DOJ decides not to fight Vigilant over tip jars

Emily Salmon

The Department of Justice will let stand a court decision allowing the Vigilant Hose Co. to keep from paying taxes on its tip-jar earnings.

Robert Branman, the trial attorney representing Tax Division of the Department of Justice, said Wednesday that the DOJ would no longer pursue its appeal in the U.S. Court of Appeals for the Fourth Circuit.

The government was contesting a May 2001 decision in the U.S. District Court of Maryland (Baltimore) allowing the fire company to keep its earnings tax-free.

In February 2000, the Vigilant Hose Co. had filed suit against the DOJ in the U.S. District Court of Maryland (Baltimore), claiming it should not have been required to pay $37,621 in taxes on tip-jar earnings from the fiscal years 1995 and 1996.

The issue, Branman said, was whether income from tip jars was "substantially unrelated" to the fire company's tax-exempt status. If so, then it would be taxable like income of any other business.

Tip jars are a legalized form of gambling in Frederick County, and a popular fundraiser for nonprofit organizations. Patrons buy tickets at local establishments such as taverns. Tickets with winning numbers earn the patron a cash prize.

In May of this year, the District Court ruled in favor of Vigilant Hose, ordering the government to repay the taxes plus interest. The government then filed an appeal in July 2001.

David R. Cohan, the Baltimore attorney who represented Vigilant Hose, said Wednesday he was pleased with the decision.

"The whole existence of the fire department depends upon contributions," which is why Frederick County drafted legislation permitting tip jars, Cohan said.