T.C. Summary Opinion 2002-83

UNITED STATES TAX COURT

HAROLD T. AND FRANCESCA REDMAN, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5523-01S. Filed July 9, 2002.

Harold T. and Francesca Redman, pro sese.

John M. Tkacik, Jr., for respondent.

DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed. Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue. The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.
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1This amount is rounded to the nearest dollar.

Respondent determined a deficiency of $2,522 in petitioners’

1994 Federal income tax. The sole issue for decision is whether

certain payments received by Harold Redman (petitioner) are in

the nature of workers’ compensation payments which are excludable

from petitioners’ gross income under section 104(a)(1).

Some of the facts have been stipulated and are so found. 

The exhibits received into evidence are incorporated herein by

reference. At the time the petition in this case was filed,

petitioners resided in Medina, Ohio. 

Background

In 1994, petitioner was employed as a firefighter by the

City of Cleveland. He is a member of Cleveland Firefighters

Local 93 (Union). Petitioner was injured on November 1, 1994,

while fighting a house-fire. As a result of petitioner’s

injuries, he was placed on “On Duty” injury status (ODIS) for a

total of 22 days. While on ODIS petitioner was paid $10,264.1

The payments were made pursuant to a provision in the Collective

Bargaining Agreement (CBA), which was agreed upon by the Union

and the City of Cleveland and approved by the City on April 1,

1992, in Ordinance No. 641-93. 

Petitioner deducted $10,264 from his income on his Form

1040, U.S. Individual Income Tax Return. The amount petitioner

deducted was the identical amount which appeared on a letter
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petitioner received from the City of Cleveland stating the amount

he received while on ODIS. Petitioner’s W-2, Wage and Tax

Statement, did not indicate the amount received while on ODIS,

nor did it identify any amount that was exempt from taxation. 

Discussion

Respondent contends that petitioners may not exclude from

gross income amounts petitioner received while on ODIS because

the payments made to him were not made pursuant to a legislative

act in the nature of a workers’ compensation act. Respondent’s

position is that the CBA entered into between the City of

Cleveland and the Union was a contract and that the ordinance

approving the CBA was merely an act by the City council to

validate its agreement with the Union. Respondent also contends

that the CBA provides for only the continuation of benefits such

as vacation time while on ODIS and that it allows the City to

assign an injured firefighter to less physically demanding jobs

such as desk duty. 

Petitioner argues that because the CBA was approved by City

ordinance it qualifies as a statute in the nature of a workers’

compensation act. He also argues that the continuation of salary

and benefits is in the nature of a workers’ compensation statute.

Gross income includes all income from whatever source

derived, unless excludable by a specific provision of the

Internal Revenue Code. Sec. 61(a). One exclusion from gross
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income can be found at section 104(a)(1) for “amounts received

under workmen’s compensation acts as compensation for personal

injuries or sickness”. Section 1.104-1(b), Income Tax Regs.

interprets section 104(a)(1) to exempt amounts received under a

workmen’s compensation act, “or under a statute in the nature of

a workmen’s compensation act which provides compensation to

employees for personal injuries or sickness incurred in the

course of employment.” This exclusion has been strictly

construed to conform with the general rule that all income is

taxable unless it is specifically excluded. See Kane v. United

States, 43 F.3d 1446, 1449, 1451 (Fed. Cir. 1994). 

Where administrative rules or regulations have “the force

and effect of law”, they will be found to be the equivalent of a

statute for purposes of section 1.104-1(b), Income Tax Regs. 

Dyer v. Commissioner, 71 T.C. 560, 562 (1979). As explained in

Rutter v. Commissioner, 760 F.2d 466, 468 (2d Cir. 1985), affg.

T.C. Memo. 1984-525:

A regulation, like a statute, is a rule of general

applicability promulgated by a public agency to govern

conduct within the agency’s jurisdiction. A labor

contract, unlike a statute, is an agreement between

union and employer, modifiable at any time. That 

* * * [a] labor contract involved a public employer is

irrelevant to the legislative purposes behind the

workmen’s compensation exclusion, and does not convert

the contract into a “statute”. 

Where the language of a collective bargaining agreement is

by legislative act incorporated by reference into a municipal
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2Generally, revenue rulings are not regarded as precedent in

this Court. In the appropriate circumstances, however, revenue

rulings may be treated as concessions by respondent. See Cascade

Designs, Inc. v. Commissioner, T.C. Memo. 2000-58 (and citations

therein). Because petitioner cites a revenue ruling that is

distinguishable from the facts in this case, the necessary

circumstances to treat the revenue ruling as a concession are not

present.

code, and by this measure is enacted into law, it meets the

statutory and regulatory requirements described above. Cf.

Givens v. Commissioner, 90 T.C. 1145, 1149-1151 (1988). Mere

approval by a city council of a collective bargaining agreement

negotiated by a city and a union does not, without explicit

incorporation into the city’s code, meet the requirements

described above. See Rutter v. Commissioner, supra at 468;

Brooks v. Commissioner, T.C. Memo. 1997-568.

At trial, petitioner argued that Rev. Rul. 81-47, 1981-1

C.B. 55, stands for the proposition that any payment made to a

disabled police officer is excludable from gross income under

section 104(a)(1).2 Petitioner overstates the breadth of the

revenue ruling. The revenue ruling involved a police officer

injured in the line of duty. State statute provided that all

collective bargaining agreements entered into by the county had

to be approved by “legislative acts” of the county council and

incorporated by reference into the county code. Adoption by the

council had the effect of enacting provisions of the collective

bargaining agreement into law. The ruling found that the county
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had adopted and incorporated the collective bargaining agreement

into the county code.

In this case, the CBA was merely approved by City council,

and there is no evidence that it was incorporated by reference or

otherwise into the City code. Rev. Rul. 81-47 does not support

petitioner’s position.

Petitioner also relied on Dyer v. Commissioner, supra. In

Dyer, a New York City high school teacher was injured in the

course of her employment. New York City public school teachers

were not covered by any regular workers’ compensation act. New

York statutes, however, vested the city with the authority and

duty to provide teachers injured in the line of duty with full

pay and no deduction from their sick leave during any absences

resulting from on the job injuries. Pursuant to this authority,

the Board of Education issued regulations which provided for such

benefits. Because New York statutes vested the Board of

Education with this authority, the regulations it issued had the

“force and effect of law.” Id. at 562. Dyer is distinguishable

from the facts in this case. In Dyer, there was no collective

bargaining agreement approved by a city ordinance. 

This Court is unable to find, and petitioner was not able to

cite, any Ohio statute or regulation analogous to that in Dyer. 

Petitioner cited statutory provisions and as part of his

testimony read to the Court Cleveland Administrative Rule 123. 
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This Court, however, finds that petitioner’s citations are to

provisions that are not in the nature of a workers’ compensation

act, and they do not support his position that the CBA had the

“force and effect of law.” Sec. 1.104-1(b), Income Tax Regs. 

Furthermore, while petitioner’s citations refer to other possible

sources of injury payments, they do not change the fact that the

payments herein were made pursuant to the CBA, not a legislative

act.

The agreement between the City and the Union was not

incorporated by reference into legislation, it was merely

approved by the City ordinance. Thus, the CBA stands by itself

as a contract between the City and the Union. The agreement does

not have the force and effect of law and is modifiable at any

time. See Rutter v. Commissioner, supra at 468 (labor contract

does not qualify as a “statute” within the meaning of sec. 1.104-

1(b), Income Tax Regs.); Covert v. Commissioner, T.C. Memo. 1990-

598. The finding that the CBA does not qualify as a “statute”

within the meaning of sec. 1.104-1(b), Income Tax Regs., is

determinative of the outcome in this case. As a result, it is

not necessary for us to decide whether the relevant provisions of

the CBA are in the nature of a workers’ compensation act. 

We hold that petitioner did not receive disability payments

under a workers’ compensation act or a statute in the nature of a
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workers’ compensation act. Thus, petitioner’s “on-duty” injury

payments must be included in gross income.

Reviewed and adopted as the report of the Small Tax Case

Division.

To reflect the foregoing,

Decision will be entered 

for respondent.