Off-Duty Policemen; Directing Traffic at Bank, Rev. Rul. 74-162 (1974) Rev. Rul. 74-162 (IRS RRU), 1974-1 C.B. 297, 1974 WL 34876 Internal Revenue Service (I.R.S.) Revenue Ruling OFF--DUTY DIRECT ING TRAFFIC AT BANK Published: 1974 26 CFR Who are employers (Also (Also Sections 3306, 3401; *1 Off-duty policemen; directing traffic at bank. Off-duty policemen who volunteer for assignment to direct traffic at a bank auto drive-in facility, who are controlled by the police department, and who are paid by the city from the bank's payments to the police department for the service, are employees of the city excepted from 'employment' under FICA and FUTA but their pay is subject to income tax withholding. Advice has been requested whether a bank or the city is the employer of 'off-duty' policemen performing services, under the circumstances described below, for purposes of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages (chapters 21, 23, and 24, respectively, subtitle C, Internal Revenue Code ofl954) The bank and the police department have an arrangement under which two off-duty policemen report to the bank each day it is open to direct traffic into and out of the bank's auto drive-in facility. Each policeman works a shift of four hours. The police department assigns only policemen who have expressed an interest in such traffic control services in the area of the auto drive- in facility owned by the bank. The traffic assignments are made and scheduled by two members of the police department who have been assigned the job of coordinating extra work assignments and who are designated by the department as the extra work coordinators. The bank has no voice in selecting the policemen assigned to the work and does not negotiate with individual policemen or give them instructions as to the manner of performing the services. While performing the services, the policemen are subject to all of the departmental rules of a police officer on regular duty and may be recalled by their superiors at any time. The remuneration the policemen receive for the traffic control services in this case is established by the City Council. The bank pays a fixed amount for such services to the police department upon receipt of a bill from the extra work coordinators. The coordinators then authorize the payment of a part of the amount to the policemen as compensation for their services. The traffic control services provided are also available on similar terms when required by the operations of other firms. The Employment Tax Regulations in discussing who are employers identify them generally as persons who employ employees (sections 31.3 and 3 and as any person for whom services are performed as an employee (section An individual is an employee for Federal employment tax purposes if he has the status of employee under the usual common law rules applicable in determining the employer-employee relationship. Guides for determining that status are set forth in three substantially similar sections of the regulations, namely, sections 31.3 31 and 31 .3401 . The regulations require the fmding of a legal relationship of contractual nature that may be examined to determine whether it comprises an employer-employee relationship. Generally, the relationship of employer and employee exists when the person for whom the (C) 2013 Thomson Reuters. No claim to original US. Government Works. Off-Duty Policemen; Directing Traffic at Bank, Rev. Rul. 74-162 (1974) services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. *2 In the instant case, the bank entered into an agreement with the police department to supply off-duty policemen to direct traffic at its auto drive-in facility for a specified rate of pay. The bank did not enter into contracts with the policemen. Therefore, the legal relationship is between the city's police department and the policemen while they are performing their services at the bank's auto drive-in facility. While performing the services, the policemen are at all times subject to the direction and control of the city's police department. The fact that such policemen receive their remuneration for performing services on the bank's premises as a result of the bank's paying the police department does not of itself make them employees of the bank. Accordingly, in the instant case, the city is the employer of the off-duty policemen performing services in the area of the auto drive-in facility owned by the bank. Section 3l21(b)(7) of the Federal Insurance Contributions Act excepts from 'employment' service performed in the employ of a State, or any political subdivision thereof, or any instrumentality of any one or more of the foregoing which is wholly owned thereby, with exceptions not here material. Section 3306(c)(7) of the Federal Unemployment Tax Act contains a similar provision. Accordingly, the services performed by the policemen at the auto drive-in facilities owned by the bank are excepted from 'employment' by sections 3121(b)(7) and 3306(c)(7) of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, respectively, and remuneration for such services is not subject to the taxes imposed by the Acts. However, it is subject to Federal income tax withholding on wages under section 3402 of the Code. When social security coverage is desired for employees whose services are excepted from 'employment' by section 3l2l(b) (7) of the Federal Insurance Contributions Act, the coverage may be obtained only pursuant to an agreement between the State and the Secretary of Health, Education, and Welfare entered into under section 218 of the Social Security Act, as amended, 42 U.S.C. 418 (1970). Compare Rev. Rul. 54-616, 1954-2 CB. 346 and Rev. Rul. 56-154, 1956-l C.B. 477, which illustrate situations in which city policemen perform services for outside businesses and the third party is the employer. See Rev. Rul. 70-504, 1970-2 C.B. 204, which illustrates a situation, similar to that in this case, in which the policemen are employees of the city. Rev. Rul. 74-162 (IRS RRU), 1974-1 C.B. 297, 1974 WL 34876 End of Document 2013 Thomson Reuters. No claim to original US. Government Works. 2013 Thomson Reuters. No claim to originai U.S. Government Works. 2