Court Opinion

ID: 4480522
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:22.394912+00
Date Added: 2024-06-11T14:53:39.706439
License: Public Domain

Tannbnwald, J., dissenting: I believe that in determining whether to follow the decision of the Court of Appeals in Commissioner v. Wolfe, 361 F. 2d 62 (C.A.D.C. 1966), the majority has been unnecessarily inhibited by prior decisions construing the language “except amounts paid by the United States or an agency thereof” contained in section 911 (a) (2). Granted that there may be uncertainties in the applicability of the statutory exception in other situations, the legislative history reveals that Congress intended that employees of the U.S. Government who were bona fide residents of a foreign country should continue to be subject to U.S. income tax. See S. Kept. Dio. 665, 72d Cong., 1st Sess. (1932), p. 31, 1939-1 C.B. (Part 2) 496, 518; 75 Cong. Kec. 10410. And, at the time the 18-month presence-in-a-foreign-country rule was engrafted on the statute in 1951, Congress included the same language of exception and specifically indicated that it realized that it was doing so. H. Kept. lío. 1213,82d Cong., 1st Sess. (1951), p.77,1951-2 C.B. 622,630. I have no quarrel with the majority conclusion that the United States was a paymaster of the funds. My difficulty stems from the fact that the majority test stops there and makes taxability depend upon whether or not there is a trust fund or whether the reimbursement is pursuant to an anterior obligation or comes after the fact. To me, the test of taxability should not turn solely upon such fine points. To the extent that our earlier decision in Eldon E. Wolfe, 43 T.C. 572 (1965), reversed by Commissioner v. Wolfe, supra, holds otherwise, I would not follow it and would adopt the reasoning of the Court of Appeals. Cf. Rev. Rul. 54-483, 1954-2 C.B. 168, where respondent ruled that employees of contractors with the United States residing 'abroad were not covered by the exception and were entitled to the benefit of the exclusion, even though their compensation was paid directly by the U.S. Government. Cf. also Rev. Rul. 67-85, I.R.B. 1967-12, 5. Clearly, in this case the United States was much more than a paymaster of the funds. Moreover, the Bureau of Public Roads was not a mere recruiter of personnel for the Government of Iran. There can be no serious argument that petitioner herein lacked the status of an employee of the Bureau. He worked on a project for which the Bureau had contracted its services and he was under the direct supervision of the division engineer, who, as an employee of and on behalf of the Bureau, was the primary instrument for seeing that the Bureau’s responsibilities were properly discharged. To be sure, he was not a regular civil service employee, but he was entitled to the benefit of several laws applicable to employees of the Federal Government — albeit not including those providing health insurance or retirement benefits. Beyond this, petitioner obtained the distinct advantage that the U.S. Government was responsible for the payment of Ms salary in dollars.1 By means of an excepted appointment, petitioner avoided all the risks of change of government, convertibility, and devaluation wliich would have existed if he had accepted employment directly by the Government of Iran. Having chosen to obtain these benefits (as well as the benefit of being relieved of taxation by Iran), petitioner should not be heard to complain. In 1932, when the exception first entered the law, Congress con-cededly was thinking only of full-time, regular employees of the United States. The unquestioned need for incentives to enable the Federal Government to recruit personnel to help implement our foreign economic policy came at least 15 years later. It may well be that these incentives should include the tax benefit which petitioner herein claims. But the applicable statute does not differentiate between types of Federal employees and I do not think that we Should draw distinctions based upon a legislative 'history which fails to take into account a then nonexistent problem. Nor do I think that congressional silence over the years should be turned into an affirmative blessing of the majority result, a suggestion advanced by Judge Fahy in his dissenting opinion in Commissioner v. Wolfe. See 361 F. 2d at 69. This is particularly true where every decision on the point prior to 1964 ( when Congress last dealt with sec. 911), with the single exception of a District Court decision (Krichbaum v. United States, 138 F. Supp. 515 (E.D. Team. 1956)), imposed taxability.2 Nor do I think it without significance that the legislative trend since 1951 has been steadily to narrow the exclusion for earned income from sources without the United States. Technical Changes Act, 67 Stat. 615 (1953), sec. 204 (a); Bevenue Act of 1962, Pu!b. L. 87-834, 76 Stat. 960, sec. 11; Revenue Act of 1964, Pub. L. 88-272, 78 Stat. 19, sec. 237 (a). In all the decided cases, except the most recent, there was a coalescence (either directly or in the capacity of a principal of a disclosed agent) of the appointing authority, the obligor of payment, and the ultimate provider of the funds. Perhaps where the status of the taxpayer as an employee of the United States does not exist or is in doubt, additional elements of the situation should be examined. But this is not our case. Where the taxpayer is clearly such an employee and receives his paycheck from the United States, I think we should look no further. PeeROe and Dbennen, JJ., agree with this dissent.   I doubt that, if the Government of Iran had failed to honor its obligations to the Dollar Working Fund, petitioner could have been denied the right to be paid his salary between the time of such default and the actual termination of petitioner’s services by the Federal Government.   Erlandson v. Commissioner, 277 F. 2d 70 (C.A. 9, 1960) ; Lawrence P. Dowd, 37 T.C. 399 (1961) ; Robert W. Teskey, 30 T.C. 456 (1958) ; Leif J. Sverdrup, 14 T.C. 859 (1950).