*2318 Compensation received by the petitioners as civil engineers for professional services rendered to Harris County, Texas, held not exempt from taxation under section 1211 of the Revenue Act of 1926.
*849 These proceedings, which were consolidated for hearing, are for the redetermination of deficiencies in income taxes asserted by the respondent against Joseph Milton Howe in the amounts of $327.13, $66.76, $110.72, and $80.15 for the years 1923, 1924, 1925, and 1926, respectively; against Mrs. Joseph Milton Howe in the amounts of $65.66, $115.95, and $10.68 for the years 1924, 1925, and 1926, respectively; against A. J. Wise in the amounts of $218.25, $150.38, and $38.49 for the years 1924, 1925, and 1926, respectively; and against Mrs. A. J. Wise in the amounts of $151.61 and $39.01 for the years 1925 and 1926, respectively.
The deficiencies result from the inclusion, in the gross incomes of petitioners' Joseph Milton Howe and A. J. Wise, of amounts received by them for services rendered to Harris County, Texas.
Two other issues, set forth in Docket*2319 No. 19771, were settled by stipulation, wherein it was agreed that petitioner Howe was entitled to a deduction of $1,000 for loss sustained in 1923 in the Damon Mound Syndicate, and that said petitioner was not entitled to a deduction of $500 for alleged loss in 1923 on stock of the American & Mexican Mining & Reduction Co.
FINDINGS OF FACT.
The petitioners Joseph Milton Howe and A. J. Wise were partners under the firm name of Howe & Wise, in the practice of civil engineering in Houston, Tex., where they resided. The other two petitioners *850 were the wives of Howe and Wise, respectively. The law of community property was in force in Texas during the years in question.
By an act of the Texas Legislature, known as the Harris County Road System, approved March 5, 1913, it was provided that the Commissioners' Court of Harris County should have the right to select a competent engineer to act as county engineer; that such engineer should hold office during the tenure of office of the court by which he was elected and should receive such salary and perform such professional services as might be agreed upon at the time of his selection; that a contract should be entered*2320 into embodying the terms of his employment; and that such contract might be made with any person, firm or engineering corporation in liek manner as it may be made with an individual. The term of office of the Commissioners' Court was two years.
On February 5, 1923, the Commissioners' Court of Harris County, acting through the county judge, entered into the following contract:
MONDAY, FEBRUARY 5TH, A.D. 1923.
STATE OF TEXAS,
County of Harris.
Know all men by these presents: That this contract and agreement between Harris County acting herein through Chester H. Bryan its County Judge hereinafter called Party of the First Part, and Howe & Wise, a co-partnership composed of J. Milton Howe and Albert J. Wise, hereinafter called Parties of the Second Part.
WITNESSETH.
1. Parties of the second part agree to do all the engineering and supervision work in connection therewith for the County of Harris incident to and reasonably connected with the expenditure of all road and bridge funds whether general or special, all funds derived from automobile licenses for the upkeep and maintenance of State Highways and all State and Federal road aid, and in addition thereto such*2321 incidental matters as may be agreed to by and between the parties, and the party of the first part hereby employs the said firm of Howe & Wise to do and perform and to furnish the services referred to.
2. Parties of the second part agree to furnish all labor, stakes, blueprints and automobile transportation for themselves and for their employees, and they are to furnish such employees as may be reasonably necessary to expeditiously and in a workmanlike manner perform the services herein contracted for.
3. Party of the first part agrees to furnish all stationery, tracing cloth and profile blanks used in the office of said parties of the second part in connection with such work as may be performed under this contract and this is to include blanks for specifications. In addition, it is to furnish such instruments, tools, furniture and fixtures owned by Harris County and now in custody of the Engineers, during the life of this Contract. Party of the first part is to pay all expenses incurred on account of work or trips out of the County. In addition, the county is to pay for testing of materials which require laboratory equipment. It is expressly understood, however, that all*2322 expense for which the County of Harris may be liable is to be incurred in the manner provided by law.
*851 Any additional instruments or tools reasonably required or necessary to carry on work contemplated by this contract shall be furnished by the parties of the second part at their own expense, and in addition thereto, they shall pay all telephone and postage charges and expenses incurred by them in the performance of such services. The County of Harris will pay express or freight charges on sample or other items found necessary to forward to laboratories or to State Highway Office.
4. In consideration of the services to be performed by said Howe & Wise agreeable to this contract, the County of Harris agrees to pay to said firm the sum of $1,250.00 per month. In addition, the County shall pay the wages or salaries of inspectors necessary in carrying out said work, and duly appointed by the Court and shall also pay for at least two Maintenance Engineers. The latter are to be appointed by Howe & Wise, subject to the approval of the Commissioners' Court.
The period of time during which this contract shall operate shall begin January 1, 1923, and continue to December 31, 1924, but*2323 this contract shall be subject to revision or cancellation on thirty days notice in writing from either party.
In testimony whereof witness our hands in duplicate this the 5 day of Feby. 1923.
HARRIS COUNTY,
By CHESTER H. BRYAN,
County Judge.
HOWE & WISE,
By A. J. WISE.
On April 6, 1925, a similar contract was entered into, covering the period from January 1, 1925, to December 31, 1926, but subject to cancellation on 30 days notice. The compensation was fixed at $1,350 per month. This contract contained a provision not included in the contract of February 5, 1923, as follows:
If Harris County should during the life of this contract obtain State or Federal Aid, or other funds from outside sources to construct or reconstruct roads or bridges, the party of the second part will be paid an additional monthly salary as the work progresses, not to exceed five per cent. of such State or Federal Aid, and not to exceed 2 1/2% on all additional funds.
Howe and Wise rendered the services required under the foregoing contracts and received the stated compensation. During the years 1923 to 1926, inclusive, they also did engineering work for others. The amount they received*2324 from Harris County, in each of those years, was about one-third of their total income from their professional services. Howe gave about half his time to the Harris County work and Wise gave from 80 to 85 per cent of his time to it. No oath of office was taken by either Howe or Wise in connection with the work. They gave bond for the faithful performance of their duties.
Each meeting of the Commissioners' Court was attended by either Howe or Wise, and they were subject to the call of the Commissioners at all times. The Commissioners' Court determined what engineering work was necessary to be done, and the amounts to be *852 expended. Howe and Wise advised how the work should be done, exercised their judgment as to proper engineering methods, and supervised the work. The Commissioners had power to accept or reject the recommendations of Howe and Wise as to the manner in which any piece of work should be done, but left much to the discretion of the engineers.
Howe and Wise maintained, at their own expense, an organization of five assistant engineers, six or eight chainmen or rodmen, and an office clerk. This organization was used both in county work and in private*2325 work as occasion required. The actual field work for the county, such as surveying, detailed supervision of road repairing, and the like, was done by subordinates employed by Howe and Wise. General supervision over the detail work was given by Howe and Wise in person. The same method was followed with respect to the private engineering work done by them.
Howe and Wise kept account of all their expenses for labor, materials, supplies and automobile expense incident to their work for Harris County. The total amount of such expenses for each year was subtracted from the amount of compensation received in that year from the county, and the remainder they treated as net income. This net income was distributed, 30 per cent to Howe and 70 per cent to Wise.
The amounts so recived by Howe and Wise from Harris County were not included in the income-tax returns here in question. The respondent increased the net income shown on the returns as follows:
| 1923 | 1924 | 1925 | 1926 | |
| Joseph Milton Howe | $2,158.75 | $1,050 | $1,428 | $1,376.19 |
| Mrs. Joseph Milton Howe | 1,050 | 1,428 | 1,376.19 | |
| A. J. Wise | 4,900 | 3,332 | 3,211.08 | |
| Mrs. A. J. Wise | 3,332 | 3,211.08 |
*2326 The increases were made on account of compensation received by the petitioners Howe and Wise in those years from Harris County, Texas, and deficiencies were determined as above set forth.
OPINION.
MARQUETTE: In each of these proceedings one and the same question is presented for our decision, namely, were Joseph Milton Howe and A. J. Wise officers or employees of Harris County, Texas, either individually or as a partnership, within the meaning of section 1211 of the Revenue Act of 1926, which provides:
*853 SEC. 1211. Any taxes imposed by the Revenue Act of 1924 or prior revenue Acts upon any individual in respect of amounts received by him as compensation for personal services as an officer or employee of any State or political subdivision thereof (except to the extent that such compensation is paid by the United States Government directly or indirectly), shall, subject to the statutory period of limitations properly applicable thereto, be abated, credited, or refunded.
It appears that the Commissioners' Court of Harris County, acting under authority of law, entered into two successive contracts with the firm of Howe & Wise, engaging that firm to act as county*2327 engineers during the years herein involved. By the terms of those contracts the firm agreed to do all the engaineering work and supervision in connection with the expenditure of all road and bridge funds of the county, and also "such incidental matters as may be agreed to by and between the parties." Each contract was to run for a period of two years, subject however to modification or cancellation by either party, upon 30 days' notice.
Article XVI, section 1, of the Constitution of the State of Texas, provides that all officers shall take a prescribed oath. Neither the Constitution nor the Legislature of the State of Texas has created the office of county engineer in general. For our present consideration such office exists, if at all, only by virtue of the Harris County Road System law, section 24, which is set forth in our findings of fact.
In our opinion that enactment does not create the office of county engineer. It provides for the selection of an engineer who is to be employed by contract, which is incompatible with the idea of a public office. In 22 Ruling Case Law, p. 379, we find the general rule that "A public office is not the same thing as a contract, and one*2328 contracting with the government is in no just and proper sense an officer of the government." Again, on page 380 of the same volume it is stated: "The fact that the duties of a particular position or governmental function do not depend on contract is itself one of the criteria that it is a public office." And to similar effect is the holding in Hall v. Wisconsin,103 U.S. 5">103 U.S. 5.
Furthermore, the statute in question provides that the position of county engineer may be filled by a firm or engineering corporation. Manifestly neither a partnership, as such, nor a corporation could take the oath of office required by the Texas Constitution. We can not assume that the legislature of that State intended to create an office to be filled by an incumbent unable to comply with the constitutional requirement.
*854 There being no office of county engineer, it is clear that neither the firm of Howe & Wise, nor the individuals themselves, could have the status of an officer of the State of Texas or of its political subdivision, Harris County. See *2329 Metcalf & Eddy v. Mitchell,269 U.S. 514">269 U.S. 514.
We think the evidence also fails to establish that either Howe or Wise, or their firm, was an employee of the State, or its political subdivision, within the meaning of the Revenue Act. They were at all times in independent practice of their profession, and were free to, and did, accept other work concurrently with the work for Harris County. They used their own judgment respecting the amount of time they should give to the county work, and were unrestricted as to the methods of doing the work. They maintained their own office, paid from their own funds at least a part of the expense for necessary equipment for the work, and employed at their own expense assistants selected by themselves to do a part of the work for which they had been retained by Harris County. All of these facts are inconsistent with the relation of employer and employee. John R. Spelman,18 B.T.A. 313">18 B.T.A. 313.
In our opinion the facts in this proceeding establish the status of the firm of Howe & Wise and each of the individuals composing the firm as that of an independent contractor, and not an officer or employee of a State or political*2330 subdivision thereof. Metcalf & Eddy v. Mitchell, supra;Lucas v. Howard,10 B.T.A. 62">10 B.T.A. 62, 280 U.S. 14">280 U.S. 14A; Blair v. Byers, 35 Fed.(2d) 326; Kreipke v. Commissioner, 32 Fed.(2d) 594. We find no error in the determination that deficiencies exist for the years herein involved.
Pursuant to the stipulation between the parties, the petitioner Joseph Milton Howe should be allowed a deduction of $1,000 from his gross income for 1923 for a loss sustained in that year in the Damon Mound Syndicate, and is not entitled to a deduction of $500 for alleged loss in 1923 on stock of the American & Mexican Mining & Reduction Co.
Judgment will be entered under Rule 50 with respect to the proceeding in Docket No. 19771. Judgment will be entered for the respondent as to the proceedings in Docket Nos. 30599, 30600, 30601, 30602, 38745, 38746, 38747, 38974, 38975, 38976, and 38977.