Opinion ID: 411167
Heading Depth: 3
Heading Rank: 2

Heading: Benefits Accrue to Members Qua Members

Text: 58 In evaluating the relationship between the activities and purposes of a business league, the capacity in which benefits are received by the organization's members is as important as the unique character of the organization's activities. For a substantial relationship to exist, any direct benefits flowing from a business league's activities must inure to its members in their capacities as members of the organization. Thus, when a business league's uniquely relevant activities produce inherently group benefits that accrue to its members qua members, a substantial relationship exists within the meaning of section 513. 59 This distinction between inherently group benefits and individual benefits is analogous to the aggregate/entity concept familiar in partnership taxation. 21 Just as a member of a partnership may enjoy benefits in his separate capacities as partner and non-partner, so may a member of the LCUL enjoy benefits both as a League member and as an individual credit union. Only those activities that benefit the credit unions in their capacities as League members can be considered substantially related to the League's exempt function. This group benefit standard also accords with the requirement that a business league seek to improve the conditions of an entire line of business rather than perform discrete services for individuals. See Treas.Reg. Sec. 1.501(c)(6)-1. When the activities of a business league are directed toward the achievement of the common business interest of its members, the benefits that accrue to its members are inherently group benefits. 60 To distinguish benefits received by League members qua members from those accruing to the credit unions in their individual capacities, it is necessary to segregate the interests of the credit unions as a group from those of the credit unions as separate entities. Because educational programs, lobbying activities, and advertising services serve the common business interest of League members, and because the benefits resulting therefrom accrue to the members in their membership roles, a substantial relationship exists between such activities and the organization's purposes. Activities that serve the interests of the individual member credit unions produce individual benefits insufficient to fulfill the substantial relationship test. 61 To reiterate, a substantial relationship exists for purposes of the unrelated business income tax provisions when a business league engages in activities unique to its exempt purpose, and those activities generate inherently group benefits that redound to the advantage of its members qua members. With this standard in mind, we turn to the facts of the case at bar.