MR. JUSTICE BRENNAN delivered the opinion of the Court.
This case presents the question whether cash payments to state police troopers, designated as meal allowances, are included in gross income under § 61 (a) of the Internal Revenue Code of 1954, 26 U. S. C. § 61 (a),
The pertinent facts are not in dispute. Respondent
The State instituted the cash meal allowance for its state police officers in July 1949. Prior to that time, all troopers were provided with midshift
The meal allowance is paid biweekly in advance and is included, although separately stated, with the trooper's salary. The meal-allowance money is also separately accounted for in the State's accounting system. Funds are never commingled between the salary and meal-allowance accounts. Because of these characteristics of the meal-allowance system, the Tax Court concluded that the "meal allowance was not intended to represent additional compensation." 65 T.C. 44, 47 (1975).
Notwithstanding this conclusion, it is not disputed that the meal allowance has many features inconsistent with its characterization as a simple reimbursement for meals that would otherwise have been taken at a meal station. For example, troopers are not required to spend their meals allowances on their midshift meals, nor are they required to account for the manner in which the money is spent. With one limited exception not relevant here,
On his 1970 income tax return, respondent reported $9,066 in wages. That amount included his salary plus $326.45 which represented cash meal allowances reported by the State on respondent's Wage and Tax Statement (Form W-2).
Respondent sought review in the United States Tax Court, arguing that the cash meal allowance was not compensatory but was furnished for the convenience of the employer and hence was not "income" within the meaning of § 61 (a) and that, in any case, the allowance could be excluded under § 119. In a reviewed decision, the Tax Court, with six dissents,
The starting point in the determination of the scope of "gross income" is the cardinal principle that Congress in creating the income tax intended "to use the full measure of its taxing power." Helvering v. Clifford, 309 U.S. 331, 334 (1940); accord, Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223 (1937); Douglas v. Willcuts, 296 U.S. 1, 9 (1935); Irwin v. Gavit, 268 U.S. 161, 166 (1925). In applying this principle to the construction of § 22 (a) of the Internal Revenue Code of 1939
Respondent contends, however, that § 119 can be construed to be a specific exemption covering the meal-allowance payments to New Jersey troopers. Alternatively, respondent argues that notwithstanding § 119 a specific exemption may be found in a line of lower-court cases and administrative rulings which recognize that benefits conferred by an employer on an employee "for the convenience of the employer"—at least when such benefits are not "compensatory"—are not income within the meaning of the Internal Revenue Code. In responding to these contentions, we turn first to § 119. Since we hold that § 119 does not cover cash payments of any kind, we then trace the development over several decades of the convenience-of-the-employer doctrine as a determinant
Section 119 provides that an employee may exclude from income "the value of any meals . . . furnished to him by his employer for the convenience of the emloyer, but only if . . . the meals are furnished on the business premises of the employer . . . ." By its terms, § 119 covers meals furnished by the employer and not cash reimbursements for meals. This is not a mere oversight. As we shall explain at greater length below, the form of § 119 which Congress enacted originated in the Senate and the Report accompanying the Senate bill is very clear: "Section 119 applies only to meals or lodging furnished in kind." S. Rep. No. 1622, 83d Cong., 2d Sess., 190 (1954). See also Treas. Reg. § 1.119-1 (c) (2), 26 CFR § 1.119-1 (1977). Accordingly, respondent's meal-allowance payments are not subject to exclusion under § 119.
The convenience-of-the-employer doctrine is not a tidy one. The phrase "convenience of the employer" first appeared in O. D. 265, 1 Cum. Bull. 71 (1919), in a ruling exempting from the income tax board and lodging furnished seamen aboard ship. The following year, T. D. 2992, 2 Cum. Bull. 76 (1920), was issued and added a convenience-of-the-employer section to Treas. Regs. 45, Art. 33, the income tax regulations then in effect.
While T. D. 2992 extended the convenience-of-the-employer test as a general rule solely to items received in kind, O. D. 514, 2 Cum. Bull. 90 (1920), extended the convenience-of-the-employer doctrine to cash payments for "supper money."
The rationale of both T. D. 2992 and O. D. 514 appears to have been that benefits conferred by an employer on an employee in the designated circumstances were not compensation for services and hence not income. Subsequent rulings equivocate on whether the noncompensatory character of a benefit could be inferred merely from its characterization by the employer or whether there must be additional evidence that employees are granted a benefit solely because the employer's business could not function properly unless an employee was furnished that benefit on the employer's premises. O. D. 514, for example, focuses only on the employer's characterization.
Adding complexity, however, is Mim. 6472, 1950-1 Cum. Bull. 15, issued in 1950. This mimeograph states in relevant part:
Coexisting with the regulations and administrative determinations of the Treasury, but independent of them, is a body of case law also applying the convenience-of-the-employer test to exclude from an employee's statutory income benefits conferred by his employer.
An early case is Jones v. United States, 60 Ct. Cl. 552 (1925). There the Court of Claims ruled that neither the value of quarters provided an Army officer for nine months of a tax year nor payments in commutation of quarters paid the officer for the remainder of the year were includable in income. The decision appears to rest both on a conclusion that public quarters by tradition and law were not "compensation received as such" within the meaning of § 213 of the Revenue Act of 1921, 42 Stat. 237, and also on the proposition that "public quarters for the housing of . . . officers is as much a military necessity as the procurement of implements of warfare or the training of troops." 60 Ct. Cl., at 569; see id., at 565-568. The Court of Claims, in addition, rejected the argument that money paid in commutation of quarters was income on the ground that it was not "gain derived . . . from labor" within the meaning of Eisner v. Macomber, 252 U.S. 189 (1920), but apparently was at most a reimbursement to the officer for furnishing himself with a necessity of his job in those instances in which the Government found it convenient to leave the task of procuring quarters to an individual officer. 60 Ct. Cl., at 574-578.
Two years later, the Tax Court in an unreviewed decision in Doran v. Commissioner, 21 T.C. 374 (1953), returned in part to the employer's-characterization rationale rejected by Van Rosen. In Doran, the taxpayer was furnished lodging in kind by a state school. State law required the value of the lodging to be included in the employee's compensation. Although the court concluded that the lodging was furnished to allow the taxpayer to be on 24-hour call, a reason normally sufficient to justify a convenience-of-the-employer exclusion,
Even if we assume that respondent's meal-allowance payments could have been excluded from income under the 1939 Code pursuant to the doctrine we have just sketched, we must nonetheless inquire whether such an implied exclusion survives the 1954 recodification of the Internal Revenue Code. Cf. Helvering v. Winmill, 305 U.S. 79, 83 (1938). Two provisions of the 1954 Code are relevant to this inquiry: § 119 and § 120,
In enacting § 119, the Congress was determined to "end the confusion as to the tax status of meals and lodging furnished an employee by his employer." H. R. Rep. No. 1337, 83d Cong., 2d Sess., 18 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess., 19 (1954). However, the House and Senate initially
The Senate, however, was of the view that the doctrine had at least a limited role to play. After noting the existence of the doctrine and the Tax Court's reliance on state law to refuse to apply it in Doran v. Commissioner, supra, the Senate Report states:
In a technical appendix, the Senate Report further elaborated:
After conference, the House acquiesced in the Senate's version of § 119. Because of this, respondent urges that § 119 as passed did not discard the convenience-of-the-employer doctrine, but indeed endorsed the doctrine shorn of the confusion created by Mim. 6472 and cases like Doran. Respondent further argues that, by negative implication, the technical appendix to the Senate Report creates a class of noncompensatory cash meal payments that are to be excluded from income. We disagree.
The Senate unquestionably intended to overrule Doran and rulings like Mim. 6472. Equally clearly the Senate refused completely to abandon the convenience-of-the-employer doctrine as the House wished to do. On the other hand, the Senate did not propose to leave undisturbed the convenience-of-the-employer doctrine as it had evolved prior to the promulgation of Mim. 6472. The language of § 119
As the last step in its restructuring of prior law, the Senate adopted an additional restriction created by the House and not theretofore a part of the law, which required that meals subject to exclusion had to be taken on the business premises of the employer. Thus § 119 comprehensively modified the prior law, both expanding and contracting the exclusion for meals and lodging previously provided, and it must therefore be construed as its draftsmen obviously intended it to be— as a replacement for the prior law, designed to "end [its] confusion."
Because § 119 replaces prior law, respondent's further argument —that the technical appendix in the Senate Report
Moreover, even if we were to assume with respondent that cash meal payments made for the convenience of the employer could qualify for an exclusion notwithstanding the express limitations upon the doctrine embodied in § 119, there would still be no reason to allow the meal allowance here to be excluded. Under the pre-1954 convenience-of-the-employer doctrine respondent's allowance is indistinguishable from that in Van Rosen v. Commissioner, supra, and hence it is income. Indeed, the form of the meal allowance involved here has drastically changed from that passed on in Saunders v. Commissioner, 215 F.2d 768 (CA3 1954), relied on by the Third Circuit below, see supra, at 82, and in its present form the allowance is not excludable even under Saunders' analysis.
Finally, respondent argues that it is unfair that members of the military may exclude their subsistence allowances from income while respondent cannot. While this may be so, arguments of equity have little force in construing the boundaries
MR. JUSTICE BLACKMUN, with whom THE CHIEF JUSTICE joins, dissenting.
More than a decade ago the United States Court of Appeals for the Eighth Circuit, in United States v. Morelan, 356 F.2d 199 (1966), held that the $3-per-day subsistence allowance paid Minnesota state highway patrolmen was excludable from gross income under § 119 of the Internal Revenue Code of 1954, 26 U. S. C. § 119. It held, alternatively, that if the allowance were includable in gross income, it was deductible as an ordinary and necessary meal-cost trade or business expense under § 162 (a) (2) of the Code, 26 U. S. C. § 162 (a) (2). I sat as a Circuit Judge on that case. I was happy to join Chief Judge Vogel's opinion because I then felt, and still do, that it was correct on both grounds. Certainly, despite the usual persistent Government opposition in as many Courts of Appeals as were available, the ruling was in line with other authority at the appellate level at that time.
On December 11, 1967, however, this Court by a 5-3 vote decided United States v. Correll, 389 U.S. 299, restricting to overnight trips the travel-expense deduction for meal costs under § 162 (a) (2). That decision, of course, disapproved Morelan's alternative ground for decision. I am frank to say that had I been a Member of this Court at the time Correll was decided, I would have joined its dissent, 389 U. S., at 307, for I fully agree with Mr. Justice Douglas' observation there, joined by Justices Black and Fortas—an observation which, for me, is unanswerable and unanswered—that the Court, with a bow to the Government's argument for administrative convenience, and conceding an element of arbitrariness, id., at 303, read the word "overnight" into § 162 (a) (2), a statute that speaks only in geographical terms.
The taxpayer in the present case, faced with Correll, understandably does not press the § 162 (a) (2) issue, but confines his defense to §§ 61 and 119.
I have no particular quarrel with the conclusion that the payments received by the New Jersey troopers constituted income to them under § 61. I can accept that, but my stance in Morelan leads me to disagree with the Court's conclusion that the payments are not excludable under § 119. The Court draws an in-cash or in-kind distinction. This has no appeal or persuasion for me because the statute does not speak specifically in such terms. It does no more than refer to "meals . . . furnished on the business premises of the employer," and from those words the Court draws the in-kind consequence. I am not so sure. In any event. for me, as was the case in Morelan, the business premises of the State of
The Court in its opinion makes only passing comment, with a general reference to fairness, on the ironical difference in tax treatment it now accords to the paramilitary New Jersey state trooper structure and the federal military. The distinction must be embarrassing to the Government in its position here, for the Internal Revenue Code draws no such distinction. The Commissioner is forced to find support for it— support which the Court in its opinion in this case does not stretch to find—only from a regulation, Treas. Reg. § 1.61-2 (b), 26 CFR § 1.61-2 (b) (1977), excluding subsistence allowances granted the military, and the general references in 37 U. S. C. § 101 (25) (1970 ed., Supp. V), added by Pub. L. 93-419, § 1, 88 Stat. 1152, to "regular military compensation" and "Federal tax advantage accruing to the aforementioned allowances because they are not subject to Federal income tax." This, for me, is thin and weak support for recognizing a substantial benefit for the military and denying it for the New Jersey state trooper counterpart.
I fear that state troopers the country over, not handsomely paid to begin with, will never understand today's decision. And I doubt that their reading of the Court's opinion—if, indeed, a layman can be expected to understand its technical wording—will convince them that the situation is as clear as the Court purports to find it.
"(a) General definition.
"Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:
"(1) Compensation for services, including fees, commissions, and similar items . . . ."
"There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him by his employer for the convenience of the employer, but only if—
"(1) in the case of meals, the meals are furnished on the business premises of the employer . . . .
"In determining whether meals . . . are furnished for the convenience of the employer, the provisions of an employment contract or of a State statute fixing terms of employment shall not be determinative of whether the meals or lodging are intended as compensation."
"(a) GENERAL DEFINITION.—`Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service, . . . or gains or profits and income derived from any source whatever." (Emphasis added.)
"[Section 61] corresponds to section 22 (a) of the 1939 Code. While the language in existing section 22 (a) has been simplified, the all-inclusive nature of statutory gross income has not been affected thereby. Section 61 (a) is as broad in scope as section 22 (a)."
"(a) GENERAL RULE.—Gross income does not include any amount received as a statutory subsistence allowance by an individual who is employed as a police official . . . .
"(1) Amounts to which subsection (a) applies shall not exceed $5 per day.
"(2) If any individual receives a subsistence allowance to which subsection (a) applies, no deduction shall be allowed under any other provision of this chapter for expenses in respect of which he has received such allowance, except to the extent that such expenses exceed the amount excludable under subsection (a) and the excess is otherwise allowable as a deduction under this chapter." 68A Stat. 39.
"(a) In general.—There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including—
"(1) . . . ;
"(2) Traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade of business . . . ."