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KNOLL GOLF CLUB v. UNITED STATES

December 22, 1959

KNOLL GOLF CLUB, Plaintiff,
v.
UNITED STATES of America, Defendant



The opinion of the court was delivered by: HARTSHORNE

Plaintiff, Knoll Golf Club, sues for a refund of Federal excise taxes paid, over objection, by it to the defendant Government for the period from July 1, 1954 to December 31, 1956. These taxes were imposed on the fees paid for individual storage lockers used by Club members. The statute under which these taxes were imposed provides:

'there shall be levied, assessed, collected, and paid --

 '(1) Dues or membership fees. A tax equivalent to 20 per centum of any amount paid as dues or membership fees to any social, athletic, or sporting club or organization, if the dues or fees of an active resident annual member are in excess of $ 10 per year.' Int.Rev.Code '39, § 1710, 26 U.S.C.A. 1952 ed. § 1710.

 '(a) Dues. The term 'dues' includes any assessment, irrespective of the purpose for which made, and any charges for social privileges or facilities, or for golf, tennis, polo, swimming, or other athletic or sporting privileges or facilities, for any period of more than six days.' § 1712, ibid.

 The above provisions are repeated verbatim in the Internal Revenue Code of 1954, §§ 4241, 4242, 26 U.S.C.A. 1952 ed. Supp. II, §§ 4241, 4242.

 We therefore turn to the words of the Tax Act, in the light of its purpose, its legislative history, and its judicial gloss.

 Clearly, the Congressional purpose in enacting these provisions was to impose a luxury tax. A similar tax has been imposed by the Federal Government since 1917, Rev.Act 1917, § 701, Chap. 63, 40 Stat. 300. But Congress did not attempt to define the terms 'dues' or 'membership fees' until 1928, when its enactment of Section 413 of that Act (Chap. 852, 45 Stat. 791) amended Section 501 of the Revenue Act of 1926 (Chap. 27, 44 Stat. 9) by stating that 'the term 'dues' includes any assessment, irrespective of the purpose for which made.' This last provision was included in the subsequent revisions of the Internal Revenue laws until 1941, when the language quoted above was adopted.

 Both the above legislative history and the judicial gloss placed upon these statutes indicate that the amendments made by the Congress therein were enacted both to clarify and broaden its previous provisions. Note specifically that under the statute here applicable the taxable dues or membership fees are those paid 'to any social, athletic, or sporting club or organization' (italics this Court's) if same exceed $ 10 per year. Note also that they include 'any charges for social privileges or facilities, or for golf, tennis, polo, swimming or other athletic or sporting privileges or facilities' if for more than six days. (Italics this Court's.)

 Turning to the judicial construction of these statutes, we find first the decision in the case of Weld v. Nichols, D.C.Mass.1925, 9 F.2d 977, which adopted a narrow and restricted construction of the Act then in force, as to which our highest Court in White v. Winchester County Club, 1941, 315 U.S. 32, at page 40, 62 S. Ct. 425, at page 430, 86 L. Ed. 619, said:

 'We reject the doctrine of the Weld case as being intrinsically unsound, and as having been demonstrated by subsequent cases to be unworkable in practice.'

 Similarly, and doubtless as a result of the same viewpoint of the Weld case on the part of Congress, the Congress adopted the amendment to the previous statute, as above indicated, for the purpose of clarifying and broadening its coverage.

 Since the Act applies to membership clubs of social, athletic or sporting character, we must note the characteristics of such organizations and of their 'social' or 'athletic or sporting privileges or facilities', since it is on 'any charges' therefor that such tax is laid. Thus, in Winchester Country Club, supra, the United States Supreme Court has held that 'the nature of club activity * * * (connotes) the element of making common cause', as distinguished from an individual's paying independently the price of a single dinner or the cost of a single round of golf. 'But, on the other hand, payment for the right to repeated and general use of a common club facility for an appreciable period of time has that element and amounts to a 'due or membership fee' if the payment is not fixed by each occasion of actual use.' Ibid, 315 U.S. at page 41, 62 S. Ct. at page 430.


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