Rev. Rul. 68-597

The purpose of this Revenue Ruling is to update and restate, under the current statute and regulations, the positions set forth in S.S.T. 310, C.B. 1938-2, 284, and Mim. 6381, C.B. 1949-1, 179.

The questions presented are whether members of the executive committee of an association (who perform services in lieu of the board of directors) and directors of a bank (who are appointed to and serve on various committees of the bank) are employees for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtitle C, Internal Revenue Code of 1954).

The executive committee of the association was formed, pursuant to the association's by-laws, as a committee of the board of directors and acts for the board. The members of the committee are not directors. The committee's services consist solely of acting in lieu of the board. It meets to discuss matters of policy as they relate to the affairs of the association but it is not charged with carrying out any administrative functions. The committee's members receive no remuneration for services rendered as members of the committee.

The directors of the bank serve on various committees that are created pursuant to the bank's by-laws or authority vested in its board of directors, or pursuant to a Federal or State statute. Some of the committees are comprised entirely of directors. The memberships of the other committees consist primarily of directors but include one or more individuals who are not directors. However, the manner of operation of such committees does not differ materially from that usually present in the committees comprised solely of directors.

Sections 31.3121(d)-1(b), 31.3306(i)-1(e), and 31.3401(c)-1(f) of the Employment Tax Regulations provide, in part, that a director of a corporation in his capacity as such is not an employee of the corporation.

Although the members of the executive committee of the association are not directors, their services consist solely of acting in lieu of the board of directors. Accordingly, the members of the committee are not employees of the association for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages. The same conclusion is made regarding the directors of the bank serving on the various committees, based on the presumption that each director is acting in his capacity as a director, as such , within the meaning of the regulations. However, with regard to the members of the various committees who are not directors of the bank, there is a presumption that the relationship of employer and employee exists between them and the bank and in accordance with that presumption they must be treated as its employees, for purposes of the above-mentioned taxes.

S.S.T. 310 and Mim. 6381 are superseded, since the positions set forth therein are restated under current law in this Revenue Ruling.

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