United States v. Kaiser/Dissent Whittaker

by Charles Evans Whittaker

United States Supreme Court

363 U.S. 299

UNITED STATES, Petitioner,  v.  Allen KAISER.

 Argued: March 23, 1960. --- Decided: June 13, 1960

Mr. Justice WHITTAKER, with whom Mr. Justice HARLAN and Mr. Justice STEWART join, dissenting.

The question here is whether, in the light of the rule adopted by the Court today in Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, there is a reasonable basis in the evidence to support the jury's conclusion that the strike benefits paid to respondent by the union were nontaxable 'gifts,' within the meaning of § 102(a) of the 1954 Internal Revenue Code. ^[1]

With deference, I am convinced that there was not, and that, to the contrary, the evidence compels the conclusion, as a matter of law, that those strike benefits were not 'gifts' within the meaning of § 102(a), as construed by the Court in the Duberstein case. ^[2]

The International Union is a private labor organization serving as the certified bargaining agent and representative of numerous collective bargaining units of employees. One of its principal purposes, as stated in its constitution, is to call, or approve the call by its local unions, of strikes to obtain better wages, hours and working conditions for those employees, and, of course, to win such strikes. To that end, its constitution provides for the creation of a Strike Fund, out of the dues of its members, for use in assisting its local unions in waging and winning such strikes, and it has actually created and maintains such a strike fund. ^[3] Article 12, § 15 of its constitution further provides that:

'If and when a strike has been approved by the International Executive Board, it shall be the duty of the International Executive Board to render all financial assistance to the members on strike consistent with the resources and responsibilities of the International Union.'

Thus there is a clear and specific undertaking by the International Union to furnish assistance to its striking members when, as here, it has approved the strike, and the union has created and maintains a fund for that purpose.

Although the mentioned provisions of the International's constitution relate to financial assistance to union members, it was stipulated at the trial that:

'The International Union grants strike benefits to non-members of the Union, who participate in a strike, if they do not have sufficient income to purchase food or to meet an emergency situation. The Union treats such non-members on the same basis as members of the Union, but non-members as well as members must be strikers before they may receive assistance from the Union.' (Emphasis added.) It was further stipulated that respondent, who was not a member of the union during the early months of the strike, 'received from the International Union' strike benefits totaling $565.54 during the taxable year 1954. ^[4]

It is now established that objective intention of the transferor determines whether transfers constitute 'gifts,' within the meaning of § 102(a). Bogardus v. Commissioner, 302 U.S. 34, 58 S.Ct. 61, 82 L.Ed. 32; Commissioner of Internal Revenue v. Duberstein, 363 U.S. at page 278, 80 S.Ct. at page 1190. In Duberstein, the Court, in attempting to shed additional light on the factors determinative of whether requisite donative intent impelled the transfer, said:

'This Court has indicated that a voluntarily executed transfer of his property by one to another, without any consideration or compensation therefor, though a common-law gift, is not necessarily a 'gift' within the meaning of the statute. * * * And, importantly, if the payment proceeds primarily from 'the constraining force of any moral or legal duty,' or from 'the incentive of anticipated benefit' of an economic nature * * * it is not a gift. * * * A gift in the statutory sense, on the other hand, proceeds from a 'detached and disinterested generosity,' * * *; 'out of affection, respect, admiration, charity or like impulses.' * * *' Commissioner or Internal Revenue v. Duberstein, 363 U.S. at page 285, 80 S.Ct. at page 1196.

I find nothing in this record to indicate that the strike benefit payments by the union to respondent and other striking workers, while they were waging the strike, were made out of any 'detached and disinterested generosity,' or 'out of affection, respect, admiration, charity or like impulses.' To the contrary, it seems plain enough that those payments were made by the union to enable and encourage respondent and other striking workers to continue the strike which had been called or approved by the union, and were not motivated by benevolence. Those payments were therefore made in furtherance of one of the union's principal economic objectives-the winning of the strike-and hence proceeded primarily from "the incentive of anticipated benefit' of an economic nature' to the union, and from 'the constraining force' of the union's promise to assist striking workers in winning the strike. Duberstein, 363 U.S. at page 285, 80 S.Ct. at page 1196. Because of the economic advantages to be obtained by the union from winning the strike, the union had a manifest self-interest in financially sustaining the strikers while they carried on its strike. This shows, as a matter of law, that the payments were not made with the donative intent required to constitute 'gifts' within the meaning of § 102(a) and of the Bogardus and Duberstein cases. Wholly apart from the immediate objective which the union sought to achieve by paying these strike benefits, they could qualify as 'gifts,' as the Court recognizes, only if they were made, as said in Duberstein, with a "detached and disinterested generosity," and this record shows that it was principally private business purposes, not detached and disinterested generosity, that prompted the union to make the payments in question.

To be sure, the International's Secretary-Treasurer expressed his conclusion at the trial that, in the course of this strike, the International carried out the 'same function' as would a local welfare agency in furnishing assistance to needy persons. But it is important to distinguish the very different factors that impelled the union from those that motivate a local welfare agency in furnishing such assistance. The union made payments only to strikers to sustain then while they carried on the strike, whereas, a welfare agency assists the needy solely from humanitarian impulses, without purpose to obtain any benefit for itself, and whether the needy recipients are strikers or not. Public welfare payments represent the charitable response of the community to relieve hardships arising from conditions beyond its control; but the strike benefits shown by this record were designed, principally at least, for the purpose of sustaining the strikers while they carried on the union's strike to victorious end. The motivation of a public welfare agency in supplying basic needs to the unemployed is purely charitable in nature, but payments by a private union to striking workers to enable them to continue to successful conclusion a strike called or approved by the union, cannot reasonably be said to have proceeded primarily from any such charitable impulse. ^[5]

This conclusion is fortified by the consistent and long-standing rulings of the Treasury Department. It has twice ruled that strike benefits do not constitute nontaxable 'gifts' to the recipient. In 1920 it held that:

'Benefits received from a labor union by an individual member while on strike are to be included in his gross income for the year during which received, there being no provision of law exempting such income from taxation.' O.D. 552, 2 Cum.Bull. 73 (1920). (Emphasis added.)

'Strike benefit payments are included within the broad definition of gross income and do not fall within any of the exclusions provided for in the Code, including the exclusions for gifts under section 102. They are paid only upon the event of a strike which is a means employed by the union and its members for securing economic benefits, and, for this reason, they do not constitute amounts gratuitously paid or received.

'Accordingly, the strike benefit payments received under these circumstances do not constitute gifts but constitute income and are includible in the gross income of the recipients even though distributed on the basis of their need and regardless of whether the recipients are members or nonmembers of the union.' Rev.Rul. 57-1, 1957-1 Cum.Bull. 15, 16-17. (Emphasis added.)

Nor do I find in this record any 'special circumstances' which might support the jury's conclusion that the payments made to respondent were 'gifts.' The record shows that it was the union's policy at the time of this strike to require strikers to avail themselves of any assistance offered by local community agencies before seeking assistance from the union. However, the union decided to waive this requirement with regard to the strike involved here, for the reasons given by the International's Secretary-Treasurer:

'In this particular case, the community assistance available in Sheboygan County was so small, and so much red tape involved in obtaining it, we decided that Kohler workers would not have to seek assistance from the community agencies.'

'The policy in 1954 was to use community agencies but, as I testified previously, that in the case of the Kohler workers we waived that particular policy because, after checking with the Sheboygan Welfare Agency, we found that the Kohler workers were expected to give up their license plates and not use their automobiles, and restrictions were so great that we didn't think we ought to impose those restrictions on the Kohler workers.'

This determination was further evidence that the union's purpose in making the payments to respondent and other strikers was a business one, not proceeding from any "detached and disinterested generosity" nor "out of affection, respect, admiration, charity or like impulses," Duberstein, 363 U.S. at page 285, 80 S.Ct. at page 1197, but proceeding, rather, from the union's business purpose to obviate the supposed oppression of the local welfare restrictions upon the strikers, and thereby more effectively to preserve and continue the strike. It corroborates, I think unmistakably, the union's business purpose in paying the strike benefits, and shows that no genuine charitable or donative intent was involved.

For these reasons I would reverse that judgment of the Court of Appeals and hold that the payments in question were not 'gifts' but were 'income' and taxable as a matter of law.

Notes

1. Section 102(a) provides: 'Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.' 26 U.S.C. § 102(a), 26 U.S.C.A. § 102(a).
2. Although the plurality opinion apparently considers it unnecessary to decide whether the strike benefits received by respondent constitute 'income,' and deals only with the question whether they were excludable 'gifts,' I think it is clear that those payments were 'income.' Strike benefits constitute realized gains to their recipients, as a partial substitute for lost wages rather than lost capital, and are materially different in nature from the various categories of realized gains which have been treated as nontaxable through administrative fiat. (See the Treasury Rulings detailed in Mr. Justice FRANKFURTER'S concurring opinion.) Strike benefits are, therefore, within the reach of the 'gross income' provision of the Code. See Commissioner of Internal Revenue v. Glenshaw Glass Co., 348 U.S. 426, 429-430, 75 S.Ct. 473, 475-476, 99 L.Ed. 483.
3. The evidence shows an administrative letter was written by the International to its locals describing the nature and purpose of its strike fund as follows:
4. While the Court of Appeals emphasized respondent's status as a nonmember when he began receiving strike benefits from the union, the parties' stipulation nullifies any possible basis for distinguishing between members and nonmembers in deciding the question before us, and, indeed, the Court does not purport to rest its decision on any such distinction.
5. That voluntary payments by a union may be and often are made with the requisite donative intent is not to be doubted. This was illustrated by the testimony of two union officials at the trial of this case. The Secretary-Treasurer testified about expenditures from the union's strike fund to assist in emergencies caused by a tornado at Flint, Michigan, and by a flood in Connecticut. A regional officer testified that the union purchased furniture for a member whose home and its furnishings had burned, viewing that action, somewhat differently than these strike benefits, as an 'outright donation' by the union. But plainly such were not the generous and charitable impulses that impelled the union to pay the strike benefits to respondent, and other strikers to sustain them while they waged the union's Kohler strike.