Opinion
Docket Nos. 42537 42538 42539.
1954-06-28
MURRAY SEASONGOOD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.AGNES SEASONGOOD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.MURRAY SEASONGOOD AND AGNES SEASONGOOD, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
James D. Long, Esq., Harry Stickney, Esq. , and Murray Seasongood, Esq. , for the petitioners. R. G. de Quevedo, Esq. , for the respondent.
Donations by petitioners to two organizations held not subject to deduction under section 23(o), Internal Revenue Code, and donations by them to another organization held to be deductible under that section. Further held that donations by petitioner Murray Seasongood to the first two organizations do not constitute business expenses deductible under section 23(a)(1)(A), Internal Revenue Code. James D. Long, Esq., Harry Stickney, Esq., and Murray Seasongood, Esq., for the petitioners. R. G. de Quevedo, Esq., for the respondent.
In these proceedings, consolidated for hearing, respondent has determined deficiencies in income tax as follows:
+--------------------------------+ ¦Docket No. 42537 ¦ +--------------------------------¦ ¦Year¦Petitioner ¦Amount ¦ +----+------------------+--------¦ ¦1946¦Murray Seasongood ¦$736.00 ¦ +----+------------------+--------¦ ¦1947¦Murray Seasongood ¦1,532.65¦ +--------------------------------+
Docket No. 42538 1946 Agnes Seasongood $325.03 1947 Agnes Seasongood 342.01
Docket No. 42539 1948 Murray and Agnes Seasongood $6,275.88 1949 Murray and Agnes Seasongood 3,552.72
The issue in each proceeding is the deductibility of certain contributions made by the petitioners in the taxable years. Certain of the facts are stipulated and so found. Other facts hereinafter recited are found upon evidence presented at the hearing.
FINDINGS OF FACT.
The petitioners are husband and wife and residents of Cincinnati, Ohio. They filed separate returns for 1946 and 1947 and joint returns for 1948 and 1949. All returns were filed with the collector of internal revenue at Cincinnati, Ohio.
The petitioner Murray Seasongood (hereinafter referred to as Seasongood) has been a lawyer in active practice for more than 50 years and is a member of a law firm in Cincinnati from which he derives a very substantial income. He has for many years had a deep interest in matters relating to good government, with special reference to the government of his community, and has taken an active part for years in civic matters pertaining to the health and general welfare of the people of Cincinnati and the efficient administration of the law in his county and State.
Seasongood has been mayor of Cincinnati for two terms, has a national reputation as an expert with reference to municipal corporation law, is the author of a case book on this subject which is widely used in law schools, and has lectured in many States on this subject and the subject of clean and efficient local government. He has served as a lecturer at Harvard Law School, as a professor of law at the University of Cincinnati Law School, and has served as trustee or in some other official capacity with many other organizations, national in character, and engaged in charitable, educational, and public welfare activities.
In 1934 there was organized in Cincinnati the Hamilton County Good Government League (hereinafter referred to as the League). This organization was incorporated in 1941. Seasongood was president of the League from 1934 to 1945. The articles of incorporation of the League evidenced the formation of a corporation not for profit.
These articles and its constitution specify the object of the League to be ‘to provide an opportunity for discussion of matters of civic importance and to advance good government.’ The activities of the League during the years here in question have been nonpartisan in the sense that it has not contributed to or affiliated itself with any political party. Its main activities during the years 1946 to 1949, inclusive, were in operating the ‘Cincinnati Forum of the Air’ to permit public discussion by individual citizens of matters affecting the city's welfare, the preparation and distribution through schools and other organizations of literature explaining to the citizens the danger to the public health by the spread of disease by rats and the best methods for rodent control, and the education of the citizens of the community in the importance of their exercising in all elections their right to vote, irrespective of their party or candidate. It has been the practice of the League in each year to prepare and mail to its members and to distribute to the voting public through corporate employers, notices of the times of approaching elections, calling attention to the necessity that a voter be registered and giving the dates for registration and urging all voters to register and exercise their right to vote as something due themselves and their community.
The income of the League is small, being represented by dues of its members and occasional contributions. Its statement of income and disbursements for the taxable year 1948 is typical of its financial activities during the 4 years in question. In this year it received dues and contributions in the total amount of $2,112, and its expenditures during that period were as follows:
+--------------------------------------------------+ ¦Wages, salaries, and commissions¦ ¦$1,382.21¦ +--------------------------------+-------+---------¦ ¦Taxes ¦ ¦185.90 ¦ +--------------------------------+-------+---------¦ ¦Miscellaneous expenses: ¦ ¦ ¦ +--------------------------------+-------+---------¦ ¦Telephone ¦$151.86¦ ¦ +--------------------------------+-------+---------¦ ¦Postage and printing ¦415.79 ¦ ¦ +--------------------------------+-------+---------¦ ¦Publicity—radio ¦201.30 ¦ ¦ +--------------------------------+-------+---------¦ ¦General expense ¦197.84 ¦ ¦ +--------------------------------+-------+---------¦ ¦ ¦ ¦966.79 ¦ +--------------------------------+-------+---------¦ ¦Total ¦ ¦$2,534.90¦ +--------------------------------------------------+
The annual report of the executive secretary of the League for 1946 shows the beginning of the weekly radio forum, ‘Cincinnati's Town Meeting of the Air,’ and the organization of a ‘Young Voters' group to meet the need of civic education and participation in the civic education of the youth of the community. It also issued a bulletin at intervals of 4 months discussing its activities, distributed voting-registration-information cards hereinbefore referred to, and cooperated with the Citizens' Committee for Rat Elimination in distributing literature on this subject. In addition to these activities the report of its executive secretary shows the following activities by its Legislative and Election Machinery committees:
Legislative Committee. Frank J. Richter, Chairman.
Worked with Civil Service Committee in opposing legislation to take the Director of Recreation Commission out of civil service.
Wrote various letters to Governor Lausche urging studies of the Ohio taxation system and funds to cities.
Followed numerous ordinances proposed and pending in City Council.
Urged County Commissioners to find better quarters for children being housed temporarily by County Welfare Department.
Stream pollution measures stimulated.
Legislative program for 1947 Ohio general assembly prepared.
Election Machinery Committee. Leo H. Beckman, Chairman.
(a) Co-operated with other organizations in get-out-the-vote campaign.
(b) Issued over 20,000 registration-information cards, sent to League members; and also to other civic organizations for other membership, and to stores and factories for use in payroll envelopes.
(c) Studied candidates and issues in November 1946 election. League endorsed all three county issues, city, and school tax levy for operating funds and improvements; endorsed the Rapid Transit franchise. Endorsed the candidacy of John W. Keefe and Judge Raymond J. Wilson.
The annual report of the executive secretary of the League for 1947 shows its activities in the distribution of registration-information cards, rodent-control pamphlets, operation of Cincinnati Town Meeting of the Air and Young Voters group, and its co-sponsorship of a Civil Service Institute. The activities of its Legislative and Election Machinery committees are set out as follows:
Legislative Committee. John W. Keefe, Chairman.
1. Recommended:
a. The retention of PR in City elections.
b. Endorsements of the nine Charter candidates and Theodore Berry for Council.
c. Endorsement of the Citizens School Committee candidates.
d. A favorable vote on the City Tax Levy.
e. A favorable vote on the UC Tax Levy amendment.
f. A negative vote for the Soldiers' Bonus.
g. A negative vote for the Vehicle Tax amendment.
2. Recommended the passage of the following bills that were introduced in the regular session of the Ohio General Assembly:
a. Reduction of the 65% requirement for passage of bond issues to 55%.
b. Judges retirement plan.
c. Tax Commission—to study taxes in Ohio.
d. Urban Redevelopment.
e. Forbidding solicitation of votes for judicial candidates.
f. Forbidding solicitation of votes for Board of Education candidates.
g. Child Welfare—to be financed one-half by State and one-half by County.
3. Urged that bills be introduced providing for:
a. Massachusetts Ballot for State and County elections.
b. New County Zoning Law. (Passed)
c. Central Count in elections.
d. Judicial candidates not being allowed to run in party primaries or to support party platform before they know what the platform is.
e. Use of the Prudents Investment theory for ascertaining the rate for public utilities.
f. Improvement in county welfare set-up (Hamilton County has since consolidated its Welfare Department).
g. Improvement of mental health and other state institutions.
4. Letters urging passage of above bills written to the Governor and Hamilton County delegation.
5. Letter sent to the new Ohio Welfare Director, Charles Sherwood, stating that it was hoped that sufficient funds would be secured for adequate personnel and wages for state institutions.
6. Effort to secure Saturday hearings before the Hamilton County Legislative delegation.
7. Protested Senator Fred G. Reiners saying that he had voted as instructed by Republican Headquarters, not according to his own convictions.
8. Endorsed Master Plan.
9. Attended public hearing in Columbus before taxation committee for proponents of Urban Redevelopment.
10. Letters written to Governor and Hamilton County delegation stating its regret over the failure to pass recommended bills.
11. Protested cutting of appropriations for state mental institutions.
Election Machinery Committee. Leo H. Beckman, Chairman.
1. Printed registration-information cards were sent to all League members, and to business and other organizations for distribution.
2. Co-operated with the League of Women Voters in securing radio spot announcements to remind people to register.
3. Secured challengers and witnesses for election day to watch for election irregularities and to witness PR count.
4. Witnessed the Zoo Bond Issue Recount.
5. Endorsed:
a. Nine Charter candidates and Theodore Berry for Council (Five Charter candidates elected)
b. Citizens School Committee Ticket for Board of Education. (elected)
c. Judges Frank Gusweiler and Joseph Bruggeman for Municipal Court. (elected)
6. Recommended:
a. Voting against the Charter amendment to abolish PR. (Vote against, carried)
b. Voting for the amendment for the UC Tax Levy. (carried)
c. Voting for the Zoo Bond Issue. (lost)
d. Voting for the City Tax Levy. (carried)
e. Voting against the State Soldiers' Bonus. (carried)
f. Voting against the State Motor Vehicle Tax amendment. (carried)
g. Voting against the State amendment to increase the number on the Sinking Fund Commission. (carried)
7. On election day, canvassed the County Court House to see the extent of absenteeism among civil service and other employees, engaging in political activity.
8. Investigated Election Fraud Cases. Wrote letter to Board of Elections asking more rigid enforcement of election laws.
The report of the executive secretary of the League for 1948 shows the activities of the League to have been largely in the publication of its bulletin, distribution by it of the June 1948 issue of the Journal of the American Judicature Society which contained a summary of the Porter report, this being a report of a study made of the administration of the law in Cincinnati, its regular distribution of voting-registration cards and rodent-control literature, and efforts to induce the local newspapers to refrain from publishing the names of women who were the subject of attacks. It also made efforts to induce the Common Pleas Court to continue its system of mandatory pretrial procedure, and was active in efforts to restore the operation by the Cincinnati Street Railway Co. of the Mt. Adams Incline because of its historic importance, and made a study of the rehabilitation of the Music Hall organ. It also reported to its membership a suggested legislative program, as follows:
SUGGESTED LEGISLATIVE PROGRAM
The following legislative program was recommended to Governor-elect Frank J. Lausche for inclusion in the legislative calendar of the 1949 session of the Ohio General Assembly. Governor Lausche replied that the proposals would be given due consideration and that he realized their importance:
1. Compulsory motor vehicle insurance for personal injuries and property damage. If possible, the legislation should include classification of risks in order to keep rates down.
2. Safety Lane inspection of motor vehicles made compulsory throughout the state of Ohio.
3. A thorough revision of the election laws of the state, remedying recent legislation which makes voting difficult and which puts it in the hands of political machines, and including a permissive provision for a central count of ballots under the supervision of the local Boards of Elections.
4. The recent restrictive legislation on the Initiative and Referendum laws should be repealed so that it is not so difficult to initiate or to have referenda on statutes and constitutional amendments.
5. Strengthen the existing law forbidding high school sororities and fraternities.
6. The 65% requirement for passage of bond issues be materially reduced.
7. An urban redevelopment statute conforming to the best practices in other states.
8. Legislation prohibiting judges from both running in party primaries and taking an oath to support a party platform.
9. Repeal, as the required method for use in determining utility rates, the law limiting ascertainment of rate base by reproduction cost less depreciation.
10. Use of a Massachusetts type ballot for state and county elections in Ohio.
11. A thorough revision of the tax structure of Ohio and including a provision that the cities shall receive a stated percentage of state collected taxes so that they will receive an equitable share of funds.
12. The General Assembly should act under Article XVI, Section 2 of the Ohio Constitution and call for a vote in 1950 on whether a Constitutional Convention should be held, rather than permit the long delay which will result by the people's voting in 1952 whether a convention should be held as provided in Article XVI, Section 3.
The report of the executive secretary shows the main activities of the League for the year 1949 as assisting in arranging public hearings on proposed legislation to give citizens and organizations an opportunity to express their views to their representatives without the necessity of traveling to the State capital, its distribution of its voting-registration-information cards, assisting in bringing about the office-type allot, its continuation of investigation of the restoration of the Music Hall organ and the restoration of operation of the Mt. Adams Incline, and its activity with respect to rodent control and the operation of ‘Cincinnati's Town Meeting of the Air.’ It also reported the activity of its Legislative Committee with respect to the legislative program, as follows:
Legislative Committee. Julia Wright Merrill, Chairman.
1. State legislation
a. To study pending legislation which would importantly affect the governmental structure or general public interest of Cincinnati and Hamilton County.
b. To study and recommend support of (or opposition to) state initiative and referendum proposals in the field noted above.
2. State Constitution
a. To support the vote scheduled for November 1952 on calling a constitutional convention and be ready to recommend specific changes in the basic law.
b. To study and recommend support of (or opposition to) proposed amendments to the Constitution, as occasion arises, and to aid in initiating such amendments.
* * * * * * *
The members also accepted the recommendation of the Board of Directors to endorse the nine Charter candidates for City Council because of the principles of good government upon which they were running. The nine were: Theodore M. Berry (elected), Newton Brokaw, Albert D. Cash (elected), Rollin H. Everett, Robert P. Goldman, Harry D. Proctor (elected), Bernard L. Rowekamp, Charles P. Taft (elected), and Edward N. Waldvogel (elected).
* * * * * * *
The Legislative Committee studied many of the bills introduced in the Ohio General Assembly and recommended action on certain ones to the Board of Directors. The bills that were endorsed by the League and which passed were:
Urban Redevelopment
Public Housing Enabling Act
2 Southern Railway Bills to permit use of revenue to carry out master plan
Bond Issue requirement reduced from 65% to 55% for passage
Bills endorsed by the League which did not pass:
Bill to simplify procedure on Initiative and Referendum
Office Type Ballot—on November Ballot and passed
Return of 30% of sales tax to local governments (but subsidies to Hamilton County increased by $730,000; to Cincinnati by $400,000)
Aid for urban highways and expressways
Civil Service—to establish three member commission
Colored Oleomargerine—on fall ballot and passed
Licensing Practical Nurses
Increased State Aid for Public Libraries
The League of Women Voters of Cincinnati is a nonprofit organization. Its bylaws provide: ‘The purpose of the League of Women Voters of Cincinnati shall be to promote political responsibility through informed and active participation of citizens in government.’ Article II of bylaws, as revised April 20, 1948, contains the following provision:
Sec. 2. Policy. The League of Women Voters of Cincinnati may take action on local governmental measures and policies in the public interest in conformity with the Platform of the League of Women Voters of the U. S. It shall not support or oppose any political party or candidate. Article VIII of the bylaw, as approved May 19, 1947, contained the following provisions:
Program
Sec. 1. The league of Women Voters of Cincinnati may act only in conformity with, or not contrary to, the position taken by the League of Women Voters of the United States as stated in its Program. It may act on state legislation only in accordance with the State Legislative Program.
Both the League and the League of Women Voters of Cincinnati were ruled by respondent as tax exempt under section 101(8), Internal Revenue Code, for the years here in question, and denied exemption under section 101(6).
In December of 1948 Seasongood and others incorporated the Murray Seasongood Good Government Fund (hereinafter referred to as the Fund) as a nonprofit organization under the laws of Ohio. The articles of incorporation of the Fund state its purposes as follows:
To receive and maintain a fund or funds or voluntary contributions and to apply and disburse the whole of or from time to time a part or parts of the principal and/or income, so that the whole fund will be completely used up in not exceeding twenty-five (25) years from January 1, 1949, for the furtherance of good government, with special emphasis on good local government in the manner to be determined from time to time by a majority of the trustees acting, but exclusively for charitable, scientific, literary or educational purposes. No part of the net earnings shall inure to the benefit of any trustee, member or individual and no substantial part of the activities of said corporation shall be carrying on propaganda or otherwise attempting to influence legislation.
* * * * * * *
The members of the corporation shall be the persons who are from time to time acting as trustees thereof, in accordance with the regulations. They shall not have any interest in the property or earnings of this corporation in their individual or private capacity, and prior to any dissolution of this corporation all of its property shall be applied and used and entirely consumed for charitable purposes, as hereinabove provided.
The first meeting of the corporation was held on December 30, 1948, and the only business transacted, other than election of officers, was the acceptance of contributions of $5,000 and $3,000 from the two petitioners and the adoption of a resolution authorizing a contribution of $1,000 to be made in the ensuing year to the League.
In the following year the contribution of $1,000 to the League by the Fund was made. The Fund, upon its organization, had applied for a ruling exempting it from taxation under section 101(6), Internal Revenue Code. Such application was denied by respondent for both the years 1948 and 1949, for the reason that the Fund had in the first year authorized a contribution of $1,000 to the League and had made such contribution in the following year. The Fund was ruled by respondent as tax exempt under section 101(8). On learning of respondent's action, the Fund immediately asked reconsideration of the ruling and requested the return by the League of the $1,000 donated to it. The return of the donation was made by the League and Seasongood replaced the amount with a personal donation of a similar amount. However, upon reconsideration respondent ruled the Fund to be exempt under section 101(6) for the year 1950 but did not change his ruling denying such exemption for 1948 and 1949. In requesting the aforementioned reconsideration of the ruling by respondent the Fund, through Seasongood, called attention to the fact that the action of the Fund had been in good faith and under the opinion that the League was an organization entitled to exemption under section 101(6); that immediately upon learning that its action was questioned it had received return of the contribution; and that it had believed the League to be exempt under section 101(6), for the reason that both of the petitioners had for many years made contributions to it which they had in each instance deducted on their returns under section 23(o)(2) and that such deductions had in each instance been unquestioned by respondent.
The petitioners made contributions for years and in amounts as follows:
+-----------------------------------------+ ¦Murray Seasongood ¦ +-----------------------------------------¦ ¦ ¦League¦League of Women Voters¦Fund ¦ +----+------+----------------------+------¦ ¦1946¦$1,000¦ ¦ ¦ +----+------+----------------------+------¦ ¦1947¦2,000 ¦ ¦ ¦ +----+------+----------------------+------¦ ¦1948¦750 ¦$25 ¦$3,000¦ +----+------+----------------------+------¦ ¦1949¦350 ¦25 ¦ ¦ +-----------------------------------------+
Agnes Seasongood 1946 500 35 1947 500 1948 5,000 1949 10 5,000
The disallowance by respondent of the deduction of these contributions gives rise to the deficiencies here in issue.
OPINION.
BRUCE, Judge:
Petitioners seek deduction under section 23(o), Internal Revenue Code,
of certain contributions, as set out in our findings, to the League, the Fund, and the Cincinnati League of Women Voters. In the alternative, the petitioner Seasongood claims the contributions made by him to these three organizations are deductible under section 23(a)(1)(A), Internal Revenue Code,
as ordinary and necessary expenses in carrying on business.
Section 23(o) and section 101(6),
Internal Revenue Code, are similarly worded in their description of organizations coming within their terms. It follows that a corporation not entitled to tax exemption under section 101(6) does not afford a tax deduction under section 23(o) to individuals contributing to its activities. Our inquiry is as to whether either one or all of the three organizations here in question are entitled to exemption under section 101(6), or, in other words, whether in the case of any one a substantial part of its activities in the taxable years was in ‘carrying on propaganda, or otherwise attempting, to influences legislation.’
SUBCHAPTER C—SUPPLEMENTAL PROVISIONS[Supplement A—Rates of Tax][Supplementary to Subchapter B, Part I]SEC. 101. EXEMPTIONS FROM TAX ON CORPORATIONS.Except as provided in paragraph (12)(B) and in supplement U, the following organizations shall be exempt from taxation under this chapter—* * * * * * *(6) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation. * * *
The provisions of the applicable sections recognizes the fact that organizations formed for purely educational or charitable purposes may in the course of their existence as an instance of their activities, be forced to take part in some political activity. Only when such activities constitute a substantial part of their general activities is the relief provision of the section withheld. If, however, a substantial part of the organization's activities is political in character, as contrasted with activities purely religious, educational, or charitable, it does not suffice to show that such activities were carried on with the highest motives and admittedly in the public interest. Efforts to convince the voters that certain candidates are best fitted for a public office or that certain legislation is for the public good are activities of a political nature. They do not qualify under the statute as educational.
Under the facts as here presented it is clear that the League was organized for and operated at all times unselfishly in the public interest as such interest appeared to its members, and the facts set out in our findings convince us that the greater portion of its activities falls within the category of charitable or educational ones. Thus its work in carrying on the Cincinnati Forum of the Air, allowing a discussion by the public of questions affecting the public interest, and its activities in educating the public as to the importance as a health measure of rodent control, together with its very considerable work in urging and educating the public on the necessity of exercising the right to vote, irrespective of party or stand on political questions, cannot be considered as political activities; nor its activities in endeavoring to maintain objects of historical value, as these are, in a broad sense, charitable activities.
In addition to the foregoing activities, the League carried on through its Legislative and Election Machinery committees activities which were definitely political in character and which appear to us to represent a substantial part of the general activities of the organization. We have set out in our findings the reports of these committees for the years in question. These indicate very active and unselfish work by the members of the committees in investigating proposed legislation and making a study of necessary legislation to effect some public purpose. The League, on the recommendation of these committees, endorsed candidates for political office and sponsored or opposed legislation through contacts with the legislative authorities. It is indicated that these activities consisted largely, if not entirely, of personal efforts and work on the part of the individual members of the committees and of the League and were not of a character to involve the expenditure of its funds. The League did not employ individuals for this work, but on the facts as disclosed by the record we are convinced that the activities of this character constituted a substantial part of all of the activities of the League.
We had a situation very similar to this in John H. Watson, Jr., 27 B. T. A. 463, where we said:
In the instant case the members of the League would perhaps paraphrase the purpose of the League as ‘the bringing about of better local government and the election of better fitted men to office.’ But in the very statement they assume the soundness of their conclusions and the accuracy of their judgment of fitness. Furthermore, they impute that those not in agreement with the League are mistaken in their philosophy and unsound in their judgment. Any organization such as that under consideration is obviously partisan in the broad sense of that term. It has its own concept of what constitutes good government and its own criteria by which to judge candidates for office, and it suggests its conclusions to others. To this extent it is an advocate. And though advocacy may be but a natural expression of sincerity of belief, it also tends to indicate the point at which education ends and, in this case, political activity begins.
On the facts before us we are not convinced that the Citizens League of Cleveland was organized and operated exclusively for educational purposes. The classification of candidates and the publishing as paid advertisements of such classification went beyond the education of the public. The obvious purpose of such advertisements was to promote the election of ‘preferred’ candidates. This was a political activity, however laudable the aim in the opinion of the members of the League. Similarly, the League presented its conclusions and, by proper inference, it recommended actions to the legislative authority. Here again it assumed the role of an advocate in political matters.
We do not think that respondent erred in denying the League tax exemption under section 101(6) and in denying the petitioners the deduction of their donations to the League under section 23(o).
As to the status of the Cincinnati League of Women Voters, little discussion is necessary. Its purposes, as set out in its constitution, are very general in character and do not preclude political activities. In Charles W. Dahlinger, 20 B. T. A. 176, we held a contribution to the Pennsylvania League of Women Voters as deductible under section 214(a)(11) of the Revenue Act of 1921 where the prescribed conditions are comparable to those carried in section 23(o), Internal Revenue Code. There, however, we found upon the record that that organization was organized and operated in the taxable years exclusively for educational purposes and a contribution to it was held to be deductible by the donor. In Henriette T. Noyes, 31 B. T. A. 121, we had a case of a donation to the Minnesota League of Women Voters. This League was not incorporated but its purposes were stated in its bylaws as fostering ‘education in citizenship and to support needed legislation.’ Its activities during the year in question were shown to consist largely of efforts in supporting proposed legislation, and the deduction of the donation to it was denied. In Luther Ely Smith, 3 T. C. 696, we had the question of a donation to the St. Louis League of Women Voters and upon the record there found that the activities of this organization in the taxable year were educational in character and no political activities in that year were indicated. Upon this showing the deduction of the contribution was allowed.
In the present case the Cincinnati League of Women Voters, as in the Dahlinger case, is shown to have a constitution and bylaws which are very general in character and do not preclude its engaging in political activities. In addition, the record is silent as to the actual activities of this organization during the years involved, and there is accordingly no evidence even tending to show that respondent erred in denying the organization tax exemption under section 101(6) and in disallowing the deduction by petitioners under section 23(o) of their donations to this organization in the years here involved.
In respect to the donations made by the petitioners to the Fund, a very different situation exists. This organization was unquestionably formed for purely charitable purposes. Its activities were limited to making donations from its funds to worthy organizations, it being specifically provided in its articles of incorporation that such organizations must so qualify and that no substantial part of their activities must consist of ‘carrying on propaganda, or otherwise attempting, to influence legislation.’ For the first 2 years of its existence, which are the ones herein involved, the Fund has been denied by respondent tax-exempt status under section 101(6). This has been due to what is in fact one instance which began by its authorization, one day before the close of 1948, of a donation of $1,000 to the League and its payment of the donation a few weeks later.
The facts show to our entire satisfaction that the Fund in authorizing and making this donation to the League was acting in the utmost good faith and in the belief that it was entirely within its powers as limited by its articles of incorporation to make donations only to organizations which would qualify under section 101(6).
Seasongood appears to have been the moving spirit in both the Fund and the League, and it is easy to understand that his opinion of the League's work was that certain of its activities which we have been constrained to treat as political were more in the nature of educational work. His belief in this was further justified by the fact that over the past years he and his wife had made donations to the League and taken deduction of these donations on their returns as allowable under section 23(o), and such deductions had not been questioned. It is further noted that upon being advised of the view taken by respondent as to the status of the League, steps were immediately taken to rescind the donation and the amount in question was returned to the Fund.
Can it be said on these facts that what was done in the closing hours of 1948 and early in 1949 constituted ‘carrying on propaganda, or otherwise attempting, to influence legislation?’ We think not. Especially is this true when we take into consideration the fact that the funds of the League manifestly were not spent in carrying on the activities which we have questioned. Its income from dues and donations was quite small and appears to have been spent upon the maintenance of an office and telephones and the dissemination of literature on rodent control, registration, and on the operation of its educational program, the Cincinnati Forum of the Air. Upon all the facts we see no indication that the activities of the Fund in the 2 years in question consisted of ‘carrying on propaganda, or otherwise attempting, to influence legislation.’ We hold that the donations made by the petitioners to the Fund in the 2 years in question were deductible under section 23(o).
There remains the alternative question as to whether the donations by Seasongood to the League and the Cincinnati League of Women Voters are deductible under section 23(a)(1)(A) as a business expense.
As our Findings of Fact set out, this petitioner was a prominent lawyer deriving a large income from his law practice and certain additional income from royalties upon a well known case book on municipal corporations of which he is the author, his salary as a professor of law at Cincinnati University Law School, and certain fees and honorariums received for lectures delivered or articles written by him. He also is in receipt of a substantial income in an undisclosed amount from personal investments.
There is one thing demonstrated very clearly by the record, and that is the tremendous and unselfish interest which this petitioner has in his community and its welfare. Any connection between the donations in question and this petitioner's income from his activities is so tenuous and indirect, if it exists at all, that we fail to see it. It is also difficult for us to recognize these donations as ones made for a business purpose with a view to obtaining additional law business or additional income from his other activities. Cf. Luther Ely Smith, supra. We cannot reconcile this purpose with his long record of unselfish activity. The donations in question appear to us to have been for personal and not business reasons and consequently are not deductible as ordinary and necessary business expenses under section 23(a)(1)(A).
Decisions will be entered under Rule 50.
1 SEC. 23. DEDUCTIONS FROM GROSS INCOME.In computing net income there shall be allowed as deductions:* * * * * * *(o) CHARITABLE AND OTHER CONTRIBUTIONS.—In the case of an individual, contributions or gifts payment of which is made within the taxable year to or for the use of:* * * * * * *(2) A corporation, trust, or community chest, fund, or foundation, created or organized in the United States or in any possession thereof or under the law of the United States or of any State or Territory or of any possession of the United States, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation. * * *
2 SEC. 23. DEDUCTIONS FROM GROSS INCOME.In computing net income there shall be allowed as deductions:(a) EXPENSES.(1) TRADE OF BUSINESS EXPENSES.—(A) In general.—All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity. * * *