*142 Decision will be entered for the petitioner.
Petitioner is an unincorporated association whose regular membership consists of jobbers and wholesalers of shoe repair supplies, known as "finders." Manufacturers of such products are associate members, but without power to vote or hold office. Petitioner's primary purpose is the promotion of the welfare of and the improvement of business conditions generally in the entire leather and shoe findings industry by training the shoe repair men in the country to be better business men and better artisans and to render better service to the public. As an educational medium, petitioner publishes a magazine for free circulation to some 65,000 shoe repair shops. Although manufacturers are allowed to advertise their products in the magazine at a flat charge, the ads contain no information that the products can be bought from any particular finder or finders. Finders are not permitted to advertise in the magazine. Through bulletins petitioner furnishes to all its members credit, tax, freight rate, and other legislative information, and the like, without special charge, but these services are only incidental to and in furtherance of the accomplishment*143 of petitioner's primary purpose to improve business conditions in the industry. Held, petitioner is an exempt business league within the meaning of section 101 (7), Internal Revenue Code.
*121 The respondent has determined the following deficiencies and delinquency penalties for the fiscal years ended April 30, as indicated:
| Declared value excess | ||||
| Income tax | profits tax | |||
| Year | ||||
| Deficiency | Penalty | Deficiency | Penalty | |
| 1936 | $ 19.85 | $ 4.96 | ||
| 1937 | 6,545.30 | 1,636.33 | $ 1,760.88 | $ 440.22 |
| 1939 | 806.06 | 201.52 | ||
| 1943 | 837.33 |
Respondent now concedes*144 that the delinquency penalties should not be imposed. He also concedes that certain trade promotional funds in the amount of $ 17,375.03 are not properly includible in income for the fiscal year ended April 30, 1937.
The question for decision is whether petitioner is entitled to exemption from tax as a business league under section 101 (7) of the Internal Revenue Code.
*122 FINDINGS OF FACT.
Petitioner, the National Leather & Shoe Finders Association, was organized as a voluntary unincorporated trade association in 1905 to correct evils which existed in the leather and shoe finding industry, and to promote harmony and cooperation among those engaged in the industry and the general welfare of the entire industry. It has its office in St. Louis, Missouri.
Pursuant to demand of Bureau of Internal Revenue authorities, petitioner in 1943 filed with the collector of internal revenue for the first district of Missouri tax returns for its fiscal years ended April 30, 1936 to 1943, inclusive.
Since the date of its organization the regular membership of petitioner has consisted of persons, firms, or corporations engaged in the sale or distribution to shoe repair shops and shoe stores, *145 as wholesalers, of leather, rubber, shoe findings, shoe store supplies, shoe machinery, and the like. These persons and firms are commonly known as "shoe finders." Petitioner also has associate members, without voting power and without the privilege of holding office, consisting of tanners and manufacturers of the above articles. These associate members were first admitted to the organization in 1909. The shoe repair man can not be a member, either regular or associate, of the petitioner.
Petitioner is operated pursuant to and in conformity with a constitution and bylaws duly adopted by its members. The constitution was amended in 1936 and, during the years here involved, read as follows:
CONSTITUTION.
The objects of the association shall be to promote the welfare of the leather and shoe findings industry in general, and of the members of the association in particular, by every lawful means. In carrying out these objects the association may publish a magazine or magazines, may conduct advertising campaigns or other promotional campaigns of benefit to its members, and engage in any other lawful activities of which a majority of its members approve.
The form of organization of *146 the association shall be that of an unincorporated association, not organized for profit. No dividends, rebates, or other allowances in the form of money shall at any time be paid to the members of the association from the revenues it receives in dues or from the earnings of any other activity it may engage in. The sole benefits which shall be given to members of the association shall be in the form of services and any services offered to any member in any particular membership classification shall be offered to all members in that classification alike.
Article II, "Shoe Service" Magazine shall be the designated name of the magazine published by the Association and it shall be dedicated to the purpose of educating the shoe repairer to better serve the public and to best serve his country the United States of America.
As an educational medium, "Shoe Service" shall be operated consistent with United States Postal Laws, Regulations and Rulings.
*123 No Regular Member of the Association shall be permitted to use, directly or indirectly, its pages for advertising or publicity of his products or service, nor is any other officer or employee of the Association to be permitted to*147 do so for him.
Any Regular Member (wholesaler) of the National Leather and Shoe Finders Association may cause to be sent to shoe shops he must designate, regular issues of "Shoe Service" Magazine, up to the number of subscriptions last specified by the Board of Directors subject to Article 7, Section 1, of the By-Laws.
Upon applying for membership in petitioner, the applicant agrees to abide by and conform to the constitution and bylaws. The dues of petitioner's regular members range from $ 25 to $ 125 a year, depending upon the particular member's volume of business. The dues of associate members are $ 75 a year.
The activities of petitioner are directed by a board of ten directors. Petitioner is a member of and elects a councilor to the United States Chamber of Commerce. Petitioner likewise has a president, vice president, recording secretary, and treasurer. These officers and directors of petitioner receive no pay for their services. Likewise, no member of petitioner receives pay for any services which he may render to the association. The operating personnel, who are not members, are the only paid employees. They are the managing secretary, the assistant treasurer, and*148 a staff of nine or ten subordinate employees. Petitioner owns no real property. Its tangible personal property consists of furniture and fixtures such as desks, chairs, typewriters, adding machines, and the like. It also has some investments in government securities, which, on the average, produced about 1 or 2 per cent of its income. Petitioner has no capital stock.
In about 1916 or 1917, petitioner established a trade promotion bureau for the purpose of educating the shoe repair men throughout the country, to teach them to be better artisans and better business men, and to render better service to the public. As a means to that end, petitioner began at about that time the publication of a magazine for free circulation among shoe repair men. The magazine, published under the title "Shoe Service," contained educational and informational articles directed to the shoe repair man, designed to demonstrate to him the advantages to be derived from modern methods of advertising, from the use of machinery, proper shop layout, etc., and to inform him as to how he could serve his customers more efficiently and economically.
Originally the magazine carried no advertising, but since 1921*149 manufacturers and tanners have advertised their products in the publication. Initially, charges for advertising were made at cost plus 10 per cent to cover contingencies, but in 1939 or 1940 a fixed rate charge system was adopted. No regular member of the petitioner may advertise in "Shoe Service."
The educational material appearing in the issues of the magazine *124 was written in part by the staff, the editor, and other individuals in petitioner's home office. Some material was purchased from free lance writers, and in some instances articles were furnished free of charge by members.
During the years here involved the magazine had a circulation of about 65,000 copies. No charge was made to the shoe repair men. Members of the petitioner would send in the names and addresses of shoe repair men to whom petitioner would mail copies.
No other comparable magazine is published in the United States. The profits from the magazine remaining after the payment of direct costs go into the general funds of petitioner and are used in furtherance of its general purposes to promote and better the industry.
Petitioner's trade promotion bureau has also conducted surveys in the industry *150 and sponsored exhibits at various dairy and food shows and the like for the purpose of informing the public as to the kind of work available in shoe repair shops.
Petitioner's membership, a little over 300, comprises about 35 per cent of the wholesalers in the country, who do about 70 per cent of the total volume of business. All wholesalers are eligible for membership. The entire industry, consisting of the 3 branches of manufacturer and tanner, the wholesaler, and the shoe repair man, members and nonmembers of the petitioner as well, benefits from the activities of petitioner's trade promotion bureau and the publication of the magazine "Shoe Service."
Petitioner has regular conventions at which all the members attend and interchange ideas.
Petitioner also operated a credit service for the benefit of its members. It had available credit information on over 65,000 shoe shops, and it kept its members posted through bulletins issued twice a month. The information consisted simply of the experience of other finders with a particular customer. This service did not attempt to give a credit rating on any particular customer. If an inquiry was made by a member as to a new customer and*151 petitioner had no information about him on file, it would write to other finders in the customer's territory to ask for their experience in dealing with him. The information came solely from finders and not from outside sources.
Petitioner from time to time assisted its members in the collection of past-due accounts. It carried out this task by sending the debtor a series of three letters urging him to pay his account, but if the account was not then paid petitioner dropped the matter and nothing further was done. Occasionally a debtor would send a payment to the petitioner, but the debtor was always urged to pay his account direct to his creditor. Petitioner received no commission if an account was paid. The use of the collection and credit service by petitioner's members *125 in the taxable years was incidental and subordinate to the main or principal purposes of its organization.
Petitioner furnished its members with a legislative service bulletin which analyzed bills in progress and acts already passed that might affect its members' business. Digests of the bills and acts were sent to the members in the bulletin, with suggestions as to what they might do to adjust their*152 business to the law. Petitioner at times protested unfavorable or detrimental legislation.
Petitioner helped its members with their tax problems by digesting tax regulations having particular bearing on their business and furnishing copies of regulations and new rules or rule changes. Petitioner also operated a research department and furnished its members with statistics about the shoe industry in general and about sales and collection trends. By itself and in cooperation with other associations, petitioner made efforts to have freight rates reduced or to prevent proposed increases in rates.
Petitioner conducted a clearing house service for its members, so that some members who might be overstocked on certain items could dispose of their surplus to other members who might be in need of such items. Petitioner induced the manufacturers of shoe repair supplies to standardize the size and shape of their catalogs and price lists and in many ways promoted better trade relations among the manufacturers, finders, and shoe repairers.
Petitioner made no special charges above dues to its members for these various services which it rendered. The services were available to all its members*153 alike and were incidental to and in furtherance of its main purpose to promote the welfare of the industry as a whole.
Petitioner's income from dues averaged about $ 15,000 a year for the eight years from 1936 to 1943. Its surplus increased from about $ 22,000 in 1936 to approximately $ 42,000 in 1943. Net income from the magazine for 1936 was $ 7,259.87, which was about 33.47 per cent of its total income; for 1937, $ 8,349.92, or 31.27 per cent of the total; for 1939, $ 9,133.26, or 37.24 per cent of the total; and for 1943, $ 17,140.92, or 49.18 per cent of the total.
The petitioner was an exempt business league during the taxable years in question.
OPINION.
Section 101 (7) of the Internal Revenue Code provides for the exemption from taxation of "Business leagues * * * not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual." Under the regulations (Regulations 111, § 29.101 (7)-1, and corresponding provisions of prior regulations), to be exempt a business league must be an association of persons with common business interests; its purpose must be to promote the common interest and not to engage *126 *154 in a regular business of a kind ordinarily carried on for profit; and its activities must be directed to the improvement of business conditions in one or more lines of business as distinguished from the performance of particular services for private individuals.
While it is true that earnings of an organization may inure to the benefit of private individuals in ways other than through the distribution of dividends, Northwestern Municipal Association, Inc. v. United States, 99 Fed. (2d) 460; Northwestern Jobbers' Credit Bureau v. Commissioner, 37 Fed. (2d) 880, it can hardly be supposed that individuals would often join organizations without the expectation of receiving some personal benefits therefrom. In recognition of this, the courts have held that if the individual benefits, such as particular services rendered to members, are only incidental or subordinate to the main or principal purposes required by the statute, exemption is not to be denied the organization. Retailers Credit Association of Alameda County v. Commissioner, 90 Fed. (2d) 47; Commissioner v. Chicago Graphic Arts Federation, Inc., 128 Fed. (2d) 424;*155 Associated Industries of Cleveland, 7 T.C. 1449">7 T. C. 1449.
In support of his position that the petitioner is not exempt, respondent stresses particularly the publication of the magazine "Shoe Service" and the fact that through advertising it produced annual net profits. While it may be said that the publication of a magazine is a business ordinarily carried on by others for profit, the magazine "Shoe service" is really not competitive in any ordinary sense. No other comparable magazine is published in the United states. It is not sold, but is circulated free to the shoe repair men over the country, and they are not members of the petitioner. Nor can we say that in publishing the magazine petitioner's purpose is "to engage in a regular business of a kind ordinarily carried on for profit," within the meaning of the regulations.
The magazine is no mere sales medium. Unlike the catalogs involved in Automotive Electric Association, 894">8 T. C. 894, which were found not to be directed to the improvement of business conditions generally, the main object of this magazine, as shown by the unimpeached testimony of the witnesses and by an*156 examination of several copies in evidence, is educational and informational. It is designed to teach the shoe repair man to be a better artisan and business man, to show him the advantages of modern advertising and the use of machinery and of proper shop layout, and in general how to render better services to the public. When petitioner was organized it was recognized by its members that only through improving the conditions of the shoe repair men, the qualtity of their workmanship, and their relations with the public could its purpose of promoting the welfare of the entire industry be accomplished. The magazine has been a means to that end, a medium for conveying the educational *127 message of the petitioner to the shoe repair man. The advertising, which is done by the manufacturer and tanner, defrays the cost of the publication; and the remaining profits go into petitioner's general funds for use in its other activities. The advertisements themselves are general in nature and do not indicate to the shoe repair man that the products advertised may be bought from any particular finder or finders. We think that the publication of the magazine does not deprive petitioner*157 of the claimed exemption.
The record convinces us that petitioner's primary purpose was the improvement of business conditions in the leather and shoe findings industry as a whole, which is an exempt purpose within the applicable statute and regulations. We think all its activities, including the publication of the magazine, the credit information and collection bureau, and the clearing house and legislative, tax, and trade statistics information made available through bulletins to the members were directed in the main toward accomplishing that primary purpose.
Petitioner was not so much engaged in rendering particular services to individual members from time to time, but rather in disseminating useful information to all its members as a group. In any event, in so far as any of these activities may be said to partake of the nature of "particular services," we are satisfied that to that extent they were but incidental to petitioner's main purpose to promote the welfare of and improve business conditions in the entire industry. It can not fairly be said on this record that petitioner was either organized or operated for the purpose of publishing a magazine for profit, or of engaging*158 in a credit or collection business, or of furnishing to individual members other services which they could purchase elsewhere.
For these reasons, we conclude that in the taxable years petitioner was an exempt business league within the meaning of section 101 (7).
Decision will be entered for the petitioner.
Turner, J., dissenting: Section 101 (7) of the Internal Revenue Code exempts business leagues from tax, but at no place in the code is a business league defined. We do have, however, the benefit of regulations promulgated by the Commissioner of Internal Revenue which, from the earliest revenue act exempting business leagues, have remained unchanged. Under the regulations the league must be an association of persons having common business interests and the purpose of the league must be the promotion of such common interest. It must not, however, "engage in a regular business of a kind ordinarily carried on for profit." Another feature is that its activities are to be directed to the general improvement of business in the *128 particular field and not to "the performance of particular services for individual persons." It is not sufficient that it is conducted*159 on a cooperative basis or that it produces only sufficient income to be self-sustaining. See art. 101 (7)-1, Regulations 101 (1938 Act); sec. 19.101 (7)-1, Regulations 103 (Internal Revenue Code); sec. 29.101 (7)-1, Regulations 111 (Internal Revenue Code).
In my opinion, petitioner in the instant case does not meet the test of the statute and the regulations. Certainly, there can be no question that all of its activities are not directed to the improvement of business conditions generally in the shoe finders field "as distinguished from the performance of particular services for individual persons." The operation of the credit bureau and the collection agency does not, in my opinion, meet the latter test, and if, as provided in the regulations, exemption does not follow merely because the organization is conducted on a cooperative basis and produces only sufficient income to be self-sustaining, so should it follow that exemption is not to be allowed where a part of the functioning of the association is not only of a kind ordinarily carried on for profit, but is in the performance of particular services for individual persons, even though other functions and activities may be within*160 the spirit of the statute and the regulations. Exemption from a general taxing statute is not lightly to be allowed and anyone claiming exemption must meet the tests of the statute. In the instant case, the petitioner meets the requirements only in part, and in my view of the law that is not enough.
I accordingly note my dissent.