Taxation-Federal Income Tax-Religious Order Not Exempt from Supplment U Tax as a Church

Plaintiff, a non-profit, membership corporation consists of members of the Christian Brothers Order, and was established to furnish religious and secular education to youth. The Catholic Church considers religious instruction to be the performance of a church function, and property of the Christian Brothers Order is church property according to Roman Catholic canon law. During the taxable years in question plaintiff owned and operated a novitiate, Catholic schools, homes for the Brothers, and a winery and distillery. Plaintiff was assessed and paid $489,800.83 as a Supplement U tax on its unrelated business income realized from the winery and distillery operation. Plaintiff claimed that it was exempt from the tax as a “church” since, under the regulations governing section 511 of the Internal Revenue Code of 1954, a religious order qualifies as a church for the purposes of the exemption if it is an integral part of a church and engaged in carrying out church functions. In a refund proceeding before the district court, held, judgment for defendant. The term “church” as used in section 511 does not include religious orders, and the treasury regulation to the contrary is invalid. De La Salle Institute v. United States, 195 F. Supp. 891 (N.D. Cal. 1961).