*1036 A municipal engineer who receives from the municipality a small annual retainer and also fees amounting to five percent of the contract cost of construction projects, held not immune from Federal income tax in respect of such percentage amount, since from the evidence it can not be determined whether the projects or the petitioner's functions and services in respect thereof were governmental in character.
*1213 Respondent determined the following deficiencies in petitioner's income taxes:
| 1927 | $471.62 |
| 1928 | 4,008.87 |
| 1929 | 527.09 |
| 1930 | 138.53 |
*1214 Petitioner contends that he was an officer or employee of state governmental agencies during the taxable years and that respondent improperly added to his reported income fees received from two municipalities for engineering services rendered to them.
FINDINGS OF FACT.
Petitioner, a resident of Newark, New Jersey, is engaged in the general practice of civil engineering. In 1927, 1928, and 1929 he was appointed township engineer for Millburn and Maplewood, New*1037 Jersey, by their respective township committees, and in 1930 was appointed for the township of Maplewood alone. The appointments were for a term of one year. The committees, consisting of members elected by the townships, are empowered by section 5, page 5571, Compiled Statutes of New Jersey, to employ or appoint a township engineer, who by section 7 is required to take an oath of office. By virtue of section 32, authorizing the committee "to fix the annual salary or compensation to be paid to each person elected or appointed to any township office," the committees of Millburn and Maplewood passed ordinances providing:
* * * that the Township Engineer shall receive a retainer of $200 per annum and such other fees for special services as the Township Committee may from time to time order paid.
After his appointments, petitioner took the prescribed oath, and during the taxable years received annually the $200 retainer and also the following fees, representing 5 percent of the amount of all contracts for public improvements which were awarded:
| 1927 | $7,485.72 |
| 1928 | 29,916.52 |
| 1929 | 9,838.26 |
| 1930 | 7,411.90 |
As township engineer, petitioner was required to advise*1038 the committees on all engineering matters pertaining to the townships, to keep in his custody all important documents, papers, maps, etc., showing towns, streets, roads, alleys, sewerage, and water and light systems. As changes were made in them, he was required to correct maps or, if necessary, to make new ones. On contemplated or proposed changes in streets, alleys, sewage systems, etc., he advised the committees, and prepared plans and specifications for proposed projects. He maintained offices in Newark, New Jersey, at his own expense, and employed a staff of assistants who rendered services in connection with his public engineering duties as well as his private contracts. At the end of each year he allocated these expenses between public and private work.
*1215 In determining petitioner's income tax liability for the years 1927 to 1930, inclusive, the Commissioner included in gross income the fees representing 5 percent of the amount of his construction contracts for the townships.
OPINION.
STERNHAGEN: The petitioner invokes the Constitution for immunity from the proposed tax liability on the ground that the income derived by him, representing 5 percent of*1039 the cost of engineering projects of the townships, was the compensation of a public officer or employee of a state or municipal government which the Federal Government is prohibited from taxing, since such a tax would have the effect of interference with the performance of the functions of the state. We may assume without discussion, and without deciding, that the petitioner was an officer or employee of a municipal subdivision of the state, and assume further that the percentage form of his compensation makes his case no weaker than if he received a fixed statutory salary. Cf. . There is still, however, a lack of sufficient evidence to establish, as the petitioner must, in order to overcome the presumption that respondent's determination is factually correct, that the services and functions petitioner performed were entirely governmental in character and were to no extent proprietary. ; ; *1040 ; ; ; . The facts were stipulated, and give no opportunity for inquiry. It appears not only that petitioner's compensation was derived from projects which were more or less or perhaps entirely connected with the furnishing of water and light, but by the use in the stipulation of an undefined "etc." it is made impossible to say what the nature and extent of his other services may be.
The factors which indicate and those which delimit the Constitutional immunity have never been easy to apply. The exemption of the individual is only derivative and incidental to the state's right to freedom from Federal interference with its sovereign activities. Manifestly the individual is not to be given the exemption upon a record which leaves it doubtful what services he performed, whether they pertained to the state's sovereign functions, and whether the tax would amount to an interference with their exercise. *1041 ; .
Judgment will be entered for the respondent.