dissenting: It has long been recognized by Congress that all amounts paid by an employer to, or on behalf of, an employee are not includable in the gross income of the employee. Secs. 101,105,106,107,112,113,117, and 119. Such specific exclusions are not exhaustive. Rudolph v. United States, 370 U.S. 269,274 (1962).
The courts have long agreed that everything of value received by an employee from his employer does not represent income. Clifford D. Jones v. United States, 60 Ct. Cl. 552 (1925) (quarters allowance for Army officer); Bereaw v. Commissioner, 165 F. 2d 521 (4th Cir. 1948) (quarters allowance for Army officer); Saunders v. Commissioner, 215 F. 2d 768 (3d Cir. 1954) (meal allowance for State police); Diamond v. Sturr, 221 F. 2d 264 (2d Cir. 1955) (food and lodging to employee while on duty at mental institution); United States v. Barrett, 321 F. 2d 911 (5th Cir. 1963) (meal allowance for State trooper); United States v. Gotcher, 401 F. 2d 118 (5th Cir. 1968) (expense paid trip to Germany); Arthur Benaglia, 36 B.T.A. 838 (1937) (meal and lodging for hotel manager); John E. Cavanagh, 36 T.C. 300 (1961) (reimbursement for food and lodging incurred because of move).
It is worth noting that all of the above cases reach the identical conclusion, that the item of value did not represent income to the recipient, based upon an analysis of section 61, or its predecessor section 22(a) of the 1939 Code, and not upon any specific exclusionary provision. It is also worth noting that, while some of the cases cited above involve payment in kind and some payment in cash, the form of payment is not controlling. Any distinction based upon this distinction was rejected by the Saunders case:
Admittedly, the payment of cash to an employee is normally compensatory and probably more obviously so than a payment in kind. Nevertheless, just as an employee is often furnished tangible property which cannot be regarded as compensation, an employee may be furnished cash which is not compensation. [215 F. 2d at 771.]
The respondent himself, as early as his Regs. 45 which were in effect in 1920, ruled in article 33 thereof that living quarters furnished an employee for the convenience of the employer did not represent income. During this period the Revenue Service had held that in varying situations amounts furnished to employees in cash or in kind need not be included in their respective gross incomes.1
In 1940 the regulations promulgated earlier were amended in relevant part to read as follows:
If a person receives as compensation for services rendered a salary and in addition thereto living quarters or meals, the value to such person of the quarters and meals so furnished constitutes income subject to tax. If, however, living quarters or meals are furnished to employees for the convenience of the employer, the value thereof need not be computed and added to the compensation otherwise received by the employees. [T.C. 4965,1940-1 C.B. 13,14.]
This regulation was interpreted by the respondent in later publications in which he explained that the “convenience of the employer” rule should not be applied in those situations in which it is evident from the other circumstances that the receipt of the quarters and meals represented additional compensation, and that the rule would be met if they were required to be accepted by an employee so that he could properly perform his duties. Mim. 5023, 1940-1 C.B. 14; Mim. 6472, 1950-1 C.B. 15.
The common theme, the rationale for all the foregoing exclusions, is that amounts paid to an employee for the convenience of the employer and not intended to be compensatory are not includable in income. For this cause of action to come within this framework we believe the determination that must be made is whether the meal allowance was furnished to the petitioner for his services or whether it was furnished to him so that he would eat in the manner prescribed. See Clifford D. Jones v. United States, supra at 570. If, after a review of the evidence in the record, the latter determination prevails, the amounts furnished should not be included in gross income.
The court in Saunders was faced with facts, as the majority has noted, “not substantially different from those involved in the instant case.” Using language from respondent’s own explanation of the regulations it said:2
Since it is not “evident” to us that the rations allowance was furnished as compensation, we should next determine, as indicated by Mimeo 5023, whether Saunders was “required to accept such * * * meals in order to perform properly his duties” and thus whether the rations allowance was furnished for the convenience of the employer so as not to be taxable. * * * [215 F. 2d at 774.]
The court then went on to find that the meal allowance was so furnished and excluded it from gross income.
It is a historical fact that New Jersey provided its troopers with meals before switching to the meal allowance program. This decision was based on the hard realities of economics and efficiency. The majority opinion has made a finding of fact that “The meal allowance was not intended to represent additional compensation,”3 leaving as the sole determining factor whether the meal allowance was paid to the petitioner for the convenience of the employer.
Police are engaged in a unique occupation, one that deals with public safety — a line of work that by its very nature breeds emergencies at any time of day or night. The interests of the employer, the State, in furtherance of its responsibility for the public safety, demand that it require its troopers to eat when, where, and for a duration that does not jeopardize the employer’s responsibility to the public. The State adopted the meal allowance system to assist it in carrying out this responsibility. Surely this decision is within the employer’s prerogative. See also United States v. Keeton, 256 F. Supp. 576, 580 (1966), affd. per curiam 383 F. 2d 429 (10th Cir. 1967); sec. 1.119-l(a)(2)(ii)(C), Income Tax Regs.
It is difficult to conceive of a situation where an employee must so clearly take his meals at the convenience of his employer. This conclusion with respect to the convenience of the employer is supported by the discussions in Barrett v. United States, supra; United States v. Morelan, 356 F. 2d 199 (8th Cir. 1966); United States v. Keeton, supra; and Tony M. Smith v. United States, (N.D. Miss. 1974, 35 AFTR 2d 75-345, 75-1 USTC par. 9184), on appeal (5th Cir.), each in the context of meal allowances for State troopers. See also sec. 1.119-l(a)(2), Income Tax Regs.
Turning now to a few brief comments on the majority opinion, the citation by the Third Circuit of its Saunders decision in Jacob v. United States, 493 F. 2d 1294,1297 (3d Cir. 1974), with specific reference to the convenience of the employer doctrine seems to me to be a clear reaffirmation of that doctrine long after the enactment of section 119. The Third Circuit clearly implied that the test survived the enactment of the 1954 Code. I also do not understand how the majority can construe the language4 in the committee reports dealing with the prospective section 119 as meaning “that the only exclusion for meals and lodging intended by Congress to be available to any taxpayer other than members of the Armed Forces after the enactment of the 1954 Code were meals and lodging excludable under the provisions of section 119.” After all there always have been more employers in the United States whose convenience must be served than the military services.
In conclusion, petitioner has received a cash allowance in lieu of meals previously provided by the State. Petitioner has shown that it was not compensatory, was required to be received primarily for the benefit of his employer so. that he could properly perform his duties, and additionally that it was spent for the purpose paid. As such we believe the determination must be made in petitioner’s favor. I would not include the cash meal allowance in petitioner’s gross income.
Forrester, Tannenwald, Gofpe, Hall, and Wiles, JJ, agree with this dissent.See O.D. 11,1 C.B. 66 (1919), an American Red Cross volunteer receiving maintenance should report as income only the excess, if any of the maintenance allowance over actual living expenses; O.D. 265, 1 C.B. 71 (1919), “Board and lodging furnished seamen in addition to their cash compensation is * * * supplied for the convenience of the employer and [its] value * * * is not required to be reported in such employees’ income tax returns”; O.D. 514,2 C.B. 90 (1920), “Supper money” paid to an employee who performs extra labor after regular business hours for the convenience of the employer does not represent additional taxable income.
See also the Fifth Circuit’s statement in United States v, Barrett, 321F. 2d 911,913:
“We find ourselves in accord with Saunders: the ‘convenience of the employer’ test is the key criterion in determining whether or not payments are income. * * *”
In this connection compare Stephen L. Zolnay, 49 T.C. 389, 396 (1968), where in the context of the exclusion for scholarship authorized by sec. 117 the issue was stated “Was the taxpayer paid to work or paid to study?”
“Therefore, any cash allowance for meals or lodging received by an employee will continue to be includible in gross income, as under existing law, to the extent that such allowance constitute compensation. [H. Rept. No. 1337, to accompany H.R. 8300, 83d Cong., 2d Sess. (1954).]”