TAX COURT OPINION

Case: Robert Joseph Chandler & Andrea Asbury
Docket Number: 1509-10S
Judge: Colvin
Opinion Type: bench
Filed: 11/17/2010
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERT JOSEPH CHANDLER AND ANDREA ASBURY Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Resporident ) ) ) ) ) ) ) ) ) O R D E R Docket No. 1509-10S. Pursuant to Rule 4152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to Petitioners and to respondent a copy of the pages of the transcript the trial in the above case before Judge Joseþh Robert Goeke at of Miami, Florida, on November 13, 2010, containing his oral findings of fact and opinion .rendered at the conclusion of .tihe trial. In accordance with' the oral findingstof fact and opinion, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. November 17, 20i0 SERVED NOV 2 3 2010 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bench Opinion by Judge Joseph Robert Goeke Robert Joseph Chandler & Andrea Asbury v. Commissioner 3 Docket No. 1509-10S November 3, 2010 THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. 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. Pursuant to Section 7463 (b) , the decision to be entered is not reviewable by any other court, and as stated previously, this opinion shall not be treated as precedent for any other case. This bench opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and Procedure. After this, rule references will be to the Tax Court Rules of Practice and Procedure, and section references will be to the Internal Revenue Code in effect for the year 2007. This is deficiency case, which is before the Court based upon a notice of deficiency issued to the Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 Petitioners by Respondent asserting that Petitioners had a deficiency in income tax in the amount of $4,434 for the taxable year 2007. The Petitioners filed a timely petition and elected small case status. The case was tried on November 1st, 2010, in Miami, Florida. At the trial, the Petitioner testified, and the parties submitted various exhibits through a stipulation of facts. Respondent submitted a pretrial memorandum, and Petitioner offered to the Court as authority for the petition taken on the Petitioner's returns a copy of Revenue Ruling 70-504. We note that the determinations made by the Respondent in the notice of deficiency are presumed correct, "and that the burden is on Petitioner to establish that the determinations are incorrect. Rule 142(a). This case involves the activities of, Petitioner husband, Mr. Robert Joseph Chandler, and the discussions that follow relate to his activities as a police officer providing services to parties oÙher than the state of Florida, for whom he was employed. The question is whether these services should be treated as part of his employment by the state of Florida. More precisely, the question is whether Petitioners are subject to self-employment tax Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 with respect to the compênsation Mr. Chandler received for providing off-duty services during 2007. Mr. Chandler was a Florida highway patrol officer throughout 2007. There is no dispute relative to the income he received from the state of Florida, and he is clearly an employee of the Florida Highway Patrol in 2007. The dispute arises because Mr. Chandler received $34,576 of additional income from third parties, and this income was reported on line 21 of the Petitioner's joint federal income tax return. The parties have stipulated the sources of this income. $17,865 was received from Flamingo Road Baptist Church. $1,125 was received from CarMax Auto Superstores, Inc. $3,442..50 was received from Ikea of North America Services, LLC. $10,935 was received from KPAK Enterprises, Inc. And $607.50 was received from.Burgeron Land Development, Inc. Mr. Chandler testified in more specificity as to the specific nature of the services he provided in the context of some of these payers. With respect to Flamingo Road Baptist Church, he testified that he provided traffic control services for the entrance and egress from the church facilities on Sunday in connection with the church services. He also Heritage Reporting Corporation (202) 628,4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 6 testified that the church was required to have assistance and a police officer, pursuant to city ordinance. With respect to the CarMax Auto Superstores, Inc.'s services, Mr. Chandler testified that he was on-site during automobile auctions to provide security services at the CarMax location. Concerning Ikea North America Services, LLC, Mr. Chandler testified that he provided traffic management services on the street outside of the Ikea store, and that local law enforcement officers for the city would provide control over the traffic light at the Ikea store. Concerning the KPAK Enterprises, Inc. services, Mr. Chandler testified that these related to managing safety at construction sites on the Florida Turnpike in Broward County, Florida, in 2007, and that the construction companies providing services for the Florida Department of Transportation were required to have police officers based upon the nature of the construction activities involved, and these requirements were dictated by the Florida Department of Transportation. The record is not clear as to the precise nature of the services provided Burgeron Land Development, Inc. Mr. Chandler testified that these Heritage Reporting Corporation (202) 628-4888 7 services would have been arranged by contact to his superiors at the Florida Highway Patrol, who would then contact him and ask him if he wished to provide the services. He did indicate that he provided services to Flamingo Road Baptist Church on a regular basis, nearly every weekend. He had no obligation to provide these services based upon his employment with the Florida Highway Patrol. But the.Florida Highway Patrol provided strict guidelines as to how he was to perform such outside services, and required that he wear his police uniform in providing these services, as well as requiring that he be available on-call should he have i official duties of the Florida Highway Patrol -while he was providing these outside services. He was also required to submit forms as to the amount of services he provided, and to obtain authorization by submitting a request to work secondary employment for a 12-month.period, to be authorized to provide such outside services. He was authorized to use -the state vehicle, but was required to provide some reimbursement for the cost to the state of Florida relative to the use of this vehicle in providing these outside services. Eursuant to the manual policy of the Florida 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Heritage Reporting Corporation. (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 Highway Patrol, in providing these services, Mr. Chandler was indistinguishable from ,on-duty officers, and that he was required to respond to serious infractions committed in his presence, and he was required to address life-sating situations and to address other problems that were a pressing public need. He testified that in conjunction with the traffic management services -he provided, he did write traffic tickets, which he normally would do on official duties. He was also subject to being called to duty while he was providing these off-duty activities, and the persons who engaged him agreed that they would not interfere with suah requirements, as a condition of being provided services by officers of the Florida Highway Patrol. He is also subject to discipline while performing these off-duty activities on the same basis as he would have been disciplined for on-duty activities . There were limits on the amount of off-duty activities he could provide, and he was clearly advised that he would not receive state-provided liability insurance or worker's compensation benefits while performing these off-duty activities. First we note that Respondent has made a Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 concession with respect to one of the items in the notice of deficiency. Respondent concedes that the Petitioners are not subject to self-employment tax with respect to $600 in taxable disability peyments received from Colonial Life and Accident Insurance during 2007. Respondent cites several cases in support of Respondent's position that the amounts in question are subject to self-employment tax. The most recent case relied upon by Respondent is Cicciari v. Commissioner, 2003 Tax Court Memo, which is located at 85 Tax Court Memorandum Decisions 1515. The Cicciari case also involved a police officer who provided outside security services, and related to the same question, whether such services were subject to self-employment tax under Section 1402 (a) . The Court first -noted that self-employment tax does not apply to compensation paid to an employee. Section 1402 (c) (2) . Section 3121(d) (2) defines an employee, and that definition is adopted for self-employment tax purposes under Section 1402(d). Whether an individual is an employee or an independent contractor is a question of fact, determined based upon common law principles. Hospital Resources Personnel Inc. v. Uni'ted States, 68 F. 3d Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 421, 424 (11th Circuit 1995). Various factors are considered in analyzing the question that is before us in this case, but no single factor controls the analysis. Weber v. Commissioner, 103 T.C. 378 (1994) affirmed 60 F. 3d 1104 (4th Circuit 1995). In Cicciari, the Court considered four factors in holding that an employee of the Tallahassee Police Department was not acting as an employee of the police department in providing the outside services. The four factors were whether the police department controlled the activities, whether the employees of the Tallahassee Police Department were paid directly by the parties for whom they provided the outside services, whether the recipients of the outside services directly benefitted from the off-duty activity, whether the police officers could be dischazged at will. The court concluded thats although some of the general factors in the case, such as the pay rate, which was controlled by the Tallahassee Police Department, and the agreement that the police officer could be called at any time to perform official duties, even while performing the off-duty activities, would seem to indicate that the off-duty services were done as an employee, that these were not enough to Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 establish that the police officer's activities were as an employee of the Tallahassee Police Department. The court noted that the police officers provided security services which directly benefitted the outside parties. We looked at these four factors as guidance, at least as a preliminary matter, in the present case. First, we note that there is a significant difference between some of the services that Mr. Chandler provided to the outside'parties in the present case and those provided by the police officer in this Cicciari case. Only CarMax received security services on CarMax's location, and those services do seem to be clearly similar to the services in the cases cited by Respondent. Therefore we do hold that with respect to the compensation Mr. Chandler received from CarMax in the amount of $1,125, he is subject to self-employment tax, and that self-employment tax should be paid with respect to the joint income tax liabilities of the Petitioners for 2007 on the amounts received from CarMax. However, as stated, we note that the other services provided, with the exception of the Burgeron Land Development, Inc. services, for which there is insufficient information, were actually provided not Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 on the premises of the third parties, but rather on local streets, or in the case of the KPAK Enterprises, Inc. services, on the Florida Turnpike. We also note that another distinguishing factor from the Cicciari case is that^ in the case of the Flamingo Road Baptist Church and the KPAK Enterprises Services, the services were required by local or state authorities. And while there was some benefit to the third parties in that they were meeting the requirements of local and state authorities, and in the case of the church were arranging for their parishioners to come and go from the church, the Florida Highway Patrol and the state of Florida in general benefitted in that management of the roads of the state were done in conformity with the laws of the state, which is generally the benefit obtained by the services of the trooper of the Florida Highway Patrol in connection with monitoring the streets and highways of the state. So we find with respect to the Flamingo Road Baptist Church services and the Ikea North America Services, Inc. that the services performed by Mr. Chandler are distinguishable from the cases cited by Respondent, and we find that those services were conducted as an employee of the Florida Highway Patrol. So those services in the amount of $17,865 Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13 and $3,442.50 respectively are not subject to self- employment tax. With respect to the KPAK Enterprises Services, the amount was $10,935, and that amount likewise is not subject to self-employment tax since it was primarily to maintain safety on the Florida Turnpike. Petitioners now carry this burden as to the nature of the activities for Burgeron Land Development, and those amounts, in the amount of $607.50, are subject to self-employment tax based upon the record before us. A Rule 155 computation will be necessary to determine the actual amount of self-employment tax owed by'the Petitioner based upon this opinion. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 3:02 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // Heritage Reporting Corporation (202) 628-4888 .