Opinion
No. 37415
Decided December 19, 1962.
Taxation — Personal property of organization for profit — Private club conducted for social purposes of members — Not conducted for profit — Not taxable under Section 5709.01, Revised Code.
The personal property of an organization formed as a corporation for profit under Ohio law, which operates a private country club conducted for social and recreational purposes solely for the benefit of its members and not conducted for purposes of gain, profit or income, is not taxable under Section 5709.01, Revised Code.
APPEAL from the Board of Tax Appeals.
The Kirtland Country Club Company, appellee herein and herein referred to as the club, was organized in 1920 as a corporation for profit under Ohio statutes. In the articles of incorporation the corporate purpose is stated as operating and maintaining a country club with clubhouse, golf courses and other amusement facilities.
Currently the club owns 292 acres of land. In line with the stated corporate purpose, the club operates for its members a clubhouse, with dining room, bar, ballroom, library and lounge; swimming pools; tennis courts; skeet range; a golf course; and locker and caddy houses.
The club is operated by a nonsalaried president and a board of directors as a private social club open only to members and their guests. Initiation fees are charged new members, and monthly dues are assessed thereafter. Food and drink consumed in the club are paid for by the members.
In March 1961, the Tax Commissioner, appellant herein and herein referred to as the commissioner, determined that the club is a corporation for profit; that its tangible personal property is used in business and is subject to taxation; and that the true value of the club property taxable under schedule 4 of the return was $40,418.73 for 1958 and $60,638.25 for 1959.
An appeal was perfected by the club to the Board of Tax Appeals. The board reversed the order of the commissioner, finding that the tangible personal property of the club is not used in business and, therefore, is not taxable under the provisions of Section 5709.01, Revised Code.
This is an appeal by the commissioner from the decision of the Board of Tax Appeals.
Messrs. McAfee, Hanning, Newcomer Hazlett, Mr. Rufus S. Day, Jr., Mr. Arthur G. Taylor and Mr. C.F. Taplin, Jr., for appellee.
Mr. Mark McElroy, attorney general, and Mr. John J. Lokos, for appellant.
The issue in this cause is whether an organization formed as a corporation for profit under Ohio law but which operates a private country club necessarily is engaged in business so that its personal property is "used in business" within the meaning of that phrase as used in Section 5709.01, Revised Code.
Section 5709.01, Revised Code, reads in part:
"All personal property located and used in business in this state * * * [is] subject to taxation, regardless of the residence of the owner thereof."
Section 5701.08, Revised Code, defines the term, "business," in the following manner:
"As used in Title LVII of the Revised Code:
"* * *
"(B) `Business' includes all enterprises conducted for gain, profit, or income and extends to personal service occupations."
These statutes indicate that for personal property to be taxable it must be "used in business." The commissioner contends that the club is engaged in business because of the fact that it is organized under Ohio law as a corporation for profit. In the case of American Jersey Cattle Club v. Glander, Tax Commr., 152 Ohio St. 506, 510, Taft, J., stated that "the fact, that a corporation is one not for profit, does not mean that its enterprises may not be conducted for gain, profit or net income."
Conversely it is possible that a corporation organized as a corporation for profit may not in fact be conducted for profit. See American Issue Publishing Co. v. Evatt, Tax Commr., 137 Ohio St. 264.
Therefore, the fact that the club in the present case was organized as a corporation for profit is not conclusive as to whether it is "conducted for gain, profit, or income."
The Board of Tax Appeals determined as a matter of fact that the club is not operated for purposes of gain, profit or income to the members of the club or the corporation. An examination of the record reveals that this determination is well founded. Here the club is conducted for purposes other than gain, namely, for social and recreational purposes. Since it is the conduct of the organization, not its form, which determines taxability in this cause, and, since the club is not conducted for gain, profit or income, it follows that the personal property of the club is not "used in business" under Section 5709.01, Revised Code, and is not taxable thereunder.
The personal property of an organization formed as a corporation for profit under Ohio law, which operates a private country club conducted for social and recreational purposes solely for the benefit of its members and not conducted for purposes of gain, profit or income, is not taxable under Section 5709.01, Revised Code.
The decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
ZIMMERMAN, TAFT, O'NEILL and GRIFFITH, JJ., concur.