Ogden v. Commissioner

*1243OPINION.

In view of the many cases heretofore decided by this Board and the courts involving the taxability by the Federal Government of compensation received by an individual from a State or a political subdivision thereof, it is deemed unnecessary to include herein either an extensive review of the problem or an extensive discussion of the decisions. The principles are well established. It is clear that the exemption from taxation, retroactively afforded by section 1211 of the Revenue Act of 1926, is not available to petitioner and that the sum of $3,900, received by him in 1923 from the counties of Norfolk, Middlesex,' and Suffolk as compensation for his services rendered as auditor in lawsuits arising in said counties, is to be included in the computation of his gross income for purposes of taxation under the provisions of section 213 (a) of the Revenue Act' of 1921, unless while rendering said services he was an officer or employee of the Commonwealth of Massachusetts, or a political subdivision thereof, engaged as an instrumentality or agent of the Government in administering or executing Governmental functions of the Commonwealth, or, if an independent contractor, unless it further appears that a Federal tax upon his compensation substantially impairs his ability to discharge his duties and obligations to the Commonwealth, or the ability of the Commonwealth, or its subdivisions, to procure the services of private individuals to aid them in their undertakings. Collector v. Day, 11 Wall. 133; Auffnorat v. Redden, 137 U. S. 310; United States v. Weitsel, 246 U. S. 533; Metcalf & Eddy v. Mitchell, 269 U. S. 514; Lucas v. Howard, 280 U. S. 526; Lucas v. Reed, 281 U. S. 699; Miller v. McCaughn, 27 Fed. (2d) 128; Blair v. Matthews, 29 Fed. (2d) 892; Blair v. Byers, 35 Fed. (2d) 326; Burnet v. Livesey, 48 Fed. (2d) 159; Elam v. Commissioner, 45 Fed. (2d) 337.

Our task, then, in deciding the case at bar, is to determine whether petitioner, in relation to the Commonwealth, or the aforementioned counties thereof, in his capacity of auditor of the Superior Court, was an officer, an employee, or an independent contractor; whether he was engaged, as an instrumentality of government, in performing-proper governmental duties; and, if we hold him to be an independent contractor, what impairment, if any, would result from levying a tax upon his compensation.

Upon consideration, we conclude that petitioner was not an independent contractor. Under the Massachusetts practice the position of “ auditor ” in law is analogous to that of “ master in chancery. The position is created by statute (General Laws of Massachusetts, ch. 221, entitled “Clerks, Attorneys, and other officers of Judicial Courts ” in section 56 et seq., under the title, “ Masters, Auditors, *1244Referees, Assessors, etc.,”1) which also outlines the duties, and authorizes the appointing court to fix the compensation which is to be jiaid by the county. Cf. Miller v. McCaughn, supra. In his capacity as auditor, petitioner was not performing the ordinary duties of a lawyer, nor did he merely take on another client. He was not giving advice, nor engaging in trial as counsel, nor otherwise rendering the legal services customary from attorney to client. Cf. Lucas v. Reed, supra; Lucas v. Howard, supra; Blair v. Byers, supra. True, he took no oath, but none was prescribed by statute, and the mere absence of an oath does not of itself make him an independent contractor. True *1245also, his appointment as auditor was for an indefinite period, but that matter was within the discretion of the appointing court. It is conceivable that by means of successive appointments he could occupy the position for the rest of his life, although, on the other hand, he might have it for but a few days. The fact that his tenure was indeterminate in time does not of itself make him an independent contractor. Cf. Frederick A. Brown, 22 B. T. A. 581, United States v. Weitzel, supra. As auditor, petitioner was an arm of the court, acting as a judge of fact, with power to swear witnesses, take testimony, and consider the evidence, making therefrom findings of law and fact. The position, created by law and permanent, was designed to lighten the burden of the courts and promote the administration of justice within the Commonwealth. It is recognized as a part of the judicial system of Massachusetts. Petitioner’s duties as auditor were to be performed as required by the statutes and the practice, and subject to the control of the appointing court. The manner and time of performance were not left solely to his discretion; on the contrary, he was controlled, not only as to what he should do, but as to when and how he should do it. Cf. Kriepke v. Commissioner, 32 Fed. (2d) 594; Burnet v. McDonough, 46 Fed. (2d) 944; Mesce v. United States, 64 Ct. Cls. 481; certiorari denied, 278 U. S. 612. While he was free to seek outside employment during the time he served as auditor, and did so, yet he was, in his official capacity, always under the control of the appointing court, which supervised his activities and from time to time directed him in the performance of his duties. Under these circumstances we think the fact that he engaged in some professional activity outside his official duties does not of itself make him an independent contractor. Cf. Burnet v. Livezey, supra; United States v. Butler, 49 Fed. (2d) 252; Mesce v. United States, supra. His compensation, while not fixed in amount by statute, was not a matter of agreement, but the determination thereof lay exclusively within the discretion of the appointing court, and it was paid by the counties in which the cases arose, as were all expenses incident to these cases incurred by petitioner. Cf. Miller v. McCaughn, supra. We conclude therefore that petitioner, while engaged in his duties as auditor of the Superior Court, was not an independent contractor in his relation to the Commonwealth of Massachusetts or its subdivisions. 14 R. C. L. 67. We believe it unnecessary here to decide whether his status is that of an officer or that of an employee of the Commonwealth within the meaning of the statute. Cf. Metcalf & Eddy v. Mitchell, supra; Auffnorat v. Hedden, supra; United States v. Hartwell, 6 Wall. 385; Haight v. Commissioner, 14 B. T. A. 844; affd., 52 Fed. (2d) 779.

*1246And we think it clear that petitioner, in his official capacity, was an instrumentality or agent of the government, administering or executing governmental functions. His services were judicial in their nature and rendered to the judicial department of the government in the administration of justice. There is no question but that this instrumentality is one through which the State government exercises its sovereign powers; such a necessary function of government as to fall within the established exemption from Federal taxation. Cf. Metcalf & Eddy v. Mitchell, supra; Flint v. Stone Tracy Co., 220 U. S. 107; Blair v. Matthews, supra.

Reviewed by the Board.

Judgment will he entered wider Rule 50.