COMMISSIONER V. KOWALSKI
| Citation | 434 U. S. 77 |
| Decision Date | 29 November 1977 |
| Court | United States Supreme Court |
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
The Tax Court rejected both contentions, but the Court of Appeals reversed.
Held:
1. In the absence of a specific exemption, the cash meal allowance payments are included in gross income under § 61(a), since they are "undeniabl[y] accessions to wealth, clearly realized, and over which the [trooper has] complete dominion." Commissioner v. Glenshaw Glass Co., 348 U. S. 426, 431. P P. 82-84.
2. The payments are not subject to exclusion from gross income under
§ 119, since § 119, by its terms, covers meals furnished by the employer, and not cash reimbursements for meals. P. 84.
3. No specific exemption for the payments can be claimed on the basis of the once-recognized doctrine that benefits conferred by an employer on an employee "for the convenience of the employer" are not income within the meaning of the Internal Revenue Code, since it appears from the legislative history of § 119 that it was intended comprehensively to modify the prior law, both expanding and contracting the exclusion for meals previously provided, and therefore it must be construed as a replacement for the prior law, designed to end the confusion that had developed respecting the "convenience of the employer" doctrine as a determinant of the tax status of meals. P P. 84-95.
544 F.2d 686, reversed.
This case presents the question whether cash payments to state police troopers, designated as meal allowances, are included in gross income under § 61(a) of the Internal Revenue Code of 1954, 26 U.S.C. § 61(a), [Footnote 1] and, if so, are otherwise excludable under § 119 of the Code, 26 U.S.C. § 119. [Footnote 2]
The pertinent facts are not in dispute. Respondent [Footnote 3] is a state police trooper employed by the Division of State Police of the Department of Law and Public Safety of the State of New Jersey. During 1970, the tax year in question, he received a base salary of ,739.38, and an additional ,697.54 [Footnote 4] designated as an allowance for meals.
The State instituted the cash meal allowance for its state police officers in July, 1949. Prior to that time, all troopers were provided with midshift [Footnote 5] meals in kind at various meal stations located throughout the State. A trooper unable to eat at an official meal station could, however, eat at a restaurant and obtain reimbursement. The meal station system proved unsatisfactory to the State because it required troopers to leave their assigned areas of patrol unguarded for extended
periods of time. As a result, the State closed its meal stations and instituted a cash allowance system. Under this system, troopers remain on call in their assigned patrol areas during their midshift break. Otherwise, troopers are not restricted in any way with respect to where they may eat in the patrol area and, indeed, may eat at home if it is located within that area. Troopers may also bring their midshift meal to the job and eat it in or near their patrol cars.
The meal allowance is paid biweekly in advance and is included, although separately stated, with the trooper's salary. The meal allowance money is also separately accounted for in the State's accounting system. Funds are never commingled between the salary and meal allowance accounts. Because of these characteristics of the meal allowance system, the Tax Court concluded that the "meal allowance was not intended to represent additional compensation." 65 T.C. 44, 47 (1975).
Notwithstanding this conclusion, it is not disputed that the meal allowance has many features inconsistent with its characterization as a simple reimbursement for meals that would otherwise have been taken at a meal station. For example, troopers are not required to spend their meal allowances on their midshift meals, nor are they required to account for the manner in which the money is spent. With one limited exception not relevant here, [Footnote 6] no reduction in the meal allowance is made for periods when a trooper is not on patrol because, for example, he is assigned to a headquarters building or is away from active duty on vacation, leave, or sick leave. In addition, the cash allowance for meals is described on a state police recruitment brochure as an item of salary to be received in addition to an officer's base salary and the amount of the meal allowance is a subject of negotiations between the State and the police troopers' union. Finally, the amount of an officer's
cash meal allowance varies with his rank, [Footnote 7] and is included in his gross pay for purposes of calculating pension benefits.
On his 1970 income tax return, respondent reported ,066 in wages. That amount included his salary plus 6.45 which represented cash meal allowances reported by the State on respondent's Wage and Tax Statement (Form W-2). [Footnote 8] The remaining amount of meal allowance, ,371.09, was not reported. On audit, the Commissioner determined that this amount should have been included in respondent's 1970 income, and assessed a deficiency.
Respondent sought review in the United States Tax Court, arguing that the cash meal allowance was not compensatory, but was furnished for the convenience of the employer, and hence was not "income" within the meaning of § 61(a), and that, in any case, the allowance could be excluded under § 119. In a reviewed decision, the Tax Court, with six dissents, [Footnote 9] held that the cash meal payments were income within the meaning of § 61 and, further, that such payments were not excludable under § 119. [Footnote 10] 65 T. C 44 (1975). The Court of Appeals for
the Third Circuit, in a per curiam opinion, held that its earlier decision in Saunders v. Commissioner, 215 F.2d 768 (1954), which determined that cash payments under the New Jersey meal allowance program were not taxable, required reversal. 544 F.2d 686 (1976). We granted certiorari to resolve a conflict among the Courts of Appeals on the question. [Footnote 11] 430 U.S. 944 (1977). We reverse.
Commissioner v. Glenshaw Glass Co., 348 U. S. 426, 429-430 (1955), citing Commissioner v. Jacobson, 336 U. S. 28, 49 (1949), and Helvering v. Stockholms Enskilda, Bank, 293 U. S. 84, 87-91 (1934). Although Congress simplified the definition of gross income in § 61 of the 1954 Code, it did not intend thereby to narrow the scope of that concept. See Commissioner v. Glenshaw lass Co., supra at 348 U. S. 432, and n. 11; H.R.Rep. No. 1337, 83d Cong., 2d Sess., A18 (1954); S.Rep. No. 1622, 83d Cong., 2d Sess., 168 (1954). [Footnote 13] In the absence of a specific exemption, therefore, respondent's meal allowance payments are income within the meaning of § 61 since, like the payments involved in Glenshaw Glass Co., the payments are "undeniabl[y] accessions to wealth, clearly realized, and over which the [respondent has] complete dominion." Commissioner v. Glenshaw Glass Co., supra at 348 U. S. 431. See also Commissioner v. LoBue, 351 U. S. 243, 247 (1956);...
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