Peninsula Light Company, Inc., a Mutual Corporation v. United States

In this case the United States Government (IRS) appeals from a district court ruling which held that Peninsula Light Company, Inc. (Peninsula) was a tax-exempt corporation under 26 U.S.C. § 501 (c)(12) and entitled to a refund of Federal income taxes paid. We affirm.

I.

THE BACKGROUND

Peninsula is a nonprofit, non-stock corporation lawfully organized under the laws of the State of Washington for the purpose of supplying electric power at cost to its members. Any party which qualifies under the corporation’s bylaws can become a member for $100.00. Peninsula currently has approximately 6,500 members, all of whom are equal. No member can acquire any interest which will entitle him to any greater voice or vote in the corporation than any other member. The articles of incorporation provide that the corporate existence is perpetual. However, should some unforeseeable event occur (i. e., eminent domain) which would force dissolution of the corporation, the articles provide that the net assets would be distributed equally to the members of the corporation.

The electric power supplied by Peninsula is sold to the members slightly over cost to insure operating and maintenance capital and…