T.C. Memo. 1999-57
UNITED STATES TAX COURT
WILLIAM E. LEVESQUE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 22348-95. Filed March 1, 1999.
William E. Levesque, pro se.
Carmino J. Santaniello, for respondent.
MEMORANDUM OPINION
COLVIN, Judge: Respondent determined a deficiency in
petitioner's income tax of $1,836 for 1992. The issues for
decision are:
1. Whether pension payments of $7,1011 that petitioner
received from his former municipal employer (Pawtucket, Rhode
Island) in 1992 are excludable from gross income under section
1
This amount is rounded to the nearest dollar.
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104(a)(1) as amounts received under a worker's compensation act
or a statute in the nature of a worker's compensation act. We
hold that they are not.
2. Whether the $7,101 is excluded from income for 1992 on
the grounds that Pawtucket and respondent violated the Americans
with Disabilities Act of 1990 (ADA), Pub. L. 101-336, sec. 2, 104
Stat. 328 (current version at 42 U.S.C. sec. 12101 (1994)). We
hold that it is not.
3. Whether including the $7,101 in petitioner's income is
unfair discrimination. We hold that it is not.
The parties submitted this case fully stipulated. Rule 122.
Section references are to the Internal Revenue Code. Unless
otherwise indicated, Rule references are to the Tax Court Rules
of Practice and Procedure.
Background
A. Petitioner
Petitioner lived in the city of Pawtucket, Rhode Island
(Pawtucket), when he filed the petition in this case. He was
born on May 11, 1935.
Petitioner began employment as a firefighter with Pawtucket
on May 14, 1961. During his career as a firefighter, petitioner
received several promotions and rose to the rank of lieutenant.
He was a member of the International Association of Firefighters,
Local No. 1261 (the union) from 1961 to September 4, 1992.
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B. Petitioner's Disability Pension
Pawtucket and the union had a collective bargaining
agreement that covered July 1, 1991, to June 30, 1993 (the
firefighter agreement). As a member of the union, petitioner was
entitled to receive pension benefits under article II, sections
59-14 to 59-28.1 of the Pawtucket City Code, entitled
"Firefighters' and Police Pension Fund".
Section 59-20 of the Pawtucket City Code provides that a
firefighter may retire after completing 20 years of service and
receive a regular service pension equal to 50 percent of his or
her average 3 highest years' salary. Firefighters who retire
after more than 20 years of service may receive an additional
retirement benefit under section 59-21 of the Pawtucket City Code
of 2 percent for each year of service over 20 years, but not more
than an additional 5 years, with a maximum retirement benefit of
60 percent. The firefighter agreement has identical provisions.
Under section 59-24.A of the Pawtucket City Code, police
officers and firefighters who become totally and permanently
disabled may receive disability pensions equal to 66-2/3 percent
of their highest years' salaries. However, section 59-24.B of
the Pawtucket City Code provides that a disability pension
received under section 59-24.A of the Pawtucket City Code
converts to a regular service pension when the employee reaches
his or her normal retirement date "as though he or she had not
been disabled." Thus, an employee who becomes disabled after
completing 25 years of service is not entitled to a 66-2/3-
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percent disability pension and instead receives a 60-percent
pension under section 59-21 of the Pawtucket City Code. The
firefighter agreement has identical provisions.
Petitioner could not work from January 2, 1991, to March 12,
1992, because of a work-related injury. During that time,
petitioner received his regular wages from Pawtucket under the
firefighter agreement.
On March 12, 1992, Martin E. Joyce, Jr. (Joyce), Pawtucket's
director of human resources, notified petitioner that he would
automatically be placed on a service retirement if he did not
return to work by July 2, 1992. Petitioner never returned to
work as a firefighter.
On March 20, 1992, Joseph E. Burns (Burns), Pawtucket's
acting fire chief, wrote a letter to petitioner in which he
stated in part:
You are hereby notified that you have been out injured
since 1/2/91. On July 2, 1992 you will reach 18 months
on disability and you have to return to work prior to
20 months of disability or you will be placed on
service retirement.
On August 18, 1992, Burns wrote a letter to petitioner in
which he said:
On September 2, 1992, your 20 months on disability will
be exhausted.
According to the contract agreement between the City of
Pawtucket and Local #1261, disability pension benefits
only apply to those with under 25 years of service.
Because you have over 31 years of service with the fire
department, please contact the Human Resource
Department to file for your retirement in accordance
with the benefits of your contract.
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On September 1, 1992, Raymond W. Houle, Jr., Pawtucket's
director of public safety, wrote a letter "to whom it may
concern" in which he stated:
In accordance with the Collective Bargaining
Agreement between the City of Pawtucket and Local 1261,
International Association of Fire Fighters, Article XV,
Section 3 and Section 6 and also the Charter of the
City of Pawtucket, specifically, the revised
ordinances, Chapter 23, Section 23-2.2 Paragraph B.
Lieutenant William E. Levesque is hereby placed on
disability retirement on the normal retirement list for
Fire Fighters due to fact that he has been out 18
months on a service connected disability. Please
contact the Human Resources Division to fill out all
necessary paperwork in order that it can be processed
in a timely manner.
On September 4, 1992, Jack Rahill (Rahill), Pawtucket's
director of finance, wrote to Joyce about petitioner's service
retirement. Rahill stated in part:
Pursuant to c.1406 of the ordinance of the City of
Pawtucket, approved 06/29/73 and the current bargaining
agreement between the City of Pawtucket and the
I.A.F.F., the following figures are submitted for your
records. To insure accuracy please compare this data
with your calculations and notify me as soon as
possible of any errors in omission, calculations or
interpretation.
Rahill calculated petitioner's pension benefits on the basis
of the following information. On September 4, 1992,2 petitioner
had 31 years and 3 months of service as a firefighter. Pawtucket
awarded to petitioner a pension under section 59-21 of the
Pawtucket City Code equal to 60 percent of his average 3 highest
years' salary because he had more than 25 years of service when
2
The parties stipulated that petitioner had 31 years and 3
months of service as of Sept. 4, 1991. However, Exhibits 5-E and
7-G show that the correct date is Sept. 4, 1992.
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he retired. Rahill calculated that petitioner's annual pension
benefit was $22,038.37 ($36,730.62 x 60%). His monthly pension
benefit was $1,836.53.
On September 8, 1992, Joyce wrote a letter to Benefit Plan
Services of State Street Bank & Trust Co. about petitioner's
retirement, stating:
Mr. William E. Levesque has retired from the City of
Pawtucket effective September 4, 1992.
Mr. Levesque is entitled to a partial check in the
amount of $1,591.72 for the month of September only and
all subsequent checks will be for the full pension
amount of $1,836.53.
Please forward Mr. Levesque's pension checks to:
119 Hunts Avenue
Pawtucket, RI 02861
Mr. Levesque's monthly pension amount is $1,836.53. He
will receive a cost of living every September 1st of
1.5%. Mr. Levesque has elected to have no Federal or
State Tax deductions from his monthly pension check.
If you have any questions pertaining to this
correspondence, please contact this office.
In 1992, petitioner received pension payments from Pawtucket
totaling $7,101. That amount equaled 60 percent of his pay from
his retirement date to December 31, 1992.
C. Petitioner's Tax Return
Petitioner timely filed his 1992 Federal income tax return
in which he reported income and deductions for the taxable year
1992 using the cash receipts and disbursements method of
accounting. Petitioner attached a copy of Form 1099-R to his
1992 Federal income tax return. It showed that he had received
the $7,101. Petitioner did not include any of that amount in his
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1992 gross income. He attached the following statement to his
return:
Compensation received by the taxpayer, a firefighter
injured in the line of duty, and paid as mandated by
section 45-19-1 of the General Laws of Rhode Island,
1954 as amended, is excluded from gross income under
I.R.C. section 104(a) and regulation section 1.104-
1(b).
Discussion
A. Exclusion Under Section 104(a)(1)
1. Background
Respondent determined and contends that petitioner's pension
payments of $7,101 for 1992 should be included in income.
Petitioner contends that his pension payments of $7,101 for 1992
are excludable from gross income under section 104(a)(1). We
agree with respondent.
Section 104(a)(1) provides that gross income does not
include amounts received under worker's compensation acts as
compensation for personal injuries or sickness. For benefits to
qualify for exclusion under section 104(a)(1), the worker's
compensation act at issue must restrict benefits to work-related
personal injuries or sickness. See Rutter v. Commissioner, 760
F.2d 466, 468 (2d Cir. 1985), affg. T.C. Memo. 1984-525; Take v.
Commissioner, 82 T.C. 630, 634 (1984), affd. 804 F.2d 553 (9th
Cir. 1986); Haar v. Commissioner, 78 T.C. 864, 868 (1982), affd.
per curiam 709 F.2d 1206 (8th Cir. 1983). If a statute under
which benefits are paid does not restrict benefits to work-
related personal injuries or sickness, the fact that the claimant
was injured on the job or in the line of duty is irrelevant. See
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Rutter v. Commissioner, supra; Green v. Commissioner, T.C. Memo.
1994-264, affd. 60 F.3d 142 (2d Cir. 1995); Curmon v.
Commissioner, T.C. Memo. 1991-432. Disability payments received
under a collective bargaining agreement are not excludable under
section 104(a)(1). See Rutter v. Commissioner, supra at 468;
McDowell v. Commissioner, T.C. Memo. 1997-500.
Petitioner bears the burden of proving that respondent's
determination is incorrect. See Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
2. Analysis
Petitioner did not include in income the $7,101 in pension
payments that he received from Pawtucket in 1992. Petitioner
contends that the disability payments were in lieu of worker's
compensation because he had been injured on the job and forced to
retire. Petitioner contends that he is being penalized for 31
years of dedicated service because he can no longer work because
of job-related injuries. We disagree. Those payments were at
the regular retirement rate of 60 percent of petitioner's average
3 years' highest salary under section 59-21 of the Pawtucket City
Code because he had more than 25 years of service when he
retired. His pension payments were not made under a statute in
the nature of a worker's compensation act, and section 104(a)(1)
does not apply. Section 59-21 of the Pawtucket City Code did not
provide that petitioner would be paid only if he had work-related
injuries. Thus, the pension payments of $7,101 that were made
under section 59-21 of the Pawtucket City Code are not in lieu of
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worker's compensation for purposes of section 104(a)(1). See
Rutter v. Commissioner, supra; Green v. Commissioner, supra;
Curmon v. Commissioner, supra.
In Mabry v. Commissioner, T.C. Memo. 1985-328, and Wiedmaier
v. Commissioner, T.C. Memo. 1984-540, affd. 774 F.2d 109 (6th
Cir. 1985), the taxpayers initially received disability payments
but were later transferred to a general service pension computed
on the basis of the number of years of service. We held that the
benefits became taxable when each taxpayer was transferred to a
general pension. Petitioner did not initially receive 66-2/3-
percent disability pension payments, and so this situation is, if
anything, stronger for respondent than that in Mabry v.
Commissioner, supra, or Wiedmaier v. Commissioner, supra.
In Picard v. Commissioner, ___ F.3d ___ (9th Cir., Jan. 26,
1999), revg. T.C. Memo. 1997-320, the U.S. Court of Appeals for
the Ninth Circuit held that pension benefits paid to a disabled
worker remained excludable under section 104 where the pension
was reduced, but the taxpayer was not transferred from a
disability pension to a general pension. We need not consider
the holding of the Court of Appeals in Picard because
petitioner's pension benefit was paid under the general pension
provisions of the Pawtucket City Code.
Petitioner contends that we should treat his payments as if
they were in lieu of worker's compensation because on June 22,
1995, the Pawtucket City Council amended the ordinance to state
that disability benefits are in lieu of worker's compensation.
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We rejected a similar argument in McDowell v. Commissioner,
supra. In McDowell, a Pawtucket firefighter who had been injured
on the job in 1989 contended that the June 22, 1995, amendment
retroactively made the Pawtucket City ordinance a worker's
compensation statute under section 104(a)(1). We concluded in
McDowell: "Even if the amendment were to be given retrospective
effect, it would not cause the ordinance to be a statute in the
nature of a worker's compensation act." The taxpayer's argument
failed in McDowell where retroactivity of the amendments to
Pawtucket disability pension ordinances was at issue.
Petitioner's retroactivity argument is even less persuasive here
because he was paid under the regular service pension ordinance.
B. Americans with Disabilities Act
Petitioner contends that the payments of $7,101 should not
be included in income in 1992 because he has suffered economic
discrimination, and that he had decreased purchasing power
because of his injuries in violation of ADA section 2, 42 U.S.C.
section 12101. Petitioner contends that Pawtucket's and
respondent's policies discriminate against disabled persons. We
disagree. Petitioner cited no authority that the ADA, and not
the Internal Revenue Code, controls whether petitioner's pension
payments are taxable. Even if he did, petitioner would not be
entitled to relief under the ADA here. ADA section 202, 42
U.S.C. section 12132, provides:3
3
The Americans with Disabilities Act of 1990, Pub. L. 101-
336, sec. 203, 104 Stat. 337 (current version at 42 U.S.C. sec.
(continued...)
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Subject to the provisions of this subchapter, no
qualified individual with a disability shall, by reason
of such disability, be excluded from participation in
or be denied the benefits of the services, programs, or
activities of a public entity, or be subjected to
discrimination by any such entity.
To establish that the ADA was violated, petitioner must show
that: (1) He was disabled, (2) he was denied a public benefit,
and (3) the denial was by reason of his disability. See Kornblau
v. Dade County, 86 F.3d 193, 194 (11th Cir. 1996).
Petitioner contends that he was denied a public benefit,
i.e., the right to exclude income, because he is disabled. We
disagree. The pension which Pawtucket pays to petitioner under
section 59-21 of the Pawtucket City Code was not based on
disability. The ADA was not violated because petitioner was not
denied a public benefit by reason of his disability. More
importantly, the taxation of his pension benefits is governed by
the Internal Revenue Code, not the ADA.
C. Whether Treatment of Petitioner Is Discriminatory
Petitioner contends that respondent's determination is
unfair because payments received by other firefighters throughout
the country who have been injured on the job have been excluded
from income. There is no evidence in the record showing how
other firefighters were treated or the legal structure of their
3
(...continued)
12133 (1994)) provides:
The remedies, procedures, and rights set forth in
section 794a of Title 29 shall be the remedies,
procedures, and rights this subchapter provides to any
person alleging discrimination on the basis of
disability in violation of section 12132 of this title.
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benefits. Petitioner cited no authority that anyone whose
benefits were structured like his was treated differently than
our holding here. We conclude that petitioner's discrimination
claim lacks merit.
D. Conclusion
We conclude that the pension payments of $7,101 that
petitioner received in 1992 are not excludable from income under
section 104(a)(1).
To reflect the foregoing,
Decision will be entered
for respondent.