Internal Revenue Service
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 Rev. Rul. 66-69

1966-1 C.B. 204

Sec. 1402

IRS Headnote

Services performed in the United States in the employ of an international organization by an individual who is a citizen of the United States are included in the term `trade or business,' and salary for such services is included in net earnings for purposes of the tax imposed by the Self-Employment Contributions Act, even though the individual is covered concurrently by the Civil Service Retirement Act.

Full Text

Rev. Rul. 66-69

Advice has been requested whether the tax imposed by the Self-Employment Contributions Act (chapter 2, subtitle A, Internal Revenue Code of 1954) applies to salary received from an international organization by an individual, who is a citizen of the United States, for services performed in the United States for the international organization, notwithstanding the employee's election to have the same services covered by the Civil Service Retirement Act.

Under section 1402(c) of the Code the term `trade or business,' for purposes of the Self-Employment Contributions Act, includes several types of service performed as an employee. One of the types is services performed in the United States in the employ of an international organization as described in section 3121(b)(15) of the Federal Insurance Contributions Act (chapter 21, subtitle C, of the Code). This is the type of service performed by the individual in the instant case, and the question presented is whether concurrent coverage under the Civil Service Retirement Act prevents the service from being a `trade or business' for purposes of the Self-Employment Contributions Act.

The individual entered the employ of and was paid a salary by the international organization. He transferred from an agency of the United States Government, pursuant to the Federal Employees International Organization Service Act (Public Law 85-795, 72 Stat. 959). The regulations under that Act, promulgated by the Civil Service Commission, provide that upon written request by an international organization for the services of an employee, the Federal agency may authorize the transfer of the employee to the organization for any period not to exceed 3 years.

Section 4 of the Federal Employees International Organization Service Act provides, in part, that any employee serving under a Federal appointment not limited to 1 year or less who transfers to an international organization shall have certain rights if the transfer is made with the consent of the head of his agency. Among other things he is entitled to retain `coverage and all rights and benefits under any system established by law for the retirement of civilian employees of the United States, if all necessary employee deductions and agency contributions in payment for such coverage, rights, and benefits for the period of employment with the international organization are currently deposited in the system's fund or depository, and for such purpose service as an officer or employee of the international organization shall be considered to be creditable service under any such system.' The individual here involved elected to participate concurrently in the Civil Service Retirement program and accordingly contributed to the Civil Service Retirement Fund.

Although the individual is considered to remain an employee of the Federal agency for certain purposes specified in the Federal Employees International Organization Service Act, he is an employee of the international organization with respect to the services performed in its employ following his transfer. Accordingly, since services performed within the United States by a citizen thereof in the employ of an international organization, which are excepted from `employment' under section 3121(b)(15) of the Federal Insurance Contributions Act, are included in the term `trade or business', as used in the Self-Employment Contributions Act, the salary received by the individual for services performed for the international organization should be taken into consideration in computing his net earnings from self-employment for purposes of the tax imposed by the latter Act even though he is covered concurrently under the Civil Service Retirement Act.