The opinion of the court was delivered by: MOSCOWITZ
MOSCOWITZ, District Judge.
This is an action by George Krug, a member of the Bakers Club, Inc., a club incorporated under the Membership Corporation Law of the State of New York, Consol.Laws, c. 35, to recover back the sum of $20 which was paid as a tax on his dues in the club for the period beginning January, 1932, and ending January, 1935. The money sought to be recovered was paid under protest. The case was heard by the court, counsel having waived a jury trial.
The tax was imposed under the provisions of section 501(a) of the Revenue Act of 1926, 44 Stat. 92, as amended by the Revenue Act of 1928, § 413(a), 45 Stat. 864, 26 U.S.C.A. § 950(a), which provides as follows:
"There shall be levied, assessed, collected, and paid a tax equivalent to 10 per centum of any amount paid --
"(1) 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 $25 per year; or
"(2) As initiation fees to such a club or organization, if such fees amount to more than $10, or if the dues or membership fees, not including initiation fees, of an active resident annual member are in excess of $25 per year."
The contention of the plaintiff is that the Bakers Club is a business organization and not a social club, and therefore not subject to the tax levied by section 501(a).
The object of the club is set forth in its certificate of incorporation as follows:
"First: The particular object for which the corporation is formed is to promote fellowship among ourselves and others, our associates and successors, who are engaged or interested in the profession of baking, and for that purpose to establish and maintain a clubhouse in New York City."
The membership numbered approximately 235, and was limited to persons engaged in the baking industry and allied fields. Of these 235, 160 were resident members. The remainder were scattered all over the United States. Most of the major bakeries of the country were represented in the membership. By "allied fields" was understood those directly or indirectly related to the baking industry by virtue of supplying products or services valuable therein, such as machinery, automobile tires, insurance, and ingredients. A booklet prepared by the secretary listed the members alphabetically with a brief notation following each name explaining the member's relationship to the baking industry.
Membership dues were $50 a year for resident members, and $25 for nonresidents. Initiation fees were $100 for residents, and $50 for nonresidents. In many instances the initiation fee and dues were paid by the company with which the member was associated at the time. In a great many cases where members resigned from the club, they had occasion at the same time to sever their relations with the industry.
At the times concerned herein, the club maintained small quarters totaling about fifteen hundred square feet in area on the fourteenth floor of the Fraternity Club Building in New York. The furniture was owned by the Fraternity Club Building with the exception of a piano for which $35 was paid, a radio donated by a member, and two desks. A small library was comprised chiefly of trade journals and technical books relating to the baking industry. Meals were served from the kitchen of the Fraternity Club Building and were paid for in cash. The club now maintains comparable quarters in the Commodore Hotel.
Before the Bakers Club was organized, the only organizations for bringing together members of the baking industry were the American Baking Association and the New York Bakers Association, which only met once a year. The Bakers Club served as a meeting place for the baking industry. Every day a few members met there for lunch and occasionally remained for some card playing. Once a month there was a regular luncheon meeting at which business was transacted, and problems of interest were discussed, such as products used, taxation, and legislation. A public speaker was heard usually on a topic of interest to the baking industry. These monthly meetings were attended by 60 to 130 members; they started between 12:30 and 1:00 p.m. and continued to about 2:30 p.m. In the summer, meetings were held at some conveniently located golf club. During the day, the members would play golf and in the evening they would be joined by other members for dinner.
The club fostered organizations among its members to deal with the technical aspects of baking. These were the Society of Cereal Chemists and the Holes-in-Bread Club. The NRA organization for the baking industry made its ...