542 Findings of Fact dues and membership fees paid by its members are not subject to the tax imposed under that section of the Act. This ruling also applies under section 413 of the Revenue Act of 1928. Taxes paid for the years 1924 to 1928 with interest were accordingly refunded to that club on or about April 25, 1929. 7. From July 1928 to December 1942, the Commissioner did not require either the plaintiff or its predecessors to pay taxes with respect to members' dues and initiation fees. 8. By letter dated November 18, 1942, the Internal Revenue Agent at New York notified the plaintiff of the then recent decision of the United States Circuit Court of Appeals for the Third Circuit in Duquesne Club v. Bell, 127 Fed. (2d) 363, in which it was held that that club was a social club within the meaning of section 1710 of the Internal Revenue Code, and concluded In conformity with the above, the Railroad-Machinery Club, the purpose and activities of which are similar to the Duquesne Club, qualifies as a social club within the meaning of section 1710 of the Code, and the dues and fees paid by the members are subject to tax. It is required that the tax on dues be collected and paid to the Collector of Internal Revenue, as provided by the Internal Revenue Code and Regulations 43, a copy of which is enclosed. In compliance with that requirement, the plaintiff duly reported excise taxes on initiation fees and dues collected from its members during the period December 1, 1942, to October 31, 1946, and paid the amounts so collected to the Collector of Internal Revenue on the dates set out in paragraph 9 of plaintiff's petition, such amounts aggregating $38,458.27. 9. By letter dated October 28, 1946, the Deputy Commissioner of Internal Revenue notified the plaintiff, in part, as follows: It is held that The Railroad-Machinery Club of New York, Inc., is not a social, athletic, or sporting club or organization, within the meaning of section 1710 of the Internal Revenue Code, and that the dues and initiation fees paid by the members are not subject to tax under that section. Findings of Fact 118 C. Cls. 10. On December 3, 1946, the plaintiff duly filed its claim for refund on the taxes paid from December 1, 1942, to October 31, 1946, in the total amount of $38,458.27, on the ground that it was not a social club within the meaning of section 1710 and that therefore the tax on dues and initiation fees had been erroneously collected and paid. It filed a copy of its certificate of incorporation and its bylaws together with a list of its members and the amount of tax paid with respect to each member during that period. In support of its claim the plaintiff filed with the Collector at New York powers of attorney from 914 members representing total tax payments of $34,710.15 and at the hearing in this proceeding it introduced in evidence powers of attorney from 53 additional members representing total tax payments of $1,223.61. In addition, the plaintiff included in that claim the sum of $211.29 covering the tax on members' dues collected in October 1946, on which the plaintiff itself had not collected but on which it paid the tax. The claim also included tax payments amounting to $2,313.22 on behalf of 199 members for whom no powers of attorney were filed. The claim as to these 199 members was waived at the hearing in this proceeding. The total amount of recovery now sought is $36,145.05 plus interest. By letter dated October 21, 1948, the Deputy Commissioner notified the plaintiff as follows: Under date of October 28, 1946, the club was advised that it did not qualify as a social, athletic, or sporting club within the meaning of section 1710 of the Code. On March 15, 1948, the United States Circuit Court of Appeals for the First Circuit, in affirming the decision handed down by the District Court of the United States for the District of Rhode Island in the case of the Turks Head Club v. Broderick, held that eating meals together by club members in a select and exclusive environment where such activity is the club's primary function qualifies the organization as a social club and renders it liable for the collection of the taxes imposed by section 1710 of the Code. In view of the foregoing and after careful consideration of all the facts in the instant case, the Bureau now 542 Findings of Fact holds that the Railroad-Machinery Club of New York, Incorporated, qualifies as a social club within the meaning of the law. Therefore, the claim is rejected in full. The club should proceed to collect and pay over to the Government the tax on dues and initiation fees paid by its members as of the date of this letter. Since the club relied on the ruling issued on October 28, 1946, that it did not qualify as a social club or organization, no assessment of the tax will be made against the club or members for the period October 28, 1946 to the date of this letter. There has been no material change in the purpose or character or activities of the plaintiff or its predecessor clubs from 1910 to the present time except that the serving of alcoholic beverages was discontinued during the Prohibition era, and, since the merger in 1935, the space formerly leased by the Machinery Club was surrendered and the quarters of the present enterprise have been limited to the facilities formerly occupied by the Railroad Club at 30 Church Street, New York, and described below. 11. The plaintiff's bylaws provide that the properties and affairs of the club shall be managed by 30 governors who shall each hold office for three years, 10 to be elected each year; that the governors shall annually elect a president, a vice president, a secretary, a treasurer, and such other officers as they may deem necessary for the proper management of club business; and that they shall also annually appoint an executive committee to supervise the club's finances, a house committee to manage the affairs of the club, and a membership committee to pass upon candidates for admission. The actual management of the enterprise is in charge of the secretary and treasurer who has been in the employ of the club, or one of its predecessors, for forty years. His annual salary is $9,000. 12. (a) The bylaws provide for three classes of members: resident members for whom the entrance fee is $100 and the annual dues $100; nonresident members for whom the entrance fee is $25 and the annual dues $25; and Army and Navy members who pay no entrance fee and whose annual dues are $10. Findings of Fact 118 C. Cls. (b) The bylaws also provide that the number of resident members shall not exceed 700. In 1940 the resident membership was 684. Since then it has declined to 599 in 1950. (c) The rental agent of the Hudson Terminal Building, who is not a member of the club, entertains prospective tenants of the building in the club, furnishes them with membership application blanks, and introduces them to the manager as possible candidates for membership. The landlord views the facilities offered by the club as a building service that helps to secure tenants for the Hudson Terminal Building. (d) In 1942 to 1946 the plaintiff employed a man to solicit new members and he received as commissions the following amounts: 1942, $992.92; 1943, $964.10; 1944, $1,495.85; 1945, $1,289.59; and 1946, $52.08. (e) The bylaws provide that any person 21 years of age may become a member of the club upon election by the board of governors, who act upon the recommendations of the membership committee. The proceedings of the board of governors with respect to the election of new members are confidential. The club's policy in admitting new members is inclined to be liberal and not highly selective. (f) Members have the privilege of inviting guests to the club subject, however, to a guest charge of 50 cents for each meal payable by the member in addition to the menu charges. (g) In the year 1948 the plaintiff had 902 members, of whom 671 were resident, 193 nonresident, and 38 Army and Navy members. The highest membership of the Railroad Club was prior to 1916 when the resident membership alone was 850. (h) of the 671 resident members, 314, that is almost half, have their offices in the Hudson Terminal Building. Most of the others have their offices in the immediate vicinity and in most instances are connected with or have business associations with railroad and utility or allied equipment or supply and service companies. The total membership is divided among the following business and professional groups: 13. The leases under which the plaintiff has occupied its quarters since April 1, 1938, both stipulate in substantially the same words that: The premises hereby leased shall be used and occupied by the tenant for the business of maintaining a luncheon club, including a kitchen and restaurant, and other conveniences necessary and incidental to a luncheon club and for no other purpose. The lease in effect from April 1, 1938, to March 31, 1946, provided that the annual rent should be 70 percent of the membership dues subject to a maximum of $60,000 and a minimum of $40,000; that the plaintiff would maintain only three classes of membership, i. e., resident members with dues of $100, nonresident members with dues of $25, and Army and Navy members with dues of $10; that the plaintiff would "diligently and in good faith endeavor to increase its membership"; and that the landlord be given power of attorney to collect, by legal process if necessary, any dues that were delinquent for more than sixty days and retain for rent 70 percent of the dues so collected plus expenses incurred. The lease further required that the tenant expend $31,000 for decorations, furniture, and fixtures "so as to stimulate the use by members of the tenant's facilities." The lease in effect from April 1, 1946, provides for a flat rental of $46,700 annually. It also requires that the plaintiff expend $20,000 for redecoration, renovation, and re |