Act of 1924. Act of 1921. Act of 1918. to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclusively to charitable, educational, or recreational purposes; (9) Clubs organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder; (9) Clubs organized and oper- (9) Clubs organized and operated exclusively for pleasure, ated exclusively for pleasure, recreation, and other nonprofita- recreation, and other nonprofitable purposes, no part of the net ble purposes, no part of the net earnings of which inures to the earnings of which inures to the benefit of any private stock- benefit of any private stockholder or member; holder or member; (10) Benevolent life insur- (10) Farmers' or other mu- (10) Farmers' or other muance associations of a purely tual hail, cyclone, or fire insur- tual hail, cyclone, or fire insurlocal character, farmers' or other ance companies, mutual ditch or ance companies, mutual ditch or mutual hail, cyclone, casualty, irrigation companies, mutual or irrigation companies, mutual or or fire fire insurance companies, cooperative telephone compa- coöperative telephone companies mutual ditch or irrigation com- nies, or like organizations of a or like organizations of a purely panies, mutual or coöperative purely local character,234 the in- local character,234 the income of telephone companies, or like or- come of which consists solely of which consists solely of assessganizations; but only if 85 per assessments, dues, and fees col-ments, dues, and fees collected centum or more of the income lected from members for the sole from members for the sole purconsists of amounts collected purpose of meeting expenses; pose of meeting expenses; from members for the sole purpose of meeting losses and expenses; (11) Farmers', fruit (11) Farmers', fruit grow- (11) Farmers', fruit growers', growers', or like associations, or- ers', or like associations, organ- or like associations, organized ganized and operated as sales ized and operated as sales agents and operated as sales agents for agents for the purpose of mar- for the purpose of marketing the the purpose of marketing the keting the products of members products of members and turn- products of members and turnand turning back to them the ing back to them the proceeds of ing back to them the proceeds of proceeds of sales, less the neces-sales, less the necessary selling sales, less the necessary selling sary selling expenses, on the expenses, on the basis of the expenses, on the basis of the basis of the quantity of produce quantity of produce furnished quantity of produce furnished furnished by them; or organized by them; or organized and oper- by them; and operated as purchasing ated as purchasing agents for agents for the purpose of pur- the purpose of purchasing supchasing supplies and equipment plies and equipment for the use for the use of members and turn- of members and turning over ing over such supplies and equip- such supplies and equipment to 234 (a) Sec. 11 (a) (10) of the Act of 1916, Sec. 231 (10) of the Act of 1918, and Sec. 231 (10) of the Act of 1921, amended by Sec. 1013 (b) of the Act of 1924 as follows: "Sec. 1013. (b) The exemption provided in paragraph (10) of subdivision (a) of section 11 of the Revenue Act of 1916, and in subdivision (10) of section 231 of the Revenue Act of 1918, and in subdivision (10) of section 231 of the Revenue Act of 1921, shall be granted to farmers' or other mutual hail, cyclone, or fire insurance companies (if otherwise exempt under such paragraphs), whether or not such organizations were of a purely local character. Any taxes assessed against such organizations shall, subject to the statutory period of limitations properly applicable thereto, be abated, credited or refunded." 234 (b) An association of members was brought together without regard to locality or place, and for the sole purpose of insuring the lives of the members. The business plan was to divide the membership into "circles' of 1000 members each, charge a small entrance fee, and pay losses by graduated limited assessments, collected at time of loss, upon the surviving members of that particular circle. The assessments also provided for the maintenance of the business organization and operation, but no reserve, surplus, or other fund was provided, and no dividends or profits could be earned. The amount of insurance of each member at entrance was $100, which amount increased after the first six months at the rate of $12.50 per month to a maximum of $1000, provided that all dues and assessments were promptly paid, and provided that the value of any certificate should not exceed the net proceeds of a regular assessment of the surviving members of that "circle." The association was not exempt under Sec. 11 (a) of the Act of 1916, as amended by the Act of 1917, as a "like organization of a purely local character," etc. Bankers' and Planters' Mutual Ins. Ass'n. Ninth. Club organized and Ninth. Club organized and operated exclusively for pleas-operated exclusively for pleasure, recreation, and other non- ure, recreation, and other nonprofitable purposes, no part of profitable purposes, no part of the net income of which inures the net income of which inures to the benefit of any private to the benefit of any private stockholder or member; stockholder or member; Tenth. Farmers' or other mutual hail, cyclone, or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character,234 the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; Tenth. Farmers' or other mutual hail, cyclone, or fire insurance company, mutual ditch or irrigation company, mutual or coöperative telephone company, or like organization of a purely local character,234 the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its ex penses; Eleventh. Farmers', fruit Eleventh. Farmers', fruit growers', or like association, or- growers', or like association, organized and operated as a sales ganized and operated as a sales agent for the purpose of market- agent for the purpose of maring the products of its members keting the products of its memand turning back to them the bers and turning back to them proceeds of sales, less the neces- the proceeds of sales, less the sary selling expenses, on the necessary selling expenses, on basis of the quality of produce the basis of the quantity of furnished by them; produce furnished by them; Act of 1913. v. Walker (Col.), (C. C. A., Eighth Cir. 1922) 279 Fed. 53. 234 (c) The words "of a purely local character" found in Sec. 11 (a) Tenth of the Act of 1916, as amended by the Act of 1917, and in Sec. 231 (10) of the Act of 1918, are words of limitation applicable to all of the companies mentioned therein, respectively, and not applicable to "like organizations" only. Commercial Health & Accident Co. v. Pickering (Col.), (D. C., S. D. Ill. 1922) 281 Fed. 539. 234 (d) A general life, health and accident insurance company organized under a general statute and doing a general business throughout the State of Illinois, with general offices in Springfield and subordinate offices in Chicago, Decatur and East St. Louis, was not "of a purely local character" so as to be exempt under Sec. 11 (a) Tenth of the Act of 1916, as amended by the Act of 1917, and Sec. 231 (10) of the Act of 1918, even though it did no business outside of the geograph ical limits of the State of Illinois. The words "like organizations of a purely local character'' mean the same in a federal statute as in a state statute. Commercial Health & Accident Co. v. Pickering (Col.), (D. C., S. D. Ill. 1922) 281 Fed. 539. 234 (e) Revenue laws should be construed strictly in favor of the taxpayer, but where a taxpayer seeks to bring himself within an exempted class, the language exempting the class should be strictly construed against the taxpayer. "A claim of exemption from taxation, must be clearly made out." Commercial Health & Accident Co. v. Pickering (Col.), (D. C., S. D. Ill. 1922) 281 Fed. 539. 234 (f) The Acts of 1917 and 1918, although passed for the purpose of raising revenue for war purposes, should be construed by the courts so as to give effect to the intention of Congress. Commercial Health & Accident Co. v. Pickering (Col.), (D. C., S. D. Ill. 1922) 281 Fed. 539. Act of 1924. ment to such members at actual cost, plus necessary expenses; (12) Corporations organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title; and (13) Federal land banks, national farm-loan associations, and Federal intermediate credit banks, as provided in the Federal Farm Loan Act, as amended. (12) Corporations organized (12) Corporations organized for the exclusive purpose of for the exclusive purpose of holding title to property, collect- holding title to property, collecting income therefrom, and turn- ing income therefrom, and turning over the entire amount ing over the entire amount thereof, less expenses, to an or- thereof, less expenses, to an organization which itself is exempt ganization which itself is exempt from the tax imposed by this from the tax imposed by this title; title; (13) Federal land banks and (13) Federal land banks and national farm-loan associations national farm-loan associations as provided in section 26 of the as provided in section 26 of the Act approved July 17, 1916, en- act approved July 17, 1916, entitled "An Act to provide capi- titled "An Act to provide capital for agricultural development, tal for agricultural development, to create standard forms of to create standard forms of ininvestment based upon farm vestment based upon farm mortmortgage, to equalize rates of gage, to equalize rates of interest interest upon farm loans, to fur- upon farm loans, to furnish a nish a market for United States market for United States bonds, bonds, to create Government de- to create Government depositapositaries and financial agents ries and financial agents for the for the United States, and for United States, and for other purother purposes;" poses; (14) Personal service corporations.235 This subdivision shall not be in effect after December 31, 1921. (14) Personal service corporations.235 NET INCOME OF CORPORATIONS DEFINED. SEC. 232. In the case of a corporation subject to the tax imposed by section 230237 the term 'net income" means the gross income as defined in section 233 less the deductions allowed by sections 234 and 206, and the net income shall be computed on the same basis as is provided in subdivision (b) of section 212238 or in section 226.239 In the case of a foreign corporation or of a corporation entitled to the benefits of section 262240 the computation shall also be made in the manner provided in section 217.241 SEC. 232. That in the case of SEC. 232. That in the case of a corporation subject to the tax a corporation subject to the tax imposed by section 230237 the imposed by section 230237 the term "net income" means the term "net income" means the gross income as defined in sec- gross income as defined in section tion 233 less the deductions al- 233 less the deductions allowed lowed by section 234, and the by section 234, and the net innet income shall be computed on come shall be computed on the the same basis as is provided in same basis as is provided in subsubdivision (b) of section 212238 division (b) of section 212238 or or in section 226.239 In the case in section 226.239 of a foreign corporation or of a corporation entitled to the benefits of section 262240 the computation shall also be made in the manner provided 217.241 in section 235 Sec. 218, p. 128. 236 Title I, Part III, Act of 1916. 237 Sec. 230, p. 176. Twelfth. Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title; or Twelfth. Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title; or Thirteenth. Federal land Thirteenth. Federal land banks and national farm-loan as- banks and national farm-loan associations as provided in section sociations as provided in section. twenty-six of the Act approved twenty-six of the Act approved July seventeenth, nineteen hun- July seventeenth, nineteen hundred and sixteen, entitled "An dred and sixteen, entitled "An Act to provide capital for agri- Act to provide capital for agricultural development, to create cultural development, to create standard forms of investment standard forms of investment based upon farm mortgage, to based upon farm mortgage, to equalize rates of interest upon equalize rates of interest upon farm loans, to furnish a market farm loans, to furnish a market for United States bonds, to cre- for United States bonds, to ate Government depositaries and create Government depositaries financial agents for the United and financial agents for the States, and for other purposes." "United States, and for other Fourteenth. Joint stock land banks as to income derived from bonds or debentures of other joint stock land banks or any Federal land bank belonging to such joint stock land bank. purposes. Fourteenth. Joint stock land banks as to income derived from bonds or debentures of other joint stock land banks or any Federal land bank belonging to such joint stock land bank. SEC. 25.238 That income on SEC. 25.236 That income on which has been assessed the tax which has been assessed the tax imposed by Section II of the imposed by Section II of the Act Act entitled "An Act to reduce entitled "An Act to reduce tariff tariff duties and to provide rev- duties and to provide revenue enue for the Government, and for the Government, and for for other purposes," approved other purposes," approved OctoOctober third, nineteen hundred ber third, nineteen hundred and and thirteen, shall not be con- thirteen, shall not be considered sidered as income within the as income within the meaning of meaning of this title: Provided, That this section shall not conflict with that portion of section ten, of this title, under which a taxpayer has fixed its own fiscal year. this title: Provided, That this 239 Sec. 226, p. 168. 240 Sec. 262, p. 268. 241 Sec. 217, p. 120. Act of 1913. Act of 1924. Act of 1921. GROSS INCOME OF CORPORATIONS GROSS INCOME OF CORPORATIONS DEFINED. SEC. 233. (a) In the case of a corporation subject to the tax imposed by sections 230242 the term "gross income" means the gross income as defined in sections 213243 and 217,244 except that mutual marine insurance companies shall include in gross income the gross premiums collected and received by them less amounts paid for reinsurance. SEC. 233. (b) In the case of a foreign corporation, gross income means only gross income from sources within the United States, determined (except in the case of insurance companies subject to the tax imposed by sections 243245 or 246) 246 in the manner provided in section 217. DEFINED. Act of 1918. GROSS INCOME DEFINED. SEC. 233. (a) That in the case SEC. 233. (a) That in the case of a corporation subject to the of a corporation subject to the tax imposed by section 230242 the tax imposed by section 230242 the term 'gross income" means term "gross income" means the gross income as defined in the gross income as defined in sections 213243 and 217,2" except section 213,243 except that: that mutual marine insurance companies shall include in gross income the gross premiums collected and received by them less amounts paid for reinsurance. (2) Mutual marine insurance companies shall include in gross income the gross premiums collected and received by them less amounts paid for reinsurance. (1) In the case of life insurance companies there shall not be included in gross income such portion of any actual premium received from any individual policyholder as is paid back or credited to or treated as an abatement of premium of such policyholder within the taxable year. SEC. 233. (b) In the case of a SEC. 233. (b) In the case of foreign corporation, gross in- a foreign corporation gross income means only gross income come includes only the gross infrom sources within the United come from sources within the States, determined (except in United States, including the inthe case of insurance companies terest on bonds, notes, or other subject to the tax imposed by interest-bearing obligations of section 243245 or 246) 246 in the manner provided in section 217. residents, corporate or otherwise, dividends from resident corporations, and including all amounts received (although paid under a contract for the sale of goods or otherwise) representing profits on the manufacture and disposition of goods within the United States. DEDUCTIONS ALLOWED CORPO- SEC. 234. (a) In computing the net income of a corporation subject to the tax imposed by section 230248 there shall be allowed as deductions: DEDUCTIONS ALLOWED CORPORA- DEDUCTIONS ALLOWED. SEC. 234. (a) That in computSEC. 234. (a) That in comput-ing the net income of a corporaing the net income of a corpora- tion subject to the tax imposed tion subject to the tax imposed by section 230248 there shall be by section 230248 there shall be allowed as deductions:249 allowed as deductions: 242 Sec. 230, p. 176. 243 Sec. 213, p. 74. 244 Sec. 217, p. 120. 245 Sec. 243, p. 240. 246 Sec. 246, p. 248. 247 Income "accrued" but not "received" was not taxable to corporations under the Act of 1913. Maryland Casualty Co. v. U. S., (1920) 251 U. S. 342, affirming Id., (1917) 52 Ct. Cl. 201; U. S. v. Christine |