Judicial Brief Example

  Citation: Bingler v. Johnson, 394 US 741 (1969), 22 L.Ed.2d 695, 89 S.Ct. 1439, 23 AFTR2d 69-1212, 69-1 USTC ¶9348, Ct.D. 1926, 1969-2 CB 17; rev’g CA-3, 396 F.2d 258 (1968), 21 AFTR2d 1418, 68-1 USTC ¶9414; rev’g and rem’g DC-Pa, 19 AFTR2d 426 (1967), 67-1 USTC ¶9165.

  History: S.Ct. and DC-Pa for govít; CA-3 for taxpayer

  Justice: Stewart

Facts: To attract quality employees and provide advance training for present employees, the employer started a two-phase program of educational support for employees willing to pursue doctoral degrees. In phase one, participating employees receive payment for 40-hour weeks but eight hours release time to attend classes. The employer pays tuition and other incidental academic expenses. Phase two allows employees to take leaves of absence to complete their dissertations. Dissertation topics must relate to the employer’s business and receive the employer’s approval. During phase two, employees receive stipends of 70-90% of prior salary plus additional amounts based on family size. Employees retain seniority status and receive all employee benefits. In return, employees submit progress reports and, after completing their degrees, work for the employer at least two years. The taxpayer took his leave of absence and received his doctoral degree in engineering. Then, as agreed, he served two years with the employer. The employer accounted for the stipend as an indirect labor expense and withheld federal income taxes. In contending that the stipend was an excludable scholarship, the taxpayer argued that limitations found in the Code are the only restrictions to excludability and, thus, that regulations providing additional limitations are invalid. The gov’t relied on the regulations and contended that amounts received did not constitute scholarship funds and, thus, were taxable.

  Issue: Is an educational support payment always excludable if it does not pay for teaching, research, or other part-time employment?

  Holding: No, recipients must include educational support in gross income if it primarily benefits the grantor or compensates for any services.

  Reasoning: The Code allows individuals to exclude scholarships but does not define the term beyond treating amounts received for teaching, research, or similar part-time employment as gross income. Regulations state that a scholarship does not include educational support that primarily benefits the grantor or that represents compensation for past, present, or future services. In short, regulations portray scholarships as no-strings-attached educational grants that require no substantial quid pro quo. The court upheld the regulation since it did not provide a clearly unreasonable or inconsistent interpretation of the statute. The House Report supports the governmentís contention that some grants for educational support are not scholarships. Also, taxpayers must narrowly construe exclusions from gross income. Finally, the taxpayerís position leads to inequities since amounts graduate assistants receive for services are taxable.