Source: https://law.justia.com/cases/federal/appellate-courts/F2/195/948/144662/
Timestamp: 2020-08-11 20:07:44
Document Index: 126914491

Matched Legal Cases: ['§ 23', '§ 23', '§ 23', '§ 101', '§ 101', '§ 23', '§ 29', '§ 23', '§ 121', '§ 23', '§ 29']

Roberts Dairy Co. v. Commissioner of Internal Revenue, 195 F.2d 948 (8th Cir. 1952) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Eighth Circuit › 1952 › Roberts Dairy Co. v. Commissioner of Internal Revenue
Roberts Dairy Co. v. Commissioner of Internal Revenue, 195 F.2d 948 (8th Cir. 1952)
U.S. Court of Appeals for the Eighth Circuit - 195 F.2d 948 (8th Cir. 1952) April 15, 1952
The petitioner contended that its contribution was deductible under either § 23(a) (1) (A) or § 23(q) (2) of the Internal Revenue Code. The Tax Court held that the contribution was not deductible because the objectives of the NTEA were to carry on propaganda or otherwise influence legislation within the meaning of § 23(q) (2) of the Internal Revenue Code and the promotion or defeat of legislation or the exploitation of propaganda within the prohibition of Section 29.23(q)-1 of Treasury Regulation 111.1
In the years immediately prior to and including 1943 the petitioner was faced with severe competition from dairies functioning in a cooperative type of business organization. It had difficulty in retaining its suppliers and customers because of the advantages offered them by the cooperatives. These advantages were made possible by reason of the stronger financial position of the cooperatives compared with petitioner, brought about to a large degree by the tax-exempt status of cooperatives under § 101 (12) and (13) of the Internal Revenue Code, 26 U.S.C. § 101 (12, 13).
NTEA was incorporated under the laws of Illinois October 11, 1943. It is a nonprofit organization supported by contributions entitling the contributor to membership for one year. Its articles of incorporation provide that the objects and purposes for which it was organized are:
"* * * to conduct educational, scientific and research activities relative to disparities in federal and state tax statutes and other laws and regulations affecting business, and to disseminate such information to civic organizations and representatives of business affected thereby to the public and to federal and state governments. The Corporation shall be non-sectarian, non-partisan, and no part of the net earnings if any, of the Corporation shall inure to the benefit of any private shareholder or individual."
Many of the bulletins issued by NTEA during the years between 1943 and 1949 were introduced in evidence by the Commissioner. One of these bulletins discussing the Association said among other things its purpose would be "Furnishing factual information on tax matters to individuals who are called upon to testify before committees and other agencies" * * and "when necessary, furnish counselors to represent the Association and its membership before state legislatures and other state, county and municipal bodies wherever tax, legislative and public educational problems arise, affecting the welfare of the members of the Association."
"Petitioner has failed to show wherein the purpose of the organization of NTEA was any different or that its activities or type of information disseminated was any different in 1943 than in later years of operating under the same charter prior to 1949. This being the case, it appears to us that all of its activities adhered to the object of its organization and that the type of information disseminated in later years, which is in evidence, was the type intended upon its incorporation."
The record abundantly supports this finding and conclusion of the Tax Court. The purpose of the organization expressed in its charter was to "* * * conduct * * research activities relative to disparities in federal and state tax statutes and other laws and regulations affecting business, and * * * to disseminate such information to civic organizations and representatives of business affected thereby, to the public and to federal and state governments."
The record shows that NTEA did the work it was organized to do, and did it thoroughly from its beginning in 1943 until it amended its charter in 1949 to enable it to perform directly and officially the part of the work it had, prior to 1949, left to its members to perform, that was to persuade congress and legislatures to remove the "disparities in federal and state tax statutes favorable to cooperative and unfavorable to their competitors."
Clearly the Tax Court did not err in holding that the contribution here involved was not deductible within the meaning of § 23(q) (2) of the Internal Revenue Code and § 29.23(q)-1 of Treasury Regulation 111.
Internal Revenue Code, 26 U.S.C. § 23 (a) (1) (A):
"(a) (As amended by § 121(a) of the Revenue Act of 1942, c. 619, 56 Stat. 798) Expenses.
"1. Trade or Business Expenses.
"§ 23 (As amended by Section 125 of the Revenue Act of 1942).
"(q) Charitable and other contributions by corporations. In the case of a corporation, contributions or gifts payment of which is made within the taxable year to or for the use of: * * *
"(2) A corporation * * * organized and operated exclusively for * * * scientific * * * or educational purposes * * * no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation * * *."
Treasury Regulation 111, § 29.23(q)-1. Contributions or Gifts by Corporations.
"* * * Sums of money expended for lobbying purposes, the promotion or defeat of legislation, the exploitation of propaganda, including advertising other than trade advertising, and contributions for campaign expenses are not deductible from gross income."