T.C. Memo. 2005-43
UNITED STATES TAX COURT
ALFAYE YOUNGBLOOD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3013-02. Filed March 7, 2005.
P received disability benefits under the Public
Employees Retirement System, Ohio Rev. Code Ann. sec.
145.35(B) (Anderson 2001), which provides disability
coverage to “each member who has at least five years of
total service credit and disability coverage for on-
duty illness or injury to each member who is a law
enforcement officer, regardless of length of service.”
P’s disability was employment-related. P excluded the
disability benefits from gross income. Under sec.
104(a)(1), I.R.C., gross income does not include
amounts received under a statute in the nature of a
workers’ compensation act. R argues that the benefits
are not excludable because P recovered under the first
clause of “B” of the above statute, which is not “in
the nature of a workmen’s compensation act,” as
required by sec. 1.104-1(b), Income Tax Regs.
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Held: P received benefits under a provision in
the statute that is not “in the nature of a workmen’s
compensation act.” Sec. 1.104-1(b), Income Tax Regs.
Consequently, the benefits are not excludable from P’s
1999 gross income.
Elizabeth I. Cooke (specially recognized), for petitioner.
Richard J. Hassebrock, for respondent.
MEMORANDUM OPINION
NIMS, Judge: Respondent determined a deficiency of $9,148
in petitioner’s Federal income tax for 1999 and an accuracy-
related penalty of $1,810 pursuant to section 6662(a) for 1999.
Respondent concedes the accuracy-related penalty and the sole
issue for our consideration is whether petitioner properly
excluded from gross income disability payments that she received
under the Public Employees Retirement System of Ohio. Both
parties have moved for summary judgment pursuant to Rule 121.
Unless otherwise indicated, all section references are to
sections of the Internal Revenue Code in effect for the tax year
in issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
Background
At the time of the filing of the petition, petitioner
resided in Columbus, Ohio.
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Petitioner Alfaye Youngblood began employment as a case
manager with the Franklin County Board of Health and Human
Services on July 18, 1988. Petitioner sought counseling to deal
with mental stress after her workload was increased in 1996. In
1997, petitioner took a temporary leave of absence from her
position as case manager. Petitioner was eventually diagnosed as
having permanent mental injury, and her employment ended on April
8, 2003. The parties agree that petitioner’s disability was
employment-related.
On September 10, 1997, petitioner applied to the Ohio Bureau
of Workers’ Compensation for disability benefits. Petitioner
claimed that the increased workload at her job had caused her to
suffer from major depression and panic disorder. Petitioner’s
claim for workers’ compensation benefits was denied because she
had not sustained a physical injury. Petitioner then applied for
disability benefits with the Public Employees Retirement System
of Ohio (PERS). PERS approved petitioner’s application for
benefits on March 23, 1999.
In 1999, petitioner received total payments in the amount of
$51,437. PERS issued a Form 1099-R, Distributions From Pensions,
Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., to petitioner in which it reported a gross
taxable distribution of $51,437. Petitioner excluded the $51,437
from gross income on her 1999 income tax return. Respondent
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determined that the payments petitioner received from PERS should
not have been excluded from income and that petitioner was liable
for a $9,148 deficiency.
Discussion
Section 104(a)(1) provides that gross income does not
include amounts received under workers’ compensation acts as
compensation for personal injuries or sickness. The regulations
expand the scope of section 104(a)(1) to include “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.” Sec. 1.104-1(b), Income
Tax Regs. However, “section 104(a)(1) does not apply to a
retirement pension or annuity to the extent that it is determined
by reference to the employee’s age or length of service, or the
employee’s prior contributions, even though the employee’s
retirement is occasioned by an occupational injury or sickness.”
Id. Nevertheless, a statute that conditions eligibility for
benefits on the existence of a work-related injury or sickness
may qualify as a workers’ compensation act for purposes of
section 104 even though those benefits are called “disability
retirement benefits.” See Take v. Commissioner, 804 F.2d 553,
557 (9th Cir. 1986), affg. 82 T.C. 630 (1984). A statute that
fails to distinguish between work-related and other types of
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injuries is not in the nature of a worker’s compensation act.
Rutter v. Commissioner, 760 F.2d 466, 468 (2d Cir. 1985), affg.
T.C. Memo. 1984-525.
The statute at issue here is Ohio Rev. Code Ann. sec. 145.35
(Anderson 2001), which provides:
Sec. 145.35 Disability coverage for on-duty illness or
injury; election of coverage; medical examination.
(A) As used in this section, "on-duty illness or
injury" means an illness or injury that occurred during
or resulted from performance of duties under the direct
supervision of a member's appointing authority.
(B) The public employees retirement system shall
provide disability coverage to each member who has at
least five years of total service credit and disability
coverage for on-duty illness or injury to each member
who is a law enforcement officer, regardless of length
of service.
In the instant case, there is no dispute that petitioner
received her benefits pursuant to the first clause in Ohio Rev.
Code Ann. sec. 145.35(B). Petitioner was a case manager for the
Franklin County Board of Health and Human Services and therefore
could not qualify under the second clause of Ohio Rev. Code sec.
145.35(B), which is limited in coverage to law enforcement
officers. The first clause of the statute provides disability
coverage to employees if they have 5 years of service credit,
regardless of whether the disability was incurred in the course
of employment.
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In Byrne v. Commissioner, T.C. Memo. 2002-319, the taxpayer
was a California municipal court judge who suffered severe mental
stress as a result of a heavy workload. The judge could not
continue his judicial responsibilities as a result of permanent
disability. We reviewed sections of the California Judges’
Retirement Law that provided petitioner with disability benefits.
Cal. Govt. Code (CGC) secs. 75000-75111 (West 1993 & Supp. 2002).
CGC sections 75060(a) and 75061(a) provide:
75060. Mental or physical disability; consents to and
approval of retirement; certificate; filling
vacancy.
(a) Any judge who is unable to discharge
efficiently the duties of his or her office by reason
of mental or physical disability that is or is likely
to become permanent may, with his or her consent and
with the approval of the Chief Justice or Acting Chief
Justice and the Commission on Judicial Performance, be
retired from office. * * *
* * * * * * *
75061. Disability retirement; prerequisites.
(a) Any person who becomes a judge during the
period of January 1, 1980, through December 31, 1988,
shall not be eligible to be retired for disability
unless the judge is credited with at least two years of
judicial service or unless the disability is a result
of injury or disease arising out of and in the course
of judicial service.
In Byrne v. Commissioner, supra, we concluded that CGC
section 75061(a) is a dual-purpose statute in which payments can
be made for work-related, as well as other types of disabilities.
A dual-purpose statute in this context contains some provision
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that restricts the payment of benefits to cases of employment-
related disabilities. The second portion of the California
statute, which addresses injuries arising during the course of
judicial service, is in the nature of a workers’ compensation act
under section 104(a)(1). The taxpayer in Byrne received his
benefits under the second portion of the California statute, and
not under the first portion of the statute, which conditions
recovery on years of service, and is not in the nature of a
workers’ compensation act.
Petitioner seeks to liken her case to Byrne v. Commissioner,
supra, in which, as above described, the taxpayer prevailed.
Petitioner argues that it is basically a matter of semantics that
prompts respondent to disallow petitioner’s deduction. We
disagree.
Petitioner would have us figuratively construe the Ohio
statute so as to make it analogous to a dual-purpose statute of
the type described in Byrne v. Commissioner, supra. This we are
not at liberty to do. The statute is not of dual-purpose in
regard to petitioner because she was not employed as a law
enforcement officer. As to petitioner, only the first clause of
Ohio Rev. Code Ann. sec. 145.35(B) applied, a clause which
provides identical benefits regardless of the circumstances in
which the disability occurred, and is simply not a statute in the
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nature of a workers’ compensation act. Take v. Commissioner, 804
F.2d 553 (9th Cir. 1986). Consequently, petitioner cannot
prevail in this case, and we so hold.
To reflect the foregoing,
An appropriate order and
decision will be entered granting
respondent’s motion for summary
judgment and denying petitioner’s
motion for summary judgment.