recognizing two lines of authority: one where courts find prevention of unfair *153 competition to be “primary purpose” and other where courts “prescribed a broader interpretation of the statute, focusing on the multiple objectives of Congress in enacting the unrelated business income tax,” and concluding that a “study of the statute, the regulations, the legislative history, and the cases inclines us toward the latter view”
How later courts described this case
- recognizing two lines of authority: one where courts find prevention of unfair *153 competition to be “primary purpose” and other where courts “prescribed a broader interpretation of the statute, focusing on the multiple objectives of Congress in enacting the unrelated business income tax,” and concluding that a “study of the statute, the regulations, the legislative history, and the cases inclines us toward the latter view”
- recognizing two lines of authority: one where courts find prevention of unfair competition to be "primary purpose" and other where courts "prescribed a broader interpretation of the statute, focusing on the multiple objectives of Congress in enacting the unrelated business income tax," and concluding that a "study of the statute, the regulations, the legislative history, and the cases inclines us toward the latter view"
- determining whether taxpayer’s activities were “substantially related” to its exempt status under section 501(c)(6) — see 26 U.S.C. §§ 511-513
- business activities generating income by a tax-exempt entity must “produce inherently group benefits that accrue to its members qua members,” rather than “individual benefits” to its members
Written by the judges who cited it.
The opinion
GARWOOD, Circuit Judge,
specially con-
curring:
I concur in the majority opinion. I write separately merely to reflect my understanding that the majority does not hold to be irrelevant, for purposes of determining if the income at issue is taxable under section 511, whether the exempt organization’s function giving rise to the income is active^ as opposed to merely passive. Here, as the majority correctly observes (see, e.g., its note 19), LCUL’s involvement was clearly “active.” That “trade or business” for these purposes imports some element of “activity” on the part of the exempt organization seems to be plainly inferable from the language of sections 513(c) and 512(a)(1). *
The first sentence of section 513(c) states: “For purposes of this section, the term ‘trade or business’ includes any activity which is earned on for the production of income from the sale of goods or the performance of services.” (Emphasis added.)
None of the emphasized words is appropriate to a purely passive income-producing function. Section 512(a)(1) makes plain that not only must the exempt organization derive income from the unrelated “trade or business,” but that also such “trade or business” must be one which is “regularly carried on by” the exempt organization.
The general rule, reflected by such decisions as International Trading Co. v. Commissioner, 275 F.2d 578, 584 (7th Cir.1960), relied on by the Tax Court in Professional Insurance Agents v. Commissioner, 78 T.C. 246 (1982), that normally whatever expense a corporate taxpayer incurs with intent to earn a profit is a- “trade or business” expense under section 162, logically applies to section 162 determinations respecting “for profit” corporations that are indisputably generally engaged in carrying on a trade or business, but not to sections 511-513 determinations respecting nonprofit corporations, such as LCUL, whose corporate purposes and functions are of another kind.