Court Opinion

ID: 9452325
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:37:14.02897+00
Date Added: 2024-06-11T17:33:10.195325
License: Public Domain

KILEY, Circuit Judge
(dissenting).
I respectfully dissent. In my opinion, taxpayer Association is not entitled to the exemption under section 501(c) (6) which includes: “Business leagues, chambers of commerce, real-estate boards, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”
The Association is not a chamber of commerce, real estate board or board of trade, nor is it like any one of them. Therefore, that it is not organized for profit is irrelevant unless it is a business league. To qualify as a business league it must possess the general characteristics of chambers of commerce, real estate boards and boards of trade under the doctrine of noscitur a sociis. Produce Exchange Stock Clearing Ass’n v. Helvering, 71 F.2d 142, 144 (2d Cir. 1934). In that case the taxpayer corporation, wholly owned by the New York Produce Exchange, was created to perform-, clearing services for its members. *253The court held that “[t]he statute could never have contemplated that by creating a subsidiary corporation to furnish such facilities, even though they were intended to be performed at cost, it could obtain tax exemption for its creature.” Id. at 143. Like the association in Produce Exchange, the Bottlers’ Association carries on its activities solely for the direct benefit of its members. “Nothing is done to advance the interests of the community or improve the standards or conditions of a particular trade * * Id. at 144.
The facts here distinguish Crooks v. Kansas City Hay Dealers’ Ass’n, 37 F.2d 83 (8th Cir. 1929). There fifty or sixty hay dealers combined to aid commerce, establish an honest hay market, and thus contribute to the betterment of Kansas City. The claim of public service, through the advancement of its members’ competitive business interests, made by the Bottlers’ Association in this case, was rejected by the court in the Produce Exchange case, 71 F.2d at 144. The benefit in any real sense is solely for Pepsi-Cola dealers.
A business league’s activities under Treasury Regulation § 1.501(c)(6)-!1 should be directed to improvement of conditions of “one or more lines of business” as distinguished from services for individual persons. The Crooks case involved a “line of business” — the hay business, and the association there did not compete with any business. 37 F.2d at 84. Similarly, in Commissioner of Internal Revenue v. Chicago Graphic Arts Federation, 128 F.2d 424 (7th Cir. 1942), this court affirmed the holding of the United States Board of Tax Appeals that Graphic Arts, whose members were all printing plant owners, combined to form an association to improve the printing industry — a line of business. In that case, the services to individuals were “incidental” to the general purpose of improving the industry and benefiting the public. Id. at 426. Bottling Pepsi-Cola is not a line of business. It is only one of a line — one of many competing businesses in the cola and soft drink industry. And the services rendered by the Association to its members are not incidental to a general purpose of improving business conditions. They are essential to an express general purpose, the improvement of the members’ competitive position as against non-members.
I would reverse the Tax Court’s judgment.

. A business league is an association of persons having some common business interest, the purpose of which is to promote such common interest and not to engage in a regular business of a kind ordinarily carried on for profit. It is an organization of the same general class as a chamber of commerce or board of trade. Thus, its activities should be directed to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. .