Rev. Rul. 57-135

Advice has been requested whether amounts paid by a hospital to an official church committee constitute `wages,' for purposes of the Federal Insurance Contributions Act and the Collection of Income Tax at Source on Wages (chapter 21 and 24, respectively, subtitle C, Internal Revenue Code of 1954), of volunteer workers with respect to whose services the amounts are paid.

The committee in the instant case is the official organization of the churches of a particular religious denomination to carry on a relief and rehabilitation program throughout the world, as well as an assistance program within the United States. The committee directs a `volunteer service program' under which young people from the member churches serve on a gratuitous bais. These unpaid volunteers are sent by the committee to perform services in connection with community projects, mental hospitals, reform schools, institutions for handicapped individuals, and similar establishments and projects. The committee receives no remuneration for the services which these volunteers render for some of the establishments; however, it does receive a contribution for such services from some of the others, the amount of which is based primarily on the prevailing pay scale which individuals receive for such work in such institutions. The volunteers do not receive any remuneration for the services which they render.

For purposes of the Federal Insurance Contributions Act and the withholding of income tax, `wages' constitute all remuneration for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash, with certain exceptions not here material.

The hospital is not considered the employer of the volunteer workers sent to perform the services here involved. Consequently, the hospital is not liable for the taxes under the Federal Insurance Contributions Act with respect to the amounts paid to the committee; neither is it required to withhold any tax therefrom for income tax withholding purposes.

Because the services are rendered directly and gratuitously to an organization of the type described in section 170(c) of the Internal Revenue Code of 1954, the amounts paid to the committee by the hospital do not constitute gross income to the volunteer workers who perform the services. Compare Rev. Rul. 71, C.B. 1953-1, 18.