*1841 1. The Delaware River Bridge Joint Commission is a governmental instrumentality of Pennsylvania and New Jersey, and The Port of New York Authority is a governmental instrumentality of New York and New Jersey.
2. The petitioner was an employee of these governmental instrumentalities mentioned in the years 1925, 1926, and 1927, and the compensation received by him for services performed is exempt from income tax.
*515 These proceedings consolidated for hearing and opinion involve deficiencies in income tax for 1925, 1926, and 1927 in the respective amounts of $369.95, $47.75, and $60.39. The questions presented are (1) whether the Delaware River Bridge Joint Commission and The Port of New York Authority are instrumentalities of Pennsylvania, and New York and New Jersey; and (2) whether the petitioner was an employee of these claimed instrumentalities during the years 1925, 1926, and 1927.
FINDINGS OF FACT.
The Delaware River Bridge Joint Commissioner was created by an act of the Legislature of Pennsylvania, approved*1842 July 9, 1919 (P.L. 814), and by chapter 69, Laws of New Jersey, 1919. This legislation authorized a commission constituted by one State to act in conjunction with a similar commission constituted by the other "as a Joint Commission for and on behalf of the Commonwealth of Pennsylvania and the State of New Jersey," for the purpose of *516 constructing a highway bridge across the Delaware river between Philadelphia, Pa., and Camden, N.J.
The Pennsylvania commission consisted of the Board of Commissioners of Public Grounds and Buildings of the Commonwealth of Pennsylvania, the mayor of the city of Philadelphia, and four other citizens of Pennsylvania to be appointed by the governor.
By an Act of Congress approved February 15, 1921, the consent of Congress was granted "to The Delaware River Bridge Joint Commission, acting in behalf of the States of Pennsylvania and New Jersey and the City of Philadelphia, to construct, maintain, and operate a bridge and approaches thereto across the Delaware River at a point suitable to the interests of navigation at or between Green Street and South Street in Philadelphia, Pennsylvania, and points approximately opposite in Camden, New Jersey, *1843 in accordance with the provisions of an act entitled 'An Act of Regulate the Construction of Bridges over Navigable Waters,' approved February 23, 1906."
The New Jersey commission was the New Jersey Interstate Bridge & Tunnel Commission constituted by chapter 49, Laws of New Jersey, 1918, which originally consisted of eight members appointed by the governor, and of which the governor was an ex officio member. By chapter 272, Laws of New Jersey, 1922, the terms of the members of this commission were terminated and in their place were substituted eight persons appointed by the legislature.
The legislation constituting the Joint Commission provided that it should have power to construct a highway bridge between Philadelphia, Pa., and Camden, N.J., at a location selected by it and in accordance with plans and specifications prepared by it. It was authorized to acquire the necessary land by purchase or by condemnation and to enter into the necessary contracts for the building and equipment of the bridge. The Joint Commission was authorized to appoint, among others:
* * * engineering, architectural and construction experts and inspectors, and such other employees as in the*1844 opinion of said Joint Commission may be necessary, all of whom shall do such work in the premises as the Joint Commission shall direct; and the said Joint Commission shall fix the respective compensations of the persons so appointed, which compensation shall be paid by the Joint Commission.
The legislation of both States furthermore provided that each State should contribute as its share of the cost of the bridge, the cost of the land and approaches in that State and one-half of the cost of the superstructure of the bridge, the city of Philadelphia to share equally with the Commonwealth of Pennsylvania in the cost of the land and approaches in that State and in one-half of the cost of the superstructure. It was expressly provided that the Joint Commission *517 should have no power to bind the Commonwealth of Pennsylvania or the State of New Jersey beyond the extent of the moneys appropriated or made available to the Joint Commission by each State.
In July, 1921, the petitioner was engaged as engineer of design of the Delaware River Bridge Joint Commission by Ralph Mojeski, its chief engineer. The commission, by a resolution dated July 21, 1921, approved this appointment, *1845 at the rate of $833.33 per month, the appointment being made subject to the pleasure of the commission. The text of this resolution is as follows:
RESOLVED: That the appointment of Leon S. Moisseiff, New York City, by the Chief Engineer of the Joint Commission to the position of Engineer of Design at the rate of $833.33 per month be and is hereby approved; one half of which compensation is to be paid by the State of New Jersey; one quarter of which compensation is to be paid by the State of Pennsylvania and one quarter of which compensation is to be paid by the City of Philadelphia; such appointment to date from July 25th, 1921, and be subject to the pleasure of the Joint Commission.
By a resolution dated September 16, 1921, the text of which follows, the compensation of the petitioner was increased to $1,000 per month:
RESOLVED: That the appointment of Leon S. Moisseiff of New York City by the Chief Engineer of the Joint Commission to the position of Engineer of Design at the rate of $1,000 per month be and is hereby approved; one helf of which salary is to be paid by the State of New Jersey; one quarter of which salary is to be paid by the State of Pennsylvania; and one quarter*1846 of which salary is to be paid by the City of Philadelphia; such appointment to date from September 1, 1921 and be subject to the pleasure of the Joint Commission.
It is understood that the petitioner was to devote Monday, Tuesday, Thursday, and Friday of each week exclusively to the duties assigned to him by the chief engineer of the Joint Commission, and that on those days he was to be at the offices of the Joint Commission in Philadelphia from 9 a.m. to 5 p.m., the normal working hours for all employees of the Joint Commission, except, of course, on such occasions as his duties might require his attendance elsewhere. It was agreed that although generally the petitioner would be required to devote only four days in each week between the hours of 9 a.m. and 5 p.m. to the duties assigned to him by the Joint Commission, he would whenever necessary devote such extra time to his duties as might be required without any extra compensation.
The duties of the petitioner were prescribed by the chief engineer of the Joint Commission and consisted generally in developing preliminary bridge designs, analyzing stresses and strains for the purpose of determining the general design of the*1847 bridge, making studies of the properties and materials for the purpose of determining the *518 nature of the materials to be employed, designing the entire structure, supervising the erection program and checking shop drawings. The petitioner was required to submit to the chief engineer a weekly report of the work of the division of design during the preceding week, and from time to time he was required to make such studies and render such further reports as the chief engineer required. In all of these duties the petitioner was under the immediate and direct supervision of the chief engineer and on occasions when the petitioner differed with the chief engineer on matters involving the design of the bridge, or the type of materials to be used, or on other matters within the scope of his employment, he was directed to proceed in accordance with the directions of the chief engineer.
The petitioner was furnished with an office by the Joint Commission, and he was supplied with all necessary supplies and materials. Traveling expenses and all other expenses incurred by him in connection with the performance of his duties were paid by the Joint Commission. The petitioner at all*1848 times during his relations with the Joint Commission had the assistance of a staff of approximately twenty persons, who were employed directly by the commission, whose names appeared on the pay roll of the commission, whose salaries were paid by the commission, and whose labors the petitioner directed and over whom he exercised general administrative control.
The name of the petitioner appeared on the pay roll of the Joint Commission and he was required to sign the same, as were all employees of the commission. Furthermore, like all employees of the commission he was required to sign daily a statement showing the number of hours worked.
The petitioner did in fact maintain his own office and render services to persons other than the Joint Commission on such days as he was not required to devote his time to his duties with the commission, but this was done only with the consent of the chief engineer of the Joint Commission and with the understanding that the petitioner should accept other employment only to the extent that it did not interfere with his duties with the commission and that, whenever required so to do, the petitioner must devote his time exclusively to the duties*1849 assigned to him by the chief engineer.
Although the petitioner was not engaged by the Joint Commission for a definite time, his employment continued regularly until May, 1926. In the period between May and October, 1926, the petitioner was employed by the Joint Commission for "twenty odd" days at the rate of $100 per day for the purpose of winding up the miscellaneous duties of the commission.
The foregoing statement describes the duties and relations of the petitioner with the Joint Commission not only during the taxable *519 years 1925 and 1926, but at all times from the date of his engagement by the Joint Commission to May, 1926.
The Port of New York Authority (for brevity hereinafter referred to as The Port Authority), has certain powers and jurisdiction with regard to terminal and transportation facilities within a district known as the Port of New York District. The Port Authority was created by and the Port of New York District was defined in a compact between the States of New York and New Jersey, dated April 30, 1921, which was consented to by the Congress of the United States by Public Resolution No. 17, Sixty-seventh Congress, Senate Joint Resolution No. *1850 88 (approved August 23, 1921).
The Port Authority consists of six commissioner, three of whom are chosen by the State of New York and the remaining three by the State of New Jersey.
The compact creating The Port Authority, after reciting that "* * * it is confidently believed that a better co-ordination of the terminal, transportation and other facilities of commerce in, about and through the Port of New York, will result in great economies, benefiting the nation, as well as the States of New York and New Jersey, * * *" and that "* * * such result can best be accomplished through the cooperation of the two states by and through a joint or common agency, * * *" pledges the two States to "* * * faithful cooperation in the future planning and development of the Port of New York, holding in high trust for the benefit of the nation the special blessings and natural advantages thereof."
Among its other powers, The Port Authority is authorized to "* * * appoint such officers and employees as it may require for the performance of its duties, and shall fix and determine their qualifications and duties."
The compact provides that each State shall appropriate annually "* * * for the*1851 salaries, office and other administrative expenses * * *" of The Port Authority, a sum not in excess of $100,000, and prohibits The Port Authority from incurring obligations for such purposes prior to the making of adequate appropriations. It is further provided in this compact that "* * * each state reserves the right hereafter to provide by law for the exercise of a veto power by the governor thereof over any action of any commissioner appointed therefrom, * * *" and the two States did in fact, by chapter 700, Laws of New York, 1927, and chapter 333, Laws of New Jersey, 1927, vest the veto power in their respective governors.
The compact contemplates the adoption of a comprehensive plan for the development of the Port of New York, and such a comprehensive *520 plan was adopted by the two States by chapter 43, Laws of New York, 1922, and chapter 9, Laws of New Jersey, 1922, and the Congress of the United States consented to the effectuation of this comprehensive plan by The Port Authority by Public Resolution No. 66, Sixty-seventh Congress, House Joint Resolution No. 337 (approved July 1, 1922).
The statutes adopting the comprehensive plan provide:
The bonds or other*1852 securities issued by the Port Authority shall at all times be free from taxation by either state. The Port Authority shall be regarded as the municipal corporate instrumentality of the two states for the purpose of developing the port and effectuating the pledge of the states in the said compact.
Subsequent to the compact and to the statutes adopting the comprehensive plan, The Port Authority was directed by the legislatures of the two States to construct and operate two bridges across the Arthur Kill (chs. 186 and 230, Laws of New York, 1924; chs. 125 and 149, Laws of New Jersey, 1924), a bridge across the Hudson River (ch. 211, Laws of New York, 1925, and ch. 41, Laws of New Jersey, 1925), and a bridge across the Kill van Kull (ch. 279, Laws of New York, 1926, and ch. 97, Laws of New Jersey, 1925). These statutes all recite that the powers therein granted are "* * * in partial effectuation of the comprehensive plan for the development of the Port of New York * * *, and of the Port Compact or Treaty between the two States dated April 30th, 1921 * * *."
The statutes relating to the financing of the Arthur Kill Bridges (ch. 210, Laws of New York, 1925, and ch. 37, Laws of New*1853 Jersey, 1925), the Hudson River Bridge (ch. 761, Laws of New York, 1926, and ch. 6, Laws of New Jersey, 1926), and the Kill van Kull Bridge (ch. 300, Laws of New York, 1927, and ch. 3, Laws of New Jersey, 1927), all contain the following provision:
The construction, maintenance and operation of said bridge is in all respects for the benefit of the people of the two States, for the increase of their commerce and prosperity, and for the improvements of their health and living conditions, and The Port Authority shall be regarded as performing a governmental function in undertaking the said construction, maintenance and operation and carrying out the provisions of law relating to the said bridges and shall be required to pay no taxes or assessments upon any of the property acquired by it for the construction, operation and maintenance of such bridge.
Pursuant to a resolution of The Port Authority dated March 17, 1927, the petitioner was engaged as advisory engineer of design at a salary of $12,000 a year. The taxt of this resolution is as follows:
RESOLVED, that the report of the Budget Committee approving of recommendation of Chief Executive Officer, that Leon S. Moisseiff be*1854 engaged in the capacity of Advisory Engineer of Design on the Hudson River Bridge between Fort Washington, New York, and Fort Lee, New Jersey, at a salary of $12,000 a year, be and is hereby received and said position and salary are hereby authorized, and that Leon S. Moisseiff be and is hereby appointed as *521 Advisory Engineer of Design at the salary above mentioned, effective March 14th, 1927.
It was understood that the petitioner was to be at the offices of The Port Authority in New York on each and every day from 9 a.m. to 5 p.m. and from 9 a.m. to 12 m. on Saturday, the normal working hours for all Port Authority employees, except, of course, on such occasions as his duties might require his attendance elsewhere. It was agreed that although generally the petitioner would be required to devote the above mentioned hours to his Port Authority duties, he would, whenever necessary, devote such extra time to his duties as might be required without any extra compensation.
The duties of the petitioner were prescribed by the chief engineer of bridges of The Port Authority and consisted generally in developing preliminary bridge designs, analyzing stresses and strains for*1855 the purpose of determining the general design of bridges, making studies of the properties of materials for the purpose of determining the nature of the materials to be employed, designing involved and complicated parts of the steel and concrete members, and supervising the erection programs. The duties of the petitioner were not limited to any one bridge, but were performed in connection with the two Arthur Kill Bridges, the Hudson River Bridge and the Kill van Kull Bridge, the only bridges thus far constructed by The Port Authority. The petitioner was required to submit to the chief engineer of bridges periodical reports, and from time to time he was required to make such studies and render such further reports as the chief engineer of bridges required. For example, the petitioner was directed by the chief engineer of bridges to make certain studies and render reports in connection with the five designs under consideration in the case of the Kill van Kull Bridge. Upon the recommendation of the chief engineer of bridges, concurred in by certain consultants, the commissioners of The Port Authority adopted the arch-type design, whereupon the petitioner was directed by the chief*1856 engineer of bridges to prepare certain computations and sketches and to work out the design and proportioning for certain members of the bridge. On another occasion the petitioner was directed to appear before the commissioners of The Port Authority to explain the various advantages and disadvantages of eye-bar cables and wire cables, both of which were being considered in connection with the Hudson River Bridge. In all his various duties the petitioner was under the immediate and direct supervision of the chief engineer of bridges and on occasions when the petitioner differed with the chief engineer of bridges on matters involving the design of the bridge, or the type of materials to be used, or on other matters within the scope of his employment he was directed to proceed in accordance with the direction of the chief engineer of bridges.
*522 The petitioner was furnished with an office by The Port Authority, and he was supplied with all necessary supplies and materials. Traveling expenses and all other expenses incurred by him in connection with the performance of his duties were paid by The Port Authority. The petitioner at all times during his relations with The Port*1857 Authority had the assistance of a staff of at least three persons, whose names appeared on the pay roll of The Port Authority, whose salaries were paid by The Port Authority, and whose labors the petitioner directed and over whom he exercised general administrative control.
The name of the petitioner appeared on the pay roll of The Port Authority and he was required to sign the same, as were all employees of The Port Authority. Furthermore, like all employees of The Port Authority he was required to submit a monthly time report showing the number of hours worked on each and every day during the month, the number of hours spent in connection with each of the several bridges under construction by The Port Authority and the number of hours worked each day over and above the seven standard hours.
The petitioner did in fact maintain his own office and render service to persons other than The Port Authority, during such hours as he was not obligated to devote to his Port Authority duties, but this was done only with the consent of the chief engineer of bridges of The Port Authority and with the understanding that the petitioner would accept other employment only to the extent that*1858 it did not interfere with his Port Authority duties and that whenever required so to do, petitioner must devote his time exclusively to the duties assigned to him by the chief engineer of bridges.
Although the petitioner was not engaged by The Port Authority for a definite time, his employment has continued regularly to the date hereof.
The foregoing statement describes the duties and relations of the petitioner with The Port Authority not only during the taxable year 1927, but at all times from the date of his engagement by The Port Authority to the date hereof.
In his income-tax returns for 1925, 1926, and 1927, the petitioner excluded from his gross income the compensation received by him from the Delaware River Bridge Joint Commission and from The Port Authority upon the ground that it was exempt from income tax. The Commissioner amended the returns by including such compensation as taxable income and determined the deficiencies accordingly.
OPINION.
SMITH: The question presented by these proceedings is whether the petitioner is liable to income tax upon compensation paid to him *523 in 1925, 1926, and 1927 by the Delaware River Bridge Joint Commission and*1859 The Port Authority. The petitioner claims that these commissions were instrumentalities of Pennsylvania, New Jersey, and New York; that he was an employee of those instrumentalities; and, accordingly, that the compensation is exempt under article 88 of Regulations 69, issued under the Revenue Act of 1926, which provides in part:
Compensation paid to its officers and employees by a State or political subdivision thereof for services rendered in connection with the exercise of an essential governmental function of the State or political subdivision, including fees received by notaries public commissioned by States and the commissions of receivers appointed by State courts, is not taxable. * * *
The respondent contends that the petitioner was not an employee of either the Delaware River Bridge Joint Commission or The Port Authority but was instead an independent contractor. He makes the further contention that The Port Authority is not a political subdivision of the States of New York and New Jersey and is not exercising an essential governmental function and, in support thereof, relies upon articles VI and XXII of the compact between New York and New Jersey creating The Port Authority, *1860 which articles provide, so far as material, as follows:
ARTICLE VI.
The port authority shall constitute a body, both corporate and politic, with full power and authority to purchase, construct, lease and/or operate any terminal or transportation facility within said district; and to make charges for the use thereof; and for any of such purposes to own, hold, lease and/or operate real or personal property, to borrow money and secure the same by bonds or by mortgages upon any property held or to be held by it. No property new or hereafter vested in or held by either state, or by any county, city, borough, village, township or other municipality, shall be taken by the port authority, without the authority or consent of such state, county, city, borough, village, township or other municipality, nor shall anything herein impair or invalidate in any way any bonded indebtedness of such state, county, city, borough, village, township or other municipality, nor impair the provisions of law regulating the payment into sinking funds or revenues derived from municipal property, or dedicating the revenues derived from any municipal property to a specific purpose.
The powers granted in*1861 this article shall not be exercised by the port authority until the legislatures of both states shall have approved of a comprehensive plan for the development of the port as hereinafter provided.
ARTICLE XXII.
Definitions. The following words as herein used shall have the following meaning: "Transportation facility" shall include railroads, steam or electric, motor truck or other street or highway vehicles, tunnels, bridges, boats, ferries, car-floats, lighters, tugs, floating elevators, barges, scows or harbor craft of and kind, air craft suitable for harbor service, and every kind of transportation *524 facility now in use or hereafter designed for use for the transportation or carriage of persons or property. "Terminal facility" shall include wharves, piers, slips, ferries, docks, dry docks, bulkheads, dock-walls, basins, car-floats, float-bridges, grain or other storage elevators, warehouses, cold storage, tracks, yards, sheds, switches, connections, overhead applicances, and every kind of terminal or storage facility now in use or hereafter designed for use for the handling, storage, loading or unloading of freight at steamship, railroad or freight terminals. * *1862 * *
The Delaware River Bridge Joint Commission was duly authorized by the legislatures of the Commonwealth of Pennsylvania and the State of New Jersey, and The Port Authority was duly authorized by the legislatures of the States of New York and New Jersey, and the consent of Congress was given to the creation of both of these districts. The agreements or compacts between the States clearly fall within the provisions of subdivision (3) of section 10, of Article I, of the Federal Constitution permitting compacts between States with the consent of Congress. The compact between the States of New York and New Jersey conferred much more authority upon the district than did the agreement or compact between the Commonwealth of Pennsylvania and the State of New Jersey, relating to the Delaware Riber Bridge Joint Commission. It authorized The Port Authority "to purchase, construct, lease and/or operate any terminal or transportation facility within" the district. The exercise of authority under the compact is necessarily subject to the control of Congress over interstate commerce and in the joint resolution giving the consent of Congress to the compact there is express provision that nothing*1863 in the compact "shall be construed as impairing or in any manner affecting any right or jurisdiction of the United States in and over the region which forms the subject of such agreement." We think there can be no doubt that both the Delaware River Bridge Joint Commission and The Port Authority are public agencies of the States which were parties to the compacts. They manifestly were not private agencies. They were established for public purposes. The purposes of The Port Authority relate to the development of terminal transportation and other facilities of commerce in the Port of New York. The Port Authority consists of commissioners appointed in the manner defined by the legislatures of the two States. The authority to be exercised, as shown by the compact, the comprehensive plan, and the supplementary legislation, is a public authority. It is an authority granted by the legislatures and to be exercised on behalf of the public by representatives of the States. The power of the States to establish public agencies for harbor improvements, for drainage and reclamation purposes, to aid navigation, and to provide facilities for commerce is not open to question. County of*1864 *525 Mobile v. Kimball,102 U.S. 691">102 U.S. 691; Minnesota Rate Cases,230 U.S. 352">230 U.S. 352, 403, 404; Houck v. Little River Drainage District,239 U.S. 254">239 U.S. 254, 261, 262; Milheim v. Moffat Tunnel Improvement District,262 U.S. 710">262 U.S. 710, 717.
The Port Authority is none the less a public instrumentality because it is the instrumentality of two States instead of one. Each State has the constitutional power to establish an instrumentality of this character and each State has the constitutional competency, with the consent of Congress, to enter into a compact with another State to establish a similar joint instrumentality. Both the Delaware River Bridge Joint Commission and The Port Authority must be regarded as validly constituted as the competent public agencies of the Commonwealth of Pennsylvania and the State of New Jersey, in the first instance, and by the States of New York and New Jersey, in the second instance.
We now come to consider the question whether the Delaware River Bridge Joint Commission and The Port Authority were engaged in essential governmental functions. The Delaware River Bridge Joint Commission was*1865 established for the sole purpose of constructing and operating a bridge over the Delaware River between Philadelphia and Camden; The Port Authority was organized with broader powers, but, up to the present time, it has not constructed any transportation or terminal facility other than bridges. The construction of bridges has always been regarded as an essentially governmental function. Bridges have to do with transportation. In Frey v. Woodworth, 2 Fed.(2d) 725; appeal dismissed in 270 U.S. 669">270 U.S. 669, it was held that the income of an employee of a street railway owned and operated by the city of Detroit, Mich., was not subject to the Federal income tax, since a street railway was a highway and the maintenance and operation of highways have from time immemorial been held to be the exercise of a strictly governmental function. In that case the court said:
* * * A careful consideration, however, of a number of important cases dealing with this and analogous situations, and of illuminative expositions by authoritative text-writers, who have considered the historical development of public highways, leads to the conclusion that highways and means of intercommunication*1866 in which the whole community is interested have been from the earliest times the peculiar concern of governments. * * *
In County Commissioners v. Chandler,96 U.S. 205">96 U.S. 205, it was held that the construction and maintenance of a toll bridge was the exercise of a governmental power and the exaction of a toll was not inconsistent with the public character of the work. The court stated:
Railroads, turnpikes, bridges, ferries, are all things of public concern, and the right to erect them is a public right. If it be conceded to a private individual or corporation, it is conceded as a public franchise; and the right *526 to take toll is granted as a compensation for erecting the work and relieving the public treasury from the burden thereof. Those who have such franchises are agents of the public. They have, it is true, a private interest in the tolls; but the works are public, and subject to public regulation, and the entire public has the right to use them. * * *
In United States v. King County, Wash.,281 Fed. 686, it was held that a county operating a ferry was not required to collect and pay over to the Government a transportation*1867 tax since the maintenance and operation of the ferry was the exercise of a strictly governmental function, protected against taxation by the Federal Constitution. In answer to the argument of counsel that the maintenance and operation of the ferry was an ordinary business enterprise as distinguished from a strictly governmental function, the court said:
We do not understand that the establishment and operation of a ferry by any governmental body can be properly regarded as a business enterprise, nor that there is or can be anything private about it. We understand it to be the duty of the government, whether national, state, county, or city, to provide suitable roads, bridges, and ferries for the convenience of the public, and that when such a government undertakes to do so, and to itself operate them, it is in the exercise of a strictly governmental function, * * *
In the creation of The Port Authority, the legislatures of New York and New Jersey have expressly provided that The Port Authority shall be regarded as performing a governmental function in the construction, maintenance, and operation of the Arthur Kill Bridges, the Hudson River Bridge, and the Kill van Kull Bridge. *1868 The statutes relating to the financing of the Arthur Kill Bridges (ch. 210, Laws of N.Y., 1925, and ch. 37, Laws of N.J., 1925), the Hudson River Bridge (ch. 761, Laws of N.Y., 1926, and ch. 6, Laws of N.J., 1926), and the Kill van Kull Bridge (ch. 300, Laws of N.Y., 1927, and ch. 3, Laws of N.J., 1927), provide as follows:
The construction, maintenance and operation of said bridge is in all respects for the benefit of the people of the two states, for the increase of their commerce and prosperity, and for the improvement of their health and living conditions, and the Port Authority shall be regarded as performing a governmental function in undertaking the said construction, maintenance and operation and in carrying out the provision of law relating to said bridge and shall be required to pay no taxes or assessments upon any of the property acquired by it for the construction, operation and maintenance of such bridge.
This constitutes a clear declaration by the sovereign States of New York and New Jersey that the construction, maintenance, and operation of these bridges is a governmental function. Such a determination by sovereign States can not be lightly disregarded. This*1869 point is illustrated in Oliver American Trading Co. v. Government of Mexico, 5 Fed.(2d) 659; certiorari denied, 267 U.S. 596">267 U.S. 596. In that case it was contended that the Mexican Government was not immune from suit as a sovereign state in so far as the operation of the *527 National Highways of Mexico were concerned, since the operation of a railroad system was a nongovernmental enterprise. The court, however, held that it was bound by the Mexican conception of what constituted a governmental function in so far as railroads operating exclusively in Mexico were concerned, saying at page 665:
It is said that the Mexican government, in operating the National Railways of Mexico, is engaged in trade and in a nongovernmental enterprise. This view of the matter we do not accept. It is a fact, of which we take judicial notice, that in the leading countries of Europe, as well as in Canada, it is the practice of the governments to own and operate the railways. This is not regarded by them as engaging in trade, but as the performance of a fundamental governmental function. It is evidently so regarded in Mexico, and while in the United States the railways*1870 are not owned and operated by either the state or federal governments, we are not justified, on that account, in holding that the Mexican government is engaged in trade, and not performing a governmental function, in operating the National Railways of Mexico.
For the reasons above stated, the conclusion that the Delaware River Bridge Joint Commission, in construction the Delaware River Bridge across the Delaware River, and The Port Authority, in constructing the Arthur Kill Bridges, the Hudson River Bridge, and the Kill van Kull Bridge, were the governmental instrumentalities of the States which they represented, and were exercising essential governmental functions, is inevitable.
The only other question presented by these proceedings is whether the petitioner was during the years 1924, 1925, and 1926 an employee of the Delaware River Bridge Joint Commission and The Port Authority within the meaning of that term as used in article 88 of Regulations 69, which defines an employee as one "* * * whose duties consist in the rendition of prescribed services and not the accomplishment of specific objects, and whose services are continuous, not occasional or temporary. * * *"
*1871 The definition of "employee" used in the regulations is substantially the same as that which is found in numerous court cases. Thus in Singer Mfg. Co. v. Rahn,132 U.S. 518">132 U.S. 518, the court said:
* * * And the relation of master and servant exists whenever the employer retains the right to direct the manner in which the business shall be done, as well as the result to be accomplished, or, in other words, "not only what shall be done, but how it shall be done."
In Railroad Co. v. Hanning,82 U.S. 649">82 U.S. 649, the court, in holding that person who had undertaken to construct a wharf for a railroad company was an employee and not an independent contractor, said:
* * * Here the general management and control of the work was reserved to the company. Its extent in many particulars was not prescribed. How and in what manner the wharf was to be built was not pointed out. That, rebuilt, was to be as good as new. The new was to be of the best workmanship. This is quite indefinite and authorizes not only, but requires a great amount of *528 care and direction on the part of the company. The submission of the whole work to the direction of the company's*1872 engineer is evidence, although not conclusive, that the company retain the management and control. The reservation of authority is both comprehensive and minute. The company have the general control, and it may prescribe where each pile shall go, where each plank shall be laid, where each stringer shall be put down, where each nail shall be driven. All the details are to be completed under their orders and according to their direction. The contractor undertakes in general terms to do the work well. The company reserve the power not only to direct what shall be done, but how it shall be done. This is an important test of liability.
In Lucas v. Howard,280 U.S. 14">280 U.S. 14A; 50 Sup.Ct. 87, the Supreme Court in a memorandum opinion reversed the judgment of the Circuit Court of Appeals reported in 29 Fed.(2d) 895, on the authority of Metcalf v. Mitchell,269 U.S. 514">269 U.S. 514. The Circuit Court of Appeals had previously reversed the judgment of this Board, 10 B.T.A. 62">10 B.T.A. 62. The Board had held that the income received by an attorney who had been retained by several cities in Texas under separate and distinct contracts for*1873 the purpose of defending suits brought by certain public service corporations to enjoin such cities from fixing rates for services rendered was taxable. The petitioner in that case expressly admitted that he was not an employee, as appears from the following language in 10 B.T.A. 62">10 B.T.A. 62:
* * * The petitioner makes no claim that he is an officer or employee of the State or of political subdivisions thereof, * * *
In Frank H. Mesce v. United States,64 Ct.Cls. 481; certiorari denied 278 U.S. 612">278 U.S. 612, the court held that the plaintiff who was engaged by the city of Chicago as a building expert in connection with the valuation of buildings affected by certain local street improvements, was an independent contractor and not an employee. The court pointed out on page 493 that the plaintiff's compensation was a specified percentage of the value of the property appraised plus $50 for each day he served in court as a witness; that he selected his own office and paid the rent therefor; that he hired and paid his own assistants and finally that:
* * * He used his own methods and instrumentalities and did the work of appraising values in his own way*1874 and as his judgment dictated, and in so doing he was free, and for such work he received his pay. As to how, with what assistance, and in what time he should perform it, he was judge and master. * * *
The Mesce case is distinguishable upon its facts from the case of the present petitioner. Here the petitioner received a fixed compensation, was on the pay rolls of the Joint Commission, and/or of The Port Authority, was furnished an office and assistants by his employers, and was subject to the control and direction by his superiors in the performance of his duties.
*529 In Metcalf v. Mitchell, supra, the court held that the plaintiffs, who were engaged as consulting engineers under contracts with several States, municipalities, water and sewage districts, were not employees, but rather independent contractors. The court, however, bases its decision upon the ground that the record did not indicate that the plaintiffs were subject to the direction and control of the public bodies engaging them. This is indicated from the following language of the court:
Nor do the facts stated in the bill of exceptions establish that the plaintiffs were "employees" *1875 within the meaning of the statute. So far as appears, they were in the position of independent contractors. The record does not reveal to what extent, if at all, their services were subject to the direction or control of the public boards or officers engaging them. In each instance the performance of their contract involved the use of judgment and discretion on their part and they were required to use their best professional skill to bring about the desired result. This permitted them liberty of action which excludes the idea that control or right of control by the employer which characterizes the relation of employer and employee and differentiates the employee or servant from the independent contractor. * * *
The decisions of the Board and of the courts have been consistent that the question whether the compensation paid by a State for services performed is exempt from tax is to be determined by the question whether he is an employee or an independent contractor. This, we think, was clearly the basis of the decision of the court in *1876 Metcalf v. Mitchell, supra.
In Blair v. Byers, 35 Fed.(2d) 326, the court held that an attorney employed by the Des Moines Board of Water Works Trustees was an independent contractor and not an employee. There, again, the court, on page 328, emphasizes the fact that "nowhere in the record is it revealed to what extent, if at all, his services were subject to the control of the Board of Trustees."
In Kreipke v. Commissioner, 32 Fed.(2d) 594, the court held that the profits derived by the appellant under certain construction contracts with the State of Oklahoma were not exempt from Federal income tax, since the appellant was an independent contractor and not an employee. The court pointed out that the appellant was under no obligation to work a specified number of hours daily; that he was not on any pay roll; that his employment could be terminated only in the event of a breach of contract; that he employed and paid his own men and selected and paid for the materials used by him. The court said:
Whether appellant is an independent contractor or a mere employee of the state of Oklahoma is to be determined by a construction*1877 of the contracts. The contract with relation to Pauls Valley Training School was introduced in evidence as a type of the contract entered into. It is to be observed that under this contract there was no regular employment of appellant, no engagement for any specific period of time. He was not compelled to devote all his *530 time to the work. There were no working hours. He was not on any payroll. He did not receive a salary or wages; he could accept concurrent employment; his employment could not be terminated except upon failure to properly perform the contract, and then only upon certificate of such failure by the supervising architect; could demand arbitration in certain cases; could demand damages for delays; was liable for damages caused by delay; employed and paid his own men; selected and paid for the materials used. * * *
In Mathews v. Commissioner, 29 Fed.(2d) 892, it appeared that the taxpayer had been appointed county attorney for a term of two years, at a salary of $200 per month. He was required to attend to all legal matters for the county and although he maintained a separate law office, he did not permit his private practice to*1878 interfere with his official duties. The court held that the taxpayer was an employee and not an independent contractor. It said:
The contract bound the taxpayer for a period of two years to attend to all legal matters for the county. He was not engaged to accomplish any particular result in a way chosen by himself, but was obligated to render any legal service for the county to which at any time during the period mentioned he was assigned by the board of county commissioners. One whose services are so at the command of another for a definite time is an employee of the latter, though the services contracted are legal services of a lawyer, who is not forbidden to render professional services to others. * * *
Cf. Charles J. Tobin,17 B.T.A. 1261">17 B.T.A. 1261; S. J. Jones,17 B.T.A. 1131">17 B.T.A. 1131.
In Richard F. Burges,17 B.T.A. 275">17 B.T.A. 275, the facts are that the petitioner was employed as attorney for two water improvement districts. He was held to be an employee and not an independent contractor of those districts. Although he was free to use his time for his own purposes when not employed in the business of the districts, he undertook to perform all*1879 legal services which the officials of the districts might require. The Board, in holding that the petitioner was an employee, said:
Petitioner was employed by the board of directors of the respective districts here in question, pursuant to the power vested in them by statute. His term of employment as provided in the statute could not be longer than one year at a time. He received a salary of $200 per month from each district. The duties performed by him included any and all legal services which the board of directors or the manager of the district might require in connection with the operation and management of the district. They ranged from consulting with and advising the board of the drawing of contracts and other legal instruments, the collection of delinquent taxes, the bringing of suits and the conduct of litigation in court. When not employed on the districts' business he was free to use his time for his own purposes. He was at the beck and call of the board of directors or the manager for any legal work they might require. In this situation we think petitioner was an employee of the districts, and the salary received for his services is exempt. * * *
*1880 Cf. *531 F. M. Livezey,15 B.T.A. 806">15 B.T.A. 806; D. F. Strickland et al.,16 B.T.A. 419">16 B.T.A. 419; James B. McDonough,16 B.T.A. 556">16 B.T.A. 556; Richard E. McIntosh,16 B.T.A. 1400">16 B.T.A. 1400; Howard S. Young et al.,16 B.T.A. 1428">16 B.T.A. 1428. In the first named action we said:
The question of whether or not a taxpayer is a state official or employee, or an independent contractor who rendered services for the State, has been before the courts and this Board in a number of cases. The compensation of a state official or employee is exempt from income taxation while that of the independent contractor is not. The difficulty in most cases is to distinguish a state employee from an independent contractor, and each case must depend largely upon its facts. The chief distinction is that the state official or employee is in the regular continuous service of the State, with varied duties and transactions, while the independent contractor is engaged to render a particular service in one or a number of specific transactions and is free to determine what is to be done and the manner of performance. * * *
We further stated:
* * * The mere fact that*1881 he was also engaged in private practice does not change the character of his employment with the State.
In Edmund D. Adcock,14 B.T.A. 844">14 B.T.A. 844, the facts are that the taxpayer, who had been general attorney for the Sanitary District of Chicago, resigned his position, and was subsequently appointed a special attorney for the purpose of representing the Sanitary District in certain cases then pending against it on account of the amount of water withdrawn by it from Lake Michigan. The compensation of the taxpayer was fixed at $100 for each day engaged. We held that the taxpayer was an independent contractor and not an employee, saying:
* * * The ordinance under which Adcock was appointed contained no provision subjecting him to the control of any one. It set forth that the petitioner be employed to take care of the matters set out therein. No other ordinance was presented or called to our attention which provided that the general attorney should direct the petitioner in the performance of his work.
Cf. Fred H. Tibbetts,6 B.T.A. 827">6 B.T.A. 827; *1882 George W. Fuller,9 B.T.A. 708">9 B.T.A. 708; E. H. Coleman et al.,11 B.T.A. 245">11 B.T.A. 245; Clarence H. Johnston,14 B.T.A. 605">14 B.T.A. 605.
The foregoing cases illustrate the distinction which the courts and the Board have made between an employee and an independent contractor. The cases are unanimous in holding that one who undertakes generally to perform whatever tasks may be assigned him is an employee, notwithstanding the fact that he is not precluded from accepting other employment. On the other hand, the cases unanimously hold that one who is engaged to accomplish a particular result in a manner chosen by himself is an independent contractor. Since the petitioner was required to perform such tasks as might from time to time be assigned to him by the chief engineer of the Delaware *532 River Bridge Joint Commission and the chief engineer of The Port Authority, and since in the performance of this task he was subject to his direction and control; was on the pay rolls of the Joint Commission and of The Port Authority the same as other employees; was required to subject himself to the regulations of the commissions with respect to the number of hours worked*1883 each day and was required to conform to the other requirements of the commissions the same as the other employees, we are of the opinion that he was an employee during the years in question of the States of New York and New Jersey and the Commonwealth of Pennsylvania, that he was not an independent contractor, and that his compensation received both from the Joint Commission and from The Port Authority is exempt from income tax.
Reviewed by the Board.
Judgment will be entered under Rule 50.
LANSDON, STERNHAGEN, and TRUSSELL dissent.