Rev. Rul. 75-499

Rev. Rul. 72-191, 1972-1 C.B. 45, which deals, in part, with the tax treatment of benefits received under the disability benefit law of New York, N.Y. Workmen's Comp. Law, sections 200 through 242 (McKinney 1965, Supp. 1975), holds that nonoccupational disability benefit payments received by an employee are "amounts received through accident or health insurance" which, unless they qualify for exclusion as amounts received under a wage continuation plan under section 105(d) of the Internal Revenue Code of 1954, are includible in gross income to the extent such amounts are (1) attributable to contributions by the employer that were not includible in the gross income of the employee, or (2) are paid by the employer. In so holding, Rev. Rul. 72-191 is dealing with the situation where contributions required of the employees have been voluntarily assumed and paid by the employer, so that all benefits are attributable to employer contributions.

That Revenue Ruling is amplified to deal with a situation where nonoccupational disability benefit payments under the disability benefit law of New York are received by an employee who has contributed to the fund from which the benefits are paid. Accordingly, where such benefits received by an employee are the only benefits payable under that law, they are excludable from gross income under section 104(a)(3) of the Code to the extent they are attributable to the employee's own contribution. See Rev. Rul. 75-479, page 44, this Bulletin, which discusses the excludability of similar payments received by an employee under the Temporary Disability Insurance Law of the State of Hawaii.

In addition, the New York disability benefit law contemplates payment of disability benefits to unemployed individuals and provides, in part, that disability causing ineligibility for unemployment benefits shall entitle the unemployed individual to disability benefits for each week of disability for which the individual would have received unemployment benefits but for the disability. Such payments are not compensation for loss of wages, but rather a substitute for loss unemployment benefits. Rev. Rul. 70-280, 1970-1 C.B. 13, holds that payments on account of unemployment paid by a state agency out of funds received from the Federal Unemployment Trust Fund are not includible in the gross income of the recipients. Accordingly, since nonoccupational disability benefit payments to an unemployed individual under the disability benefit law of New York are in the nature of unemployment compensation, they are likewise excludable from the gross income of the recipient. See Rev. Rul. 75-479, this page, which discusses the excludability of similar payments received by an unemployed individual under the Temporary Disability Insurance Law of the State of Hawaii.

Rev. Rul. 72-191 is amplied to include the above two holdings.