Rev. Rul. 59-152

Advice has been requested whether, under the circumstances described below, contributions made to the State Bar of a certain state are deductible for Federal income tax purposes under section 170 of the Internal Revenue Code of 1954.

The State Bar of a certain state was created by statute as a public corporation. Its membership, by law, consists of all persons admitted and licensed to practice law in the state except justices and judges of courts of record during their continuance in office. The statute provides for its governing body, known as the board of governors of the State Bar, and provides for the election of its members and confers powers and duties upon it. The statute empowers the board to create local administrative committees and authorizes the board or its committees to initiate and conduct investigations of all matters affecting or related to the State Bar or its affairs, the practice of law, the discipline of members of the State Bar and any other matter within the jurisdiction of the State Bar. For purposes of such investigation, the statute empowers the board or committee to administer oaths or affirmations and to compel, by subpoena, the attendance of witnesses and the production of books, papers and documents relating to the proceeding. Refusal by any person to comply with such subpoena is made a contempt of the board or committee and subject to the same proceedings and the same penalties as in the case of a witness subpoenaed to appear and give evidence on the trial of a civil cause before a superior court.

The board is also authorized to establish an examining committee having the power to examine all applicants for admission to practice law, to administer the requirements for admission to practice, and to certify to the supreme court of the state for admission those applicants who fulfill the requirements of the statute. Applicants for admission to practice shall pay such reasonable fees, fixed by the board, as may be necessary to defray the expense of administering the provisions of the law relating to admission to practice, and such fees are to be collected by the committee and paid into the treasury of the State Bar. The board of governors is empowered, with the approval of the supreme court of the state, to formulate and enforce rules of professional conduct for members of the bar, and, after hearing, to recommend to the supreme court disbarment or suspension from practice of members, or to discipline them by reproval, public or private, without such recommendation.

The State Bar has been held exempt from Federal income tax as an instrumentality of the state.

Section 170(a) of the Code allows as a deduction any charitable contribution, as defined in subsection (c) of section 170, payment of which is made within the taxable year.

Section 170(c) of the Code provides, in part:

* * * For purposes of this section, the term "charitable contribution" means a contribution or gift to or for the use of--

(1) A State, a Territory, a possession of the United States, or any political subdivision of any of the foregoing, * * * but only if the contribution is made for exclusively public purposes.

The State Bar performs functions of a public nature customarily performed by government instrumentalities and is an administrative arm of the supreme court of the state. Contributions to it for its public purposes are deductible by members or other donors under the above-quoted provisions.

The State Bar is distinguishable from the R Bar Association considered in G. C. M. 4805, C. B. VII-2, 58 (1928), in which it was held that the association was not exempt as a charitable or educational organization under the provisions of the section of the Revenue Act of 1928, corresponding to section 501(c)(3) of the 1954 Code, and that contributions to it were not deductible. The R Bar Association was a voluntary association, similar to other professional associations organized for the mutual interest and benefit to members and designed to elevate the standards of the profession, to promote reforms in the law, and to cultivate the science of jurisprudence. Such organizations have no power or authority to exercise governmental functions.

In view of the foregoing, it is held that contributions made by members and other donors to or for the use of a State Bar which exercises governmental functions and is not subject to Federal income tax are deductible in computing their taxable income in the manner and to the extent provided by section 170 of the Code. Further, such contributions are deductible for Federal estate tax and gift tax purposes under the provisions of sections 2055(a)(1) and 2522(a)(1), respectively, of the Code.

G. C. M. 4805, C. B. VII-2, 58 (1928) is distinguished.