Internal Revenue Service
Revenue Ruling
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smRev. Rul. 57-41
1957-1 C.B. 341
Caution: Superseded by Rev. Rul. 75-484
IRS Headnote
A corporation grows mushrooms in standard mushroom houses and in an abandoned limestone mine. Held , the `surface' and `mine' areas where operations relating to the growing of mushrooms are conducted constitute a `farm' for purposes of the taxes under the Federal Insurance Contributions Act. Held, also , services performed by the corporation's employees in connection with its mushroom growing operations constitute `agricultural labor' as defined in that Act.
S.S.T. 293, C.B. 1938-1, 432, distinguished.
Full Text
Rev. Rul. 57-41
The Internal Revenue Service has been requested to determine the extent to which services performed in connection with the growing of mushrooms constitute `agricultural labor' within the meaning of section 3121(g) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954).
A corporation owns and raises mushrooms in an abandoned limestone mine located on a large acreage. It also raises mushrooms in socalled `standard mushroom houses' located on the surface area of the property and plants and cultivates field crops on the property to produce the hay and top soil used in the mushroom growing beds.
The mushrooms are grown in a compost consisting principally of stable manure purchased from racing stables. This is brought to the corporation's compost area and piled in windrows to undergo a natural heating and fermentation process, during which time it is turned several times by special equipment. The compost is then taken to a filling machine, a specially designed, custom built machine, which fills the growing trays with a uniform layer of compost. The filled trays are stacked in a pasteurization house and held at a high temperature for several days to kill all insects and harmful organisms. Mushroom spawn is then spread evenly over the compost layer and the trays are held at a constant temperature for a `growing' period of three weeks while the spawn spreads through the compost. The trays are taken from the pasteurization house to the `casing' machine, where a one-inch layer of top soil, which has been produced on the corporation's property and cleaned and processed by special equipment, is spread over the compost. The trays are then ready for placing in the growing houses and growing areas of the mine tunnels.
Mushrooms ordinarily are grown in buildings of a specialized design to give control over such factors as light, heat, ventilation and humidity. The corporation has constructed growing houses of that specialized design. The limestone mine, mentioned above, provides natural control facilities and, accordingly, the corporation has installed in the mine tunnels growing equipment identical to that installed in its growing houses. The growing methods followed in both locations are identical. After the mushrooms are harvested they are cooled, packed in pint boxes for delivery to stores, or in three pound baskets for hotel and restaurant use, and loaded into and delivered to market by the corporation's refrigerator trucks.
Some of the corporation's employees perform services directly associated with the mushroom growing operations, while other employees are engaged in cleaning the areas, maintaining and repairing buildings and equipment, and performing administrative services, all within the boundaries of the corporation's property.
In S.S.T. 231, C.B. 1937-2, 417, it was held that services performed in the growing of mushrooms on a farm of which the employer is owner or tenant constitute `agricultural labor' within the meaning of sections 811(b)(1) and 907(c)(1), Titles VIII and IX, respectively, of the Social Security Act. In arriving at this holding, it was recognized that mushrooms are generally grown in sheds, cellars, caves, or barns and not under general field conditions. In a prior ruling, it had been held that services performed by an employee in the growing of vegetables in greenhouses located on a farm of which the employer is owner or tenant constitute `agricultural labor.' It was reasoned that no valid distinction could be made between the growing of products in greenhouses located on a farm and the growing of products in cellars, caves, barns, or specially constructed sheds which were located on a farm. Since mushrooms are by definition somewhat closely related to those vegetables which are produced for food, it was concluded that services performed in the growing of mushrooms should be classified as `agricultural labor,' provided they were performed on a farm in the ordinarily accepted sense of that word.
Titles VIII and IX of the Social Security Act did not define the terms `agricultural labor' and `farm' and, in the absence of a statutory definition, it was necessary to define those terms by regulation. Article 6 of Regulations 91 and article 206(1) of Regulations 90 provided, in part, that the term `agricultural labor' includes all service performed by an employee, on a farm, in connection with the cultivation of the soil and the raising and harvesting of crops and that the term `farm' embraces the farm in the ordinarily accepted sense and includes stock, dairy, poultry, fruit, and truck farms, plantations, ranches, ranges, and orchards. The ruling stated in S.S.T. 231, supra , was based upon this provision of the regulations and the Service has not receded therefrom.
Section 3121(g) of the Federal Insurance Contributions Act provides that as used therein the term `farm' includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities and orchards. That section also sets forth the types of services and the conditions under which services of the prescribed types must be performed to come within the meaning of the term `agricultural labor.'
Pursuant to section 3121(g) of the Federal Insurance Contributions Act, it is the position of the Service that any plot of ground or other area used primarily for the raising of an agricultural or horticultural commodity constitutes a `farm' within the meaning of that section, irrespective of its size or location or the extent to which the soil actually is used in connection with the operations being conducted. See Rev. Rul. 54-310, C.B. 1954-2, 264; Rev. Rul. 54-587, C.B. 1954-2, 359; and Rev. Rul. 55-456, C.B. 1955-2, 418. It is the position of the Service, furthermore, that mushrooms are `agricultural or horticultural commodities' within the meaning of that term as used in section 3121(g). See Rev. Rul. 56-560, C.B. 1956-2, 698. Accordingly, a structure used primarily to raise mushrooms, whether a standard mushroom house or any similar structure, such as a building which has been remodeled to provide the controls needed to raise mushrooms, constitutes a `farm' within the meaning of that section. Furthermore, any area utilized in connection with the raising operations, such as areas used for compost, producing top soil, etc., also constitutes a component part of such mushroom `farm.'
In the instant case, the corporation grows mushrooms both in standard mushroom houses and in its mine property. Identical growing equipment is installed in both locations, identical processes are followed to produce identical crops and the corporation's election to use the mine property was to utilize the natural control facilities therein available instead of constructing additional houses. Under these circumstances, the Service is of the opinion that it would be impracticable to attempt to distinguish between the `surface' and `mine' areas. Accordingly, it is held that the areas utilized in connection with the mushroom growing operations conducted by the corporation constitute a `farm' within the meaning of section 3121(g) of the Federal Insurance Contributions Act. It is further held that the services described above as being performed by the corporation's employees constitute `agricultural labor' within the meaning of that section.
In a ruling published as S.S.T. 293, C.B. 1938-1, 432, it was held that services performed by employees in the growing of mushrooms in natural caves located within the corporate limits of a city do not constitute `agricultural labor' for the reason that the caves are neither located on nor operated as a `farm' in the ordinarily accepted sense. However, that ruling was issued under the taxing provisions of the Social Security Act in effect for periods prior to 1940. The Act contained no definition of the word `farm,' that term being defined by Article 6 of Regulations 91. The holding in S.S.T. 293 still represents the position of the Service on this matter, but only for periods prior to 1940.