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National League of Postmasters of the United States v. Commissioner

86 F.3d 59 (1996)

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National League of Postmasters of the United States v. Commissioner

United States Court of Appeals for the Fourth Circuit
86 F.3d 59 (1996)

Facts

The National League of Postmasters of the Unites States (league) (plaintiff) was a tax-exempt labor organization under § 501(c)(5) of the Internal Revenue Code. According to its articles of incorporation, the league’s overarching purpose was to improve working conditions for postmasters. The league’s full members generally were active postmasters. The league created a new class of membership offered to any current or retired federal employees. An enrollee in the new class was called a league benefit member (LBM). LBMs were entitled to elect one out of 10 members of the league’s board and to send one delegate out of 500 to the league’s national convention. LBMs could participate in the league’s health insurance plan. The league marketed the health plans available with LBM membership in a commercial way and acted as a competitor to for-profit health insurance providers. The league was unable to contradict a presumption of the Internal Revenue Service (IRS) (defendant) that no meaningful number of people paid to become LBMs without enrolling in the health plan. The IRS issued deficiencies against the league, claiming that the league had to pay income tax on the LBM membership dues. The league challenged the deficiencies in the United States Tax Court, which held in favor of the IRS. The league appealed.

Rule of Law

Issue

Holding and Reasoning (Lay, J.)

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Casebooks

Taxation of Nonprofit and Exempt Organizations

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