Court Opinion

ID: 4604909
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:35:13.861287+00
Date Added: 2024-06-11T07:53:05.320124
License: Public Domain

MARTN P. O'CONNOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.O'Connor v. CommissionerDocket No. 74383.United States Board of Tax Appeals35 B.T.A. 402; 1937 BTA LEXIS 881; February 5, 1937, Promulgated *881 Held, that during the year 1931 the petitioner, as counsel for the board of education of the city of Elizabeth, New Jersey, was an employee of such board and that the compensation received by him therefrom is not subject to the Federal income tax.  Martin P. O'Connor, Esq., pro se.  L. W. Creason, Esq., for the respondent.  HARRON *403  This is a proceeding for the redetermination of a deficiency in income tax for the calendar year 1931 in the amount of $150.85.  It is alleged that the respondent erred in including in petitioner's taxable income the amount of $3,500 representing salary received by petitioner as counsel of the board of education of the city of Elizabeth, New Jersey.  FINDINGS OF FACT.  The petitioner is an attorney at law, residing at Elizabeth, New Jersey.  During the year 1931, petitioner received $3,500 as compensation from the board of education of the city of Elizabeth, New Jersey.  The board of education of the city of Elizabeth, Union County, New Jersey, is a public corporate body existing by virtue of the constitution and laws of the State of New Jersey.  Section 50 of Public Laws, 1903 (2d sp. sess.) provides*882  that every board of education "may appoint a superintendent of schools, a business manager and other officers, agents and employes as may be needed * * *." Section 51 provides that any such board shall make regulations and bylaws for its own government and transaction of business, and for the government and management of public schools.  Chapter 215 of the Laws of New Jersey, 1920, provides, that, in addition to any official oath that may be specially prescribed, every person thereafter elected or appointed to any public office shall take and subscribe to a certain designated oath.  The petitioner's employment by the board of education commenced in 1921 pursuant to a resolution adopted by the board of education on December 29, 1920.  The "Rules of Government of the Board of Education of Elizabeth, N.J." adopted January 27, 1921, set forth the duties of the president of the board, vice president, secretary, counsel, superintendent, principals, teachers, janitors, and all other employees.  Rule 12, "Counsel and His Duties", states as follows: The counsel to the Board shall be the advisor of the Board and its officials upon questions arising in relation to their official duties and*883  shall give his opinion on all legal questions referred to him by the Board and its officials.  He shall prosecute and defend as Attorney of the Board, any action or suits in which the Board is a party; he shall prepare all instruments necessary to be executed by the Board and shall, if called upon by the Board, approve all instruments presented to the Board.  He shall perform such other legal duties as the Board may prescribe from time to time.  At a meeting of the board of education held on July 12, 1928, petitioner's annual compensation was fixed at $3,500.  *404  The petitioner took the oath prescribed by chapter 215 of the laws of 1920 and filed it with the secretary of the Board of education.  Petitioner has continuously occupied the position of counsel for the board of education since 1921 through 1931 and up to the present.  The board is a noncontinuous board, organized annually.  There was no written agreement of any kind between the board of education and the petitioner.  Petitioner's work for the board was in accordance with the duties outlined in rule 12, above, requiring his training and experience as a lawyer.  The board of education specifically directed*884  what matters the petitioner should work upon, and he prepared matters for the board in accordance with legal requirements.  The board did not always act upon his judgment or recommendations.  The board had the right of control over all petitioner's activities for it.  Petitioner devoted to the affairs of the board of education all the time which was required.  He was not required to keep regular office hours.  Petitioner, in 1931, maintained a law office and engaged in that year in the general practice of law in addition to his work with the board, but the work required by the board took precedence over his other work.  His income in 1931 from other activities amounted to $17,065.95.  The board did not furnish the petitioner an exclusive office, but he used the board's office.  Petitioner's services to the board were rendered at various places, some in his own private office, some in the office of the secretary of the board, some in the office of the superintendent of schools, some in the manager's office, and some in the court room.  It was a matter of accommodation and convenience.  The petitioner reported the sum of $3,500 in his income tax return for 1931 as income and deducted*885  the same amount on the theory that it was not taxable income.  The respondent, in determining the deficiency in question herein, disallowed the deduction and included such amount in petitioner's net taxable income.  OPINION.  HARRON: The question presented is whether the compensation of the petitioner as counsel for the board of education of Elizabeth, New Jersey, is exempt from tax under the implied constitutional prohibition against the taxation by the Federal Government of the instrumentalities of a state.  This depends upon whether the petitioner was an office or employee of the board of education or was merely an independent contractor. . No question is raised as to whether the duties performed by petitioner on behalf of such board were performed in connection with the exercise of an essential or usual governmental function, but *405  it has been held that the operation of public schools is an essential governmental function.  , and *886 . We find it unnecessary to determine whether the petitioner was an officer of the board in the taxable year, since we are satisfied and hold that he was an employee thereof.  In Louisville, etc., ., the supreme Court defined "officers" and "employees" as follows: The terms "officers" and "employees", both, alike, refer to those in regular and continued service.  Within the ordinary acceptation of the terms, one who is engaged to render service in a particular transaction is neither an officer nor an employee.  They imply continuity of service, and exclude those employed for a special and single transaction.  An attorney of an individual retained for a single suit, is not his employee.  It is true, he has engaged to render services; but his engagement is rather that of a contractor than that of an employee.  In the instant proceeding the petitioner was appointed by the board of education, pursuant to statutory authority, and his duties were prescribed in regulations of the board promulgated pursuant to statutory authority.  He was not employed for a special or single*887  transaction.  He was in regular and continual service of the board of education.  The board of education controlled or had the right to control his actions, thus characterizing his relation to the board as that of an employee rather than that of independent contractor.  The case of , is quite similar to the instant proceeding and is governing in principle.  We there held that compensation received by the taxpayer from a poor district and from a school district in the State of Pennsylvania is exempt from taxation, the taxpayer being held to be an employee of such districts.  In that proceeding we found as a fact that the taxpayer was under the direction and control of the boar of directors, except as to legal procedure necessary to accomplish desired results.  The same situation exists in the instant proceeding.  We there stated in part: The duties of the petitioner were continuous and embraced all the ordinary legal services required by the districts.  The respective boards of directors had the right to demand all of the petitioner's time for the rendition of services within the scope of his employment.  The fact that they did*888  not utilize all of his time and that the petitioner conducted a private law practice during his spare time is not controlling.  Neither is it fatal to the petitioner's claim that he relied on his own ability as a lawyer to carry out duties assigned him.  ; ; . There was present at all times the right to control the petitioner's activities, which distinguishes an employee from an independent contractor.  . See also the following cases, which are governing in principle: ; ; *406 ; ; petition to review dismissed, March 27, 1936, by the United States Circuit Court of Appeals for the Third Circuit; ; *889 ; and . In each of those cases, except Joseph J. Sullivan, the taxpayer carried on a private law practice and in some instances the income therefrom far exceeded the income from employment by a governmental instrumentality.  Here, as in the Coughlin case, we are of the opinion that petitioner's claim is not invalidated by the fact that petitioner conducted a private law practice in his spare time, or that he exercised his specialized skill as a lawyer in carrying out his duties.  The instant proceeding is clearly distinguishable from such cases as , reversing ; , reversing ; and , in each of which cases the taxpayer was an independent contractor engaged to accomplish some specified object or objects, and where there were not continuing general duties and supervision or right of supervision thereof*890  which obtain in the instant proceeding.  We hold that the compensation in question is not subject to the Federal income tax.  Decision will be entered under Rule 50.