(dissenting).
The question for decision is whether taxpayer is within the exemption found in section 103 (6) of the Revenue Act of 1928 (26 U.S.C.A. § 103 (6) note). In my opinion it is. I reach this conclusion on undisputed evidence which establishes clearly, as I think, that the corporation was organized and is operated exclusively for educational purposes and that no part of its net earnings inures to the benefit of any shareholder or individual. The corporation was organized and is operating with a single object. That object was and is to furnish books and school supplies to the students and teachers in Stanford University as cheaply as might be done with due regard to contingencies and emergencies. . I cannot doubt that an organization endowed by some philanthropist to supply free, or at a reduced price, textbooks to college students would be considered as serving an “educational purpose,” and I reject wholly the suggestion of the government that textbooks are not in .themselves educational without the assistance of an instructor. Where, as here, an organization works hand in hand with an educational institution in supplying cheap educational facilities, it is discharging a function so intimately connected with the common end that it is incorrect to say it is not serving an educational purpose.
The taxpayer here is not a private, independent corporation. To all practical intents and purposes it is a part of the university. It is controlled by its faculty. Its books and school supplies are purchased in the light of class-room needs, and 99 per cent, of its sales are to students who use the things they purchase in their class rooms. The obvious purpose of its formation was to assist tile university in providing cheap education by supplying cheap textbooks, and T think it is of no consequence that its charter authorized it to carry on a general mercantile business. It never did, and never was anything else than a facility of the university in educational lines.
The question is interesting because it involves a principle which I think should have a liberal rather than a narrow construction. No cases in point are cited by cither side. One state case — not cited ■ — but which I think is persuasive, is worth noticing. There a publishing house was incorporated for the purpose of carrying on a general bookselling, publishing, and printing business. In operation, however, it was controlled by the Lutheran Synod, a religious tax-exempt corporation. The publishing house printed and distributed religious pamphlets and turned over the profit to the synod which used it for religious purposes. The Wisconsin Supreme .Court refused to pass on the question whether the publishing house was a religious organization, but held that it was tax exempt on the ground that it was discharging an educational and benevolent purpose. Northwestern Pub. House v. Milwaukee, 177 Wis. 401, 188 N.W. 636. The case is interesting and, I think, reasonably in point because it shows a refusal to accept, as the board did, the statement of the purposes of incorporation as conclusive. In its result it is a holding that a corporation actually performing an educational service, with no purpose of private or individual gain, is within the spirit of the tax exemption statutes.
I am unable to agree with the opinion of the court that the rebate system is a distribution of earnings inuring to the benefit of an individual. The purpose of the system is obvious. The organization cannot anticipate its actual needs and expenses during the year, but whenever it sells to a student a textbook, it says to. him: The price charged is subject to rebate to the extent of the surplus earnings *714(less a contingent fund) to be ascertained and returned at the end of the year. It obtained its funds from the sale to students and faculty members of school room necessities. If the total fund exceeded the cost of the supplies and the cost of operation, and the small retained contingent fund, the difference was returned to the purchasers. In my opinion there is no difference between this and the sale to the students in the first instance at wholesale prices, plus a small estimated excess to coyer expenses. The contingent fund of which I have spoken was reserved for emergencies such as earthquake and fire, and the by-laws of the corporation show clearly that this fund at dissolution was expected to pass to some charitable or educational organization.
From beginning to end, the plan shows that there was not in contemplation an accumulation or distribution of profits, but that the purpose was educational.
I am for reversing the order of the Board of Tax Appeals.