Case Name: INTERNATIONAL REFORM FEDERATION v. DISTRICT UNEMPLOYMENT COMPENSATION BOARD
Court: United States District Court for the District of Columbia
Jurisdiction: United States
Decision Date: 1942-09-21
Citations: 131 F.2d 337
Docket Number: No. 8064
Parties: INTERNATIONAL REFORM FEDERATION v. DISTRICT UNEMPLOYMENT COMPENSATION BOARD.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 131
Pages: 337–346

Head Matter:
INTERNATIONAL REFORM FEDERATION v. DISTRICT UNEMPLOYMENT COMPENSATION BOARD.
No. 8064.
United States Court of Appeals for the District of Columbia.
Argued May 8, 1942.
Decided Sept. 21, 1942.
MILLER, Associate Justice, dissenting.
Mr. R. H. McNeill, of Washington, D. C. , for appellant.
Mr. Charles H. Burton, Counsel, District Unemployment Compensation Board, with whom Messrs. Richmond B. Keech, Corporation Counsel, D. C., Vernon E. West, Principal Assistant Corporation Counsel, D. C., and Boynton P. Livingston, Assistant Attorney, District Unemployment Compensation Board, all of Washington, D. C., were on the brief, for appellee.
Before GRONER, Chief Justice and MILLER and VINSON, Associate Justices.

Opinion:
GRONER, C. J.
The District of Columbia Unemployment Compensation Act requires every employer who employs one or more individuals in any employment to pay into a fund to be administered under the provisions of the Act monthly contributions based upon percentages of the total wages payable to such persons. Section 1(b) (7) of the Act excepts: "service performed in the employ of a corporation, community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual." (Italics supplied.)
The question in this case is whether appellant, the International Reform Federation, is an employer within the meaning of the Act and as such is required to make reports and unemployment contributions to the District Board in conformity therewith. The Board decided that it was. The District Court affirmed. The case is here on appeal.
The Federation has existed nearly half a century. The object of incorporation, as stated in its constitution, is "the promotion of those reforms on which the churches sociologically agree while theologically differing, such as the enactment and enforcement of laws prohibiting the alcoholic liquor traffic, the white slave traffic, harmful drugs and kindred evils in the United States and throughout the world; the defense of the Sabbath and purity; the suppression of gambling and political corruption; and the substitution of arbitration and conciliation for both industrial and international war". It boasts of having, at one time or another, written 36 bills on moral subjects for- submission to various State legislatures, and 18 that have been passed by the Congress. Maintaining headquarters in Washington City, it has "expended much money in Asiatic countries in the suppression of the opium traffic" and has contributed "many thousands of dollars to scientific temperance education" and other like purposes. Its superintendent has authority to employ, when in his opinion such action is necessary, a law enforcement director to aid in "the enforcement of moral laws in the cities, counties, and states". Its literature department is made available to schools, libraries, and churches, and its official magazine is mailed to libraries, churches, ministers, moral leaders, and to members of the United States Congress and the State legislatures when moral issues are pending. Its funds are supplied by voluntary contributions from members in every State of the Union, from church budgets and voluntary offerings, and from a small endowment fund. It is admittedly a non-profit corporation, and no part of its earnings inures to the benefit of any private individual. - It has no salaried personnel except its superintend ent, its magazine editor, and a clerical staff of two persons.
Its superintendent, who is also its legislative director, testified that the work of the Federation consisted in part of the presentation of facts and arguments against immoral and illegal conditions found to exist in different parts of the United States; that its object and purpose is to co-operate with the religious, charitable, and educational organizations similarly engaged; and that it has from time to time devoted some of its income and some of the time of its employees to fighting for the prohibition of the alcoholic liquor traffic, to upholding the prohibition of the white slave and harmful drug traffics, and to the suppression of gambling and political corruption. The witness further testified that its activity in these latter respects is not its chief object, but is secondary and incidental and consumes very little of its time or effort in comparison to the time and effort consumed by other activities such as the dissemination of literature and pamphlets containing information, statistics, and other data on the subjects covered in its constitution.
The position of appellee, District of Columbia Unemplojunent Compensation Board, is that even if appellant should be classed as a corporation organized for charitable, religious, or educational purposes, which it says it should not he, it is nevertheless not organized nor operated exclusively for those purposes within the meaning of the exception clause in the Act. The basis of this contention is that the promotional and propaganda objects and activities of the Federation, as outlined above, place it outside the class of organizations intended to be exempt.
Counsel for the Board insist that, in order to be classified as a charitable corporation, it is necessary that appellant show that its principal objectives are to provide for the poor, the sick, and the needy, but we think this is too narrow and restricted a formula. In Commissioner v. Pensel, Lord MacNaghten said that charity, in its legal sense, comprises four principal divisions — trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. And we know of no modern case in which the definition has been confined strictly to the enumeration found in the Statute of Elizabeth. On the contrary, as the California Court said: " the differing condition, character, and wants of communities and nations, change and enlarge the scope of charity, and where new necessities are created new charitable uses must be established."
And, as Chief Justice Fitzgibbon in an Irish case said, if the benefit is one which the founder believes to be of public advantage and his belief is rational and not contrary to the general law of the land or the principles of morality, the gift is charitable in the eyes of the law.
That Congress had in mind these broader definitions is confirmed by the words used in the Act, for by its terms it embraces religious, charitable, scientific, literary, or educational corporations, thus including within the exemption clause every nonprofit organization designed and operating for the benefit and enlightenment of the community, the State, or the Nation — in short, to apply the exemption to those organizations commonly designated charitable in the law of trusts. Consequently, we may properly draw analogy from the trust cases. In line with this, Pennsylvania upheld a charitable trust to promote improvements in the structure and methods of government with special reference to the initiative, referendum, and recall, and to ballot reform. Taylor v. Hoag, 273 Pa. 194, 197, 116 A. 826, 21 A.L.R. 946. Washington upheld one for the spread of the teaching of socialism. Peth v. Spear, 63 Wash. 291, 115 P. 164. New Jersey upheld one to distribute the works of Henry George in advocacy of the single tax principle. George v. Braddock, 45 N.J.Eq. 757, 18 A. 881, 6 L.R.A. 511, 14 Am.St.Rep. 754. Massachusetts sustained one for the preparation and circulation of books, newspapers, and the delivery of speeches and lectures to create public sentiment that would put an end to Negro slavery. Jackson v. Phillips, 14 Allen 539. Illinois upheld one to promote the attainment of women's suffrage. Garrison v. Little, 75 Ul.App. 402. And in Massachusetts, New York, Wisconsin, and Indiana, charitable trusts to reduce and abolish the use of intoxicating liquor have been held valid. To the same effect is a recent English case. Re Joseph Hood, [1931] 1 Ch. 240.
In the view taken in the cases to which we have referred, it cannot be questioned that the general purposes as well as the activities of appellant, as we have outlined them above, may be said to be well within this rule. Unless, then, that1 portion of appellant's activities in relation to Federal and State legislation on subjects of moral or social interest unclass it as a charitable organization, the decision below must be reversed. The Board insists that appellant's activities are political and, being political, may not at the same time be charitable or educational in the sense in which those words are used in the Act. Undoubtedly some cases may be found sustaining the view that organizations seeking changes of law are engaged in political activity and therefore neither charitable nor educational, whatever the motive. The ground for such holdings is that the court has no means of judging whether a proposed- change in the law will or will not be for the public benefit. But this reasoning is not, convincing, and we prefer the more modern view that so long as the purpose can be thought by some to be in the public interest, the court is not concerned with its wisdom. See Vol. 2, Bogert, Trusts and Trustees, § 378, at p. 1204.
Certainly no one will question that an educational campaign to arouse public sentiment against the commercial use of women in immorality, against the use of narcotic drugs, against gambling, and against political corruption, is in the public weal. Certainly most people believe that the habit of temperance in the use of intoxicating liquor is beneficial. - And certainly many believe that the absolute prohibition of the use of liquor will be helpful to mankind. In the 50 years of its existence, appellant has pursued just these objectives, along with others which it believes to be for the public good and in the interest of public morals.
To this end it disseminates writings and sermons and expends its funds in educating the public mind to the nature and character of the evils it seeks to eradicate, and in doing so keeps in touch with, and on occasion prepares, bills, and appears before legislative committees, State and Federal, when these subjects are under consideration. It would seem to us to be going very far to say that these legislative activities accomplish a metamorphosis in appellant's character whereby it is changed from a charitable or educational to a political organization. Such activities have never been classified as lobbying in the sense in which that activity has been either prohibited or licensed. Hence we see no actual difference between the education of the individual — admittedly proper — and the education of the legislator, where both are directed to a common end, and that end, not the advancement, by political intrigue or otherwise, of the fortunes of a political party, but merely the accomplishment of national social improvement. There is nothing new in this position, and it has found support in many cases.
In the recent case -of Girard Trust Co. v. Commissioner of Internal Revenue, 122 F.2d 108, 138 A.L.R. 448, the Third Circuit Court of Appeals decided the identical question. The case involved the deduction for estate tax purposes of the amount of a bequest to the Board of Temperance, Prohibition, and Public Morals of the Meth-odist Episcopal Church. One of the stated objects of the Board was to promote temperance and suppress the liquor traffic through "the speedy enactment of such legislation throughout the world". It was urged there, as here, that this object of the Temperance Board invalidated its claim to exemption as a charitable, religious, or educational organization. In refuting this argument, Judge Goodrich says:
"Nor has the law sought to draw such a bright line between the exercise of private and public influence . Surely a church would not lose its exemption as a religious institution if, pending a proposal to repeal Sunday observance laws, the congregation held a meeting on church property and authorized a committee to appear before a legislative body to protest against the repeal."
In the case now under consideration, as we have seen, the statute in precise terms excepts from its provisions service performed in the employ of a corporation operated exclusively for religious, charitable or educational purposes. Nothing is to be found in this paragraph which pronounces the corporation or the fund less charitable or less religious or less educational because it seeks to accomplish its purpose as well in the corridors of Congress as in the churches and homes of the people. Nor can such a distinction be implied with any degree of reason.
In the enactment of the unemployment law in the District of Columbia, it was within the discretion of Congress to include charitable or educational institutions on the same terms as business or social organizations or, if it excluded the former, to limit in such way as it thought proper the enjoyment of the preferred position. The language used by Congress evinces a clear purpose to exclude the former, but no purpose to limit their enjoyment of their preferred position. Had Congress intended such a limitation as is here contended for, it is fair to assume that it would have said so in precise terms. All that is requisite under the Act is that the institution shall be organized and operated exclusively for one of the named purposes. If this appears, the Act is inapplicable.
The conclusion we reach is strengthened by the fact that the words "corporations organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes" were thoroughly familiar to Congress, having been used in nearly all, if not all, of the revenue acts since 1913. In the Revenue Act of 1934, § 23 (o) (2), 26 U.S.C.A.Int.Rev.Code § 23(e) (2), Congress definitely circumscribed them by the addition of the phrase "and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation". These supplementary words, if they show anything, show that Congress regarded the new phrase as necessary to avoid exemptions which might lawfully be claimed under the language of the original clause, and when it is remembered that in the present Act, passed just a year later, the same Congress used the original phrase without the addition, the natural and common sense view of the situation impels the conclusion that it did so deliberately and with the intention of distinguishing the rights under the two statutes.
The Board points to the case of Slee v. Commissioner of Internal Revenue, 2 Cir., 42 F.2d 184, 183, 72 A.L.R. 400, as reaching a different conclusion than that we announce, but we think this is not an accurate statement. That case involved the right to deduct from the federal income tax gifts to the American Birth Control League. Judge Hand, who wrote the opinion, reached the conclusion that the League was conducted in part for charitable purposes, in that it operated a free clinic, but that its avowed purpose to "enlist the support 0f legislators to effect the lawful repeal" of existing laws against birth control made that, rather than charity, its real objective. He distinguished the case from one in which a corporation, otherwise charitable, educational, or scientific, seeks legislation merely ancillary to the achievement of its main objective. He said:
"Nevertheless, there are many charitable, literary and scientific ventures that as an incident to their success require changes in the law. A charity may need a special charter allowing it to receive larger gifts than the general laws allow. It would be strained to say that for this reason it became less exclusively charitable, though much might have to be done to convince legislators. A society to prevent cruelty to children, or animals, needs the positive support of law to accomplish its ends. It must have power to coerce parents and owners, and it does not lose its character when it seeks to strengthen its arm. A state university is constantly trying to get appropriations from the Legislature; for all that, it seems to us still an exclusively educational institution. No less so if, for instance, in Tennessee it tries to get leave to teach evolutionary biology. We should not think that a society of book lovers or .scientists was less 'literary' or 'scientific,' if it took part in agitation to release the taboos upon works of dubious propriety, or to put scientific instruments upon the free lists. All such activities are mediate to the primary purpose, and would not, we should think, unclass the promoters."
So, in the instant case, the Federation's primary purpose is the establishment of higher codes of morality and manners throughout the world, and its contribution to or even its advocacy of legislation to these ends merely "mediate" or "ancillary" to the primary purpose.
In this view, we conclude that appellant is within the exception clause of the Act; that what are denominated its political activities do not make its purposes less charitable or educational; and that it was the intent and purpose of Congress, in enacting the clause in question without including the limitation which appears in the revenue laws, to make the exception apply where, as here, the primary and hence the exclusive purpose is religious, charitable, or educational.
The judgment of the lower court is, therefore, reversed, and the cause remanded with instructions to proceed in accordance with the views expressed in this opinion.
Reversed and remanded.
49 Stat. 946, Sec. 311 (b) (7) T. 8, Supp. V, D.C.Code; 49 Stat. 1888, Sec. 311(b) (7), Supp. V, D.C.Code.
[1891] A.O. 531, 583.
Collier v. Lindley, 208 Cal. 641, 266 P. 526. 528.
In re Cranston, 1 Ir. 431, 446-7, cited in Scott on Trusts, vol. 3, Sec. 374.7.
Bowditeh v. Attorney General, 241 Mass. 168, 134 N.E. 796, 28 A.L.R. 713; Buell v. Gardner, 83 Mise. 513, 144 N.Y. S. 945; Harrington v. Pier, 105 Wis. 485, 82 N.W. 345, 50 L.R.A. 307, 76 Am. _ St.Rep. 924. Haines v. Allen, 78 Ind. 100, 41 Am.Rep. 555.
71 Pa.Law Rev. 89 (1922) and 36 Mich.Law Rev. 140 (1937-38).
In Taylor v. Hoag, 273 Pa. 194, 197, 116 A. 826, 827, 21 A.L.R. 946, the Supreme Court of Pennsylvania said: "We are led to conclude that a trust for a public charity is not invalid merely because it contemplates the procuring of such changes in existing laws as the donor deems beneficial to the people in general, or to a class for whose benefit the trust is created". To the same effect, see Bowditeh v. Attorney General, 241 Mass. 168, 134 N.E. 796, 28 A.L.R. 713; Garrison v. Little, 75 Ill.App. 402; George v. Braddock, 45 N.J.Eq. 757, 18 A. 881, 6 L.R.A. 511, 14 Am.St.Rep. 754; Buell v. Gardner, 83 Mise. 513, 144 N.Y.S. 945; Re Foveaux, [1895] 2 Ch. 501; Armstrong v. Reeves, [1890] Ir.L.R., 25 Eq. 325; Farewell v. Farewell, [1892] 22 Ont.Rep. 573.
Appellee cites Hazen v. National Rifle Association of America, 69 App.D.C. 339, 101 F.2d 432, 436, as sustaining its position. But that ease is not in point for, in rejecting the contention of appellant there that it was exempt from the District of Columbia personal property tax because its property was used for educational purposes, we said that "it is the primary use made of the property which determines whether it is exempt" and "that at most the educational phase of appellee's activities is incidental and collateral to the social, recreative, promotional and propaganda phases which constitute its major reasons for existence". That condition does not obtain in the present case.