Reporter's Statement of the Case 100 C. Cls. SOUTHEASTERN FAIR ASSOCIATION v. THE UNITED STATES [No. 45399. Decided October 4, 1943] On the Proofs Social Security taxes; corporation conducting educational fair, without profit to individuals, exempt.-Where plaintiff, a corporation, was organized for the purpose of conducting an annual fair, whose activities and exhibits are unquestionably educational, except for incidental concessions utilized to attract attendance; and where the income from such fair is used to pay expenses and maintain, repair and improve the buildings and grounds, and no dividends are paid; it is held that plaintiff is exempt from Social Security taxes under the provisions of Sections 811 and 907 of the Social Security Act (U. S. Code, Title 42, Sections 1011 and 1107). Same.-Whether an enterprise is exclusively educational, or religious, or charitable, for tax exemption purposes, depends not upon how it earns its income but how it spends its income. Trinidad v. Sagrada Orden, 263 U. S. 578; Sand Springs Home v. Commissioner, 6 B. T. A. 198. Same; same language in different statutes.-Where Congress in different statutes uses substantially the same language, it can not be said that Congress intended that the language so used should have a different meaning in each of the acts. The Reporter's statement of the case: Mr. J. C. Murphy for the plaintiff. Mrs. Elizabeth B. Davis, with whom was Mr. Assistant Attorney General Samuel O. Clark, Jr., for the defendant. Messrs. Robert N. Anderson and Fred K. Dyar were on the briefs. The court made special findings of fact as follows: 1. Plaintiff is a corporation organized under the laws of Georgia, with its principal office in Atlanta. The particular business which it was authorized to carry on was to hold and conduct from time to time, and at such times as may be determined, in or near the City of Atlanta, in the State of Georgia, in the southeastern section of the United States, fairs, exhibitions, and expositions of the products and resources of the States in the 216 Reporter's Statement of the Case southeastern section of the United States, and of any or all of the other States of the United States, and of any or all other countries, and of the appliances, machinery, inventions, property, and devices used in the cultivation, preparation, manufacture, and use of such products and resources, together with exhibitions of horses, cattle, sheep, swine, poultry, pet stock, livestock, dairy products, agriculture, horticulture, floriculture, manufacture, liberal arts, women's work, educational exhibits, and fine arts, and to conduct any and all exhibitions or institutions proper or appropriate to the holding of a fair or exposition. 2. Beginning on October 6, 1937, plaintiff sought a ruling from the Commissioner of Internal Revenue regarding its liability for the payment of social security taxes under Titles VIII and IX of the Social Security Act. January 7, 1938, the Commissioner wrote plaintiff that it was deemed advisable to determine its status for Federal income tax purposes before ruling on its status for social security tax purposes. He held that plaintiff was entitled to exemption from payment of income taxes under the provisions of Section 101 (8) of the Revenue Act of 1936 and the corresponding provisions of prior revenue acts (49 Stat. 1648, 1674). 3. September 24, 1938, the Commissioner advised plaintiff that it was not entitled to exemption from social security taxes. His letter reads in part as follows: Sections 811 (b) (8) and 907 (c) (7) of the Social Security Act provide that the taxes imposed by Titles VIII and IX of the Act are not applicable with respect to services performed in the employ of a corporation, 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. Section 101 (6) of the Revenue Act of 1936 contains provisions similar to those of Sections 811 (b) (8) and 907 (c) (7) of the Social Security Act. Since the Southeastern Fair Association is held exempt under Section 101 (8) of the Revenue Act of 1936, it is evident that it is not organized and operated exclusively for one or more of the purposes specified in Sections 811 (b) (8) and 907 (c) (7) of the Social Security Act. Reporter's Statement of the Case 100 C. Cls. 4. Plaintiff refused to execute and file any returns under Titles VIII and IX of the Social Security Act, and appropriate returns were executed in its behalf by a deputy collector of internal revenue pursuant to Section 3612 of the Internal Revenue Code. Thereafter the following taxes, interest and penalties were duly assessed by the Commissioner and paid by plaintiff on the dates shown: TITLE VIII-SOCIAL SECURITY ACT 5. August 9, 1940, plaintiff filed three claims for refund of the taxes collected under Title VIII of the Social Security Act as follows: The ground relied upon in these claims was as follows: the Southeastern Fair Association, claimant, is exempt under Title VIII, Section 81, 49 Statute, 639 (August 14, 1935, c. 531), as amended August 10, 1939, c. 666 (Title IX, Section 905 (a), 53 Statute, 1400) and being Subsection 8 of Subsection b of Title 42 of U. S. C. A., Section 1011, and the Southeastern Fair Associa 216 Reporter's Statement of the Case tion was organized and operates exclusively for scientific and/or educational purposes, and no part of the net earnings inured to the benefit of any private shareholders or individuals. The Commissioner rejected these claims by letter dated October 24, 1940, reading in part as follows: The records of the Bureau indicate that in a letter addressed to the Association under date of September 24, 1938, it was held that the Association and its employees, including its officers, are liable with respect to the taxes imposed by Title VIII of the Social Security Act. Such ruling was affirmed by the Bureau under date of November 16, 1938. The above ruling is also applicable under Subchapter A of Chapter 9 of the Internal Revenue Code, in force prior to January 1, 1940. 6. August 9, 1940, plaintiff filed four claims for refund of taxes paid under Title IX of the Social Security Act, as follows: * the Southeastern Fair Association, claimant, is exempt under Title IX, Section 907, 49 Statute, 642 (August 14, 1935, c. 531), as amended June 25, 1938, c. 680, Section 13 (a), 52 Statute, 1110, being Subsection 7 of Subsection c of Title 42, U. S. C. Á., Section 1107, and the Southeastern Fair Association was organized and operates exclusively for scientific and/or educational purposes, and no part of the net earnings inured to the benefit of any private shareholders or individuals. The Commissioner rejected these claims by letter dated October 22, 1940, from which the following is quoted: The records of the Bureau show that you are exempt from the payment of income tax under the provisions of Section 101 (8) of the Revenue Act of 1936 and corresponding provisions of prior revenue acts. Since there are no provisions under Title IX of the Social Security Act and the Federal Unemployment Tax Act in force prior to January 1, 1940, corresponding with Section 101 (8) of the Revenue Act of 1936, under which you were held entitled to exemption for Federal Reporter's Statement of the Case 100 C. Cls. income tax purposes, you are not exempt from the payment of excise tax under the provisions of Title IX of the Social Security Act and Subchapter C, Chapter 9, of the Internal Revenue Code, as amended. 7. The fair authorized by plaintiff's corporate charter is usually held in the fall of the year for a period not exceeding 10 days. The fair grounds are owned by the City of Atlanta. Plaintiff has possession of the property under a lease from the City dated September 23, 1924, the material terms of which are as follows: (a) Plaintiff agreed that during the term of the lease, which is 25 years, it would hold a fair on the leased property in the fall of each year for a period of not less than six consecutive days; (b) that the fair would be maintained at a high standard of excellence; (c) that plaintiff would reinvest all of the profits made by it in improvements on the grounds; (d) that during the continuance of the lease all of the common stock, which was the controlling stock of the corporation, would be owned and controlled exclusively by the Chamber of Commerce, a civic organization; (e) that during the term of the lease plaintiff would not pay any dividend or interest of any kind on the common or preferred stock but might retire a part of the preferred stock under certain conditions. 8. Plaintiff maintains the leased property as a recreation park and playground for the free use of the public, except during the period each year when the fair is held and on occasions when fraternal or civic organizations are given the exclusive use of the property for entertainment purposes. 9. Plaintiff issued and has outstanding 10 shares of common stock of the par value of $100, and preferred stock in the amount of $69,000. The common stock, which is the voting stock, is held exclusively by the Atlanta Chamber of Commerce. The preferred stock has been subscribed by individuals and business firms in Atlanta. No dividends have ever been declared or paid on either common or preferred stock, except one liquidating dividend, which was used to retire a portion of the preferred stock. 10. Annually before the fair is held, plaintiff's officers and directors confer with educators, representatives of the Georgia Agricultural Extension Service, State Planning |