Rev. Rul. 68-595

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the position set forth in I.T. 4077, C.B. 1952-1, 149.

The question presented is whether fees and other remuneration received by a director of a corporation for services performed on committees of its board of directors are self-employment income within the meaning of section 1402(b) of the Self-Employment Contributions Act of 1954 (chapter 2, subtitle A, Internal Revenue Code of 1954).

Section 1402 of the Act, defining certain terms relating to the tax on self-employment income, provides, in part, as follows:

(a) NET EARNINGS FROM SELF-EMPLOYMENT.-The term `net earnings from self-employment' means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business * * *

(b) SELF-EMPLOYMENT INCOME.-The term `self-employment income' means the net earnings from self-employment derived by an individual * * * during any taxable year; * * *

(c) TRADE OR BUSINESS.-The term `trade or business,' when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses), except that such term shall not include- * * *.

Section 1402(c) of the Act lists a number of functions and services that do not constitute the carrying on of a trade or business for self-employment tax purposes. Among the exceptions is the performance of service as an employee for Federal employment tax purposes. Sections 31.3121(d)-1(b) and 31.3306(i)-1(e) of the Employment Tax Regulations relating to the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, respectively, provide that a director of a corporation, as such, is not an employee of the corporation. A director of a bank serving on a committee created pursuant to a Federal or State statute, corporate bylaws, or authority vested in the board of directors is deemed to be acting in the capacity of a director, as such, and should not be treated as an employee for Federal employment tax purposes. (See Revenue Ruling 68-597, page 463, this Bulletin).

Accordingly, it is held that the fees and other remuneration received by the director of the corporation for performing the services described are self-employment income within the meaning of section 1402(b) of the Self-Employment Contributions Act of 1954. It is immaterial whether the fees and other remuneration are received for attending directors' meetings or for serving on the committees.

I.T. 4077 is superseded, since the position set forth therein is restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.