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February 13, 1975


The opinion of the court was delivered by: DUMBAULD

 In this case the Court is invited by the Government to follow the footsteps of

"one who treads alone
Some banquet hall deserted,
Whose lights are fled,
Whose garlands dead,
And all but he departed." *fn1"

 We are to inquire what meals have been eaten and drinks drunk, and by whom, at the Pittsburgh Press Club in order to determine whether the club is entitled to maintain its status as a tax-exempt organization under 26 U.S.C. 501(c)(7) as a club "organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net earnings of which insures to the benefit of any private shareholder."

 Concluding that the Press Club was not exempt, the Government on February 2, 1972, revoked plaintiff's tax-exempt status retroactively to June 1, 1966, and assessed and collected deficiencies amounting to $228,483.00. Plaintiff paid that sum, and sues for refund. Defendant has filed a counterclaim seeking $55,988.18 in interest. Fiscal years ending May 31, 1967 through 1971 are involved. These years are open, appropriate waivers having been signed. Exemption had been recognized on October 17, 1959. Trial was held November 25-27, 1974, followed by oral argument and comprehensive briefs.

In my own case the words of such an act as the Income Tax, for example, merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception -- couched in abstract terms that offer no handle to seize hold of -- leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegel: that they were no doubt written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness. Much of the law is now as difficult to fathom, and more and more of it is likely to be so; for there is little doubt that we are entering a period of increasingly detailed regulation, and it will be the duty of judges to thread the path -- for path there is -- through these fantastic labyrinths. *fn2"

 These reflections apply a fortiori to Regulations, Procedures, Rulings, and other Treasury glosses on the tax statute itself. Regarding these emanations we echo the wish of the late esteemed Judge Goodrich in Keystone Automobile Club v. Comm'r., 181 F.2d 402, 406 (C.A. 3, 1950): "The order of rank among administrative agencies making tax rulings is one we should like to avoid assigning if we can."

 Succinctly stated, the Government relies on two contentions to justify revocation of the Club's exemption. The first contention is that the dues structure results in "net earnings" inuring to the benefit of regular members, who are the only voting members, but pay lower dues than other categories of members.

 The second contention is that the volume of meals and drinks consumed by non-members on the club premises is so great that the club is engaged in a lucrative restaurant business, open to the general public, and thus is no longer being "operated exclusively for . . . non-profitable purposes."

 The record shows that the club was organized on March 18, 1885, as a Pennsylvania non-profit corporation. After various vicissitudes, it was reactivated about 1955. It was located in the old Sherwin hotel, then in 1961 purchased the former Kramer restaurant property and then in July, 1966, obtained a long lease on its present attractive headquarters in a penthouse at 300 Sixth Avenue (atop a building formerly McCreery's store).

 An active member is "One who is regularly and directly concerned with gathering or preparing editorial material, and who is employed by a . . . newspaper published in Allegheny County, a press wire service or magazine of general circulation that maintains a full-time office in Allegheny County, or a radio or television station located in Allegheny County; or one who resides in Allegheny County and derives his principal source of income from creative ...

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