*793 A "realtor", employed by the Board of Local Improvements of Chicago as a "chief real estate valuator", was paid on a per diem basis upon vouchers submitted by him for "expert services" rendered in connection with certain projects. He also received substantial amounts from private individuals and corporations for services as a realtor and for valuations and appraisals. He took no oath of office, furnished no bond, and was employed for no definite period of time. He was not under civil service; his duties were not prescribed by ordinance or statute; he had no written contract of employment, but was simply told to "go to work." Under such facts, it is held, that petitioner was not an officer or employee of a political subdivision and the compensation so received is not exempt from the Federal income tax. Edgar N. Finn,31 B.T.A. 439">31 B.T.A. 439, and Metcalf & Eddy v. Mitchell,269 U.S. 514">269 U.S. 514, followed.
*173 In these proceedings, which were consolidated, the petitioner contests deficiencies in income tax determined against*794 him by the respondent for the years 1929, 1930, and 1931, in the respective amounts of $2,493.15, $4,988.62, and $3,702.23.
Petitioner claims that certain sums paid to him by the Chicago Board of Local Improvements for personal services rendered as an expert appraiser, or chief valuator, are exempt from the Federal income tax, contending that he was an employee of a political subdivision of the state and that such services were rendered in connection with the exercise of an essential governmental function.
FINDINGS OF FACT.
The facts were developed by stipulation, the testimony of witnesses, and documentary evidence.
The respondent determined that the petitioner, a resident of Chicago, received from the Board of Local Improvements of the city of Chicago, $30,400 in 1929 and $40,600 in 1930. A substantial sum was received from the same source during 1931. Petitioner also received commissions and fees from private individuals and corporations for services as a realtor, and for valuations and appraisals as follows: 1929, $42,498.74; 1930, $39,816.75; 1931, $10,832.25.
*174 It was stipulated that the constitution and statutes of the State of Illinois conferred upon*795 cities the power to make local improvements; that a board of local improvements had been established for said city under chapter 24 of Illinois Revised Statutes, and existed during the three years in question.
The stipulation contained seriatim practically the whole of chapter 24, Cahill's Revised Statutes of Illinois, from section 122 through section 213. We will take judicial notice of all the acts quoted, although we do not deem it necessary for an understanding of this case to set them out in toto.
In brief, the act provided that it should apply only to such cities as adopted it, which cities were given the power to prescribe by ordinance whether improvements should be made by special assessment, special taxation of contiguous property, or by general taxation. If the improvement were to be paid wholly or in part by special assessment or taxation, it was provided that the ordinance therefor should not be considered or passed by the council unless first recommended by the Board of Local Improvements, consisting of five members, no one of whom, except the superintendent of special assessments, who was ex officio secretary, should hold any other office or position*796 in the city.
The board, in addition to having the power "to originate a scheme for any local improvement, to be paid for by special assessment or special tax either with or without a petition", was charged with the responsibility of causing an estimate of the cost to be made, conducting public hearings after notifying the owners of the property involved, and preparing an ordinance therefor for submission to the governing body in the city. Provision was made for the filing of a remonstrance with the board. The ordinance prepared by the board was required to be referred to the proper committee and published in the proceedings of the governing body of the city, and after the passage of the ordinance the board was authorized to make the necessary contracts, fix the time for the commencement and completion of the work, and to do any other act expressed or implied, pertaining to the execution of the work, all of which was required to be done under the direction and to the satisfaction of the board.
The board was given the power to appoint an attorney for the board, to have charge, under its direction and control, of all of its legal matters, and also to appoint an engineer for the*797 board and such assistant attorneys, engineers, clerks, inspectors, etc., as should be necessary to carry into effect the purposes of the act. (Proviso authorizing appointment of attorney was held not valid, ; .)
Petitioner was compensated by the board during the taxable years for services rendered as "chief real estate valuator." He *175 had received other compensation from the city, or the board, previously, and more or less continuously since April 1911.
During the years involved herein he occupied a suite of rooms assigned to him by the Board of Local Improvements, but took no oath of office and furnished no bond, neither being required. He styled himself a "realtor", especially when testifying in court, and was in the real estate business as president of the Harry Goldstine Realty Co., for which he was paid a salary of $12,000 a year, "for advice given * * * when I was * * * not working for the City of Chicago."
During the year 1929 he received $8,751.50 "as loan commissions" and $23,174.74, for conducting appraisals for private clients. In the year 1930 he received "for commissions on*798 loans" $7,590.50, and from one client $11,775 for "the same sort of appraisals" which he was making for the city or the board. Substantial amounts were received for similar services in 1931.
Petitioner was not under civil service and the record shows no ordinance or statute creating the position of "chief real estate valuator", or fixing the duties of such position. The journal of proceedings of the city, however, discloses certain appropriations for the Board of Local Improvements and authorizes "a real estate valuator, $100 per day, as needed." Petitioner's services were rendered "as a real estate expert and chief valuator in charge of the work", at the rate of $100 per day (a day being from 10:00 a.m. to 12:00, and from 2:00 p.m. to 4:30 p.m.) and at the same rate for overtime. He had no written contract of employment, but "was told to go to work."
During most of the time in question he submitted vouchers, a number of which were introduced in evidence, all of them being similar in form. The one submitted July 1, 1929, is a representative sample. It reads as follows:
City of Chicago,
Debtor to Harry Goldstine:
To expert services re widening Robey Street from Blue*799 Island Avenue to 33rd Street, and from Harrison Streets to Roosevelt Rd.; examination of property; conferences with Mr. Faherty, Mr. Dahlberg and attorneys representing objectors - June 1, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 15, 17, 18, 19, 20, 21, 22, 24, 25, 26, 27, 28, 29 - 25 days at $100 per day - $2,500.00.
He also received a check dated July 26, 1929, in the amount of $2,000, based upon a voucher submitted reading: "To services in connection with the case of B. A. Eckhart of City of Chicago, re damage to property on Market Street, between Randolph and Lake Streets; examination of property, conferences with corporation counsel and witnesses, and court attendance during year 1928 - $2,000.00."
*176 Some time in 1931 the board began to carry him on on the pay roll at $100 per day, but no evidence was introduced to show when the method of payment was changed, nor to show the amount received by petitioner while "on the pay roll." We are unable, therefore, to make any specific finding as to the respective amounts received "by voucher" and "from the pay roll." Petitioner "wasn't concerned much with how I got the money, just so I got it." His duties consisted generally*800 in furnishing the attorney for the board with expert testimony, either by himself or his assistants, but included advising with the attorneys and assisting them in preparing the various cases for trial; assigning other real estate valuators; advising with the attorney for the board, with the president of the board, and with the finance committee and the mayor as to improvements and the advisability of making them. He also testified as an "expert" in many cases.
During the taxable years involved, he engaged actively in the real estate business and, when called on to testify, gave his office as the Foreman Building, which was the building in which was located the office of "Harry Goldstine & Company, Real Estate, Loans, Insurance, Expert Valuators of Real Estate." The office furnished him by the Board of Local Improvements was located in the City Hall Square Building. Petitioner deemed it expedient to testify that his office was in the Foreman Building in order to qualify as an "expert."
OPINION.
MELLOTT: Petitioner contends that the compensation received from the Board of Local Improvements of the city of Chicago, is exempt from the Federal income tax. He bases his contention*801 on the doctrine, often enunciated by the courts, that the Federal Government may not interfere with the exercise of an essential governmental function by the state through taxing the agencies of the state. The rule is well settled and not difficult to understand, but its application to a particular set of facts has given the courts and this Board some difficulty.
The rule is recognized by respondent. By regulations duly enacted, he has provided for the exemption in a proper case, as follows: "* * * compensation received for services rendered to a State or political subdivision thereof, is included in gross income unless (a) the person receives such compensation as an officer or employee of a state or political subdivision, and (b) the services are rendered in connection with the exercise of an essential governmental function * * *." (Art. 88, Regulations 69; Art. 643, Regulations 74.)
It is, therefore, essential for this petitioner to show, first, that he was an officer or employee and, second, that the services were rendered in connection with an essential governmental function.
*177 It is not seriously contended that petitioner is an officer, but in the brief and*802 reply brief submitted by him it is earnestly argued that he "was an employee."
It is contended that the Board of Local Improvements is an executive branch of the city government, performing an essential or ordinary governmental function. It is doubtful if we should so hold, in the face of the well reasoned decision by the Seventh Circuit in the case of . However, we do not deem it essential to determine the question in this case, being content to rest our decision upon other grounds.
Petitioner is not entitled to the immunity unless he brings himself clearly within the rule under which exemption can be allowed. The mere fact that he received compensation from the board is not sufficient. Private citizens engaged in the practice of a profession or the conduct of a business frequently enter into contracts with the Government from which they derive a profit. In such cases, the income so received is not exempt.
But it is contended that petitioner was an employee, and in support of that contention the fact that he was paid by the day (consisting of five hours) is stressed. Let us see.
One item in controversy is $2,000, *803 paid by check dated July 26, 1929. This was in connection with services rendered in the case of B. A. Eckhart, and consisted of "examination of property, conferences with corporation counsel and witnesses, and court attendance." This particular voucher did not purport to cover any particular time, number of days or hours, or to be based upon anything other than the value of the services rendered. Clearly as to this item petitioner was merely an independent contractor.
Should a different conclusion be reached as to the compensation paid for services rendered on a per diem basis for supervising the work of other appraisers, consulting with the legal department, and assisting in the preparation of cases for trial? In that connection petitioner cites , and especially the following language of the court:
That he lndulged to some extent in private practice is immaterial. It is quite usual for attorneys occupying public positions to engage in private practice if time and opportunity permit.
In our opinion, the facts in this case are not similar to the facts in the Butler case. In that case the taxpayer, employed*804 by a board of county commissioners to represent it as its legal advisor, was carried on the pay roll of the board and was paid his salary monthly. He was continuously under the direction and control of the board, and frequently advised with, and received instruction from, it. He was required to represent the county in all matters of a legal nature, *178 and was expected, without express orders from the board, to represent and defend the county in all such matters.
An entirely different situation is shown here. Petitioner was not "on the pay roll." All of his compensation was received upon vouchers, detailing the work performed by him - "examination of property; conferences." Each voucher also made specific reference to the project in connection with which the services were rendered - "Re widening Robey Street"; "Re widening Ashland Avenue"; "Re widening Western Avenue"; "Re widening Damen Ave."; "Re Magnolia Sewer", etc. Some of the vouchers were for "13 days of 5 hours each at 100 per day, 1300. 65 hours overtime at $20 per hour, 1300, total $2,600." Some vouchers cover only parts of a month - periods of one week or two weeks - and others 25, 26, or 27 days.
The*805 following vouchers are submitted in connection with the widening of Robey Street:
| May 1, 1929 | $1,300 |
| July 1, 1929 | 2,500 |
| Aug. 1, 1929 | 2,600 |
| Sept. 3, 1929 | 2,700 |
| Oct. 1, 1929 | 2,400 |
| Nov. 1, 1929 | 2,700 |
| Dec. 2, 1929 | 2,500 |
| Jan. 2, 1930 | 2,500 |
| Feb. 1, 1930 | $2,600 |
| Mar. 1, 1930 | 2,200 |
| Apr. 1, 1930 | 2,600 |
| May 1, 1930 | 2,600 |
| June 2, 1930 | 2,600 |
| July 1, 1930 | 2,500 |
| Aug. 1, 1930 | 2,600 |
Other vouchers were submitted in connection with other projects.
In the case of , we held that the compensation of an expert real estate appraiser for the city of New York was not exempt, following , and . We see no reason to do otherwise in this case.
Petitioner having failed to establish facts showing he is entitled to exemption, it follows that respondent's determination of the deficiency should stand.
Judgment will be entered for the respondent.