Sierra Club v. Commissioner

86 F.3d 1526 (1996)

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Sierra Club v. Commissioner

United States Court of Appeals for the Ninth Circuit
86 F.3d 1526 (1996)

Facts

Sierra Club, Inc. (plaintiff) was a tax-exempt social-welfare organization under § 501(c)(4) of the Internal Revenue Code. Sierra Club raised funds by allowing other organizations to rent the names from Sierra Club’s mailing lists for a fee. Sierra Club hired a contractor to administer the rental program, and the contractor received commissions from the fees paid by the list users. Sierra Club did not market or sort the lists, nor did it provide any other service to the list users. The commissioner of internal revenue (commissioner) (defendant) determined that Sierra Club’s earnings from this program constituted unrelated business taxable income (UBTI) and issued a notice of deficiency. After paying the taxes the commissioner claimed were owed, Sierra Club challenged the determination, arguing that the earnings in question were royalties that were excludable from UBTI. The United States Tax Court entered summary judgment in favor of Sierra Club on this issue, and the commissioner appealed.

Rule of Law

Issue

Holding and Reasoning (Wiggins, J.)

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