Rev. Rul. 56-651

Advice has been requested whether the retirement income credit provided by section 37(a) of the Internal Revenue Code of 1954 is denied for the year 1954 to a retired officer of the United States Coast and Geodetic Survey, who is under the age of 65, by reason of his being within the exception provided by section 37(f) of the Code as originally enacted.

Section 37(a) of the Code provides for a credit against the tax for a taxable year in the case of an individual who has had earned income before the beginning of the taxable year. Section 37(c) of the Code provides that for the purpose of subsection (a), the term `retirement income' means, in the case of an individual who has not attained the age of 65 before the close of the taxable year, income from pensions and annuities under a public retirement system (as defined in subsection (f)) to the extent provided therein.

Section 37(f) of the Code, as originally enacted, applicable to the taxable year 1954, provided as follows:

PUBLIC RETIREMENT SYSTEM DEFINED.-For purposes of subsection (c)(2), the term `public retirement system' means a pension, annuity, retirement, or similar fund or system established by the United States, a State, a Territory, a possession of the United States, any political subdivision of any of the foregoing, or the District of Columbia; except that such term does not include a fund or system established by the United States for members of the Armed Forces of the United States . Italics supplied.

The United States Coast and Geodetic Survey is ordinarily a civilian agency under the Department of Commerce. See section 4, Act of February 14, 1903, 32 Stat. 825; Reorganization Plan effective May 24, 1950, 64 Stat. 1263. However, the President is authorized, whenever in his judgment a sufficient national emergency exists, to transfer to the Service and jurisdiction of the Department of the Army, or the Department of the Navy, such personnel of the Coast and Geodetic Survey as he may deem to be in the best interest of the country. See section 16, Act of May 22, 1917, 40 Stat. 84, at page 87. Personnel so transferred are, while serving with the Department of the Army or the Department of the Navy, considered as members of the military and naval forces of the United States. See I.T. 1402, C.B. I-2, 72 (1922); I.T. 4061, C.B. 1951-2, 13. The compensation of the commissioned officers of the Coast and Geodetic Survey is paid from appropriations of the Department of Commerce except during those periods of emergency when the individual is paid by the military service under whose jurisdiction he has been temporarily transferred. The funds provided for these commissioned officers' retirement also are paid from the Department of Commerce appropriations.

In accordance with the Act of May 18, 1920, Public Law 210, 66th Cong., 41 Stat. 601, all laws relating to the retirement of commissioned officers of the Navy shall, after May 18, 1920, apply to commissioned officers of the Coast and Geodetic Survey. I.T. 4017, C.B. 1950-2, 12, as amplified by Revenue Ruling 55-88, C.B. 1955-1, 241, relating to the exclusion from gross income provided by section 22(b)(5) of the 1939 Code with respect to the retirement pay received for active service disability by members of the `uniformed services' who retire under the provisions of section 402(f) of the Career Compensation Act of 1949, 63 Stat. 802, discloses that section 102 of that Act includes the Coast and Geodetic Survey in the definition of the term `uniformed services.' However, section 7701(a)(15) of the 1954 Code provides that the term `military or naval forces of the United States' and the term `Armed Forces of the United States' each includes all regular and reserve components of the uniformed services which are subject to the jurisdiction of the Secretary of Defense, Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force. The commissioned officers of the Coast and Geodetic Survey are not under the jurisdiction of any of these Services except temporarily when certain officers may have been transferred to one of them in a time of emergency. Otherwise, they are under the jurisdiction of the Department of Commerce.

Accordingly, it is held that, for the purposes of section 37(f) of the Internal Revenue Code of 1954, as originally enacted and applicable to the year 1954, commissioned officers of the Coast and Geodetic Survey are not `members of the Armed Forces,' since they are not subject to the jurisdiction of the Secretary of Defense, the Secretary of the Army, the Secretary of the Navy, or the Secretary of the Air Force, as contemplated in section 7701(a)(15) of the 1954 Code except in the case of certain individuals who are transferred thereto on an emergency basis during a time of national emergency. At the time of their retirement, the fund established by the United States, payable from the appropriations of the Department of Commerce, does not represent a fund or system established by the United States for members of the Armed Forces of the United States.

The Act of August 9, 1955, Public Law 299, 84th Cong., 69 Stat. 591, 26 U.S.C. 37, effective for taxable years beginning after December 31, 1954, amended section 37(f) of the Internal Revenue Code of 1954 by striking out the following: `; except that such term does not include a fund or system established by the United States for members of the Armed Forces of the United States.' See section 1.37-3(a)(3) of the Income Tax Regulations.