Tax Officials’ Bid to Get Club’s Member List Fails

SAN FRANCISCO —  A California Court of Appeal on Thursday rejected a precedent-setting attempt by state tax officials to obtain the membership list of an all-male private club.

The state Franchise Tax Board, led by state Controller Gray Davis, had sought the list from San Francisco’s exclusive Pacific-Union Club so it could conduct random audits to see whether members illegally deducted club-related expenses.

A tax regulation issued in 1988 barred such deductions for members of clubs that discriminate on the basis of race, religion, age, sex, or national origin. A law patterned after the regulation took effect in 1990.

The appeal panel, in an opinion by Justice Harry W. Low, called discrimination repugnant, but said that relatively small, purely social organizations like the Pacific-Union Club are entitled to protection from such governmental intrusions by the right to free association.

“To retain its vitality, the First Amendment must protect the ideas society condemns as well as those it embraces,” Low wrote in an opinion joined by Justices Zerne Haning III and Donald B. King. “The specter of a tax audit solely because of membership in a private group is chilling.”

The panel noted that tax authorities had failed to present any independent evidence that members were violating the law and had readily conceded they were “fishing” for such proof. Nor, Low wrote, had the state “established that the elephant gun of membership list disclosure is the only way to bring down the flea of the occasional tax cheat.”

Davis expressed disappointment with the ruling and said the case would be taken to the state Supreme Court. “To insure that taxpayers are not subsidizing discrimination, we have an obligation to appeal,” the controller said. “I believe America wants to put discrimination behind it and that the Supreme Court will uphold the law.”

William I. Edlund of San Francisco, the club’s attorney, welcomed the decision, saying it appeared to mark the first time an appellate court in the nation had granted such constitutional protection to a private club.

“I would hope that the government does not continue to invest its resources--particularly in these days of limited resources--to prying into the affairs of bona fide private clubs,” he said.

Another lawyer for the club, Dennis K. Bromley, pointed out that members are warned repeatedly that tax deductions for club-related expenses are prohibited. “It’s printed in capital letters right on the bill,” he said.

The case arose when Davis and the board, in an effort to enforce the ban on illegal deductions, sought membership lists from 87 of the approximately 1,000 private clubs in California. About 20 clubs have thus far complied and further action against the others has been deferred pending a ruling on the board’s action. Thursday’s ruling, if upheld, could strengthen resistance to the board’s bid for membership lists.

Among those that refused to comply was the Pacific-Union Club, a 110-year old institution located on this city’s Nob Hill. The club, with a membership limited to 958, does not publicly discuss its membership policy but is widely reputed to bar women. A state tax document filed in 1952 defines membership qualifications as “any male over 25 years of age approved by current members.”

Last year San Francisco Superior Court Judge Ira A. Brown ordered the organization to comply with the board’s demand. The club appealed, charging that its rights to privacy and free association would be violated.

In its 31-page opinion, the appeal court observed that the “purely convivial” nature of the Pacific-Union Club set it apart from less-selective, business-oriented organizations like the Rotary Club or the Jaycees--organizations that have been held subject to anti-discrimination laws. Because of its nature, Low said, the Pacific-Union Club was entitled to greater constitutional protection.

Even though the board maintains that membership lists would remain confidential, the right to privacy “permits the citizen to shield him or herself from the prying eyes of government agents,” Low said.

The club’s rights could be overcome if the state could show a compelling interest in acquiring the list, the panel said.