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rates with insurers, compiling lists of its members, soliciting
and collecting premiums from its members, sending premiums to the
insurer, keeping files on each policyholder, answering members'
questions about insurance policies, and screening claims for
benefits. Id. The Court held that ABE was engaged in a trade or
business. Id. at 114.
The Court found that this arrangement created unfair
competition because ABE's members could deduct part of their
premium payment as a charitable contribution. This deduction
lowered the cost of ABE's insurance to its members. Id. at
114-115. Nonexempt businesses would be disadvantaged if ABE were
not taxed on its earnings from the insurance program because ABE
would not need to be as profitable to receive the same return on
its investment. Id. at 115.
This case is not like American Bar Endowment. ABE paid
premiums to insurance carriers; petitioner did not make payments
to USNB. ABE required members to assign any amounts paid in
excess of the cost of the insurance to ABE. Petitioner imposed
no similar obligation on its members. ABE members could deduct
excess payments assigned to ABE as charitable contributions.
Petitioner's members could not deduct their payments to USNB.
ABE collected premiums and screened claims for benefits.
Petitioner did not bill cardholders, collect payments, or decide
who was eligible to receive a credit card.
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