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 Rev. Rul. 66-3

1966-1 C.B. 19

Sec. 61

IRS Headnote

Amounts received as subsistence allowances, under the provisions of the Reserve Officers' Training Corps Vitalization Act of 1964, Public Law 88-647, as amended by Public Law 89-51, by members of the ROTC selected for advanced training under section 2104 of title 10 of the United States Code and members appointed under section 2107 of title 10, are not includible in the gross income of the recipients for Federal income tax purposes.

Full Text

Rev. Rul. 66-3

Advice has been requested whether amounts received by certain students participating in the ROTC program under the provisions of the Reserve Officers' Training Corps Vitalization Act of 1964, Public Law 88-647, as amended by Public Law 89-51, are subject to Federal income tax.

Section 202(2) of title II of the Reserve Officers' Training Corps Vitalization Act of 1964, amended section 209 of title 37 of the United States Code, and provided that, except when on active duty, members of the ROTC selected for advanced training under the provisions of section 2104 of title 10 U.S.C. and members appointed under the provisions of section 2107 of title 10 U.S.C. are entitled to receive retainer pay during certain periods of training. Sections 2104(b)(3) and 2107(b)(3) of title 10 U.S.C. require that the ROTC member enlist in a reserve component of the Armed Forces for the period prescribed by the Secretary of the military department concerned.

However, section 3 of Public Law 89-51, amended section 209 of title 37 U.S.C. by striking out the words ` retainer pay ,' wherever they appeared in that section, and inserting the words ` subsistence allowance ' in place thereof. In connection with this change in terminology, see H.R. Report 348, 89th Congress and S. Report 315, 89th Congress. Section 4 of that public law provides that the effective date of the amendment is October 13, 1964.

Under section 61 of the Internal Revenue Code of 1954, gross income includes, among other items, all compensation for services, including fees, commissions, and similar items.

Section 1.61-2(a)(1) of the Income Tax Regulations in part provides, that pay of persons in the military or naval forces of the United States is income to the recipients. Under the provisions of section 1.61-2(b) of the regulations, subsistence allowances granted to various members of the Armed Forces of the United States are excludable from gross income.

ROTC retainer pay is pay of persons in the military or naval forces of the United States and is includible in the gross income of the recipients. However, subsistence allowances received by members of the ROTC are subsistence allowances granted to members of the Armed Forces of the United States and are excludable from the gross income of the recipients.

By virtue of the change made by Public 89-51, the allowances received by members participating in the ROTC program are subsistence allowances, as contemplated by section 1.61-2(b) of the regulations, rather than retainer pay. Therefore, the amounts representing allowances for subsistence are not subject to Federal income tax.

Accordingly, amounts received as subsistence allowances, under the provisions of Public Law 88-647, as amended by Public Law 89-51, by members of the ROTC selected for advanced training under the provisions of section 2104 of title 10 U.S.C. and members appointed under the provisions of section 2107 of title 10 U.S.C. are not includible in the gross income of the recipients.