dohi 9. Perry Btioivn 

dhalrmah Tetas Emplo$ment 

Opinion No. i#-247 

Collimission 

Brown ailding 

Re: Taxability under the Texas 

Unemployment Compensation 

Austin, Texas Act of payment6 Into or 

from Supplemental UhemDear Mr. Drowhi 

ployment Benefit Plan punds 

@the Ford kotor company - 

UAW-CIb type. 

This is in reply to your requeet for an opinion a8 

to the taxability under the Texas Unemployment Compendation Act of pafmentd made into &id out of Supplemehtal 

Uhemployment Benefit Plah Funde of the Ford Motor Company - 

UAW-CT0 typei 

You aaked the foilowing questlond: 

the z;tpz;n;; p;;$$& inFmde 

to unemployed workers taxable under the 

Texag Unemployment Compensation Act? If 

either type of paymant ia taxable, against 

whom is it taxable?" 

Briefly;~this type of Supplemental Unemployment Benefit Planprovide@ forthe edtablishmentby the employer of 

a Trust Pund b cohtributions made Solely by the employer, 

After payment f nto thb Fund, the employer his ho right, tit 

or ihterest in the aaseta. The Fund 1~ administered by independent trucrtees; There is a maximum funding amount 

which when reached stops payments into the Pound until such 

time as the amount remaining becomes lesls than the maximum 

finding &mount. 

The Plan further provides that no employee has any 

Hght in aiiy slbsetd of the Fund unless and until the employee,ie qualified and eligible. Among the ellgi,bllity 

conditions ia the requirement that the employee must have 

received state unemployment benefits for the week for 

which application ia made for supplemental benefits. 

The Plan alrso provides that: "Neither the Company's 

contributions nor any benefit paid under the Plan shall 

le 
Hon. S. Perry Brown, page 2 (W-247) 

be considered a part of any employees wages for any 

purpose.” 

Our Texas Unemployment Compensation Act provides 

that employers who come witNn its scope must make contributions to a Commission In amounts determined by the amount 

of "wages" paid by the employers to their employees. These 

contributions are placed in a fund and can only be used for 

the purposes for which such fund was created. The Act 

defines "wages" as "all remuneration for personal servieas, 

including commissions and bonuses and the cash value of 

all remuneration in any medium other than cash." (Art. 

522113-17, V.C.S.). 

There ha8 been no court decision on the taxability, 

under the Texas Unemployment Compensation Act, of payments 

into or from Supplemental Unemployment Compensation Plan 

Funds, nor have the courts of any other state,passed on 

the taxability of such Funds under their respective 

state unemployment compensation statute. However, the 

questions have been passed upon administratively by many 

of the states. Of twenty-one states that have administratively ruled on the taxability of payments into such 

Funds, twenty have ruled that such payments are not 

taxable. Of fifteen states that have administratively 

ruled on the taxability of payments from such Funds, fourteen have ruled that such payments are not taxable. 

The Bureau of Internal Revenue ruled (Rev. Rul. 56- 

249, IR - 156) that payments Into and out of such Funds 

are not taxable under the Federal Unemployment Tax Act. 

In arriving at such conclusion the Bureau used the following language: 

,t .it is concluded that the benefits 

pkLi;l to former employees of M Company 

under the terms of the Supplemental Unemployment Benefit Plan do not constitute 

'wages' for purposes of the Federal Unemployment Tax Act. It is also concluded 

that the benefits paid to former employees 

of M Company under the terms of the Supplemental Unemployment Benefit Plan do not 

constitute 'wages' for purposes of the 

Federal Insurance Contributions Act and 

the Collection of Income Taxes at Source 

on Wages." 
Hon. 5. Perry Brown, page 3 (WJf-247) 

Generally, 8 right to remuneration aaaruea upon the 

rendition of serviaes by virtue of the contract of hire, 

so that the provision that the employee has no rights 

in the Fund indicates that whatever is paid the employee 

out of the Fund is not intended as remuneration for 

sellrlcea. The employee may work a lifetime and thereupon retire or die and receive no payments. This Is an imR 

ortant distinction from the concept of "remuneration" or 

wages" which would be,payable In any event. 

Moreover, the reaeipt of benefits by an employee is 

not dependent on whether contribution8 to the Fund have 

been made by the employer with respect to the hours worked' 

by the employee. An employee may receive benefits although 

no contributions were made during his entire employment with 

that employer due to the Fund having reached and maintained 

the presaribed maximum level. Conversely, If there ,is an 

insufficient amount in the Fund, the applicant would receive 

no benefits. If the Fund or the benefits paid therefrom 

could be aalled "wagea" the applicant would have a vested 

ihtereat and could bring an action. No such vested interest 

or right exists under the Plan. In order to receive benefits 

the applicant must have received state benefits for that 

week. This requirement makes the Plan truly zsupplemental and 

the benefits paid therefrom are supplemental unemployment 

benefits. 

We, therefore, are of the opinion that neither contributions into the Fund nor benefits paid therefrom are taxable 

under the Texas Unemployment Compensation Act. 

Inasmuch aa neither contributions into the Fund nor 

benefits paid therefrom are taxable under the Texas Unemployment Compensation Act your last question Is moot. 

To the extent that this opinion may be in conflict with 

prior opinions of this office they are expressly overruled. 

S.U M'MA,R.Y 

Under Supplemental Unemployment 

Benefit Plans of the Ford Motor 

Compsny - UAW-CIO type, neither 
Hon. S. Perry Brown, 

FCJG/f'b 

payments 

p8yments _ _ 

made into the Fund 

made therefrom to unemployed applicants are taxable 

under the Texas Unemployment Compensation Act. 

page 4 (W-247) 

Very truly yours, 

WILL WILSON 

Attorney General 

JACK GOODMAN 

APPROVED: 

OPINION COMMITTEE 

George P. Blackburn, Chliwan 

U. V. Geppert 

Howard Mays 

SamLane 

REVIEWED FORTHEATTORNEYGFNERAL 

By: James N. Ludlum