Petitioner William A. Rutter appeals from an order and decision of the United States Tax Court, Peter J. Panuthos, Special Trial Judge, that held payments he received while on sick leave were not excludable from his gross income since they were not amounts received under a workmen's compensation act or under a statute in the nature of a workmen's compensation act.
Van Graafeiland, Winter, and Pratt, Circuit Judges.
The sole issue before us is whether payments received by petitioner William A. Rutter while on sick leave from the New York City Police Department as the result of an injury received in the line of duty are excludable from gross income as amounts received under either a workmen's compensation act, 26 U.S.C. § 104(a)(1), or a statute in the nature of a workmen's compensation act, Treas. Reg. § 1.104-1(b) (1982). Finding that these payments met neither qualification, we conclude that they are not excludable from Rutter's gross income and affirm the order and decision of the tax court.
Although Rutter served as a New York City police officer during most of the taxable year 1978, he was absent from work for approximately six months of that year due to an injury sustained in the line of duty in 1972. During that absence, he received sick leave payments totaling $10,873.45. These payments were made pursuant to a labor contract between the City of New York and the Patrolmen's Benevolent Association of New York, Inc. The relevant portion of the contract provides that
each employee shall be entitled to leave with pay for the full period of any incapacity due to illness, injury or mental or physical defect, whether or not service-connected.
The parties stipulated that this section of the labor contract is "consistent with" § 434a-14.0(c) of the Administrative Code of the City of New York, which provides that the New York City police commissioner is authorized
to deduct and withhold salary from any member or members of the force for or on account of absence for any cause without leave, lost time, sickness or other disability.
On his 1978 federal income tax return, Rutter claimed an exclusion from gross income for the amount he had received as sick leave payments during that tax year, but the commissioner disallowed this amount in full. The tax court upheld the commissioner's determination and this appeal followed.
Section 61(a) of the Internal Revenue Code provides that, except as otherwise provided by law, gross income means all income from whatever source derived, including compensation for services. 26 U.S.C. § 61(a). Under § 104(a)(1), however, " amounts received under workmen's compensation acts as compensation for personal injuries or sickness" are excluded from gross income. 26 U.S.C. § 104(a)(1). Treasury Regulation § 1.104-1 interprets § 104(a)(1) to exclude from gross income any amounts
received by an employee under a workmen's compensation act * * * or under a statute in the nature of a workmen's compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment.
Rutter does not claim that the plain language of the statute, § 104(a)(1), allows him to exclude his sick leave pay from gross income, since his sick leave pay was obviously not received "under a workmen's compensation act". Rutter does contend, however, that he qualifies under the regulation, § 1.104-1, which allows for the exclusion of payments made "under a statute in the nature of a workmen's compensation act."
To qualify under the regulation, however, Rutter must first show that he received his sick leave pay pursuant to a "statute", and this he cannot do. We recognize that courts have not limited the interpretation of the term "statute" in this section to state or federal statutes or city ordinances. For example, in Dyer v. Commissioner of Internal Revenue, 71 T.C. 560 (1979), the petitioner received sick leave payments pursuant to regulations of the Board of Education of the City of New York, and, reasoning that "these regulations [had] the ...