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solicitations for the credit card program, petitioner expressly
did not treat the credit card to be a member service in the
sense of a service being offered and overseen by petitioner.
Rose Marie Maune (Ms. Maune) was employed by petitioner from
1976 until 1992. She was petitioner's membership director
until about the years in issue, when she became director of
operations, where she fulfilled a similar role. Ms. Maune
testified that the membership services department did not
handle any inquiries regarding the affinity credit card
program. She testified that they would not answer members'
questions because they were not in control of the program.
Moreover, petitioner did not provide any significant
administrative services with respect to the credit or other
services provided by Chase Lincoln and ABS.
If, by characterizing the credit card program as “a member
service”, respondent means that petitioner provided something
of value to the members, that something was the opportunity for
the members to benefit petitioner by using a credit card that
was to be provided by Chase Lincoln or to use a travel service
that was affiliated with ABS. That is the essence of an
affinity card program, and the intended result of the license
of the organization’s name, logo, mailing list, and other
intangibles. The income received in consideration for such
licenses alone is royalties within the meaning of section
512(b)(2).
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