Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 55-96

1955-1 C.B. 488

IRS Headnote

Commissions and foundations established under the Fulbright Act, are wholly owned instrumentalities of the United States for Federal tax purposes. Services performed in the employ of such commissions and foundations come within the classification of services excepted from `employment' under section 1426(b)(7)(B) of the Federal Insurance Contributions Act. However with respect to such services performed on and after January 1, 1951, the determination as to whether an individual is performing services which constitute `employment' is to be made under section 1420(e) of the Act by the head of the Government agency involved.

Full Text

Rev. Rul. 55-96

Advice has been requested whether services performed by a teacher in Thailand for an educational foundation established and operating under the Fulbright Act are excepted from `employment' under the Federal Insurance Contributions Act (subchapter A, chapter 9, Internal Revenue Code of 1939).

The Fulbright Act, Act of August 1, 1946, 60 Stat. 754, 50 U.S.C. 1641, authorizes the State Department to enter into agreements with foreign governments to provide for an educational exchange program. This statute contemplates that its provisions will be carried out by the formation of educational foundations operating in the foreign countries concerned. Such foundations will receive foreign currencies, or credits therefor, held or available for expenditure by the United States or any agency thereof, and not required by law or agreement to be used for any other purpose, and will use such funds for the purpose, among others, of financing studies, research, instruction, and other educational activities of or for American citizens in schools and institutions of higher learning located in countries other than the United States.

It is concluded that commissions and foundations established under the Fulbright Act are wholly owned instrumentalities of the United States for Federal tax purposes. Since these commissions and foundations are not corporations it is the opinion of the Internal Revenue Service that services performed in the employ of such commissions and foundations come within the classification of services excepted from `employment' by section 1426(b)(7)(B) of the Federal Insurance Contributions Act. However, section 1420(e) of the Act provides, with respect to services performed on and after January 1, 1951, in the employ of the United States or a wholly owned instrumentality thereof, that (1) the determination as to whether an individual has performed services which constitute `employment' as defined in section 1426 of the Act, (2) the determination of the amount of remuneration for such services which constitutes `wages' as defined in such section, and (3) the return and payment of the taxes imposed by the Act, shall be made by the head of the Federal agency or instrumentality having control of such services or by such agents as he may designate