Court Opinion

ID: 3322533
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:40:04.176163+00
Date Added: 2024-06-11T12:36:11.057420
License: Public Domain

The majority opinion lays stress on the proposition that the mere fact that under the plaintiff's charter its members might possibly secure some benefit through distribution of its property is not sufficient to take it out of the exemption clause in the act. While this was one of the grounds upon which the trial court based its decision, it was not the main ground. The main ground was that under the special act creating it the plaintiff's earnings inured to the benefit of its members as a matter of law, there being no provision that these should be otherwise disposed of. This conclusion seems inescapable and to leave no room for the determination of the existence of an intent otherwise to dispose of possible net earnings from the conduct of the plaintiff corporation. The plaintiff apparently realized this and attempted to cure it by amendment to the act creating it. It secured such an amendment but failed to accept it in accordance with the provisions of General Statutes, 3370. Its claim that acceptance *Page 512 
was not essential to the amendment's validity under General Statutes, 3371, is not tenable. The latter section was not applicable in the absence of a provision in the amendment itself expressly stating that consent was not necessary.
It is a matter of common knowledge that there are numerous private institutions organized for educational purposes but conducted for profit. Under the ruling in the majority opinion, no assessment for unemployment contribution may be made against these unless it is found as a matter of fact that they have acquired a net income and have distributed this to individuals. The difficulties of the defendant administrator in applying such a rule are obvious. His assessments are based upon wages, not on income, are payable quarterly and are required to be made within twenty-eight days after the end of the period of employment in question. Cum. Sup. 1939, 1336e. This emphasizes the importance of the provision in 1335e that a corporation to be exempt must be organized exclusively as well as operated exclusively for educational purposes.
An examination of the federal authorities leads to no contrary conclusion. In Trinidad v. Sagrada Orden,263 U.S. 578, 44 Sup. Ct. 204, the basic case on the subject, the members of the corporation had no right to its property, even in case of dissolution, and it was said that the primary test of exemption was the destination rather than the source of income. In Northwestern Municipal Assn. v. United States,99 F.2d 460, 461, it was said that the corporation must not be organized for profit under the first restriction of the act and, if profit occurs as an incident, this may not inure to the benefit of any private shareholder or individual. See commissioner of Internal *Page 513 
Revenue v. Chicago Graphic Arts Federation,128 F.2d 424, 427.
If the federal rule be, as the opinion states, that the test of exemption is found in the actual purposes which an organization serves and for which its funds are used, the instant case does not come within the factual situation contemplated in the cases cited in its support. There the profits had accrued and were used for purposes other than private enrichment. Here there have been no net earnings and hence no appropriation of them to exclusively educational purposes from which intent may be determined.
I think there was no error.
In this opinion JENNINGS, J., concurred.