Suffolk County Patrolmen’s Benevolent Association v. Commissioner

The Suffolk County Patrolmen’s Benevolent Association (the association) (plaintiff), a tax-exempt organization, was the collective-bargaining agent for the police officers of Suffolk County, New York. The association was also actively involved in various community-service projects. As a fundraising venture, the association contracted with a producer to sponsor several professional vaudeville-type shows over a period of six years with plans to continue the event on an annual basis indefinitely. The association sponsored multiple shows during one weekend each year. The producer supplied, without cost to the association, the cast for the shows, as well as the venue, equipment, and promotions for the events. The association provided ticket takers, ushers, and other support. The association received a percentage of the revenue the shows generated from ticket sales and the sale of advertisements in programs that were distributed at the shows. During the years in question, the shows were the association’s only fundraising activity aside from the collection of membership dues. The commissioner of internal revenue (commissioner) (defendant) determined that the association’s earnings from the shows constituted unrelated business taxable income (UBTI), defined as gross income derived from any trade or business regularly carried on by the organization that is unrelated to its exempt purposes. The association challenged the commissioner’s determination, arguing that even if the shows were a trade or business, they were not regularly carried on.