Document: 450 U.S. 1 101 S.Ct. 836 67 L.Ed.2d HCSC-LAUNDRYv.UNITED STATES. No. 80-338. Feb. 23, 1981. PER CURIAM. Petitioner HCSC-Laundry is a Pennsylvania nonprofit corporation. It was organized in 1967 under the law of that Commonwealth "[t]o operate and maintain hospital laundry linen supply program for those public hospitals non-profit or related health facilities andoperated exclusively religious, charitable, scientific, educational purposes contract with [it]."1 2 provides service to 15 an ambulance service. All these are located eastern Pennsylvania. Each organization served possesses certificate exemption from federal income taxation § 501(c)(3) Internal Revenue Code 1954, 26 U.S.C. 501(c)(3).2 participating pays petitioner annual membership dues based upon bed capacity. The no dues. Petitioner's only other derived (a) charge budgeted costs (b) 11/2 cents per pound laundry. Budgeted include operating expenses, debt retirement, replacement. amounts charged excess have been placed fund equipment acquisition 3 No part petitioner's net earnings inures benefit any individual. 4 formed after Lehigh Valley Health Planning Council determined shared, nonprofit, off-premises would best accommodate requirements member respect both quality economies scale. had investigated various alternatives. rejected joint concept because sufficient serve more than itself. A commercial declined offer business all hospitals, most available laundries were not capable managing heavy total volume. 5 plant built equipped at cost about $2 million. This financed through loans local banks, 15-year contracts 10 used as collateral. employs approximately 125 persons. 6 In 1976 applied taxation. Service denied application on grounds 501(e)3 exclusive provision which acooperative could qualify "an operated charitable purposes" therefore exempt. Because subsection (e)(1)(A) does mention laundry, reasoned entitled tax exemption. 7 duly filed its corporate return fiscal year ended June 30, 1976. That showed taxable $123,521 $10,395. paid. Shortly thereafter, claim refund and, when took action within six months, see 6532(a)(1), commenced this suit United States District Court Eastern 8 On stipulated facts cross-motions summary judgment, ruled favor petitioner, holding it described 501(c)(3), 473 F.Supp. 250 (1979). Appeals Third Circuit, however, reversed. held 501(e) cooperative obtain exemption, omission services 501(e)(1)(A)'s specific list activities demonstrated Congress intended deny exempt status laundries. 624 F.2d 428 (1980). 9 ruling conflict decisions elsewhere,4 we grant certiorari, now affirm. has said: "The starting point determination scope 'gross income' cardinal principle creating 'to use full measure taxing power.' " Commissioner v. Kowalski, 434 77, 82, 98 315, 318, 54 252 (1977), quoting Helvering Cliford, 309 331, 334, 60 554, 556, 84 L.Ed. 788 (1940). See 61(a) Code, 61(a). Under our system therefore, every element gross person, individual, subject unless there statute some rule exempts person element. 11 Sections 501(a) (c)(3) provide such complete one, corporation fitting description set forth fulfilling subsection's requirements. But (e) also 501. And expressly concerns organization. if, among things, consist "data processing, purchasing, warehousing, billing collection, food, clinical, industrial engineering, laboratory, printing, communications, record center, personnel (including selection, testing, training, education personnel) services." Laundry service, so essential hospital's operation, included indeed, noticeable absence. issue, thus, whether prohibits qualifying 501 Government's position controlling exclusive, it, available. takes opposing clearly entitles claimed 12 Without reference legislative history, Government appear skirmish, basic statutory construction statute, here (e), controls over general (c)(3), particularly two interrelated closely positioned, fact being parts relating organizations tax. Bulova Watch Co. States, 365 753, 761, 81 864, 869, 72 (1961). 13 Additionally, history strong conclusive support position. persuades us be organizations. Prior enactment 1968, shared uncertain. if tax-exempt created entity perform them, Rev.Rul. 54-305, 1954-2 Cum.Bull. 127.5 502, amended, 1954 502. position, by Claims Hospital Bureau Standards Supplies, Inc. 141 Ct.Cl. 91, 158 560 (1958). After noting uncertainty law,6 enacted (e). Expenditure Control Act Pub.L. 90-364, 109(a), 82 Stat. 269. 14 considering provisions adjustment bill 1968 ultimately became Senate sought still status. Treasury Department supported amendment. 114 Cong.Rec. 7516, 8111-8112 (1968). At urging interests, however (see Hearings Certain Committee Amendments H.R. 10612 before Finance, 94th Cong., 2d Sess., 608 (1976)), Conference accept limited version recommending adoption managers House emphasized performing new provision. H.R.Conf.Rep.No.1533, 90th 43 (1968); U.S.Code Cong. & Admin.News 2341; Finance Ways Means, Explanation Bill 15414, Sess. 1, 20 (Comm.Print 1968). Later, 1976, American Association, proposed amendment added specified (e)(1)(A). 2765-2772 (1976); S.Rep.No.94-938, pt. 2, pp. 76-77 (1976), 2897. amendment, defeated floor Senate. 122 25915 (1976). 16 view this, seems beyond dispute 501, despite seemingly broad language specifies types encompassed Inasmuch deliberately omitted specifically refused inclusion list, inevitably follows easily can change whenever inclined.7 17 judgment affirmed. 18 ordered. 19 Justice WHITE dissents case plenary consideration. STEVENS, dissenting. 21 Today summarily decides read light 501(e), requires tax, even though they may satisfy §§ 501(c)(3). my opinion, Court's disposition ill-advised understanding question presented examination underlying present state When against background—indeed, isolation—its plain unambiguously 22 * 1950 amended 1939 adding section paragraph dealing so-called "feeder organizations." 1950, 301(b), 814, ch. 994, 64 953. subsequently reenacted without substantial 502(a) 1954.1 1952, adopted regulation designed implement feeder 101. Treas.Reg. 111, 29.101-3(b).2 Although did specifi cally address organizations, indicate considered ventures entities purpose providing necessary nonexempt organizations.3 23 first Ruling, 127. primary maintaining purchasing agency members—tax-exempt institutions—fell thus issue realized substantialprofits operations distributed portion profits members. Ibid. Accordingly, found carrying trade profit meaning Code. based, sources Treasury's pre-1968 24 judicial consideration came 1958 560.4 case, group act their agent certain research functions behalf. brought recover taxes assessed 1952 1953, alleging 101(6) predecessor opposed arguing primarily 118, 39.101-2(b) (1953). inapplicable required reported years question. Ct.Cl., 95-96, F.Supp., 563-564. court 101(6).5 25 Almost passed next important development area. 1967, connection Social Security original provided long satisfied requirements, them requirement which, performed themselves, constitute integral activities. S.Rep.No.744, Report 1st 201-202, 318-319, 2834 (1967). indicates Id., 201. aware belief Code's 200-201.6 However, noted well Bureau, "the leading point," 201, n. 1. accepted form. H.R.Conf.Rep.No.1030, 73 (1967), 2834. Rather, during inits form into 1968.7 adequate detail majority ante, 6-7, opinion Appeals, 428, 433-434 (CA3 1980), warrant repetition here.8 As I establishes servicesfrom 501(e). These conclusions reinforced Congress' rejection eligible services. 7. 27 Despite until 1980 decided 501.9 Between 1980, courts contention listed 501(c)(3).10 alternative that, automatically excluded nonetheless 1.502-1(b). three Courts concluded means acquire exemption.11 relied cited majority. decision series decisions, presently us. II 28 argued, five previous occasions, necessarily followed outside 250, (ED Pa. 1979). argument, choosing instead align itself then unbroken line precedent. Id. 253-254.12 argument 502(a). appeal, abandoned F.2d, 432, 6, solely 501(e).13 Thus, asshaped proceedings below, Congress, enacting must all. concludes require affirmative answer Neither factor, supports conclusion. 29 Correct analysis should focus actually creates 501(a), states: 30 "An (c) (d) 401(a) shall subtitle 502 503." 501(a). 31 clear unambiguous. Insofar relevant meeting tax.14 Such exemptiononly fall 503. Section contains nor way 32 Applying but undisputed satisfies 501(c)(3).15 Therefore, one express exceptions identified applies. "for profit" basis. 254-255. finding challenged Government. 503 simply irrelevant case. statutes states 33 overrides construing exception charitableexemption Construed manner, operates otherwise itself, express: rather identifying particular nonexempt, identifies apparently implication, denies similar unlisted 34 silently dismisses contain indicating limiting effect; between supplied "interrelated" "closely positioned" Ante, 6. cannot close statute's text surely significant physical location.16 state, does, substitute conclusion analysis. Apart proximity another, relationship treated purposes. Nothing suggests effect denying wanted effect, difficulty making intention unmistakably plain, evident 501(a)'s employed reflects enlarge, reduce, category 501(c)(3).17 B 35 interpretation discussion history. makes Instead, focuses insofar relies rests non sequitur. persuade section, 1954.18 Unless later earlier premise. 36 might revealed: (1) believed extend previously exemption; (2) hospitalservice least arguably withdraw some, all, entities. persuasive neither proposition. 37 granted already There absolutely evidence benefits Act. Proper analysis, law. 38 including corporations "operated . purposes." always clear. less discussed Part I, supra, prior organization" Code.19 quite properly opinion—held "feeder" what 39 matter history—presumably fairly common industrys arose disputes affiliates. Conceptually, reason why identical arise entities, schools churches, find advantageous cooperatives them.20 event, attention concerned made unequivocal policy choice rejecting granting unambiguous functions.21 legislation explicitly implicitly qualified 501.22 40 confer religious organizations.23 If construed withdrawn saw fit confine clarifying "cooperative organizations"? think same apply covered Its evaluated basis remaining 41 recognize attempts explicit encompass rejected. proves nothing plainly stated itself: petitioner. equally true intent whatever 42 Nor logic compel pre-existing policy, obvious legitimate giving favorable treatment data processing food better Furthermore, kind reasoning—which unfortunately characterize dispositions—that interprets do taxpayers taxpayers. respectfully dissent. quoted articles incorporation, May 29, 1970. further accomplished "in manner consistent 1954." 429, 1980). Subsections extent pertinent here, read: "(a) Exemption "(c) List following referred (a): "(3) Corporations, community chest, fund, foundation, testing safety, literary, purposes, foster national international amateur sports competition (but involve athletic equipment), prevention cruelty children animals, private shareholder propaganda, attempting, influence (except (h)), participate in, intervene publishing distributing statements), political campaign behalf candidate office." reads: "(e) Cooperative "For title, if— "(1) solely— "(A) perform, centralized basis, own (a), exercising function constituting exemption: services; "(B) each is— "(i) "(ii) constituent separate entity, "(iii) owned State, Columbia, possession subdivision instrumentality foregoing." Among cases Circuit's Northern California Central Services, 219 60, 591 620 (1979), 384 776 (SD Ind. 1974). Chart, 491 (DC 1979) (appeals pending, Nos. 80-1138 80-1139 (CADC)). Decisions accord Circuit Services Assn. 623 611 (CA9 cert. denied, 911, 1348, Metropolitan Detroit Area 634 330 (CA6 Associated Commissioner, 74 T.C. 213, 231 (1980) (reviewed court, four dissents; appeal 80-3596 (CA5)). Since adhered 69-160, 1969-1 147; 69-633, 1969-2 121. 200-201 2834; We agree suggestion 67, 624, "may wished encourage exemptions, vehement objections, yet leave free exemptions existing afford them." extended hearings, considerations, debates reveal informed deliberate decision. congressional choice. provides: ground payable 501." redesignated regulation, appears substantially 1.502-1(b), CFR 1.502-1(b) provides, part: "If subsidiary parent organization, will lost because, accounting derives dealings example, sole furnishing electric power unrelated (that is, activities) regularly carried For consumers (and parent's organizations), since Similarly, several generating profits. governing 502(a), applicable profit," implementing requirement. feeders, failure take account statute. See, e. g., 560, 563-564 (1958); AFTR 77-5646, 77-5648 (WD Wash. 1977); Community 79-934, 79-939 79-940 Mich. 1979); 254-255 (case below); 234-235 (Tannenwald, J., dissenting), (CA5). Stanley Reed, recently retired Court, sat designation never announced nonacquiescence apparent response respects 1963. T.D. 6662, 1963-2 214, 215-216. 219. heading "Present law," statement: join together constitutes 'feeder organization' special code performed, individually, spite Service, tax." 200-201, foregoing; "(2) allocates pays, 81/2 months year, patrons them; capital stock, stock outstanding patrons." 330, 334-335 shortly 147. 1974); 77-5646 445 857 1978); (1979); 79-934 below). 1979), 80-1138, (CADC), qualifies broader 1980) 334; supra. 213 (1980), (CA5), sharply divided Tax explained note 13, infra, reasoning above-cited fact, instant 10, dissent judges, nonexempt. reasons dissenting opinions Judge Tannenwald Wilbur, disagree What holding, precludes observed intentionally went consider inquiry wholly unnecessary argues For, II-A, 501(c) controlled 254. reversed decision, disturb finding. attempt governs once established except enumerated decline give merely me 501(e)'s place declaration Indeed, expand, contract, 624; 253; 860; 781. 1939. text, precise origin unimportant; According Treasury, failed provisions. 127; indicated opposition cooperatives, 1968. Several passages knew approved 7516 id., 8112. point." 12. reasonable construe limit Some view. 501(e)(2) allocate pay members year. "destination income" culminating famous involving New York University School Law's noodle factory, C. F. Mueller 190 120 1951), directed precisely funneled institutions. reasonably funnel back members, deprived shield avoid challenge merits. feeders restrictive observed, able great deal flexibility 13-14. 501(f) "Cooperative organizations," analogous invest funds institutions resulting

Category: 11