## Facts

- Stichting Pensioenfonds Voor de Gezondheid, Geestelijke en Maatschappelijke Belangen (the Fund) was a Dutch pension plan formed in 1969 to provide benefits for hospital workers in the Netherlands.
- The Fund was created after negotiations between labor unions representing hospital employees and a national association of hospital employers.
- The Dutch government later granted the Fund “compulsory treatment,” requiring private hospitals and their employees to participate, and the Fund’s coverage expanded beyond hospitals to additional health and social welfare sectors.
- Under Dutch law, the Fund was governed by a 12-member board: employers appointed six directors and unions appointed six directors, with equal voting power.
- To maintain parity, if all directors were not present at a meeting, each side could cast only as many votes as the side with fewer directors present.
- For policy matters, employer and union directors had to agree; absent agreement, the board could not act. Committees formed by the board likewise had equal representation from employers and unions.
- The Fund’s activities consisted of receiving employer contributions, investing assets, and paying retirement-related benefits (including disability and survivor benefits) to eligible participants.
- The Fund had no principal place of business in the United States and did not conduct a trade or business in the United States, but it earned U.S.-source investment income (including from U.S. securities) that triggered U.S. tax consequences.
- The Internal Revenue Service assessed U.S. income tax on the Fund’s U.S.-source income.
- The Fund paid the assessment and filed a refund action, claiming it was exempt from U.S. income tax as a “labor organization” under I.R.C. § 501(c)(5).
- The United States District Court for the District of Columbia granted summary judgment for the United States, upholding the IRS’s denial of § 501(c)(5) exempt status.
- The Fund appealed to the U.S. Court of Appeals for the D.C. Circuit.

## Issues

1. Whether the Fund, a Dutch pension plan jointly controlled by unions and employers and operating as a compulsory pension arrangement for Dutch workers, qualifies as a “labor organization” exempt from U.S. federal income tax under I.R.C. § 501(c)(5).

## Decision

- The D.C. Circuit reviewed the district court’s summary judgment ruling de novo.
- The court held that the Fund did not qualify as a “labor organization” within the meaning of I.R.C. § 501(c)(5).
- The court emphasized that tax exemptions require “unambiguous proof” and that it found no authority directly entitling this pension fund to the claimed exemption.
- The court affirmed the district court’s grant of summary judgment to the United States.

## Legal Principles

- Federal tax exemptions are narrowly construed; the party claiming an exemption bears the burden of showing clear entitlement.
- Under § 501(c)(5), the classification turns on what the organization is and does; benefiting workers through pension administration is not enough, by itself, to make an entity a “labor organization.”
- Equal union–employer governance and collective-bargaining origins do not convert a pension plan into a § 501(c)(5) labor organization when the entity’s function is administering retirement benefits rather than performing labor-organization functions (such as representing employees in dealings with employers).
- When the material facts are undisputed and the dispute concerns the legal meaning of a statutory term, summary judgment is appropriate.

## Conclusion

The D.C. Circuit affirmed summary judgment for the United States, holding that the Fund—though created through union–employer negotiations and jointly administered—operated as a pension plan and lacked the attributes and activities that would qualify it as a “labor organization” under I.R.C. § 501(c)(5); because exemptions require clear statutory entitlement and the Fund could not supply it, the IRS’s tax assessment stood.


Stichting Pensioenfonds Voor de Gezondheid v. United States, 129 F.3d 195 (1997)