26 U.S.C. § 277

Deductions incurred by certain membership organizations in transactions with members

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(a) General rule

In the case of a social club or other membership organization which is operated primarily to furnish services or goods to members and which is not exempt from taxation, deductions for the taxable year attributable to furnishing services, insurance, goods, or other items of value to members shall be allowed only to the extent of income derived during such year from members or transactions with members (including income derived during such year from institutes and trade shows which are primarily for the education of members). If for any taxable year such deductions exceed such income, the excess shall be treated as a deduction attributable to furnishing services, insurance, goods, or other items of value to members paid or incurred in the succeeding taxable year. The deductions provided by sections 243 and 245 (relating to dividends received by corporations) shall not be allowed to any organization to which this section applies for the taxable year.

(b) ExceptionsSubsection (a) shall not apply to any organization—(1) which for the taxable year is subject to taxation under subchapter H or L,(2) which has made an election before October 9, 1969, under section 456(c) or which is affiliated with such an organization,(3) which for each day of any taxable year is a national securities exchange subject to regulation under the Securities Exchange Act of 1934 or a contract market subject to regulation under the Commodity Exchange Act, or(4) which is engaged primarily in the gathering and distribution of news to its members for publication.(Added Pub. L. 91–172, title I, § 121(b)(3)(A), Dec. 30, 1969, 83 Stat. 540; amended Pub. L. 94–568, § 1(c), Oct. 20, 1976, 90 Stat. 2697; Pub. L. 99–514, title XVI, § 1604(a), Oct. 22, 1986, 100 Stat. 2769; Pub. L. 113–295, div. A, title II, § 221(a)(41)(G), Dec. 19, 2014, 128 Stat. 4044.)Editorial NotesReferences in Text

The Securities Exchange Act of 1934, referred to in subsec. (b)(3), is act June 6, 1934, ch. 404, 48 Stat. 881, which is classified principally to chapter 2B (§ 78a et seq.) of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 78a of Title 15 and Tables.

The Commodity Exchange Act, referred to in subsec. (b)(3), is act Sept. 21, 1922, ch. 369, 42 Stat. 998, which is classified generally to chapter 1 (§ 1 et seq.) of Title 7, Agriculture. For complete classification of this Act to the Code, see section 1 of Title 7 and Tables.

Amendments

2014—Subsec. (a). Pub. L. 113–295 struck out “, 244,” after “sections 243”.

1986—Subsec. (b)(4). Pub. L. 99–514 added par. (4).

1976—Subsec. (a). Pub. L. 94–568 provided that the deductions provided by sections 243, 244, and 245 (relating to dividends received by corporations) shall not be allowed to any organization to which this section applies for the taxable year.

Statutory Notes and Related SubsidiariesEffective Date of 2014 Amendment

Amendment by Pub. L. 113–295 not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under section 247 of this title as in effect before its repeal by Pub. L. 113–295), see section 221(a)(41)(K) of Pub. L. 113–295, set out as a note under section 172 of this title.

Except as otherwise provided in section 221(a) of Pub. L. 113–295, amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 1986 Amendment

Pub. L. 99–514, title XVI, § 1604(b), Oct. 22, 1986, 100 Stat. 2769, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Oct. 22, 1986].”

Effective Date of 1976 Amendment

Amendment by Pub. L. 94–568 applicable to taxable years beginning after Oct. 20, 1976, see section 1(d) of Pub. L. 94–568, set out as a note under section 501 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1970, see section 121(g) of Pub. L. 91–172, set out as an Effective Date of 1969 Amendment note under section 511 of this title.

Notes of Decisions

Cited in 14 cases, 1935–2006 · leading case: United States v. Shepard, 196 F. Supp. 281 (N.D.N.Y. 1961).

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United States v. Shepard, 196 F. Supp. 281 (N.D.N.Y. 1961). · cites it 4× “§ 275(a) after giving effect to the time periods during which the running of the statute of limitation was suspended according to the provisions of 26 U.S.C. § 277 . (2) That the five year statute of limitations upon assessment provided in 26 U.”

Five Lakes Outing Club v. United States, 468 F.2d 443 (8th Cir. 1972). · cites it 2× “First, a new section, 26 U.S. C. § 277, expressly provides that club expenses are deductible up to, and only up to, the extent of club revenues.”

Armour-Dial Men's Club, Inc. v. Comm'r of Internal Revenue, 708 F.2d 1287 (7th Cir. 1983). · cites it 2× “, on the ground that the petitioner was a “membership organization,” “not exempt from taxation,” “operated primarily to furnish services or goods to members,” and subject to the deduction limitation in 26 U.S.C. § 277 (a). We affirm. I This ease involves alleged deficiencies in…”

United States v. Barber, 24 F. Supp. 229 (D. Maryland 1938). · cites it 2× “” 26 U.S.C.A. § 277 . These sections of the 1928 Revenue Act provide the income tax administrative procedure where the taxpayer, when notified of a proposed deficiency assessment by the Commissioner, elects to appeal to the Board of Tax Appeals rather than pay the tax and sue…”

Olds & Whipple, Inc. v. United States, 22 F. Supp. 809 (Ct. Cl. 1938). “58 , and section 277 of the Revenue Act of 1928, 26 U.S.C.A. § 277 and note, the unexpired portion of the statute of limitation remaining at the time the deficiency notices were mailed may not be carried over and added to the 60 days after the decision of the Board becomes final…”

McCarthy Co. v. Comm'r of Internal Revenue, 80 F.2d 618 (9th Cir. 1935). “870 , 26 U.S.C.A. § 277 note) is as follows: “(a) Section 277 (b) of the Revenue Act of 1926 is amended to read as follows : “ ‘(b) The running of the statute of limitations provided in this section or in section 278 on the making of assessments and the beginning of distraint or…”

Sanborn v. Helvering, 108 F.2d 311 (8th Cir. 1940). “” Section 277, 26 U.S.C.A. § 277 , provides: “The running of the statute of limitations provided in section 275 or 276 * * * shall (after the mailing of a notice under section 272(a)) be suspended for the period during which the Commissioner is prohibited from making the…”

California Iron Yards Corp. v. Comm'r of Int. Rev., 82 F.2d 776 (9th Cir. 1936). “870 , 26 U.S.C.A. § 277 and note. The decision of the Board did not become final until July 8, 1931.”

United States v. City of New York, 134 F. Supp. 374 (S.D.N.Y. 1955). “26 U.S.C. § 277 ; Green Spring Dairy v. Commissioner, 4 Cir.”

Rolling Rock Club v. United States, 785 F.2d 93 (3rd Cir. 1986). “Nonexempt social clubs were prohibited by 26 U.S.C. § 277 , Section 121(b)(3)(A), Tax Reform Act of 1969, Pub.”

Mayes v. United States, 106 F. Supp. 961 (E.D. Okla. 1952). “§ 273 , relating to jeopardy assessments overcomes the objection of the taxpayers as to the prohibition on assessments during the 90 day period, and, Section 277 of the Internal Revenue Code, 26 U.S.C.A. § 277 , provides that the sending of a deficiency notice suspends the…”

White v. United States, 22 F. Supp. 821 (Ct. Cl. 1938). “277 [ 26 U.S.C.A. § 277 and note].) “The law should be amended to include a provision that additional assessments with respect to corporations which have been dissolved shall be made within one year after written request therefor by the proper representative of the dissolved…”

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