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American Automobile Association v. United States

United States Supreme Court
367 U.S. 687 (1961)


Facts

The American Automobile Association (AAA) (plaintiff) received its funding through annual membership dues. AAA enrolled members year-round. Current members could call upon AAA to provide services to them at any time during their membership period, which often spanned two different calendar tax years. AAA paid its taxes on the accrual accounting basis. For each tax year, AAA reported as gross income only the portion of each member’s prepaid annual dues attributable to that year. AAA accrued each member’s prepaid dues pro rata for each month of membership in order to offset liabilities associated with providing any services to that member during the subsequent tax year. The federal tax commissioner sought to tax AAA on the amount of membership dues that AAA actually received during each tax year, without regard to AAA’s expected future service expenses in the subsequent year. AAA filed suit against the United States government (defendant) in the United States Court of Claims, seeking a redetermination. The court of claims entered judgment in favor of the United States. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Clark, J.)

Dissent (Stewart, J.)

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