in their profession.

VII. The Chemists’ Club has occupied the basement and first. five floors of the Chemists Building, located at No. 52 East Forty-first Street, New York -City, since 1912. Situated in the Chemists’ Club is a large auditorium called Rum-ford Hall, seating about 300 people. The stage or platform of this hall is fully equipped with gas, vacuum, steam, hot and cold water, and power appliances for the purpose of scientific demonstration and illustrated lectures on chemistry. This hall is used as a meeting place for various chemical organizations and for lectures and discussions of a purely scientific nature. This hall has never been used for a dance, card party, or. a social gathering of any nature or description, other than as above.

VIII. The library of the Chemists’ Club occupies practically the entire third floor of the building. This library consists of approximately 40,000 volumes, which are without exception technical and reference works on chemistry and its allied sciences. This library can only be used for scientific study and reference. The library also contains chemical magazines and publications from all over the world and in practically every language. It is recognized as the most complete chemical library in the United States and is the olficial library of the American Chemical Society. It is open, free, to the public, and is daily made use of by chemical students and others in the search of scientific knowledge and education who are not members of the Chemists’ Club. During the period of the late war fourteen United States Army chemists from the Chemical Warfare Department were quartered in the Chemists’ Building, and throughout that period made daily use of the library in connection with their experimental and research work. Mustard gas was discovered and perfected by these chemists through their work in the library. There is no revenue derived from this library; its upkeep is about twelve thousand dollars per year, without considering the rental value of the space occupied, which cost of upkeep is entirely borne by the plaintiff.

*159TX The Chemists’ Club maintains an employment bureau, the object of which is to bring together chemists and employers of chemists. It is not limited to members of the club; any chemist may register for employment. A small fee is charged for the work of this bureau; however, its yearly deficit has been approximately one thousand dollars ($1,000), which has been borne by the Chemists’ Club.

X. There are two scholarships administered by the Chemists’ Club, derived from donations made for that purpose by two of its members. The purpose of these scholarships is to encourage students who are in need of financial assistance to enter the field of chemistry.

XI. The Chemists’ Club has no ball room, card room, gymnasium, swimming pool, tennis court, golf course, or similar social, athletic, or sporting facility, and the club does not hold or give dances, card parties, athletic tournaments, or game contests. The only facilities in the club for the playing of games are a pool table, billiard table, and a checker board. The pool and billiard tables are confined to one end of the library. This space is so crowded with book shelves that there is hardly space to properly play on them, and they are seldom used. There is practically no revenue derived from them. These tables were a gift to the club about ten years ago by one of its members and could not well have been refused.

XII. The Chemists’ Club is frequented by only those who are interested in the science or study of chemistry. It is the center of the chemical industry in the United States. New chemical processes are continually being developed in the Chemists’ Club, such as processes for extracting oil from the ground and from shale, dye and pharmaceutical processes and discoveries in electrical and chemical engineering.

XIII. The club had a lounging room and operated a dining room seating 180 persons and a service-pantry on the second floor and a kitchen in the basement, from which it received a large income, but the expense of operation showed a deficit each year.

The court decided that plaintiff was entitled to recover $17,094.52, with interest.

*160Campbell, Chief Justice,

delivered the opinion of the court:

The question for decision is whether the Chemists’ Club is a social club within the meaning of section 801 of the revenue acts of 1918, 40 Stat. 1057, 1121, and of 1921, 42 Stat. 227, 291. The applicable provision is section 801, imposing' a tax on the amount paid as dues or initiation fees to “ any social, athletic, or sporting club or organization.” There is a specific exemption of dues or fees paid to “ a fraternal society, order, or association, operating under the lodge system.” The regulations prescribed by the Treasury Department make it clear that it is not every club that comes within the terms of the taxing act, and it is accordingly declared that “the purposes and activities of a club and *not its name*determine its character for the purpose of the tax on dues.” Defining a social club, article 4 of the regulations 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,” but the regulation adds this important qualification, “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.” Treating these regulations as embodying the construction given the taxing act by the Treasury Department, it appears that where the “ predominant purpose ” of the organization is the accomplishment of something in religon, the arts, or business it is not a social club notwithstanding it provides incidentally means of social intercourse. And that some such distinction is to be observed seems plain, because practically all clubs may be said to have a feature of the social, using the term as having to do with human intercourse; but all clubs are not social or athletic or sporting clubs. If the criterion is the dominant purpose of the organization, it is not difficult to determine that the Chemists’ Club is not a social club, because its dominant purpose is that of a scientific or educational or*161ganization. Article 4 of the regulations to which we have adverted declares that—

> “An organization that has for its exclusive or predominant purpose religion or philanthropic social service (or the advancement of the business or commercial interest 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.”

The certificate of incorporation of the plaintiff states that “ the particular objects for which the club is to be formed are to promote the interests of chemists and those interested in the science and application of chemistry,” and to the end that this dominant purpose may be accomplished it provides a place furnished more or less with social-club facilities. Its membership is composed of chemists or those connected with chemical pursuits. It provides a building and provides certain scientific equipment. It maintains a library and publications bearing on the science of chemistry. It affords facilities for discussions and for experiments in the field of chemistry. Somebody gave it billiard tables and it has a chess board, but the membership is too busy to make much use of them. The club has no ball room, card room, gymnasium, or swimming pool, and it does not give card parties, dances, or other purely social affairs. It does have a large dining room and service-pantry kitchen on the second floor of the building and a kitchen in the basement which have been operated at a loss, indicative of the fact that chemists must eat, and it has what is called a lounging room, but these things are not confined to clubs or social organizations. The social features of the Chemists’ Club are incidental, and remotely so, to its general or “ predominant purpose,” and in our opinion it is not a social club within the meaning of the taxing acts. Judgment will be rendered in favor of plaintiff for the amount of the taxes exacted, with interest as provided by law. And it is so ordered.

Moss, *Judge;*Hat, *Judge;*and Booth, Judge, concur.

Geaham, Judge, took no part in the decision of this case.