Rev. Rul. 68-97

Advice has been requested as to the treatment, for Federal income tax purposes, of payments made to foster parents for providing facilities for `emergency shelter care.'

A department of public welfare of a state administers an `emergency shelter care program' under which children in physical or moral danger are placed in the homes of temporary foster parents where they remain for periods of not more than 30 days before being placed in permanent foster homes. Foster parents who provide emergency shelter care must have adequate house space, be physically fit, and have a suitable personality.

In order to assure the availability of suitable homes for such care, the welfare department is authorized to pay a monthly `subsidy' ranging from 20 dollars to 40 dollars a bed, totaling from 100 dollars to 200 dollars a month, depending on the locality.

Foster parents who participate in this program are paid these amounts for making the emergency shelter care available, and payment is not dependent upon a child being currently in the home.

Under section 61(a) of the Internal Revenue Code of 1954, gross income means all income from whatever source derived.

Section 1.6041-1(a)(1) of the Income Tax Regulations provides, with certain exceptions not here material, that every person engaged in a trade or business shall make an information return for each calendar year after 1962 with respect to payments made by him during the calendar year in the course of his trade or business to another person of fixed or determinable salaries, wages, commissions, fees, and other forms of compensation for services rendered aggregating $600 or more.

Section 1.6041-1(b) of the regulations provides that the term `all persons engaged in a trade or business' includes organizations the activities of which are not for the purpose of gain or profit. Section 1.6041-1(g) of the regulations provides that returns on Forms 1099 and 1096 of payments made by a State shall be made by the officer or employee having control of such payments or by the officer or employee appropriately designated to make such returns.

Under these circumstances, the `subsidy payments' are gross income within the meaning of section 61(a) of the Code and are therefore includible in the gross income of the recipients. Also, under section 6041 of the Code, information returns on Forms 1099 and 1096 must be made with respect to subsidy payments made to any person which aggregate $600 or more in a calendar year.