Cummins v. Commissioner

ROBERT J. CUMMINS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Cummins v. Commissioner Docket No. 33354. United States Board of Tax Appeals 19 B.T.A. 498; 1930 BTA LEXIS 2380; April 8, 1930, Promulgated *2380 Compensation received by the petitioner as a consulting engineer for professional services rendered to the city of Corpus Christi, Tex., held not exempt from taxation under section 1211 of the Revenue Act of 1926. Robert Ash, Esq., and J. A. Phillips, C.P.A., for the petitioner. O. J. Tall, Esq., for the respondent. MARQUETTE *499 This proceeding is for the redetermination of deficiencies in income tax asserted by the respondent as follows: [1924] $1,127.88 [1925] 107.16 The deficiencies result from the inclusion in the petitioner's gross income of amounts received by him for services rendered to the city of Corpus Christi, Tex. FINDINGS OF FACT. The petitioner is a consulting engineer residing in Houston, Tex., where he maintains his office and practices his profession. Prior to 1923 the Texas Legislature enacted the necessary legislation enabling the city of Corpus Christi to build protective sea walls, breakwaters, etc., and to construct a deep-water port. The work was committed to a board of navigation and canal commissioners appointed in conformity with the statute. On February 17, 1923, the petitioner*2381 submitted to that board the following proposal: CORPUS CHRISTI, TEXAS. February 17, 1923. MAYOR AND COMMISSIONERS, Corpus Christi, Texas. GENTLEMEN: In compliance with your request we take pleasure in submitting the following proposal: We will prepare plans and specifications for all the work embraced under your Two and a half million Seawall and Breakwater Bond issue, and will invite bids, canvass same, advise with you regarding the awarding of the contract and in case the work is awarded will supervise same from its inception to its completion to insure that it is being installed in full compliance with the term of the contract for a fee of five (5) per cent of the cost to you of the work handled by us. This fee is to be paid us in the customary proportions of two and one-half (2 1/2) per cent when the plans are completed and accepted by you, one per cent additional when the contracts are awarded, and the remaining one and one-half (1 1/2) per cent as the work progresses, based on monthly estimates issued to the contractor or contractors on the various portions of the work. We are in position to start work on the plans immediately and will carry same through*2382 to completion as rapidly as possible. Respectfully submitted, (Signed) ROBERT J. CUMMINS, E. E. SANDS, by R. J. C., Engineers. This proposal was accepted by the commissioners and the petitioner and Sands were employed. Sands died before construction work had fairly begun. The employment of the petitioner has been continuous down to the present time, although it is terminable at the will of the commissioners. No oath of office was administered to the petitioner. *500 There was a tacit understanding between the commissioners and the petitioner that the latter should make two trips to Corpus Christi each month while the work was in progress, and he did make such trips during the taxable years. The petitioner also held himself in readiness to make other trips to Corpus Christi at the call of the commissioners, and at their direction be made one trip to Washington. Aside from these trips the petitioner was left entirely to his own discretion respecting the amount of time he should devote to the work. The petitioner employed a resident engineer in Corpus Christi and such inspectors as might be necessary from time to time to look after the work during his*2383 absence. All these assistants were paid by the petitioner. All the office work necessary for the Corpus Christi project was done in the petitioner's office in Houston, which he maintained entirely at his own expense. The commissioners controlled and determined the location of the work, the amount to be expended in the construction, and they usually indicated what they wanted to do before petitioner began drawing plans. They had authority to, and sometimes did, reject plans and recommendations submitted by the petitioner, but they exercised no control or direction over the technical work, it being left entirely to the petitioner's judgment. Throughout the years 1924 and 1925 the petitioner carried on other engineering work for private concerns and continued his practice as a consulting engineer in Houston just as he had done continuously since 1910. He conducted the Corpus Christi work in the same manner as that of other clients. The petitioner filed income-tax returns for the years 1924 and 1925. The respondent increased the net income shown on the returns by the amounts of $16,593.82 and $9,490.33 respectively, on account of compensation received by the petitioner in*2384 those years from the city of Corpus Christi, and determined deficiencies as above set forth. OPINION. MARQUETTE: This proceeding presents only one question for our determination - whether the petitioner was an officer or employee of the city of Corpus Christi, Tex., within the meaning of section 1211 of the Revenue Act of 1926, which provides: SEC. 1211. Any taxes imposed by the Revenue Act of 1924 or prior revenue Acts upon any individual in respect of amounts received by him as compensation for personal services as an officer or employee of any State or political subdivision thereof (except to the extent that such compensation is paid by the United States Government directly), shall, subject to the statutory period of limitations properly applicable thereto, be abated, credited, or refunded. *501 Neither the petition nor the evidence indicates whether the petitioner claims to have been an officer or an employee of the city during the years 1924 and 1925. On behalf of the petitioner it is urged in argument that he was appointed port engineer for the city of Corpus Christi by its board of navigation commissioners, under authority of the following provisions of article*2385 8263, section 17, Vernon's Annotated Texas Statutes: Said commissioners shall have authority to employ a competent engineer, whose term of office shall be at the will of said commissioners and who shall receive such compensation as may be determined by said commissioners. It shall be the duty of the engineer to make all necessary surveys, examinations, investigations, maps, plans, and drawings with reference to the proposed improvements. He shall make estimates of the cost of same, shall supervise the work of improvement, and shall do and perform all such duties as may be required of him by the commissioners. * * * This statute does not create an office of port engineer. It merely authorizes the commissioners to secure the services of an engineer when, in their judgment, such services may be necessary or desirable. The expression "term of office" as used in the statute means no more than "period of employment," "duration of service," or like phraseology. Article 977, Vernon's Annotated Texas Statutes, creates certain city offices, but does not include the office of port engineer. It does provide for "such other officers and agents as the city council may from time to time*2386 direct." The record here does not disclose, nor does the petitioner contend, that the city council of Corpus Christi ever directed the employment of a port engineer. Article XVI, section 1, of the constitution of the State of Texas, provides that all officers shall take a prescribed oath. Section 993, Vernon's Annotated Texas Statutes, provides that every person elected or appointed to fill a city office shall, before entering upon the duties of his office, take and subscribe the official oath. The petitioner did not take and subscribe any oath, and none was required of him in connection with the Corpus Christi work. The situation here is very aptly described in the following language of the Supreme Court in Metcalf & Eddy v. Mitchell,269 U.S. 514: The term officer is one inseparably connected with an office; but there was no office of sewage or water supply expert or sanitary engineer, to which either of the plaintiffs was appointed. The contracts with them, although entered into by authority of law and prescribing their duties, could not operate to create an office or give to plaintiffs the status of officers. That the petitioner was not an officer*2387 of the State of Texas, nor of its political subdivision, the city of Corpus Christi, is clear. In our opinion the evidence also fails to establish that he was an employee *502 of the State or of its political subdivision within the meaning of the Revenue Act. The petitioner was at all times in independent practice as a consulting engineer and he was free to, and did, accept other employment concurrently with his work for the city of Corpus Christi. He used his own judgment as to the amount of time he should give to the work and was free to choose his own methods in the work. He maintained his own office and employed at his own expense assistants selected by himself to do a part of the work for which he had been retained by the navigation commissioners. All of these facts are inconsistent with the relation of employer and employee. John R. Spelman,18 B.T.A. 313. In our opinion the facts in this proceeding definitely establish the status of the petitioner as an independent contractor, and not an officer or employee of a State or political subdivision thereof. *2388 Metcalf & Eddy v. Mitchell, supra;Lucas v. Howard,10 B.T.A. 62; 280 U.S. 14A; Blair v. Byers, 35 Fed.(2d) 326; Kreipke v. Commissioner, 32 Fed.(2d) 594. We find no error in the determination of the respondent. Judgment will be entered for the respondent.