RESPONDENT: United States
LOCATION: Mapp's Residence
DOCKET NO.: 288
DECIDED BY: Warren Court (1958-1962)
CITATION: 367 US 687 (1961)
ARGUED: Apr 17, 1961
DECIDED: Jun 19, 1961
Facts of the case
Media for American Automobile Association v. United States
Audio Transcription for Oral Argument - April 17, 1961 in American Automobile Association v. United States
Number 288, American Automobile Association, Petitioner, versus United States.
Mr. Bomar, you may proceed with your argument.
May it please the Court.
This is a federal income tax case.
It is before this Court on writ of certiorari to the United States Court of Claims which dismissed petitioner's suit.
Petitioner is the American Automobile Association, a nonstock membership corporation with its principal offices in the District of Columbia.
Petitioner is a national organization which renders services to its affiliated local clubs and their members and performs services of a public nature and fields relating to motoring and travel.
Separate books and records are maintained by petitioner with respect to its national activities and those activities are not involved in this proceeding.
In addition, petitioner operates directly 10 local automobile clubs as divisions of the corporation.
Those clubs include the club which serves the metropolitan area of Washington, a club which serves South Florida, went in Texas, Wisconsin, Wyoming and so forth.
Substantially, all of the income which petitioner derives from its divisions is paid in the form of dues prepaid by its members in advance, in consideration for services to be rendered by the club over the ensuing 12-month period.
Petitioner is obligated to render services over that ensuing 12-month period which include a complete travel service, trip planning, tour books, accommodation directories, maps, emergency road service, personal automobile accident insurance, bail bond protection.
The obligation of petitioner necessarily includes the duty to maintain the staff and the facilities in -- which are adequate to permit it to perform.
The issue in this case is whether petitioner in computing its income for federal income tax purposes can account for prepaid dues as taxable income in accordance with sound principles of accrual accounting.
Or whether this Court, in Automobile Club of Michigan, intended to lay down a broad general rule of law that under no circumstances can prepaid receipts, be accounted for as taxable income later than the year in which received.
And regardless of sound accounting -- accounting principles and irrespective of whether net income is clearly reflected, petitioner's entire argument will be directed toward establishing the point that this Court did not intend to lay down such a broad sweeping rule law in Automobile Club of Michigan on the accounting issue.
And that therefore, the Michigan case should not be controlling here.
John M. Harlan II:
Could I suggest one point at this point that I --
John M. Harlan II:
-- hope you'll cover in your argument.
That is what you say that the Government's argument which is I recall the Michigan case was not presented as to the bearing of Sections 452 and 462 of the 1940 Code in congressional action, what bearing all that has on this case.
I will cover it.
Does the Commissioner take the position that under no circumstances, these can be -- be adjusted through the year?
On page 20 of his brief.
Under any circumstances --
The Commissioner volunteers the definition of accrual accounting which says never later than the year of receipt.
Petitioner isn't accrual basis tax payer.
It falls --