SSR 85-10c: SECTION 210(a)(8)(A) (42 U.S.C. 410(a)(8)(A)) COVERAGE -- SERVICES OF MEMBERS OF RELIGIOUS ORDERS WHO WORK FOR THIRD PARTIES

20 CFR 404.1023(e)

SSR 85-10c

Samson v. U.S., 743 F.2d 884 (Fed. Cir. 1984)

COWEN, Senior Circuit Judge:

This is an appeal in a tax refund suit from the United States Claims

Court (Claims Court). [1] Taxpayer, a member of a religious order, is subject to vows of poverty and

obedience, and all income derived from her activities is the property of

the order. The question presented is whether services she performed as a

speech therapist for a county hospital, wholly unrelated to her order,

come within the exception to the definition of "employment" for FICA tax

purposes (26 U.S.C. § 3121(b)(8)(A)), since she was directed by the order

to accept the hospital's offer of employment and to perform the services

after she had been appointed by the hospital. Trail Judge White ruled that

the earnings were taxable, granted the government's motion for summary

judgment, and dismissed the complaint. We have added a discussion of two

matters which were not considered by him, and with these additions, we

agree with his analysis and affirm the decision of the Claims Court on the

basis of his opinion.

1. Trial Judge White's construction of the applicable statutes and

regulations is consistent with the position of the Commissioner of

Internal Revenue as set forth in a number of revenue rulings which were

not referred to in the trial judge's opinion. The general rule derived

from these rulings is that where a member of a religious order enters into

an employment relationship with a third party who is unrelated to the

order, but who looks to the member rather than to the order for the

performance of the duties, the member's earnings are subject to FICA

taxation, even though the order directed the member to apply for the

position and to perform the duties thereof. See, e.g., Rev. Rul. 84-13,

1984-4 Int. Rev.Bull. 5 (member's private practice as a psychologist);

Rev.Rul. 83-127, 1983-2 Cum.Bull. 25 (member employed as a teacher in a

secular private school); Rev.Rul

he

performance of the duties, the member's earnings are subject to FICA

taxation, even though the order directed the member to apply for the

position and to perform the duties thereof. See, e.g., Rev. Rul. 84-13,

1984-4 Int. Rev.Bull. 5 (member's private practice as a psychologist);

Rev.Rul. 83-127, 1983-2 Cum.Bull. 25 (member employed as a teacher in a

secular private school); Rev.Rul. 81-267, 1981-2 Cum.Bull. 196 (member

employed by a private hospital not associated with the order's church);

Rev.Rul. 79-132, 1979-1 Cum.Bull. 62 (member serving as an Army chaplain);

Rev.Rul. 78-229, 1978-1 Cum.Bull. 305 (minister performing non-religious

services for a manufacturing company); Rev.Rul. 76-323, 1976-2, Cum.Bull.

18 (members employed as a plumber and as a construction worker).

We are aware of revenue rulings dealing with different factual patterns,

including situations where the services of members were performed when the

member was acting as agent of the religious order or for another agency of

the church or an associated institution. See e.g. Rev.Rul. 56-187, 1956-1

Cum.Bull. 483 (ordained minister serving as executive or administrative

officer of a federation of churches); Rev.Rul. 68-123, 1968 Cum.Bull. 35

(nurse assigned as agent of religious order to perform duties for a

hospital where she was under the supervision and control of the order at

all times); Rev.Rul. 77-290, 1977-2 Cum.Bull. 26 (experienced secretary

assigned to perform duties as the business officer of a church). Although

taxpayer claims that Rev.Rul. 68-123 is inconsistent with the rulings

holding that a member's employment by a third party, not associated with a

church order, is subject to FICA taxation, we find this ruling is clearly

distinguishable on its facts.

times); Rev.Rul. 77-290, 1977-2 Cum.Bull. 26 (experienced secretary

assigned to perform duties as the business officer of a church). Although

taxpayer claims that Rev.Rul. 68-123 is inconsistent with the rulings

holding that a member's employment by a third party, not associated with a

church order, is subject to FICA taxation, we find this ruling is clearly

distinguishable on its facts.

2. On appeal, taxpayer argues that taxation of her income from the

hospital amounts to double taxation. Her order had elected to provide

social security coverage for its members in accordance with 26 U.S.C. §

3121(r)(1) and was making FICA payments on her behalf based on the fair

market value of maintenance and benefits the order provided for her. She

maintains, therefore, that the only lawful way she could be taxed for FICA

purposes was through the payments made by her order under section 3121(r).

We disagree. We think Trial Judge White correctly held that taxpayer's

employment by the hospital was not covered by the exception of section

3121(b)(8)(A) of the Code, because her day-to-day activities were under

the control and supervision of the hospital. By enacting the Social

Security Amendments of 1972, Pub.L. 92-603 (86 Stat. 1329), Congress

authorized religious orders to elect social security coverage for their

members by filing an irrevocable certificate for that purpose. The

legislative history of the 1972 amendments shows that Congress intended to

limit the new coverage to the types of service excluded by section

213(b)(8)(A) and to extend the new benefits to services rendered by

members as employees of the order or for an autonomous subdivision of the

order. H.R.Rep. No. 231, 92d Cong., 1st Sess., U.S. Code Cong. &

Admin. News 1972, pp. 4989, 5045, 5046, 5268 (1972-2 Cum.Bull. 739), which

states:

* * * * * *

ngress intended to

limit the new coverage to the types of service excluded by section

213(b)(8)(A) and to extend the new benefits to services rendered by

members as employees of the order or for an autonomous subdivision of the

order. H.R.Rep. No. 231, 92d Cong., 1st Sess., U.S. Code Cong. &

Admin. News 1972, pp. 4989, 5045, 5046, 5268 (1972-2 Cum.Bull. 739), which

states:

* * * * * *

Section 129(b) of the bill amends section 3121 of the Code by adding a

new subsection (r). The new section 3121(r)(1) provides that a religious

order whose members are required to take a vow of poverty, or any

autonomous subdivision of such an order, may file a certificate with the

Internal Revenue Service electing to extend social security coverage to

the services performed by its members in the exercise of the duties

required by such order or subdivision.

In accordance with the legislative history, 26 U.S.C. § 3121(r)(1)(C)

provides that all services performed by a member of the order (covered by

the election) in the exercise of duties required by the order shall be

deemed to have been performed as an employee of the order.

The emphasis in the legislative history and in the language of the 1972

amendments is on the employment relationship between the order and its

members. Although the members are not "employees" of the order, Congress,

as taxpayer suggests, has created a legal fiction by providing that they

shall be deemed employees when performing duties required by the order.

as an employee of the order.

The emphasis in the legislative history and in the language of the 1972

amendments is on the employment relationship between the order and its

members. Although the members are not "employees" of the order, Congress,

as taxpayer suggests, has created a legal fiction by providing that they

shall be deemed employees when performing duties required by the order.

We agree with the government that the two FICA coverages are for two

different purposes much the same as when an individual holds more than one

job. As indicated above, the purpose of the 1972 amendments was to

authorize religious orders to elect social security coverage for their

members who perform duties directly for the order or for an associated

institution under circumstances which normally create an employer-employee

relationship. We are not persuaded that there is anything in the

legislative history or in the 1972 amendments which requires a holding

that the section 3121(r) coverage for duties performed for the order and

separate coverage for work done by members while employees of a third

party are mutually exclusive.

AFFIRMED.

* * * * *

[1] Reported at 4 Cl. Ct. 325

(1984).