Rev. Rul. 68-238

The purpose of this Revenue Ruling is to update and restate, under the current statutes and regulations, the position set forth in S.S.T. 49, C.B. XV-2, 420 (1936).

The question presented is whether certain payments made by the M Company to its employees for the time they are temporarily absent from work while serving in a State National Guard are wages for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtible C, Internal Revenue Code of 1954).

The M Company voluntarily pays to its employees the difference between their normal earnings and the amount actually received by them from the State for the time they are temporarily absent from work to serve as members of the State National Guard. The employment relationship between the company and its employees is not disturbed by this service in the Guard.

Under the circumstances, the payments made by the M Company to its employees who are temporarily absent from work while they are serving in a State National Guard are `wages' for services performed, or to be performed, by the employees for the company. The payments of these `wages' are subject to the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act and to the Collection of Income Tax at Source on Wages.

S.S.T. 49 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.