Commissioner v. Kowalski

434 U.S. 77 (1977)

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Nature of the Case

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Facts

P received a base salary of $8,739.38, and an additional $1,697.54 designated as an allowance for meals. The State instituted the cash meal allowance for its state police officers in July 1949. Prior to that time, all troopers were provided with mid-shift meals in kind at various meal stations located throughout the State. A trooper unable to eat at an official meal station could, eat at a restaurant and obtain reimbursement. This system required troopers to leave their assigned areas of patrol. The State closed its meal stations and instituted a cash-allowance system. Troopers remained on call in their assigned patrol areas during their mid-shift break. Troopers are not restricted as to where they may eat in the patrol area. Trooper may bag their meals or eat anywhere so long as it is within their patrol area and they remain on call. Meal allowances are accounted for separately by the State. D decided that the allowance was gross income. The Tax Court concluded that the 'meal allowance was not intended to represent additional compensation.' Troopers are not required to spend their meal allowances on their mid-shift meals, nor are they required to account for how the money is spent. No reduction in the meal allowance is made for periods when a trooper is not on patrol. A police recruitment brochure states that it is an item of salary to be received in addition to an officer's base salary and the amount of the meal allowance is a subject of negotiations between the State and the police troopers' union. The amount of an officer's cash meal allowance varies with his rank and is included in his gross pay for purposes of calculating pension benefits. D reported $326.45 of his meal allowance on his taxes but not the remaining $1,371.09. The court held for D and P appealed. P claimed the allowance was not compensatory but was or the convenience of the employer and hence was not 'income' within the meaning of §61(a) and that, in any case, the allowance could be excluded under §119. The Third Circuit held that the cash payments were not taxable. D appealed.