Diggs v. Commissioner

76 T.C. 888, 1981 U.S. Tax Ct. LEXIS 118

• Court: United States Tax Court
• Decided: June 4, 1981
• Docket: Docket No. 4818-76
• Status: Published

Opinions

Nims, Judge:

Respondent determined the following deficiencies and additions to tax:

Additions to tax

Year Deficiency under sec. 6651(a)¹

1971 ....'.$3,448.16 $862.04

1972 . 5,767.12 1,304.78

Concessions having been made, the substantive issues remaining for decision are:

(1) Whether unreimbursed travel expenses incurred by a U.S. Congressman in connection with his attendance at meetings of the National Black Political Conference in 1972 are deductible as ordinary and necessary business expenses under section 162;

(2) Whether the unreimbursed travel expenses incurred by the Congressman in connection with his attendance at the 1972 National Democratic Party Convention are deductible as ordinary and necessary business expenses under section 162.

FINDINGS OF FACT

Some of the facts have been stipulated by the parties and are found accordingly. The stipulation of facts and the exhibit attached thereto are incorporated by this reference.

Petitioners resided in Detroit, Mich., at the time they filed their petition herein. Janet H. Diggs, the wife of Charles C. Diggs, Jr., is a party to this proceeding only by virtue of having filed joint Federal income tax returns with her husband for the years at issue. Mr. Diggs will be referred to herein as the petitioner.

During 1972 (the only year remaining in issue after the above-mentioned concessions), petitioner was a Member of the U.S. House of Representatives. He represented the 13th Congressional District of Michigan, which includes the city of Detroit. Petitioner served on the House Committee on Foreign Affairs and the House Committee on the District of Columbia.

Petitioner played a significant role at the Democratic National Convention held in Miami, Fla., in 1972. He was an official voting delegate to the convention and was Chairman of the Minorities Division of the Democratic National Committee. He served as the principal host, not only for the minority delegates, but also for other people who had similar concerns and who came to the convention. He participated in various discussions and strategies to try to achieve a favorable response to the petitions of the minority groups before the Platform Committee, the Credentials Committee, and the Rules Committee. The views of the various individuals had to be assessed to determine their feasibility, and there was an investigative aspect to this.

The National Black Political Conference was a nonpartisan group with approximately 10,000 people in attendance at its assembly held in Gary, Ind., on March 10 through 13,1972. One of the reasons petitioner attended meetings of the National Black Political Conference was to make an assessment of the concerns of black citizens in the United States and to develop a national black agenda regarding those concerns. The conference was not a nonprofit exempt organization.

The agenda published by the National Black Political Conference was presented to the platform committees of the National Democratic Party and National Republican Party Conventions in 1972. Petitioner appeared before the platform committee of the Democratic National Convention in support of the agenda published by the National Black Political Conference.

Growing out of the National Black Political Conference, of which petitioner was one of three co-conveners, was a permanent organization which came to be known as the National Black Assembly.

At the time of the trial of this case, petitioner ranked 19th out of 435 Members of the House of Representatives and was the senior ranking delegate from Michigan. He was also, in his words, “the senior member of Congress who happens to be black.”

Certain of petitioner’s constituents attended the Democratic National Convention in Miami and the meetings of the National Black Political Conference. Petitioner believed that his attendance and participation helped in having the views of his constituents represented.

Petitioner expended $1,303 for travel expenses, including meals and lodging, for attendance at meetings of the National Black Political Conference. In addition to the above-mentioned Gary meeting, this organization held meetings in various cities, as follows:

Feb. 20, 1972 ... Muskegon Heights, Mich.

Feb. 25, 1972 ... Chicago, Ill.

Feb. 28, 1972 ... Cleveland, Ohio

Apr. 10, 1972 ... Chicago, Ill.

Apr. 16, 1972 ... New York City, N.Y.

June 24, 1972 ... Las Vegas, Nev.

Aug. 4, 1972 ... Chicago, Ill.

Oct. 10, 1972 ... Chicago, Ill.

Oct. 20 through

Oct. 22, 1972 ... Chicago, Ill.

Petitioner expended $1,083 for travel expenses, including meals and lodging, to attend the Democratic National Convention at Miami, Fla., from July 7 through July 15,1972.

OPINION

In 1972, petitioner was a Member of Congress, representing the 13th Congressional District of Michigan, which included Detroit. During that year, he incurred $1,303 in travel expenses, including meals and lodging, to attend meetings of the National Black Political Conference. In addition, he expended $1,083 in 1972 for travel expenses, including meals and lodging, to attend the Democratic National Convention held at Miami, Fla.

Petitioners take the position that the Congressman’s primary purpose for attending such meetings was to investigate and ascertain the facts and concerns of minorities in order to better serve his constituents and reflect their views in proposed legislation and as a guide for voting. On this basis, they contend that the expenses were ordinary and necessary business expenses deductible under section 162(a)(2) and were not political expenses, the deduction of which is limited by sections 162(a), 162(e)(1) or (2), or by section 1.162-2(d), Income Tax Regs.

Respondent’s position is that these costs are not deductible under section 162(a) because the meetings or conventions in question were primarily political in nature, and further, that section 162(e)(2)(A) denies a deduction under section 162 when the amounts in question were paid in connection with participation or intervention in political campaigning. Furthermore, argues respondent, petitioner’s travel expenses are denied deductibility under section 162(e)(2)(B) because that section, in part, precludes a section 162 deduction for amounts paid in connection with any attempt to influence the general public with respect to legislative matters or elections.

Section 162(a) allows as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including traveling expenses. The term “trade or business” includes the performance of the functions of a public office. Sec. 7701(a)(26). It is beyond question that the Office of Member of Congress falls within this definition.

At first blush it would appear that somewhere among the myriad categories of deductible travel expenses there should be an appropriate analogue to the instant situation. Judge Brown cataloged some of these in a dissenting opinion in Rudolph v. United States, 291 F.2d 841 (5th Cir. 1961), affd. per curiam 370 U.S. 269 (1962),² as follows:

Deductions have been allowed as “ordinary and necessary” to clergymen attending a church convention; to expenses of an employee attending conventions of a related business group; to a lawyer attending a meeting of the American Bar Association; to a legal secretary attending the national convention of the National Association; to physicians attending medical conventions; to certified public accountants attending conventions; to university teachers in attending conventions or scientific meetings; to professional cartoonists attending political conventions; to persons attending the Red Cross Convention; to school teachers attending summer school; to attorneys attending an institute on Federal taxation; to employees sent to refresher courses to become more acquainted with new processes in the industry; to a furniture store sending its buyers to the annual furniture mart; to representatives to annual conventions of trade associations; and to an insurance agent away from home on business. [291 F.2d at 844-845. Fn. refs, omitted.]

To draw an analogy, however, between petitioner’s situation and any of the foregoing would be to blur the line of distinction between petitioner’s respective positions as a political figure and as a Member of Congress. Only those expenses incurred in the latter capacity and directly related to the performance of the functions of that office are allowable under section 162 and the regulations thereunder.

Section 1.162-2(a), Income Tax Regs., provides that only such traveling expenses as are reasonable and necessary in the conduct of a taxpayer’s business and directly attributable to it may be deducted. Section 1.162-2, Income Tax Regs., entitled “Traveling Expenses,” was first adopted on April 3, 1958 (by T.D. 6291, 1958-1 C.B. 63) and amended on August 27, 1958 (by T.D. 6306, 1958-2 C.B. 64). It has remained unchanged and, insofar as the provisions of section 1.162-2(d), Income Tax Regs., relating to political conventions are concerned, unchallenged in the courts since the date of the last amendment over 22 years ago. Suffice it to say that petitioners do not challenge the validity of this regulation and we can conceive of no reason to do so.

In connection with convention travel expenses, section 1.162-2(d), Income Tax Regs., provides:

Expenses paid or incurred by a taxpayer in attending a convention or other meeting may constitute an ordinary and necessary business expense under section 162 depending upon the facts and circumstances of each case. * * * The allowance of deductions for such expenses will depend upon whether there is a sufficient relationship between the taxpayer’s trade or business and his attendance at the convention or other meeting so that he is benefiting or advancing the interests of his trade or business by such attendance. If the convention is for political, social or other purposes unrelated to the taxpayer’s trade or business, the expenses are not deductible. [Emphasis added.]

Of course, the last sentence of this regulation does not bar the travel expense deduction of a taxpayer who attends a political convention for purposes directly related to his trade or business rather than for political purposes. The Board of Tax Appeals held to this effect in Darling v. Commissioner, 4 B.T.A. 499 (1926), and respondent states on brief that he does not challenge such a position. In Darling, the Board allowed a political cartoonist to deduct the expenses of attending a political convention.

As previously noted, respondent maintains that section 162(e)³ is also involved. The legislative history of section 162(e) (which was added to the Code by Pub. L. 87-834, sec. 3(a), 76 Stat. 973 (1962), effective for taxable years beginning after Dec. 31,1962) reveals it to have been a legislative response to regulations adopted in 1959 following the Supreme Court’s decision in the companion cases of Cammarano v. United States and F. Strauss & Son, Inc. v. Commissioner, 358 U.S. 498 (1959). H. Rept. 1447, to accompany H.R. 10650, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 405, 422. In Cammarano, the Supreme Court upheld the disallowance under a then-existing regulation of expenses (concededly “ordinary and necessary”) incurred to defeat a legislative initiative. In the course of its opinion, the Supreme Court made it clear that the regulation there in question disallowed both “expenditures made in connection with efforts to promote or defeat the passage of legislation by persuasion of the general public” (hereinafter for our purposes called grass root campaigns) and also those expenditures incurred to directly influence legislative bodies (which the Supreme Court simply called “lobbying” expenses). 358 U.S. at 504.

The House report referred to above points out that section 162(e) is intended to provide a deduction for lobbying expenses incurred in a trade or business but not for the expenses of a grass root campaign. As regards the former, section 162(e), according to the House report, is intended to correct the anomaly that then existed between the disallowance of expenses incurred in connection with appearances before legislative bodies or before legislators and the allowance of expenses incurred in connection with appearances before executive or administrative officials with respect to administrative matters, or before the courts with respect to judicial matters.

The House report also provides that “the expenses may not be in connection with legislative matters such as nominations, etc., but rather must be in connection with specific legislation or proposals for legislation.” (Emphasis supplied.) H. Rept. 1447, supra, 1962-3 C.B. at 422. The Commissioner’s regulations pick up on this concept. Section 1.162-20(c)(2)(ii)(a), Income Tax Regs., provides that “The term ‘legislation or proposed legislation’ includes bills and resolutions introduced by a member of Congress or other legislative body * * * for consideration by such body as well as oral or written proposals for legislative action submitted to the legislative body or to a committee or member of such body.”

Section 162(e), as finally enacted, includes two general categories of allowable deductions in connection with “Appearances, etc., With Respect to Legislation.”⁴ These are business expenses incurred in direct connection with appearances before legislative bodies (sec. 162(e)(1)(A)) and those incurred in direct connection with communication of information between the taxpayer and an organization of which he is a member (sec. 162(e)(1)(B)).

Section 162(e) also contains two limitations on the allowance of section 162(e) deductions, to wit: no deduction is allowed for participation in, or intervention in, any political campaign on behalf of any candidate for public office — section 162(e)(2)(A); and no deduction is allowed in connection with any attempt to influence the general public, or segments thereof, with respect to legislative matters, elections, or referendums — section 162(e)(2)(B).

In McDonald v. Commissioner, 323 U.S. 57 (1944), the Supreme Court held that campaign expenses of a public official seeking election are not deductible. Section 162(e)(2)(A) is thus a codification of this rule. The Tax Court has consistently applied this rule in cases subsequent to McDonald. See Martino v. Commissioner, 62 T.C. 840 (1974), and cases cited therein. Furthermore, the House report states that it is not intended that any deduction be allowed for any amount paid or incurred for participation or intervention in “any political campaign for any candidate.” (Emphasis added.) H. Rept. 1447, supra, 1962-3 C.B. at 422. In other words, the disallowance is not just limited to the campaign expenses of the candidate himself; all such expenses are disallowed.

Section 162(e)(2)(B) is intended to disallow deductions for grass root campaigns directed toward developing a point of view among the public generally which, in turn, is directed toward the legislators. H. Rept. 1447, supra, 1962-3 C.B. at 422.

With regard to his activities at the Democratic National Convention, petitioner testified, in part, as follows:

Q. Now, at the Democratic Convention, in 1972, in Florida, what role did you play at that convention?

A. Well, I was Chairman of the Minorities Division, which is a statutory division of the Democratic National Committee. And, in that capacity, I served as the supervisor of the office at the convention, as the principal host for not only the delegates but other people who had similar concerns and came to the convention, and participated in various discussions and strategies to try to achieve a favorable response to the petitions of the minority groups before the Platform Committee, the Credentials Committee, and the Rules Committee.

Q. Now, as a host, did you investigate and gather facts necessary to aid you in your congressional duties?

A. Well, the whole process involved an exchange of views and diaglogue, and investigations of issues among those that were there. It was not a monolithic group. They came from all over the country. They had various points of view. These views had to be assessed, to determine their feasibility, and there was a certain obvious investigative aspect to this, as part of the guidance and leadership procedure, that I had to provide.

Q. And as a result of gathering this data, it aided you in your support of legislation that you ultimately voted on?

A. Well, the Platform Committee, in essence, is the repository for prospective legislation that would engage the party at the national level. And in that sense, those concerns, particularly since that party was the majority party in the Congress, that raised the level of its importance in terms of legislative concerns and prospective legislation, and much legislation did come as a direct result of the party’s adherence to the planks of the platform.

With regard to his activities at the National Black Political Conference, petitioner testified, in part, as follows, on direct examination:

Q. And what was the main purpose of the National Black Political Conference?

A. Well, it was for the purpose of making an assessment of the concerns of black citizens here in the United States and beyond, because we did take up several issues involved in international relations. And to develop an agenda— which was developed — a national black agenda which itemized domestic concerns and international concerns. This was put in a published form. It was sent to the principals of both parties, and was the basis upon which the Congressional Black Caucus, which had also been organized in 1972 — it served as a basis for a large part of their agenda, in carrying out their legislative duties.

Petitioner also testified, in part, as follows, on cross-examination:

Q. And we have stipulated that there were some of the meetings that continued into October of which there was an assembly in Chicago, Illinois. Was there any — did this convention and assembly in October, 1972, was it part of the action of this National Black Political Convention to advise the public, blacks and whites, of the principles and purposes of the National Black Political Conference and of the minority which they represented?

A. That’s correct. We had an educational job to do, because we knew that without public opinion behind us, that the possibility of attaining certain objectives could be frustrated, and so therefore, in that sense, we sought to disseminate our objectives, you know, beyond our own community, and to form alliances with anyone beyond that who would support our common objectives. Because we called it a National Black Convention, and it was, in that sense, black, in that kind of participatory fashion, but it — really, the objectives are related to the disadvantaged, which obviously went beyond that.

The real thrust of petitioner’s argument is that the principal motivation for his travel expenses was investigative, relating to the performance of the functions of his public office, rather than political. He points out that the Fourth and Ninth Circuit Courts of Appeal have allowed travel expenses of Foreign Service officers who are required by law to return periodically to the United States from abroad to renew touch with the American way of life and so become better representatives of this country abroad: Hitchcock v. Commissioner, 578 F.2d 972 (4th Cir. 1978); Stratton v. Commissioner, 448 F.2d 1030 (9th Cir. 1971).

Petitioners also strongly urge that we apply to the facts of this case the rationale of the Ninth Circuit’s holding in Frank v. United States, 577 F.2d 93 (9th Cir. 1978), and the Commissioner’s ruling in Rev. Rul. 65-224, 1965-2 C.B. 42. In the Frank case, an administrative aide to a U.S. Senator was permitted to deduct expenses incurred in traveling extensively to report to the Senator on various problem areas in the world at large. In Frank, as in the case before us, the IRS did not question the reasonableness of the expenses. However, unlike the case before us, the IRS in Frank did accept the travel expenses “as accurate and as necessary to the performance of [the taxpayer’s] duties.” On this posture of the case, the Circuit Court agreed with the holding of the District Court that the amounts expended while the taxpayer worked for the Senator as a member of the Senate staff were ordinary and necessary business expenses under section 162(a)(2) because they were traveling expenses, incurred while taxpayer was away from home and while he was in pursuit of a trade or business as defined in section 7701(a)(26).⁵

In Rev. Rul. 65-224, supra, the Commissioner ruled that “the reasonable ordinary and necessary expenses incurred by a State legislator in making an investigation to ascertain facts which resulted in a legislative proposal and enactment are deductible as business expenses.”

Petitioners also cite Rev. Rul. 59-316, 1959-2 C.B. 57, for the proposition that, to quote petitioners’ brief, “the expenses incurred in attending a convention or meeting in connection with the taxpayer’s business interest are deductible.” The Commissioner takes the position in the ruling that—

The allowance of deductions for convention expenses as business expenses will depend upon whether the relationship between the taxpayer’s trade or business and his attendance at the convention is such that by his attendance he is benefiting or advancing the interests of his trade or business.

One method of determining whether such a relationship exists is to compare the individual’s duties and responsibilities of his own position with the purpose of the meeting as shown by the program or agenda. If personal and business purposes are both involved, a proper allocation must be made in accordance with section 1.162-2(b) of the Income Tax Regulations. [1959-2 C.B. at 58-59.]

Basically, respondent’s position is that petitioner’s activities, both with respect to the Democratic National Convention and the National Black Political Conference, were political in nature and not sufficiently related to his congressional functions so as to render them deductible.

We think petitioners have failed to show that the expenses for which deduction is sought are so directly related to the functions of the Office of Congressman as to permit the allowance of the deduction. With regard to the Democratic National Convention, the very raison d’etre for holding the convention was to convene a meeting of the delegates for the purpose of formulating a platform and selecting candidates for the Offices of President and Vice President. Such an assemblage is quintessential^ political. While petitioners concede, sub silentio perhaps, that this is so, they nevertheless urge that the Congressman participated qua Congressman rather than as a delegate per se. We have found as a fact that petitioner was an official delegate to the convention and as such he of course was privileged to participate in and vote upon the candidate selections and formulation of a party platform.

Petitioner testified at some length as to the investigative and collating-of-views activities relating to the interests of minority citizens, which included many of his congressional constituents, in which he engaged at the convention. However, as petitioner’s testimony makes clear, the Platform Committee, on which he served as a delegate and not In his official capacity as a Congressman, “in essence, is the repository for prospective legislation that would engage the party at the national level.” Petitioner, as “principal host” to the minority groups, participated in various discussions and strategies to try to achieve a favorable response to the petitions of the minority groups before the Platform Committee, the Credentials Committee, and the Rules Committee. The agenda which had been previously formulated by the National Black Political Conference was presented to the Platform Committee as a part of the minority group’s aforementioned strategy which it, in turn, hoped and expected would become a part of the national party’s strategy— clearly a political goal.

Petitioners’ argument that the foregoing constitute “business” activities on the Congressman’s part must furthermore fail on two counts: they were not undertaken in direct connection with submissions to committees or individual Members of Congress, and they were not engaged in with respect to any specific legislation or proposed legislation. A laundry list of general objectives, such as the aforementioned agenda represented, does not meet the test of “bills and resolutions” and “proposals for legislative action submitted to the legislative body” contained in section 1.162-20(c)(2)(ii)(a), Income Tax Regs., and the House report, noted above, from which the regulation obviously stems. In light of the committee report’s expression of congressional intent on this point, the regulation is a reasonable and therefore valid interpretation and application of the provisions of section 162(e)(1)(A), which deals with appearances before legislative bodies.

While petitioners might also argue that section 162(e)(1)(B) (relating to communications between a taxpayer and an organization of which he is a member) would permit the deduction, such an argument again must fail for the reason that the communication must relate to specific legislation. The regulation referred to above is of equal application to “communications” under section 162(e)(1)(B). The communications to and from the Democratic National Convention and its committees and petitioner and his clients were far more directly related to the formulation of party strategy than they were to any specific legislation to be proposed or under consideration by Congress, and therefore were essentially unrelated to the functions of petitioner’s Office as Congressman.

Petitioners’ reliance upon the Frank case, supra, is misplaced. The principal issue there was not whether the taxpayer’s investigative activities constituted a trade or business but rather whether he engaged in his activities as a member of the Senate staff for profit. As already noted, in Frank, the Government questioned neither the reasonableness nor the necessity of the claimed expenses. Since the question of whether a public servant must exhibit a profit motive for his activities is not a question in the case before us, the decision in Frank is not apposite.

Nor can petitioners rely on Rev. Rul. 65-224, supra. The ruling involved the case of a State legislator who, after taking office, initiated an investigation into leasing agreements for certain parcels of State-owned lands. The facts stated in the ruling make it clear that disclosures made by the taxpayer from information obtained in his investigation resulted in a legislative inquiry and the enactment of legislation introduced by him relating to negotiations of agreements to lease State-owned lands. Petitioners have nowhere shown that any investigations by the Congressman in connection with the activities for which he is claiming deductions lead to any specific legislation or proposals therefor. We reiterate that the above-quoted House report pinpoints the legislative intent that the expenses must be incurred in connection with specific legislation or proposals for legislation. This test is simply not met by petitioner’s activities in the case before us.

Neither the Hitchcock nor the Stratton case, supra, involving as they do the question of the deductibility of travel expenses incurred by Foreign Service officers while traveling on vacation in the United States, are at all apposite to the Congressman’s travel expenses here. Petitioners make no effort to analogize these cases to their situation beyond making the flat assertion that “the expenditures were in the pursuit of their trade or business.” Petitioners have failed to establish the nexus between the Foreign Service officers’ cases and the one before us.

We accordingly conclude that petitioner’s travel expenses incurred in connection with his attendance at the Democratic National Convention must fail as deductions for two reasons. Primarily, because his activities there, commendable as they might have been, were essentially political in nature and not sufficiently related to the functions of his Office as Congressman; i.e., his trade or business.

Secondarily, since petitioner has failed to meet the threshold test of showing that the expenses incurred were incurred in connection with petitioner’s trade or business, they cannot be allowed as expenses incurred in connection with appearances, etc., with respect to legislation under section 162(e). Allowance of deductions under that section presupposes a trade or business connection with the expenses.

Petitioner’s expenses incurred in connection with the National Black Political Conference are, for the same reasons, nondeductible. Petitioner, in his testimony, expressly emphasized the political purpose of this organization and insisted that it developed its agenda for the purpose of influencing the party platform of the Democratic National Party and, to an apparently lesser extent, the Republican National Party. If anything, the nature of the National Black Political Conference rendered petitioner’s activities there one step closer to grass root campaigning and one step further removed from the functions of his public office.

For the foregoing reasons, we hold that petitioner’s travel expenses paid or incurred in connection with his attendance at the Democratic National Convention or the National Black Political Conference are not deductible under section 162(a) as ordinary and necessary expenses paid or incurred in the performance of his public office as a Congressman or under section 162(e) in connection with appearances, etc., with respect to legislation.

To reflect the foregoing and concessions by the parties,

Decision will be entered under Rule 155.

Reviewed by the Court.

1 All section references are to the Internal Revenue Code of 1954, as in effect during the years in issue, except as otherwise expressly indicated.

2 The holding in the Rudolph case is not strictly comparable with travel expense deduction cases because Rudolph involved the includability in gross income of convention expenses paid by the taxpayer’s employer. See Rudolph v. United States, 291 F.2d 841 (5th Cir. 1961), affd. per curiam 370 U.S. 269 (1962).

3 Sec. 162(e) provides as follows:

(e) Appearances, etc., With Respect to Legislation.—

(1) In general. — The deduction allowed by subsection (a) shall include all the ordinary and necessary expenses (including, but not limited to, traveling expenses described in subsection (a)(2) and the cost of preparing testimony) paid or incurred during the taxable year in carrying on any trade or business—

(A) in direct connection with appearances before, submission of statements to, or sending communications to, the committees, or individual members, of Congress or of any legislative body of a State, a possession of the United States, or a political subdivision of any of the foregoing with respect to legislation or proposed legislation of direct interest to the taxpayer, or

(B) in direct connection with communication of information between the taxpayer and an organization of which he is a member with respect to legislation or proposed legislation of direct interest to the taxpayer and to such organization,

and that portion of the dues so paid or incurred with respect to any organization of which the taxpayer is a member which is attributable to the expenses of the activities described in subparagraphs (A) and (B) carried on by such organization.

(2) Limitation. — The provisions of paragraph (1) shall not be construed as allowing the deduction of any amount paid or incurred (whether by way of contribution, gift, or otherwise)—

(A) for participation in, or intervention in, any political campaign on behalf of any candidate for public office, or

(B) in connection with any attempt to influence the general public, or segments thereof, with respect to legislative matters, elections, or referendums.

4 The Senate version of sec. 162(e) would have included a third category: expenses incurred in connection with communications between the taxpayer and employees or stockholders with respect to legislation. S. Rept. 1881, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 707, 730. This provision was not adopted.

5 The Government had argued that the taxpayer should be barred from deducting his expenses as a member of the Senate staff because he did not engage in that activity for profit, an argument rejected by the Court. Frank v. United States, 577 F.2d 93, 94 (9th Cir. 1978).