Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 78-80

1978-1 C.B. 22

Sec. 61

IRS Headnote

Supplemental stipends paid to volunteers in Foster Grandparent Program. Supplemental stipends paid by sponsoring state agencies to volunteers in the Foster Grandparent Program authorized pursuant to title II of the Domestic Volunteer Service Act of 1973, in addition to the monthly stipend paid from Federal funds for the volunteers' services, are not includible in the recipients' gross income and are not wages for purposes of the FICA and income tax withholding, Rev. Rul. 74-322 amplified.

Full Text

Rev. Rul. 78-80

Advice has been requested whether a supplemental stipend paid by a state agency to a volunteer in the Foster Grandparent Program is includible in the taxpayer's gross income pursuant to section 61 of the Internal Revenue Code of 1954, and whether such payments are "wages" for purposes of the Federal Insurance Contributions Act and the Collection of Income Tax at Source on Wages under sections 3121 and 3401, respectively, of the Code.

A taxpayer, over 60 years of age, is a volunteer in the Foster Grandparent Program, a program administered and funded by ACTION, an independent government agency of the Executive branch of the United States Government.

Under the program, the taxpayer works with children with special or exceptional needs, and receives a monthly stipend for services. The stipend is paid by a state agency from funds made available for this purpose by ACTION. In addition, the state agency pays to the taxpayer a supplemental stipend from funds supplied by the state.

Section 61 of the Code and the Income Tax Regulations thereunder provide, in part, that gross income means all income from whatever source derived, unless excluded by law.

Section 418 of the Domestic Volunteer Service Act of 1973, Pub. L. 93-113, 87 Stat. 394, 1973-2 C.B. 441, in part provides:

Notwithstanding any other provision of law, no payment for supportive services or reimbursement of out-of-pocket expenses made to persons serving pursuant to titles II [which authorizes the Foster Grandparent Program] or III of this Act shall be subject to any tax or charge or be treated as wages or compensation. . . .

Section 1208.4-3(b)(2) of the Foster Grandparent Program Regulations (45 CFR 1208.4-3(b)(2) (1976)) provides that the Director of ACTION shall establish the amount of the stipend paid to volunteers serving in the Foster Grandparent Program. Section 1208.4-3(b)(3) of the regulations provides that a sponsoring organization may pay a volunteer a higher stipend than that established by ACTION. Section 1208.4-3(b)(4) then provides that for Federal, state and local purposes, no stipend shall be subject to any tax.

Accordingly, the supplemental stipend paid by the sponsoring agency to the taxpayer is not includible in the taxpayer's gross income under section 61 of the Code.

Furthermore, such payments are not "wages" for purposes of the Federal Insurance Contributions Act and the Collection of Income Tax at Source on Wages under sections 3121 and 3401, respectively, of the Code.

Rev. Rul. 74-322, 1974-2 C.B. 17, holds, in part, that payments for supportive services or reimbursements of out-of-pocket expenses made to persons serving in volunteer service programs pursuant to titles II (which includes the Foster Grandparent Program) and III of the Act are not includible in their gross incomes under section 61 of the Code and are not "wages" for purposes of the Federal Insurance Contributions Act and the Collection of Income Tax at Source on Wages under sections 3121 and 3401, respectively, of the Code. Rev. Rul. 74-322 does not specifically refer to supplemental payments for supportive services made by a sponsoring state organization.

Rev. Rul. 74-322 is amplified.