Rev. Rul. 81-47
1981-1 C.B. 55, 1981-7 I.R.B. 10.
Internal Revenue Service
Revenue Ruling
DISABILITY PAYMENTS; POLICE OFFICERS
Published: February 17, 1981
SECTION 104.--COMPENSATION FOR INJURIES OR SICKNESS, 26 CFR 1.104-1: Compensation for injuries or sickness
(Also Section 61; 1.61-2.)
Disability payments; police officers. Payments made by a county to a police officer injured in the line of duty pursuant to a collective bargaining agreement that was incorporated by reference into the county code are excludable from gross income under section 104(a)(1) of the Code.
ISSUE
Are payments made to a disabled police officer excludable from gross income pursuant to section 104(a)(1) of the Internal Revenue Code under the circumstances described below?
FACTS
A, a police officer employed by county M of state P, was injured in the line of duty on January 21, 1979. After examination by the applicable medical authorities A was determined to be unable to perform regular police duties as a result of the injury and was ordered to remain off duty for an indefinite period of time. A was not considered to be retired because of disability by either M or the police officer's union, X, of which A was a member. As a member of X, A was entitled, under the terms of a collective bargaining agreement negotiated between M and X, to leave with pay for the full period of any incapacity resulting from a service-connected illness or injury.
The statutes of M provide that all collective bargaining agreements entered into by county M shall be adopted and approved by legislative acts of the county council. Such collective bargaining agreements are incorporated by reference into the county code. Upon adoption of the legislative act by the county council, any provisions in the applicable agreement contrary to any provisions of the county code shall have the effect of amending such provision of the county code and enacting the provision applicable to that collective bargaining unit into law.
The collective bargaining agreement between M and X was incorporated by reference into the county code of M in June 1978.
LAW AND ANALYSIS
Section 61(a) of the Code and the Income Tax Regulations thereunder provide that, except as otherwise provided by law, gross income means all income from whatever source derived, including compensation for services.
Section 104(a)(1) of the Code provides, with certain exceptions not pertinent to this revenue ruling, that gross income does not include amounts received under workmen's compensation acts as compensation for personal injuries or sickness.
Section 1.104-1(b) of the regulations provides that section 104(a)(1) of the Code excludes from gross income amounts received by an employee under a workmen's compensation act or under a statute in the nature of a workmen's compensation act that provides compensation to the employee for personal injuries or sickness incurred in the course of employment.
The disability benefits in this revenue ruling are authorized by a collective bargaining agreement that provides benefits to a class restricted to employees with service-incurred disabilities. These benefits are thus payments for those disabilities. Therefore, the collective bargaining agreement that was incorporated by reference into the county code of M qualifies as a statute in the nature of a workmen's compensation act. Compare Rev. Rul. 72-291, 1972-1 C.B. 36; Rev. Rul. 72-44, 1972-1 C.B. 31.
HOLDING
Because the collective bargaining agreement between M and X was incorporated by reference into the county code of M, the payments made to A are received under a statute in the nature of a workmen's compensation act within the meaning of section 1.104-1(b) of the regulations. Therefore, A may exclude from gross income under section 104(a)(1) of the Code payments received from M pursuant to that agreement during the period A is incapacitated as the result of the line of duty injury.
Rev. Rul. 81-47, 1981-1 C.B. 55, 1981-7 I.R.B. 10.