T.C. Memo. 2001-152
UNITED STATES TAX COURT
JAMES E. & RUTH L. NORRIS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2081-98. Filed June 26, 2001.
James E. Norris, pro se.
Roy Wulf, for respondent.
MEMORANDUM OPINION
GOLDBERG, Special Trial Judge: Respondent determined a
deficiency in petitioners’ Federal income tax for 1995 in the
amount of $6,630. Unless otherwise indicated, section references
are to the Internal Revenue Code in effect for the year in issue,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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After concessions by the parties,1 the sole issue for
decision is whether payments under the Federal Employees
Retirement System (FERS) received during the 1995 tax year are
excludable from gross income under section 104(a)(1).
Adjustments to Social Security income are computational and will
be resolved by the Court’s holding on the issue in this case.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time of filing the
petition, petitioners resided in Tacoma, Washington. Petitioners
are husband and wife. References to petitioner in the singular
are to James E. Norris.
Petitioner has a 4-year degree in social sciences from
Central Washington University with a minor in aviation studies.
He also holds a master’s degree in criminal justice
administration and has completed 1 year of law school.
Petitioner served for approximately 8 years in the United States
Air Force and left at a rank of Captain in 1980. After a few
1
Petitioners concede that they failed to report interest
income of $141 received by Ruth L. Norris from Peoples Bank and
Trust in 1995. Petitioners further concede that they failed to
report gambling winnings of $798 earned by petitioner in 1995.
Because petitioner incurred gambling losses in excess of his
gambling income, $798 will be deductible on Schedule A, Itemized
Deductions.
Respondent concedes an accuracy-related penalty under sec.
6662(a) and (d) of $1,326, as determined in the notice of
deficiency.
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different jobs, petitioner was employed by the Department of
Transportation, Federal Aviation Administration (FAA), as a pilot
examiner from 1988 until November 2, 1992. Petitioner’s first 3
years of service with the FAA passed without incident. In 1991,
after petitioner’s immediate supervisor left the FAA, petitioner
began to have problems with his new supervisors. Petitioner
became severely depressed and alleged that his depression
resulted from discrimination from other FAA supervisors and
employees. Petitioner was placed on medical light duty with the
FAA in October 1991. Due to the claimed unstable work
environment, petitioner sought psychiatric treatment beginning in
1991.
On October 2, 1992, petitioner received a 30-day notice of
employment termination, and, subsequently, on November 2, 1992,
the FAA terminated petitioner’s employment. Prior to
petitioner’s termination, petitioner filed claims on October 12,
1992, with the Social Security Administration (SSA) and the
Office of Personnel Management (OPM) for disability retirement
annuity payments pursuant to FERS. Petitioner was approved for
Social Security disability on June 22, 1994, and FERS disability
retirement on March 8, 1995.
Concurrent with filing claims with SSA and OPM, petitioner
also filed a claim with the United States Department of Labor
(DOL) pursuant to the Federal Employees’ Compensation Act (FECA),
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5 U.S.C. ch. 81 (1994). Petitioner believed that he “suffered
from an emotional/psychiatric injury as a result of harassment
and racial discrimination” in his workplace. Petitioner’s
request was denied on March 2, 1993.
Petitioner disagreed with the OPM decision denying that
request, and obtained a rehearing on January 12, 1994. In a
decision dated March 23, 1994, the March 2, 1993, decision was
affirmed. Petitioner requested reconsideration of the March 23,
1994, decision and on January 30, 1995, OPM denied modification
of the March 23, 1994, decision. Petitioner requested further
reconsideration of the January 30, 1995, decision, and, again,
OPM denied merit review of the case in a decision dated June 7,
1997. Petitioner continued to appeal unfavorable decisions
through OPM’s appeals process.2 On October 5, 2000, the
Employment Compensation Appeals Board (ECAB) of the DOL rendered
a Final Appeals decision finding that petitioner had not
established that his emotional condition arose out of the
performance of duty, and, further, that the Office of Workers’
Compensation Programs properly denied petitioner’s request for
reconsideration.
On February 6, 1997, petitioner filed a complaint with the
United States District Court for the Western District of
2
Petitioner has filed, unsuccessfully, a total of six
appeals of prior unfavorable decisions from 1994 through 2000.
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Washington seeking compensation for an emotional injury allegedly
sustained as a result of discrimination by the FAA. Petitioner
sought relief under the Federal Tort Claims Act (FTCA), 28 U.S.C.
secs. 2671-2680, but asserted that jurisdiction was appropriate
under FECA. This action was subsequently dismissed without
prejudice based upon petitioner’s failure to exhaust
administrative remedies prior to bringing suit under FTCA and
petitioner’s failure to allege a constitutional claim under FECA.
On their 1995 Federal income tax return, petitioners
reported total pension and annuity income in the amount of
$6,936, none of which was included in their gross income for that
year. Petitioner received from OPM Form 1099-R, Statement of
Annuity Paid, for 1995 showing a gross annuity amount of
$29,459.94. Petitioners included an attachment to their return
stating “Although the total Personal Injury Disability Annuity
listed on the OPM Form No. CSA-1099-R, lists the total annuity as
$29,459.94. [sic] Only $6,936.00 was for Tax Year 1995.”
Petitioner further disclosed the pending worker’s compensation
claim.
In the notice of deficiency, respondent determined that no
portion of payments from OPM paid to petitioners during 1995 was
excludable from gross income and increased petitioners’ 1995
taxable income in the amount of $29,459.
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Respondent contends that petitioners may not exclude FERS
payments received during the year in issue from gross income
because the amounts were not received under a worker’s
compensation act pursuant to section 104(a)(1), or a statute in
the nature of a worker’s compensation act pursuant to section
1.104-1(b), Income Tax Regs.
Petitioners contend that the disability pension amounts
received should be paid under FECA rather than FERS. The parties
agree that had the payments been made under FECA they would be
excludable under section 104(a)(1).
This Court is a court of limited jurisdiction as
specifically authorized by Congress. See sec. 7442; Neilson v.
Commissioner, 94 T.C. 1, 9 (1990). Although we have jurisdiction
to redetermine the income tax deficiency under section 6213, the
Court does not have jurisdiction to decide employee benefit
entitlement issues that fall within the purview of various
departments and agencies of the United States Government. See
sec. 7442; Merker v. Commissioner, T.C. Memo. 1997-277; Steines
v. Commissioner, T.C. Memo. 1991-588, affd. without published
opinion 12 F.3d 1101 (7th Cir. 1993). The record is clear that
petitioner’s numerous requests to transform the payor of the
disability payments from FERS to FECA have been consistently
denied. Further, all payments at issue in this case are
disability payments pursuant to FERS. Therefore, the issue
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before us is whether such disability payments are exempt under
section 104(a)(1).
Section 61(a) provides that gross income includes all income
from whatever source derived. Certain income, however, may be
specifically excluded from gross income. See sec. 61(b).
Under section 104(a)(1), worker’s compensation amounts are
excluded from gross income. However, such exclusions have been
“strictly construed so as to conform with the general rule that
all income is taxable unless it is specifically excluded.”
McDowell v. Commissioner, T.C. Memo. 1997-500; see Take v.
Commissioner, 804 F.2d 553, 558 (9th Cir. 1986), affg. 82 T.C.
630 (1984).
Section 104(a)(1) excludes from gross income “amounts
received under workmen’s compensation acts as compensation for
personal injuries or sickness”. Section 1.104-1(b), Income Tax
Regs., interprets section 104(a)(1) to exempt amounts received
under a worker’s compensation act, or under a statute “in the
nature of a workmen’s compensation act which provides
compensation to employees for personal injuries or sickness
incurred in the course of employment.”
“Workmen’s compensation act” is defined as a statute which
requires as a precondition to eligibility for benefits that the
injury be incurred in the course of employment. Take v.
Commissioner, supra at 557. A statute is not considered to be in
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the nature of a workmen’s compensation act if it allows for
disability payments for any reason other than on-the-job
injuries. See Haar v. Commissioner, 78 T.C. 864, 868 (1982),
affd. per curiam 709 F.2d 1206 (8th Cir. 1983). If the statute
does not qualify, then the fact that the taxpayer’s injury was
work related is irrelevant. See Smelley v. United States, 806 F.
Supp. 932, 935 (N.D. Ala. 1992), affd. per curiam 3 F.3d 389
(11th Cir. 1993).
Disability retirement payments received under FERS are not
workmen’s compensation payments. See Merker v. Commissioner,
supra; Wham v. Commissioner, T.C. Memo. 1985-625, affd. without
published opinion 812 F.2d 1402 (4th Cir. 1987). Although
petitioner suffers from a disability which may have arisen in the
course of his employment with the FAA, a Federal agency, that
alone is insufficient to meet the requirements of section
104(a)(1). Petitioner received his disability annuity under
FERS, 5 U.S.C. ch. 84 (1994). Under FERS, an employee shall be
considered disabled only if the employee is found by OPM to be
“unable, because of disease or injury, to render useful and
efficient service in the employee’s position.” 5 U.S.C. sec.
8451(a)(1)(B) (1994). Disability under FERS does not distinguish
between injuries occurring on the job or elsewhere; rather, the
focus is on whether the employee is able to perform the tasks of
his employment in a “useful and efficient” manner. See Merker v.
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Commissioner, supra. Because petitioner received disability
retirement payments under FERS, which is not in the nature of a
workmen’s compensation statute, petitioners are not entitled to
exclude these payments from their gross income under section
104(a)(1).
We have considered all of the other arguments made by
petitioners, and, to the extent we have not addressed them, find
them to be without merit.
To reflect the foregoing,
Decision will be entered
under Rule 155.