University Hill Foundation, Etc. v. Commissioner of Internal Revenue

446 F.2d 701 UNIVERSITY HILL FOUNDATION, etc., Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant. No. 24929. United States Court of Appeals, Ninth Circuit. May 17, 1971. Rehearing Denied September 20, 1971. Gilbert E. Andrews (argued), Atty. Tax Div., Johnnie M. Walter, Asst. Atty. Gen., Washington, D. C., for respondent-appellant. Austin Peck (argued), Dana Latham, Henry Steinman, and John Hall, Los Angeles, Cal., for petitioner-appellee. Before BARNES and DUNIWAY, Circuit Judges, and SCHNACKE, District Judge. * DUNIWAY, Circuit Judge: 1 This case involves disputed income and excess-profits taxes in the aggregate amount of $10,070,677.25, for the period beginning with the fiscal year ended April 30, 1952, and ending with fiscal year ended April 30, 1965. The Commissioner of Internal Revenue appeals from a decision of the Tax Court finding the University Hill Foundation free from liability for the disputed taxes. We reverse. 2 The Tax Court's opinion contains comprehensive findings of fact, University Hill Foundation, 1969, 51 T.C. 548, 549-559 , and we do not restate them here. There is no dispute as to the facts, and this opinion will assume…

This case involves disputed income and excess-profits taxes in the aggregate amount of $10,070,677.25, for the period beginning with the fiscal year ended April 30, 1952, and ending with fiscal year ended April 30, 1965. The Commissioner of Internal Revenue appeals from a decision of the Tax Court finding the University Hill Foundation free from liability for the disputed taxes. We reverse.

The Tax Court’s opinion contains comprehensive findings of fact, University Hill Foundation, 1969, 51 T.C. 548, 549-559 , and we do not restate them here. There is no dispute as to the facts, and this opinion will assume familiarity with the findings and opinion of the Tax Court, to which reference will be made from time to time.

The Commissioner, on June 15, 1945, ruled on a temporary basis that the Foundation was tax exempt under Section 101(6) of the Internal Revenue Code of 1939. That subsection exempted from taxation

The ruling was made final on November 19, 1946.

The Revenue Act of 1950 amended Section 101:

We refer to this amendment as the feeder organization amendment. Under Section 303 of the Revenue Act of 1950, the amendment applies only to fiscal years beginning after December…

(concurring in part and dissenting in part):

I concur in so much of the opinion of the majority as holds that the Foundation is and was organized exclusively for religious, charitable, or educational purposes within the meaning of Sections 101(6) of the 1939 Code and 501(c) (3) of the 1954 Code. Indeed, the contrary, though urged by the Commissioner before the Tax Court, has not been pressed here.

I respectfully dissent, however, from so much of the opinion as holds that the income of the Foundation is rendered taxable by the feeder organization provisions added as Section 101(6) (b) by the Revenue Act of 1950 and the provisions of Section 502 of the 1954 Code, essentially for the reasons advanced in the majority opinion of the Tax Court, University Hill Foundation, 51 T.C. 548, 559-574 .

The court decisions prior to the statutory provisions here involved are exhaustively reviewed by the Tax Court and, to some extent, by the majority opinion, and will be adverted to here only insofar as is necessary to show the-basis of my disagreement with the majority of the Court.

As the Tax Court well said,

In my view, the majority in this case has run aground upon such a reef.

There can…