St. Thomas Journal of Complex Litigation – First Responders Cannot Exclude a Burger Break under Kowalski and I.R.C. Section 119

First Responders Cannot Exclude a Burger Break under Kowalski and I.R.C. Section 119

By Daniela Curiel

In Kowalski,1 the Court created ambiguity for first responders on the application of the Internal Revenue Code’s section 119 2 meals exclusion, partially addressed the “convenience of the employer” issue,3 and called on Congress to provide more guidance.4 This blog post highlights (1) section 119’s problematic application to first responders and (2) the circuit split5 focusing on the “business premise” definition.

In Kowalski, an on-duty state trooper received a cash meal allowance during his meal break, followed by cash reimbursement.6 The Court held gross income includes cash meal allowance payments.7 Section 119 did not include cash reimbursements, only meals furnished by the employer,8 superseding the judicial “convenience of the employer” doctrine.9 The Court explained payments could be claimed based on the once-recognized doctrine;10 however, the codified topic under code section 119 was more persuasive.11 The issue remains because Kowalski only highlighted the issue for Congress.

In Kowalski, the in-kind requirements were not met, so the Court did not address whether public restaurants constituted “business premises of the employer.” The Ninth Circuit, in Sibla, distinguished Kowalski and excluded mandatory payments into a firehouse mess fund from employees’ gross income.12 The Ninth Circuit defined a “business premise” using Treasury Regulations.13 The Third,14 Fifth,15 Eighth,16 and Tenth17 Circuits held business premises of the state highway department included the entire state, while the First18 and Fourth19 Circuits disagreed by defining it as not encompassing restaurants adjacent to state highways.

The Sixth Circuit in Anderson defined business premises to include places where employees perform some significant portion of their duties, appearing to agree with the Fifth, Eighth, and Tenth Circuits.20 The First Circuit in Baertschi disagreed with Anderson reasoning restaurants were not a place where the employee performs any significant portions of his duties; they were “off duty.”21 Despite section 119’s uncertainness application, a section 162 deduction may still be available for significant employer-imposed restrictions limiting how first responders eat their meals on duty.22

Whether meals in public restaurants qualify as furnished “on the employer’s business premises” remains unresolved. Congress’s definition of “business premise” must cover meals for on-duty first responders, or the unambiguity will cause a shortfall like in Anderson. Congressional action is needed to make section 119 exclusions available to first responders, resolve the circuit split, and offer guidance for our first responders.

1 Comm’r v. Kowalski, 434 U.S. 77 (1977).
2 I.R.C. § 119 (An employee may exclude from income “the value of any meals . . . furnished to him by his employer for the convenience of the employer, but only if . . . the meals are furnished on the business premises of the employer.”).
3 Kowalski, 434 U.S. at 77 (ruling the assumptions that section 119 was not limited to meals in kind and the meals allowance was excludible from income was invalid but not ruling on what was defined as a “business premise” under section 119).
4 See Id.
5 The Circuit Courts’ cases contain state law rules generally providing that the policeman was on duty at all times, subject to call while eating, and had to notify headquarters of the location where the meal was being eaten.
6 Kowalski, 434 U.S. at 79-80.
7 Id. at 77 (quoting Comm’r. v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955) (expanding definition of income in the I.R.C. of 1954)).
8 Id. at 77-78.
9 Id. at 84. (noting the “convenience of the employer” doctrine is a question of fact requirement that must be satisfied to qualify for section 119 meals) Reg. §1.119-1(a)(1), §1.119-1(b); U.S. Junior Chamber of Com. v. United States, 334 F.2d 660 (Ct. Cl. 1964).
10 Kowalski, 434 U.S. at 90-92 (defining the doctrine as an employer can confer benefits on the employee for the employer’s convenience).
11 Id. at 93-96.
12 Sibla v. Comm’r, 611 F.2d 1260, 1261-62 (9th Cir. 1980).
13 Id. at 1264 (agreeing with Tax Court opinion that “[i]n substance, there is no difference between this situation and the typical situation in which the employer directs the preparation of the meals”) (citation omitted); See Treas. Reg. § 1.119-1(a)(3) (1985).
14 Comm’r v. Kowalski, 544 F.2d 686 (3d Cir. 1976), rev’d, 434 U.S. 77 (1977).
15 United States v. Barrett, 321 F.2d 911, 912 (5th Cir. 1963) (“The Commissioner takes to narrow a view of what constitutes the “business premises” of the Mississippi Highway Patrol. The major “business” of this state law enforcement agency is obviously not confined to isolated station houses; rather, it covers every road and highway in the state twenty-four hours a day every day. In view of the special nature and functions of the highway trooper’s work, it is unrealistic to treat the employer’s place of business as limited to the state [patrol] headquarters.”); followed in Smith v. United States, 543 F.2d 1155 (5th Cir. 1976), rem’d, 434 U.S. 978 (1977).
16 United States v. Morelan, 356 F.2d 199 (8th Cir. 1966).
17 United States v. Keeton, 383 F.2d 429 (10th Cir. 1967).
18 Wilson v. United States, 412 F.2d 694, 696 (1st Cir. 1969), aff’g 292 F. Supp. 200 (D.N.H. 1968) (disdaining the idea that as the taxpayer’s employer, the state, conducts business everywhere within its “metaphysical” borders).
19 Koerner v. United States, 550 F.2d 1362 (4th Cir. 1977), cert. denied, 434 U.S. 984 (1977).
20 Comm’r v. Anderson, 371 F.2d 59, 63 (6th Cir. 1966); See, e.g., I.R.S. Priv. Ltr. Rul. 81-30-134 (Apr. 30, 1981) (questioning whether the employees perform some significant services on the business premises).
21 Comm’r v. Baertschi, 412 F.2d 494, 495 (6th Cir. 1969).
22 See, e.g., Christey v. United States, 841 F.2d 809 (8th Cir. 1988), cert. denied, 109 S. Ct. 1131 (1989) and Contra Hammond v. Commissioner, T.C. Memo 1985-252, aff’d by unpub. order, No. 85-1891 (4th Cir. 1986) (cash meal reimbursement to state trooper only deductible when taxpayer is “away from home” overnight under §162(a)(2)).

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