Internal Revenue Service
Revenue Ruling

TaxLinks.com   sm

 Rev. Rul. 75-30

1975-1 C.B. 235

Sec. 911

IRS Headnote

Income source; Atomic Bomb Casualty Commission employee in Japan. A U.S. citizen employed by the Atomic Bomb Casualty Commission, an activity funded largely under contracts with agencies or instrumentalities of the U.S. Government, is not an employee of the U.S. or any of its agencies though considered so by an agreement between the U.S. and Japanese Governments and the salary paid to the employee while stationed in Japan is subject to the exclusion from gross income under section 911(a) of the Code.

Full Text

Rev. Rul. 75-30

Advice has been requested whether the salary paid to an employee of the Atomic Bomb Casualty Commission, under the circumstances described below, is an amount paid by the United States or any agency thereof within the meaning of section 911(a) of the Internal Revenue Code of 1954.

For the taxable year 1973, the taxpayer, a United States citizen, was stationed in Japan as an employee of the Atomic Bomb Casualty Commission ("ABCC"). The ABCC was established as an activity of the National Academy of Sciences-National Research Council. ABCC is funded largely under contracts between the National Academy of Sciences, a non-governmental corporation, and the Atomic Energy Commission, the National Cancer Institute, and the National Heart and Lung Institute, all of which are agencies or instrumentalities of the United States government.

For purposes of certain purchasing, foreign tax, and customs benefits afforded to employees of agencies of the United States, the taxpayer, as an employee of ABCC, was deemed to be an employee of an agency of the United States by an agreement between the United States and Japanese governments.

During 1973 the taxpayer received his salary directly from the National Academy of Sciences and had no civil service status. The taxpayer's employment contract with the National Academy of Sciences provided that should a default occur in the payment of the taxpayer's salary, no government agency or instrumentality would in any way be liable for payment thereon. The taxpayer was in no way responsible to, or under the control of, any United States agency or instrumentality.

Section 911(a) of the Code excludes from gross income certain income from foreign sources attributable to services performed in a foreign country by a United States citizen who meets either the bona fide residence test or the physical presence test set forth in subsections (a)(1) and (a)(2), respectively, of section 911. Both the bona fide residence test and the physical presence test except amounts paid by the United States or any agency thereof from the earned income eligible for the section 911(a) exclusion.

Section 1.911-2(a) and 1.911-2(b) of the Income Tax Regulations interpret the exception to the exclusion as applying to amounts paid by an agency or instrumentality of the United States.

Rev. Rul. 67-87, 1967-1 C.B. 186, holds that compensation received by a United States citizen for services performed in a foreign country, under a contract funded by a United States agency with a foreign government that required him to render advisory services for a period of two years, is not an amount paid by the United States or any agency thereof within the meaning of section 911(a)(2) of the Code. In so holding, Rev. Rul. 67-87 emphasized the facts that no United States agency exercised control over the citizen and that the foreign country had the primary and sole obligation to pay his salary.

In the instant case, neither the United States nor any agency thereof has primary legal responsibility for the payment of the taxpayer's salary. Moreover, the taxpayer is not under the control or supervision of any United States agency or instrumentality. The fact that the Japanese Government treats ABCC as an agency of the United States for certain purposes does not make ABCC an agency of the United States.

Accordingly, ABCC is not an agency or instrumentality of the United States within the meaning of section 911(a) of the Code and the regulations thereunder. Thus, the salary paid to the taxpayer in 1973 is not an amount paid by the United States or any agency thereof under section 911(a). Therefore, such salary is excluded from gross income under section 911(a) to the extent determined by applying the special rules contained in section 911(c), provided that the taxpayer otherwise satisfies the bonafide resident test or the physical presence test set forth in subsections (a)(1) and (a)(2), respectively, of section 911.