## Facts

- American Kennel Club, Inc. (AKC) was a New York membership corporation composed of dog clubs.
- AKC’s principal activities involved organizing, regulating, and maintaining standards for dog shows and field trials, including selecting judges and ensuring fair competition.
- AKC maintained pedigrees, registration records, and other breeding data that could be used by scientists and geneticists.
- The Internal Revenue Service assessed federal income taxes against AKC.
- AKC paid the taxes and sued the Collector of Internal Revenue for a refund, asserting exemption from income tax.

## Issues

1. Whether AKC was organized and operated exclusively for scientific purposes under Internal Revenue Code § 101(6).
2. Whether AKC qualified as a business league under Internal Revenue Code § 101(7).
3. Whether the court needed to decide whether any net earnings inured to the benefit of private individuals or members.

## Decision

- The Second Circuit affirmed the judgment denying AKC’s claimed tax exemption.
- AKC was not organized and operated exclusively for scientific purposes under § 101(6) because its dominant purpose was the maintenance and regulation of a sport (dog shows and field trials).
- AKC was not a business league under § 101(7) because its member clubs were primarily sport-oriented rather than business organizations.
- Because AKC failed the threshold purpose tests under both provisions, the court did not reach the question of inurement of net earnings.

## Legal Principles

- Tax exemption for organizations “organized and operated exclusively” for a specified exempt purpose turns on the organization’s primary or dominant purpose, not on incidental byproducts of its activities.
- The fact that an organization’s activities generate information useful to scientific work by others does not, without more, establish that the organization’s purposes are themselves exclusively scientific.
- A “business league” exemption requires an association directed to common business interests; an organization centered on sport or hobby activities does not qualify merely because it is a league of clubs.
- Courts may avoid deciding the “inurement” condition when the organization fails to satisfy the statutory requirement that it be organized and operated for an exempt purpose category.

## Conclusion

The court held that AKC’s core mission was promoting and regulating dog-show and field-trial sport, not conducting scientific work, and that its membership was not a league of business enterprises; accordingly, AKC did not qualify for exemption under either the scientific-organization or business-league provisions and remained subject to federal income tax.


Am. Kennel Club, Inc. v. Hoey, 148 F.2d 920 (2d Cir. 1945)