Rev. Rul. 75-64

Advice has been requested whether amounts received under the circumstances described below are includible in income under section 61 of the Internal Revenue Code of 1954.

A, an individual, filed a complaint against U, a labor organization, with The National Labor Relations Board for the alleged misconduct of U in causing A's employer to discharge him. The Board held that A was illegally discharged and ordered that U award him 50 x dollars for lost pay he would have received had he not been illegally discharged. U made the payment pursuant to the order of The National Labor Relations Board.

Under The National Labor Relations Act, 29 U.S.C. section 160 (1970), as amended, The National Labor Relations Board is empowered to remedy the illegal discharge of an employee by directing reinstatement and requiring the payment of back pay by the employer or labor organization, as the case may be, responsible for such improper discharge. Depending on the circumstances, an aggrieved employee would file a complaint against both his employer and labor organization jointly or against either one separately. In any event, the Board's jurisdiction in a particular case is limited to the party or parties against whom a complaint has been brought.

In Rev. Rul. 57-55, 1957-1 C.B. 304, it is held that the payment of back pay by either the employer or the labor organization pursuant to an order by The National Labor Relations Board where the employer is a sole or joint respondent constitutes "wages" for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act and for purposes of the Collection of Income Tax at Source on Wages (chapters 21, 23 and 24 respectively, subtitle C, Internal Revenue Code of 1954).

However, the Revenue Ruling further holds that where the labor organization is the sole respondent, as in the instant case, the payment of back pay under an order of the Board does not constitute "wages" for purposes of the Federal Insurance Contribution Act, the Federal Unemployment Tax Act and for purposes of the Collection of Income Tax at Source on Wages.

Section 1.61-1(a) of the Income Tax Regulations defines the term "gross income" as all income from whatever source derived unless excluded by law. There is no provision in the Code or regulations that would specifically exclude the payment made by U from the gross income of A.

Accordingly, the amount of 50 x dollars received by A from the labor organization is includible in his gross income for Federal income tax purposes even though such payment does not constitute "wages" for purposes of the Federal Insurance Contribution Act, the Federal Unemployment Tax Act and for purposes of the Collection of Income Tax at Source on Wages.

Rev. Rul. 57-55 is amplified.