Petitioner is a trade organization for muffler dealers, but it
has confined its membership to dealers franchised by Midas
International Corporation and its activities to Midas' muffler
business. In a suit seeking a federal income tax refund, petitioner
claimed the "business league" exemption provided by § 501(c)(6) of
the Internal Revenue Code of 1954. Treas.Reg. § 1.5'1(c)(6)-1
states that a business league is "an organization of the same
general class as a chamber of commerce or board of trade," and that
a tax exempt business league's activities "should be directed to
the improvement of business conditions of one or more lines of
business." The District Court held that Midas muffler franchisees
do not constitute a "line of business," and that petitioner was not
a "business league" within the meaning of § 501(c)(6), and thus was
not entitled to the claimed refund. The Court of Appeals affirmed,
applying the maxim
noscitur a sociis and holding that
petitioner's purpose was too narrow to satisfy the "line of
business" test of the Regulation.
Held: Petitioner is not entitled to the tax exemption
as a "business league" within the meaning of § 501(c)(6). Pp.
440 U. S.
476-489.
565 F.2d 845, affirmed.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER, C.J., and BRENNAN, WHITE, MARSHALL, and POWELL, JJ.,
joined. STEWART, J., filed a dissenting opinion, in which REHNQUIST
and STEVENS, JJ., joined,
post, p.
440 U. S.
489.
Page 440 U. S. 473
MR. JUSTICE BLACKMUN delivered the opinion of the Court.
Petitioner, National Muffler Dealers Association, Inc.
(Association), as its name indicates, is a trade organization for
muffler dealers. The issue in this case is whether the Association,
which has confined its membership to dealers franchised by Midas
International Corporation (Midas), and its activities to the Midas
muffler business, and thus is not "industrywide," is a "business
league" entitled to the exemption from federal income tax provided
by § 501(c)(6) of the Internal Revenue Code of 1954, 26 U.S.C. §
501(c)(6). [
Footnote 1]
I
In 1971, during a contest for control of Midas, Midas muffler
franchisees organized the Association under the New York
Not-for-Profit Corporation Law. The Association's purpose was to
establish a group to negotiate unitedly with Midas management. Its
principal activity has been to serve as a bargaining agent for its
members in dealing with Midas. It has enrolled most Midas
franchisees as members. [
Footnote
2] The Association was successful in negotiating a new form of
franchise agreement which prevents termination during its 20-year
life except for cause. It also persuaded Midas to eliminate its
requirement that a customer pay a service charge when a guaranteed
Midas muffler is replaced. And the Association
Page 440 U. S. 474
sponsors group insurance programs, holds an annual convention,
and publishes a newsletter for members.
The Association sought the exemption from federal income tax
which § 501(c)(6) provides for a "business league." Treasury
Regulation § 1.501(c)(6)-1, 26 CFR § 1.501(c)(6)-1 (1978), states
that the activities of a tax exempt business league "should be
directed to the improvement of business conditions of one or more
lines of business." [
Footnote
3] In view of that requirement, the Internal Revenue Service
initially rejected the Association's exemption application, stating
that § 501(c)(6) "would not apply to an organization that is not
industrywide." [
Footnote 4]
The Association then (in October 1972) amended its bylaws and
eliminated the requirement that its members be Midas franchisees.
Despite that amendment, and despite the Association's announced
purpose to promote the interests of individuals "engaged in
business as muffler dealers," [
Footnote 5] it neither recruited nor acquired a member who
was not a Midas franchisee. [
Footnote 6]
Page 440 U. S. 475
In 1974, after the Internal Revenue Service had issued a final
rejection of the Association's exemption application, the
Association filed income tax returns for its fiscal years 1971,
1972, and 1973, and, thereafter, claims for refund of the taxes
paid with those returns. The 1972 claim was formally denied.
Subsequent to that denial, and after more than six months had
passed since the filing of the 1971 and 1973 claims,
see §
6532(a)(1) of the 1954 Code, 26 U.S.C. § 6532(a)(1), the
Association brought this suit in the United States District Court
for the Southern District of New York asserting its entitlement to
a refund for the income taxes paid for the three fiscal years. The
District Court found: "There is no evidence that [the Association]
confers a benefit on the muffler industry as a whole or upon
muffler franchisees as a group." App. to Pet. for Cert. 11a. It
then concluded that "Midas Muffler franchisees do not constitute a
'
line of business,'" and held that the Association was not a
"business league" within the meaning of § 501(c)(6), and thus was
not entitled to the claimed refund. App. to Pet. for Cert.
13a-14a.
The United States Court of Appeals for the Second Circuit
affirmed. 565 F.2d 845 (1977). It confronted what it called the
"lexicographer's task of deciding what is meant by a 'business
league.'"
Id. at 846. Finding no direct guidance in the
statute, the court applied the maxim
noscitur a sociis
("[i]t is known from its associates," Black's Law Dictionary 1209
(Rev. 4th ed.1968)), and looked "at the general characteristics of
the organizations" with which business leagues were grouped in the
statute, that is, chambers of commerce and boards of trade. The
court agreed with the Service's determination,
Page 440 U. S. 476
in § 1.501(c)(6)-1 of the regulations, that a business league is
an "organization of the same general class as a chamber of commerce
or board of trade." Reasoning that it was the "manifest intention"
of Congress by the statute
"to provide an exemption for organizations which promote some
aspect of the general economic welfare rather than support
particular private interests,"
the court concluded that the "line of business" requirement set
forth in the regulations is "well suited to assuring that an
organization's efforts do indeed benefit a sufficiently broad
segment of the business community." 565 F.2d at 846-847. The court
noted that any success the Association might have in improving
business conditions for Midas franchisees, and any advantage it
might gain through tax exemption, would come at the expense of the
rest of the muffler industry, and concluded that the Association's
purpose was too narrow to satisfy the line of business test.
The court,
id. at 847 n. 1, explicitly refused to
follow the decision in
Pepsi-Cola Bottlers' Assn. v. United
States, 369 F.2d 250 (CA7 1966). There, the Seventh Circuit,
by a divided vote, had upheld the exempt status of an association
composed solely of bottlers of a single brand of soft drink. It did
so on the ground that the line of business requirement unreasonably
narrowed the statute.
We granted certiorari to resolve this conflict. 436 U.S. 903
(1978).
II
The statute's term "business league" has no well defined meaning
or common usage outside the perimeters of § 501(c)(6). It is a term
"so general . . . as to render an interpretive regulation
appropriate."
Helvering v. Reynolds Co., 306 U.
S. 110,
306 U. S. 114
(1939). In such a situation, this Court customarily defers to the
regulation, which, "if found to
implement the congressional
mandate in some reasonable manner,' must be upheld."
United States v.
Cartwright, 411 U.S.
Page 440 U. S. 477
546, 550 (1973), quoting
United States v. Correll,
389 U. S. 299,
389 U. S. 307
(1967).
We do this because
"Congress has delegated to the [Secretary of the Treasury and
his delegate, the] Commissioner [of Internal Revenue], not to the
courts, the task of prescribing 'all needful rules and regulations
for the enforcement' of the Internal Revenue Code. 26 U.S.C. §
7805(a)."
United States v. Correll, 389 U.S. at
389 U. S. 307.
That delegation helps ensure that, in "this area of limitless
factual variations,"
ibid., like cases will be treated
alike. It also helps guarantee that the rules will be written by
"masters of the subject,"
United States v. Moore,
95 U. S. 760,
95 U. S. 763
(1878), who will be responsible for putting the rules into
effect.
In determining whether a particular regulation carries out the
congressional mandate in a proper manner, we look to see whether
the regulation harmonizes with the plain language of the statute,
its origin, and its purpose. A regulation may have particular force
if it is a substantially contemporaneous construction of the
statute by those presumed to have been aware of congressional
intent. If the regulation dates from a later period, the manner in
which it evolved merits inquiry. Other relevant considerations are
the length of time the regulation has been in effect, the reliance
placed on it, the consistency of the Commissioner's interpretation,
and the degree of scrutiny Congress has devoted to the regulation
during subsequent reenactments of the statute.
See Commissioner
v. South Texas Lumber Co., 333 U. S. 496,
333 U. S. 501
(1948);
Helvering v. Winmill, 305 U. S.
79,
305 U. S. 83
(1938).
III
A
The history of Treas.Reg. § 1.501(c)(6)-1 and its "line of
business" requirement provides much that supports the Government's
view that the Association, which is not tied to a particular
community and is not industrywide, should not be exempt. The
exemption for "business leagues" from federal
Page 440 U. S. 478
income tax had its genesis at the inception of the modern income
tax system with the enactment of the Tariff Act of October 3, 1913,
38 Stat. 114, 172. In response to a House bill which would have
exempted, among others, "labor, agricultural, or horticultural
organizations," the Senate Finance Committee was urged to add an
exemption that would cover nonprofit business groups. Both the
Chamber of Commerce of the United States and the American
Warehousemen's Association, a trade association for warehouse
operators, [
Footnote 7]
submitted statements to the Committee. The Chamber's spokesman
said:
"The commercial organization of the present day is not organized
for selfish purposes, and performs broad patriotic and civic
functions. Indeed, it is one of the most potent forces in each
community for the improvement of physical and social conditions.
While its original reason for being is commercial advancement, it
is
not in the narrow sense of advantage to the individual, but
in the broad sense of building up the trade and commerce of the
community as a whole. . . ."
(Emphasis added.) Briefs and Statements on H.R. 3321 filed with
the Senate Committee on Finance, 63d Cong., 1st Sess., 2002 (1913)
(hereinafter Briefs and Statements). The Chamber's written
submission added:
"These organizations receive their income from dues . . . which
business men pay that they
may receive in common with all other
members of their communities or of their industries the
benefits of cooperative study of local development, of civic
affairs, of industrial resources, and of local, national, and
international trade."
(Emphasis added.)
Id. at 2003. [
Footnote 8]
Page 440 U. S. 479
The Committee was receptive to the idea, but rejected the
Chamber's proposed broad language which would have exempted all
"commercial organizations not organized for profit." Instead, the
Committee, and ultimately the Congress, provided that the tax would
not apply to
"business leagues, nor to chambers of commerce or boards of
trade, not organized for profit or no part of the net income of
which inures to the benefit of the private stockholder or
individual."
Tariff Act of Oct. 3, 1913, § IIG(a), 38 Stat. 172. Congress has
preserved this language, with few modifications, in each succeeding
Revenue Act. [
Footnote 9]
The Commissioner of Internal Revenue had little difficulty
determining which organizations were "chambers of commerce" or
"boards of trade" within the meaning of the statute. Those terms
had commonly understood meanings before the
Page 440 U. S. 480
statute was enacted. [
Footnote 10] "Business league," however, had no common
usage, and, in 1919, the Commissioner undertook to define its
meaning by regulation. The initial definition was the
following:
"A business league is an association of persons having some
common business interest, which limits its activities to work for
such common interest and does not engage in a regular business of a
kind ordinarily carried on for profit. Its work need not be similar
to that of a chamber of commerce or board of trade."
Treas. Regs. 45, Art. 518 (1919). This language, however, proved
too expansive to identify with precision the class of organizations
Congress intended to exempt.
Page 440 U. S. 481
The Service began to cut back on the last sentence of the
material just quoted when, in 1924, the Solicitor of Internal
Revenue invoked
noscitur a sociis to deny an exemption
requested by a stock exchange. He reasoned that, while a stock
exchange conceivably could come within the definitions of a
"business league" or "board of trade," it lacked the
characteristics that a "business league," "chamber of commerce,"
and "board of trade" share in common and that form the basis for
the exemption. Congress must have used those terms, he said, "to
indicate organizations of the same general class, having for their
primary purpose the promotion of business welfare." The primary
purpose of the stock exchange, by contrast, was "to afford
facilities to a limited class of people for the transaction of
their private business." L.O. 1121, III-1 Cum.Bull. 275, 280-281
(1924). The regulation was then amended so as specifically to
exclude stock exchanges. T.D. 3746, IV-2 Cum.Bull. 77 (1925).
[
Footnote 11]
In 1927, the Board of Tax Appeals, in a reviewed decision with
some dissents, applied the principle of
noscitur a sociis
and denied a claimed "business league" exemption to a corporation
organized by associations of insurance companies to provide
printing services for member companies.
Uniform Printing &
Supply Co. v. Commissioner, 9 B.T.A. 251,
aff'd, 33
F.2d 445 (CA7),
cert. denied, 280 U.S. 591 (1929). In
1928, Congress revised the statute so as specifically to exempt
real estate boards that local revenue agents had tried to
Page 440 U. S. 482
tax. [
Footnote 12] The
exclusion of stock exchanges, however, was allowed to remain.
In 1929, the Commissioner incorporated the principle of
noscitur a sociis into the regulation itself. The
sentence, "Its work need not be similar to that of a chamber of
commerce or board of trade," was dropped and was replaced with the
following qualification:
"It is an organization of the same general class as a chamber of
commerce or board of trade. Thus, its activities should be directed
to the improvement of business conditions or to the promotion of
the general objects of one or more lines of business as
distinguished from the performance of particular services for
individual persons."
Treas.Regs. 74, Art. 528 (1929). This language has stood almost
without change for half a century [
Footnote 13] through several reenactments and one
amendment of the statute.
During that period, the Commissioner and the courts have been
called upon to define "line of business" as that phrase is employed
in the regulation. True to the representation made by the Chamber
of Commerce, in its statement to the Senate in 1913, that benefits
would be received "in common with all other members of their
communities or of their industries,"
supra at
440 U. S. 478,
the term "line of business" has been interpreted
Page 440 U. S. 483
to mean either an entire industry,
see, e.g., American
Plywood Assn. v. United States, 267 F.
Supp. 830 (WD Wash.1967);
National Leather & Shoe
Finders Assn v. Commissioner, 9 T.C. 121 (1947), or all
components of an industry within a geographic area,
see, e.g.,
Commissioner v. Chicago Graphic Arts Federation, Inc., 128
F.2d 424 (CA7 1942);
Crooks v. Kansas City Hay Dealers'
Assn., 37 F.2d 83 (CA8 1929);
Washington State Apples,
Inc. v. Commissioner, 46 B.T.A. 64 (1942). [
Footnote 14]
Most trade associations fall within one of these two categories.
[
Footnote 15] The
Commissioner consistently has denied exemption to business groups
whose membership and purposes are narrower. Those who have failed
to meet the "line of business" test, in the view of the
Commissioner, include groups composed of businesses that market a
single brand of automobile, [
Footnote 16] or have licenses to a single patented
product, [
Footnote 17] or
bottle one type of soft drink. [
Footnote 18] The Commissioner has reasoned that these
groups are not designed to better conditions in an entire
industrial "line," but, instead, are devoted to the promotion
Page 440 U. S. 484
of a particular product at the expense of others in the
industry. [
Footnote 19]
In short, while the Commissioner's reading of § 501(c)(6)
perhaps is not the only possible one, it does bear a fair
relationship to the language of the statute, it reflects the views
of those who sought its enactment, and it matches the purpose they
articulated. It evolved as the Commissioner administered the
statute and attempted to give to a new phrase a content that would
reflect congressional design. The regulation has stood for 50
years, and the Commissioner infrequently but consistently has
interpreted it to exclude an organization like the Association that
is not industrywide. The Commissioner's view therefore merits
serious deference.
B
The Association contends, however, that the regulation is
unreasonable because it unduly narrows the statute. This argument
has three aspects: first, the Association argues that this Court
need not defer to the regulation because, instead of being a
contemporaneous construction of the statute, it is actually
contrary to the regulation first in force from 1919 to 1929.
Second, it argues that the addition in 1966 of professional
Page 440 U. S. 485
football leagues to the statutory list of exempt organizations
makes a new view of
noscitur a sociis appropriate. Third,
it contends that, if the maxim applies here, the Court should reach
out beyond § 501(c)(6) and take into account the fact that the
Association's bargaining function is much like that of a labor
organization which would be exempt under § 501(c)(5). We consider
these arguments in turn.
1. As noted above, the Commissioner's first definition of
"business league" provided that its work "
need not be
similar to that of a chamber of commerce or board of trade."
Treas.Regs. 45, Art. 518 (1919) (emphasis added). The Association
contends that, because this language differs from the language that
replaced it in 1929, the latter is not a "contemporaneous
construction" to which this Court should defer,
Bingler v.
Johnson, 394 U. S. 741,
394 U. S.
749-750 (1969), but is instead an arbitrary narrowing of
the statute. It is said that the earlier language rejects the rule
of
noscitur a sociis, and that it is the earlier language
that should be treated by the Court as truly authoritative.
Contemporaneity, however, is only one of many considerations
that counsel courts to defer to the administrative interpretation
of a statute. It need not control here. Nothing in the regulations
or case law,
see Produce Exchange Stock Clearing Assn. v.
Helvering, 71 F.2d 142 (CA2 1934), directly explains the
regulatory shift. We do know, however, that the change in 1929
incorporated an interpretation thought necessary to match the
statute's construction to the original congressional intent.
[
Footnote 20] We would be
reluctant to adopt the rigid view that an agency may not alter its
interpretation in light of administrative experience. In
Helvering v. Wilshire
Oil
Page 440 U. S. 486
Co., 308 U. S. 90,
308 U. S. 101
(1939), the Court acknowledged the need for flexibility and applied
a 1929 regulation to a taxpayer even though the taxpayer had acted
in reliance on an opposite interpretation incorporated in an
earlier regulation. Here, where there is no claim that the
Association ever relied on the Commissioner's prior view, the case
for accepting the later regulation as authoritative is even
stronger.
2. In 1966, Congress amended § 501(c)(6) by adding to the list
of exempt organizations "professional football leagues (whether or
not administering a pension fund for football players)." Act of
Nov. 8, 1966, Pub.L. 89-800, § 6(a), 80 Stat. 1515. The Association
contends that a professional football league is not of the same
general character as a chamber of commerce or board of trade, and
that a new view of
noscitur a sociis is appropriate, one
that would include the Association within the exemption. This, of
course, is the complement to the first argument.
Nothing in the legislative history of the amendment, however,
indicates that Congress objected to or endeavored to change the
Commissioner's position as to the class of organizations included
in § 501(c)(6). [
Footnote
21] The purpose of the amendment was to forestall any claim
that a football league's pension plan would be considered inurement
of benefits to a private individual. Congressman Mills stated
flatly that "no inference is intended by this change as to the
application of section 501(c)(6) to other types of organizations."
112 Cong.Rec. 28228 (1966).
Nor does the Association share characteristics in common with a
professional football league that would necessarily
Page 440 U. S. 487
entitle it to exemption even if a new view of
noscitur a
sociis were applied. The teams in a football league depend on
mutual cooperation to promote a common business purpose. They need
a league to provide uniform rules of play. A franchisee, however,
does not need another franchisee in order to bargain with its
franchisor, even though joint bargaining may make them more
powerful. Also, it is not without significance that the 1966
amendment was part of a large statutory package which paved the way
for a merger which created an "industrywide" professional football
league. It can hardly be read to evince a congressional intent that
other associations that are not industrywide should be afforded
tax-exempt status.
3. The Association says that, if
noscitur a sociis is
to apply, then sound policy considerations support the
reasonableness of searching for
socii beyond the confines
of § 501(c)(6). The Association draws a comparison to other exempt
organizations, particularly labor unions that are exempt under §
501(c)(5). The Association says that, like a labor union, it exists
to redress unequal bargaining power in the marketplace. Some States
have special legislation protecting franchisee associations.
[
Footnote 22] Employer
bargaining associations that deal with unions in a particular
industry are exempt "business leagues." Rev.Rul. 65-14, 1965 Cum.
Bull. 236, 238. It is argued that the Association meets all the
regulation's requirements except the line of business test.
[
Footnote 23] Applying
the
Page 440 U. S. 488
thin logic of that requirement to tax a nonprofit organization
like the Association, it is said, unreasonably will discourage
joint action to improve shared business conditions and will yield
only scant revenue to the Treasury. The Association concludes that
it would be appropriate now to expand the "business league"
exemption to embrace the modern phenomenon of franchisee
associations that was unknown in 1913.
These arguments are not unlike those that persuaded the Senate
to add the business league exemption to the 1913 bill.
See
Briefs and Statements 2002-2003. Perhaps Congress would find them
forceful today. The Association, however, needs more than a
plausible policy argument to prevail here. Just last Term, in
Fulman v. United States, 434 U. S. 528,
434 U. S. 536
(1978), the Court upheld a regulation which had a "reasonable
basis" in the statutory history, even though the taxpayer's
challenge to its policy had "logical force."
Id. at
434 U. S. 534,
424 U. S. 536,
and 540 (dissenting opinion). The choice among reasonable
interpretations is for the Commissioner, not the courts. Certainly,
noscitur a sociis does not compel the Commissioner to draw
comparisons that go beyond the text of the Senate's amendment to
the 1913 bill, particularly when the Senate Finance Committee, in
drafting the amendment, rejected a broad proposal modeled on the
same labor exemption the Association now wishes to incorporate.
In sum, the "line of business" limitation is well grounded in
the origin of § 501(c)(6) and in its enforcement over a long period
of time. The distinction drawn here, that a tax exemption is not
available to aid one group in competition with another within an
industry, is but a particular manifestation of an established
principle of tax administration. Because the Association has not
shown that either the regulation or the Commissioner's
interpretation of it fails to "implement the congressional mandate
in some reasonable manner,"
Page 440 U. S. 489
United States v. Correll, 389 U.S. at
389 U. S. 307,
the Association's claim for a § 501(c)(6) exemption must be
denied.
The judgment of the Court of Appeals is affirmed.
It is so ordered.
[
Footnote 1]
The statute exempts:
"Business leagues, chambers of commerce, real-estate boards,
boards of trade, or professional football leagues (whether or not
administering a pension fund for football players) not organized
for profit and no part of the net earnings of which inures to the
benefit of any private shareholder or individual."
[
Footnote 2]
The trial court, in focusing on the Association's fiscal years
ended November 30 in 1971, 1972, and 1973, found that 290
franchised Midas dealers were members of the Association. App. 18a.
This was about 50% of the dealers. By the time of the trial in
1975, the Association included almost 80% of all Midas dealers.
Id. at 49a.
[
Footnote 3]
The regulation reads:
"A business league is an association of persons having some
common business interest, the purpose of which is to promote such
common interest and not to engage in a regular business of a kind
ordinarily carried on for profit. It is an organization of the same
general class as a chamber of commerce or board of trade. Thus, its
activities should be directed to the improvement of business
conditions of one or more lines of business as distinguished from
the performance of particular services for individual persons. . .
. A stock or commodity exchange is not a business league, a chamber
of commerce, or a board of trade within the meaning of section
501(c)(6) and is not exempt from tax. . . ."
[
Footnote 4]
Letter dated March 28, 1972, from District Director (New York),
Internal Revenue Service, to the Association. Complaint Exhibit C,
Record Document No. 1.
[
Footnote 5]
Certificate of Incorporation of National Muffler Dealers
Association, Inc., 113. App. 41a.
[
Footnote 6]
According to an Association survey, Midas has 21% of the
replacement muffler business in 18 major metropolitan markets.
See 565 F.2d 845, 847 n. 2 (CA2 1977). A letter dated
November 27, 1975, sent out by the Association's president and
seeking new members, contained the greeting, "Dear Fellow Midas
Dealer." In that letter, the Association's president announced a
joint endeavor with Midas "to improve the Midas program," and
stated, "I have been as loyal to the Midas business as I have to
our country." App. 49a.
[
Footnote 7]
See Proceedings of the Twenty-Third Annual Meeting of
the American Warehousemen's Association (1913).
[
Footnote 8]
The Chamber's statement and submission, and those of the
American Warehousemen's Association, Briefs and Statements 2040,
assume an importance here beyond that usually afforded such
documents in the interpretation of statutes. They do so for two
reasons. First, the submissions are the only available evidence of
the amendment's purpose. The amendment was not discussed on the
floor of either the House or the Senate,
see J. Seidman,
Legislative History of Federal Income Tax Laws 1002, 1003 (1938),
and the Committee Reports do no more than state its text,
see S.Rep. No. 80, 63d Cong., 1st Sess., 25-26 (1913);
H.R.Conf.Rep. No. 86, 63d Cong., 1st Sess., 26 (1913). Second, the
subsequent administrative interpretation of the statute directly
parallels the language of the private submissions.
[
Footnote 9]
Revenue Act of 1916, § 11(a), Seventh, 39 Stat. 766 (punctuation
added); Revenue Act of 1918, § 231(7), 40 Stat. 1076; Revenue Act
of 1921, § 231(7), 42 Stat. 253; Revenue Act of 1924, § 231(7), 43
Stat. 282; Revenue Act of 1926, § 231(7), 44 Stat. 40; Revenue Act
of 1928, § 103(7), 45 Stat. 813 (real estate boards added); Revenue
Act of 1932, § 103(7), 47 Stat.193; Revenue Act of 1934, § 101(7),
48 Stat. 700; Revenue Act of 1936, § 101(7), 49 Stat. 1674; Revenue
Act of 1938, § 101(7), 52 Stat. 481; Internal Revenue Code of 1939,
§ 101(7), 53 Stat. 33; Internal Revenue Code of 1954, § 501(c)(6),
68A Stat. 164.
See also Act of Nov. 8, 1966, Pub.L. No.
89-800, § 6(a), 80 Stat. 1515 (reference to professional football
leagues added).
[
Footnote 10]
Webster's New International Dictionary 245, 366 (1913), defined
the terms as follows:
board of trade: "In the United States, a body of men appointed
for the advancement and protection of business interests.
Cf. chamber of commerce."
chamber of commerce:
"[A] board or association to protect the interests of commerce,
chosen from among the merchants and traders of a city. The term
chamber of commerce is by some distinctively used of the
bodies that are intrusted with the protection of general commercial
interests, esp. in connection with foreign trade and
board of
trade for those dealing primarily with local commerce."
In
Retailers Credit Assn. v. Commissioner, 90 F.2d 47,
51 (CA9 1937), an additional explanation of the difference between
the two terms was offered:
"Although the terms 'chamber of commerce' and 'board of trade'
are nearly synonymous, there is a slight distinction between their
meanings. The former relates to all businesses in a particular
geographic location, while the latter may relate to only one or
more lines of business in a particular geographic location, but
need not relate to all."
In L. O. 1121, III-1 Cum.Bull. 275, 280 (1924), the Solicitor of
Internal Revenue rejected an approach to the term "board of trade"
that would have encompassed "organizations which provide
conveniences or facilities to certain persons in connection with
buying, selling, and exchanging goods."
[
Footnote 11]
See Treas.Regs. 69, Art. 518 (1926). Because the
regulation now incorporates the denial of exempt status to stock
exchanges, L.O. 1121 eventually was declared obsolete. Rev.Rul.
68-207, 1968-1 Cum.Bull. 577, 578.
In
United States v. Leslie Salt Co., 350 U.
S. 383,
350 U. S.
393-394, and n. 12 (1956), the Court approved a similar
use of
noscitur a sociis by the Solicitor in defining the
term "certificate of indebtedness."
See L.O. 909, Sales
Tax Rulings, No. 85 (1920).
[
Footnote 12]
Revenue Act of 1928, § 103 (7), 45 Stat. 813.
See
Hearings on Revenue Revision 1927-1928, before the House Committee
on Ways and Means, Interim 69th-70th Cong. 235-239, 268 (1927);
H.R.Rep. No. 2, 70th Cong., 1st Sess., 17 (1927).
[
Footnote 13]
See Treas.Regs. 77, Art. 528 (under 1932 Act);
Treas.Regs. 86, Art. 101(7)-1 (under 1934 Act) ("or to the
promotion of the general objects" dropped); Treas.Regs. 94, Art.
101(7)-1 (under 1936 Act); Treas.Regs. 101, Art. 101(7)-1 (under
1938 Act) ; Treas.Regs. 103, § 19.101(7)-1 (under 1939 Code);
Treas.Regs. 111, § 29.101(7)-1 (same): Treas.Regs. 118, §
39.101(7)-1 (same) ; T.D. 6301, 1952 Cum.Bull.197, 203-204, and
Treas. Reg § 1.501(c)(6)-1 (under 1954 Code) .
[
Footnote 14]
Cf. Produce Exchange Stock Clearing Assn. v. Helvering,
71 F.2d 142, 144 (CA2 1934) (organization not entitled to exemption
because "[n]othing is done to advance the interests of the
community or to improve the standards or conditions of a particular
trade, as in the case of chambers of commerce, real estate boards,
and boards of trade"); Note, 35 Ford.L.Rev. 738, 741 (1967).
[
Footnote 15]
The Department of Commerce has defined a trade association
as
"a nonprofit, cooperative, voluntarily-joined, organization of
business competitors designed to assist its members
and its
industry in dealing with mutual business problems."
J. Judkins, National Associations of the United States viii
(1949) (emphasis added).
[
Footnote 16]
Rev.Rul. 67-77, 1967 Cum. Bull. 138, superseding I.T. 4053,
1951-2 Cum.Bull. 53 (to the same effect under prior law).
Cf. Rev.Rul. 55-444, 1955-2 Cum.Bull. 258 (industrywide
advertising program exempt).
[
Footnote 17]
Rev.Rul. 58-294, 1958-1 Cum.Bull. 244.
[
Footnote 18]
Rev.Rul. 68-182, 1968-1 Cum.Bull. 263 (announcing
nonacquiescence in
Pepsi-Cola Bottlers' Assn. v. United
States, 369 F.2d 250 (CA7 1966)).
[
Footnote 19]
See Rev.Rul. 76-400, 1976-2 Cum.Bull. 153-154.
Cf. Rev.Rul. 61-177, 1961-2 Cum.Bull. 117 (organization to
improve members' competitive standing in various lines of business
through lobbying exempt).
The Association contends that the "line of business" language in
the regulation does not represent a separate requirement for
exemption, but instead is merely illustrative of the type of
organization normally granted an exemption. Both the Commissioner
and the courts, however, have repeatedly characterized the line of
business test as one that must be met before a business league
exemption will be allowed.
See Rev.Rul. 67-77, 1967-1
Cum.Bull. 138;
United States v. Oklahoma City Retailers
Assn., 331 F.2d 328, 331 (CA10 1964);
Associated
Industries of Cleveland v. Commissioner, 7 T.C. 1449, 1466
(1946). While the plausibility and consistency of the
Commissioner's interpretation are relevant to the reasonableness of
the regulation as applied here, the Commissioner is otherwise free
to determine how the regulation he has written should be
construed.
[
Footnote 20]
The Court has said:
"The maxim
noscitur a sociis, that a word is known by
the company it keeps, while not an inescapable rule, is often
wisely applied where a word is capable of many meanings in order to
avoid the giving of unintended breadth to the Acts of
Congress."
Jarecki v. G. D. Searle & Co., 367 U.
S. 303,
367 U. S. 307
(1961).
[
Footnote 21]
See H.R.Conf.Rep. No. 2308, 89th Cong., 2nd Sess., 9-10
(1966); Summary of the Act Temporarily Suspending the Investment
Credit and Limiting the Use of Accelerated Depreciation, Joint
Committee on Internal Revenue Taxation, 22 (1966); 112 Cong.Rec.
26882-26887, 28226, 28228 (1966).
[
Footnote 22]
See, e.g., Franchise Practices Act, N.J.Stat.Ann. §
56:10-7 (West Supp. 1978-1979); Franchise Investment Protection
Act, Wash.Rev.Code § 19.100.180 (1976) .
[
Footnote 23]
The Association is nonprofit, and the Government does not
contend here that it engages in a regular business of a kind
ordinarily carried on for profit, or that its income inures to
individual members, or that it performs particular services for
individual members in the fee-for-service sense. It does, however,
provide services that benefit Midas franchisees exclusively.
MR. JUSTICE STEWART, with whom MR. JUSTICE REHNQUIST and MR.
JUSTICE STEVENS join, dissenting.
I would reverse the judgment for substantially the reasons
expressed by the Court of Appeals for the Seventh Circuit in
Pepsi-Cola Bottlers' Assn. v. United States, 369 F.2d 250
(1966). Additionally, I note that the initial administrative
interpretation of the statute in the Treasury Regulations was
exactly the opposite of the one now urged.
Ante at
440 U. S. 480.
That is strong evidence of the understanding of the meaning of the
law at the time it was enacted.