OPINION.
Trussell :
It is well settled that compensation of officers and employees of States and municipal subdivisions thereof is exempt from the Federal income tax. And, while this principle has become the settled law of the land, difficulties and uncertainties arise in determining who are officers and employees of States and municipal subdivisions thereof. That is the issue in the instant case.
Chapter 288 of Laws of the 38th General Assembly of the State of Iowa granted to certain cities the power to own, construct, acquire, and maintain and operate waterworks within their corporate limits and authorized such cities to appoint the directors of waterworks trustees who should have supervision over and be responsible to the city council of all details of administration and operation of such waterworks.
In September, 1919, the city council of the city of Des Moines enacted an ordinance by which it adopted—
A plan for the management of the waterworks and creating and establishing a board of waterworks trustees, providing for the appointment of the members thereof, fixing their terms of compensation, describing the powers and duties of such board .
And, in section 3 of said ordinance it was provided that such board of waterworks trustees shall have general supervision over the waterworks and be responsible to the city council for all details of administration and operation of such waterworks. It shall immediately after its organization make and prescribe all the necessary rules for the government and operation of such waterworks. It shall employ a general manager and treasurer and such accountants and assistants as may be necessary in the conduct of the business incident to the operation of the waterworks, and they shall hold office at the pleasure of the board.
Pursuant to this legislation the said board of waterworks trustees adopted the resolution set out in the findings of fact for the purpose of employing the petitioner in the capacity of counsel and general advisor. The petitioner accepted such employment and continued to hold said appointment during all the years here under consideration.
We are of the opinion that the petitioner thus became and continued to be an employee of the political subdivision of the State of Iowa, that the compensation which he received for services rendered to the board of waterworks trustees of the city of Des Moines is exempt from income taxes. John E. Mathews, 8 B. T. A. 209; P. Frank Durkin, 4 B. T. A. 748. There are no deficiencies for the years 1920 to 1923, inclusive.
Judgment of no deficiency will be entered.
Considered by Littleton, Smith, and Love.