Court Opinion

ID: 4478171
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:55.022132+00
Date Added: 2024-06-11T14:53:55.574099
License: Public Domain

Opper, J., dissenting: It is not at all clear to me whether the recognized activities of petitioner are such as to bring it within the meaning of a social welfare organization. That presumably involves a consideration of the definition of that term as it is used in section 101 (8). The opinion, however, does not purport to discuss or dispose of any such theory, but, on the contrary, it appears to be assumed that petitioner’s ultimate function was civic, educational, and cultural, and hence that it was devoted to objects included in “social welfare.” Once it is further conceded that organization under a business corporation act does not characterize a social welfare enterprise as “organized for profit,” it seems to me impossible to find anything in the declared purpose or actual operation of this petitioner to eliminate it from the designated exemption. The basic purpose of “conducting a free public radio forum for the dissemination of liberal and progressive social views” could obviously be promoted only through the medium of the physical facilities of a radio broadcasting station. It is easy to see that the unrestricted realization of that aim might be regarded as more readily feasible if the station were owned outright. An undertaking so designed, however, would naturally entail expenses of considerable magnitude both for capital investment and for maintenance, or even for improvement and expansion. But to say that the use of earnings to those ends indelibly ascribes the profit purpose overlooks the necessity of ascertaining the basic object for which such maintenance and expansion is undertaken. If the earnings were being reinvested with a view to increasing profits which would eventually become separated from the business and find their way as income to private interests, it might be possible to arrive at the conclusion that the exemption should be denied. But the record is clear and uncontradicted that, as the petitioner is organized and as it is operated, that result is impossible. The figures indicate that operations as a whole have up to now been conducted at a loss, so that apparently profitable years merely make good the deficits of others. But if we speculate that in the future over-all profits may arise, the facts as demonstrated by the record leave only two possibilities open. Either these profits can be devoted to an amplified pursuit of petitioner’s basic purpose, possibly by reducing the amount or value of commercial time in favor of educational programs, in which event there would be no profit in the tax sense and the subordination of the commercial to the welfare object would require our recognition, Trinidad v. Sagrada Orden de Predicadores, 263 U. S. 578; or the proceeds would pass to the organization which the prevailing opinion views as the one who “owns petitioner’s shares,” which, being itself exempt, would then endow petitioner with a corresponding immunity. Roche's Beach, Inc. v. Commissioner (C. C. A., 2d Cir.), 96 Fed. (2d) 776. In neither event could the proceeds possibly inure to private profit. Indeed, even though the modifying language appearing in some other subdivisions prohibiting “the benefit of any private shareholder or individual” were applicable here, which it is not, petitioner’s exemption, would, it seems to me, remain inescapable. In Roche’s Beach, Inc. v. Commissioner, supra, the commercial operation of a bathing beach was found to be exempt as a consequence of the devotion of its proceeds to the charitable foundations established in the will of its former owner. Declaring that “the destination of the income is more significant than its source,” the court further characterized as “too narrow a view” the “theory that the stated purposes for which a corporation is organized are to be found in its charter.” If in addition to the charitable destination of the bathing beach proceeds the ultimate aims of the commercial corporation itself had been to provide beach facilities to the poor without charge, and it had used' its commercial income only for improving its facilities, increasing its own charitable operations, and furthering the charitable work of the foundations, the case would obviously have been more favorable to that petitioner. Yet, in principle, that is the situation we have here. Anderson Country Club, 2 T. C. 1238, involved an organization apparently dedicated to the development of physical rather than mental benefits. Arguments were made there by respondent similar to those advanced here. We said: Respondent feels that the enhancement of the club’s facilities, the retirement of its indebtedness, and the possibility of gain upon dissolution by reason of the receipt and application of the profits to such uses require us to hold that the profits inured to the benefits of the shareholders [who were private individuals]. No authorities are cited to that eifect. The record shows that no dividends were ever paid to the shareholders * * * and that dissolution has not been and is not contemplated * * *. * * * such advantages as these do not constitute the profits inuring to the benefit of a private shareholder, within the meaning of the statute. I am at a loss to see how the development of this radio station for the greater and more effective presentation of programs of social benefit can be the kind of profit which the statute presupposes. Under circumstances much less favorable the exemption has been granted. Garden Homes Co. v. Commissioner (C. C. A., 7th Cir.), 64 Fed (2d) 593; Anderson Country Club, supra; Roche's Beach, Inc. v. Commissioner, supra. Equal treatment of taxpayers similarly situated seems to me to require it here. Keen, J., agrees with this dissent.