- 36 -
We draw no inference from the enactment of section 513(h) as to
whether the affinity program at issue is a trade or business.6
G. Whether Royalty Treatment Is Consistent With the Purpose of
the Tax on Unrelated Business Income
Respondent contends that the affinity credit card program at
issue here leads to unfair competition between tax-exempt
organizations and taxable businesses and that Congress intended
to subject that income to the tax on unrelated business income.
We disagree.
The tax on unrelated business income was enacted to prevent
tax-exempt organizations from unfairly using their tax-exempt
status to compete with commercial businesses. United States v.
American College of Physicians, 475 U.S. 834, 837-838 (1986).
Respondent contends that petitioner's activities relating to
the affinity credit card were like the insurance activities at
issue in United States v. American Bar Endowment, 477 U.S. 105
(1986). In that case, the Supreme Court held that the American
Bar Endowment (ABE) conducted a trade or business, creating the
kind of unfair competition that led to the enactment of section
512. Id. at 114. We disagree that the facts are similar. ABE
provided group insurance policies to its members. Id. at 107.
ABE actively administered the insurance program. Id. ABE chose
insurers, negotiated premium rates with insurers, compiled lists
6See Sierra Club, Inc. v. Commissioner, 86 F.3d at 1534
n.17.
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