Court Opinion

ID: 4617224
Source: CourtListenerOpinion
Date Created: 2020-11-21 02:36:08.358254+00
Date Added: 2024-06-11T07:55:16.111749
License: Public Domain

GEORGE TROSK, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Trosk v. CommissionerDocket Nos. 76256, 77204.United States Board of Tax Appeals35 B.T.A. 681; 1937 BTA LEXIS 847; March 12, 1937, Promulgated *847  Petitioner, an attorney, was appointed associate counsel by the Joint Legislative Committee of the State of New York, which was conducting an investigation of the governmental structure of the city of New York.  He was appointed for the duration of the investigation at a fixed monthly salary, with the agreement that he would devote all of his time to the work of the committee.  He devoted all of his time to the work of the committee and gave up his private law practice.  His work was controlled and directed by the committee.  Held, petitioner was an employee of the State of New York and the salary received from the state was immune from Federal income tax.  George Trosk, Esq., pro se.  James H. Yeatman, Esq., for the respondent.  HARRON *681  These proceedings involve deficiencies in income tax determined by the respondent for the years 1931 and 1932 in the respective amounts of $565.48 and 452.69.  These cases were consolidated for hearing with two other cases, 1 but additional facts present in those *682  cases require the rendition of separate opinions.  The sole issue presented is whether the respondent erred in adding to the income*848  reported by the petitioner for the taxable years the compensation which the petitioner received from the State of New York for services rendered to the Joint Legislative Committee appointed by the state legislature to investigate and report on the administration and conduct of the various departments of the government of New York City.  FINDINGS OF FACT.  The petitioner is an attorney at law of the State of New York.  Prior to the taxable years he practiced law in New York, City, in the office of Samuel Seabury.  He was employed on a salary basis plus additional compensation based on earnings of the law office.  He had the privilege of conducting a private law practice from which he retained all the income.  In 1930 his income from his law practice was approximately $21,000.  His average income from law practice had been close to this amount over several years immediately preceding 1931.  On June 1, 1931, the petitioner was appointed as an associate counsel for the Joint Legislative Committee of the State of New York for the investigation of the affairs of New York City.  Shortly after the*849  committee was organized it employed Seabury as its counsel and soon thereafter the committee retained the petitioner as associate counsel at a compensation of $1,000 a month beginning on June 1, 1931.  The petitioner was engaged by the committee for the duration of the investigation.  The life of the committee extended over a period from March 23, 1931, to February 1, 1933.  Most of the investigation was concluded June 30, 1932.  He was engaged continuously in the work of the committee from June 1, 1931, to June 30, 1932.  The committee had been created by joint resolution of the Senate and Assembly of the State of New York adopted March 23, 1931, for the purpose of conducting "a thorough-going investigation of the governmental structure of said city, whereby the Legislature may be adequately informed as to the conditions existing in said city, the causes thereof, and the advisability of remedial legislation." By the terms of this resolution the committee consisted of three members of the Senate and four members of the Assembly of the State of New York, and it was empowered: * * * to investigate, inquire into and examine the administration and conduct of the various departments*850  of the government of theCity of New York, its boroughs and including the administration and conduct of the government of the counties geographically included within said city, the State and local courts therein, the Board of Transportation established by and pursuant to Chapter 573 of the Laws of 1924, the Board of Education and all other Educational Agencies in or connected with said city, and all other agencies of government *683  in or connected with the government of the City of New York; and to investigate all matters and things affecting the methods and practices relating to the appointment, nomination, election and promotion in or to public office or employment in such said city, counties, courts, boards or other agencies exercising governmental functions in or connected with the said city, the circumstances of employment, appointment, nomination, election or promotion of any official or employee of said city, counties, courts, boards or other agencies above mentioned; and in general to investigate, inquire into and examine into every matter and thing whatsoever that affects the past, present or future conditions concerning or in any way bearing upon or relating to the*851  structure, conditions and administration and the conduct of the municipal government in such city, and of the government of the counties geographically included therein, and of the administration of justice in such city and counties and of all other agencies of government in or connected with the government of said city.  The resolution further provided: * * * The investigation of said committee may include every other matter and thing not specifically mentioned in this resolution deemed by the committee relevant to the general question of ascertaining and improving the administration, conditions and conduct of such government and courts, as though the same had been expressly specified herein.  * * * The said committee shall have full power and authority and it shall be its duty to prosecute its inquiries in any and every direction and by any and every means, in its judgment necessary or proper to enable it to obtain information in regard to and report upon the matters contemplated by this resolution.  The committee was given power to take testimony at public or private hearings; to subpoena witnesses and compel the production of books, documents, and papers; by a majority*852  vote to punish for contempt; and to administer the oath to witnesses.  It was further empowered "to employ a secretary, counsel, accountants, investigators and such other assistants as it may deem necessary" and "to fix the compensation of its counsel, secretary and other assistants, and to engage suitable office or offices for the conduct of its investigations * * *." The resolution appropriated $250,000 or so much thereof as might be necessary for the expenses of the committee to be paid out of the state treasury on vouchers approved and audited according to law.  The committee was directed to report its conclusions to the legislature with all convenient speed but not later than February 1, 1932.  This date was later extended by joint resolution of the State senate and assembly to February 1, 1933, because the investigation was not completed by the earlier date.  Petitioner's work for the committee consisted of passing upon questions of law which arose in the course of investigation; in writing briefs; in appearing in the courts in the first and second judicial districts and the Court of Appeals in Albany; in examining witnesses *684  at private hearings of the committee, *853  and in assisting Seabury in the conduct of the public hearings which were held by the committee.  There were 37 such public hearings at which 173 witnesses were examined and 5,216 pages of testimony taken.  The petitioner was present throughout these hearings and actively participated therein.  seabury examined witnesses in public hearings.  The petitioner assisted him during these hearings.  The petitioner and other members of the staff conducted many private hearings where a total of some 2,260 persons were examined and 46,968 pages of testimony were taken.  In addition he was required to study numerous documents, books of account, and similar papers, and the evidence obtained from the witnesses.  The committee had the power of subpoena and under this power attorneys working for the committee could subpoena witnesses and compel the production of books and records.  The work of counsel was supervised by the committee.  This was effected by frequent conferences between Seabury and the chairman of the committee wherein it was determined what lines the investigation should take, what witnesses should be examined, and which of the witnesses examined in private hearings should be called*854  at public hearings.  When the chairman of the committee approved Seabury's plans and proposals they were authorized and carried out.  When the chairman did not, they were not carried out.  In all respects the judgment of the committee was controlling.  That judgment, authorization, and direction governed the petitioner and all other counsel.  The petitioner had direct contact with members of the committee in which they would give him instructions with respect to specificsubject matter and mathods of investigation.  Petitioner reported directly to the committee members on those subjects.  The committee determined what work was to be done and what channels the investigation should follow, but the petitioner used his own discretion in applying his legal skill to such matters as writing briefs and examining witnesses.  The petitioner was instructed at the time he was retained that he would be required to give all his time and attention to the work of the committee and that he would have no time for private practice.  The work did require all of his time as it was an undertaking of great magnitued.  The petitioner and other counsel very frequently worked until midnight and on Saturdays*855  and Sundays.  The petitioner completely gave up his private practice during the period from June 1, 1931, to June 30, 1932, except for some inconsequential work for his family which resulted in a fee of $50 in 1931 and $57 in 1932.  He was paid no compensation by Seabury.  His only compensation received during this period for work performed within the period was the $1,000 a month received from the state.  He did *685  receive during that period fees totaling $7,850, but these fees were for work performed before entering on his services for the committee, and $50 from an attorney to whom he had referred a client.  Offices for the committee and all of its counsel and employees were furnished without cost in the State Office Building at 80 Centre Street in New York City.  Office furniture, supplies, and other requirements were supplied by the state without expense to counsel.  All of the counsel and employees of the committee worked in this building.  The petitioner did not use his private law office for any private purpose between June 1, 1931, and June 30, 1932.  On a few occasions he interviewed witnesses there as a part of the investigation, particularly important public*856  officials whose presence at the official committee offices in the State Building would have caused them undesired publicity.  At these examinations the testimony would be taken by one of the regular stenographers in the employ of the committee.  The petitioner and all others who worked for the committee, attorneys, clerks, stenographers, accountants, office boys, signed each month the regular state pay roll on the printed form prepared and supplied by the state, and after signing it they were paid upon regular vouchers supplied by the state comptroller which were approved by the president pro tem of the senate and the speaker of the assembly.  No deductions were made from the petitioner's salary under the New York Civil Service Employees' Retirement Act, as he was not a civil service employee subject to the provisions of that act.  Seabury did not sign a pay roll, but was paid separately pursuant to a separate resolution of the legislature.  Before entering on his duties petitioner executed an oath of office.  OPINION.  HARRON: The petitioner contends that he was an employee of the State of New York and that consequently compensation received from the State of New York is not*857  subject to Federal income tax.  Respondent concedes that the Joint Legislative Committee was an instrumentality of the state and that the conduct of the investigation of the administration of the government of New York City was the exercise of an essential governmental function, but the respondent contends that this petitioner and others whose petitions were consolidated for hearing with this proceeding, were not employees but were independent contractors.  It is contended that the Joint Legislative Committee did not control the work of petitioner so as to bring him within the status of an employee.  The sole question is whether petitioner was an employee of the State of New York, for, if he was, compensation paid to him would not be subject to Federal income tax.  *686  The facts have been set forth at length.  It is noted that petitioner was appointed by the Joint Legislative Committee at a fixed monthly salary for the duration of the investigation, with the understanding that he would devote all of his time to the work of the committee.  Petitioner served the committee continuously from the date of his appointment until the conclusion of the investigation and gave up his*858  private law practice and the use of his private law office.  He was not the general counsel of the committee, but one of several assistants, and his work consisted of carrying on the routine work of the investigation as directed by the committee.  In these and in other respects this proceeding is distinguishable from the cases relied on by the respondent, namely, , where the petitioner was the general counsel in whose control the legislative investigation rested, who was engaged to accomplish certain objectives, who was not in fact restricted from engaging in other work, and whose compensation was not fixed; ; ; affd., ; ; ; . To determine whether the employee relationship exists, it is fundamental that control or the right of control by the employer over the alleged employee exists.  See*859 . In the instant proceeding the investigation of the governmental structure of the city of New York was made by the Joint Legislative Committee empowered by the state legislature to make the investigation.  It is evident that the magnitude of the investigation required that the committee obtain assistants in order that the investigation could be made and the legislature appropriated a maximum of $250,000 to meet expenses of the committee.  The committee, with the aid and advice of its general counsel, Seabury, mapped the course of the investigation.  It conducted the public hearings and determined what witnesses examined in private hearings should be called for public hearing.  The investigation was not turned over to this petitioner nor to any staff of lawyers. The committee determined what work was to be done and the methods to be used.  Petitioner received assignments of work from the committee and had the general task of doing the work.  He reported on his work to the committee.  His work was performed in the name of the committee and he was not free to act on his own determination.  This serves to distinguish this case*860  from . The petitioner exercised his own judgment in the use of his professional skill, but this does not prevent his occupying the status of an employee if his work is controlled and directed by his employer.  It is also noted that petitioner was not engaged to *687  perform any one or several specific tasks or arrive at any definite result, but rather was required to do the routine work of the investigation and his work developed as the investigation progressed.  In this respect this proceeding is distinguishable from . In our opinion the Joint Legislative Committee exercised continuous control and supervision over petitioner's services as to what should be done and the methods to be used and had exclusive command over all his time so as to bring petitioner within the status of an employee.  See ; ; ; *861 , and cases cited therein.  This case is distinguishable on facts from . The petitioner occupied an office furnished by the stated and all supplies and stenographic and clerical help were furnished by the state.  He signed the state pay roll each month and was paid on vouchers of the state comptroller out of the state treasury.  These factors are also material characteristics of an employee.  It is held on the evidence that petitioner was an employee of the Joint Legislative Committee and therefore of the State of New York, so that the compensation he received from that state, during the taxable years, is immune from Federal income tax.  Reviewed by the Board.  Judgment will be entered for the petitioner.Footnotes1. William B. Northrop, Docket No. 77959, and Philip W. Lowry, Docket No. 76775. ↩