## Facts

- The United States Junior Chamber of Commerce (a nonprofit) maintained its headquarters in Tulsa, Oklahoma, and owned a residence known as the “U.S. Jaycee White House.”
- The organization’s president served as chief executive officer for a fixed, one-year, nonrenewable term; successive presidents relocated from out of state to Tulsa for their terms and returned home afterward.
- The organization’s bylaws required the president (and family, if any) to reside in Tulsa at the White House during the term, citing benefits and convenience to the organization.
- Presidents paid no rent; the organization paid all operating and maintenance expenses for the residence.
- The residence was used for organizational functions, including meetings, briefings, and entertaining guests in connection with the organization’s business.
- The Internal Revenue Service treated the residence’s fair rental value as taxable wages, assessing withholding and FICA taxes for 1959 and 1960.
- The organization filed a refund suit for $747.89, contending the lodging was excludable under I.R.C. § 119.

## Issues

1. Whether the fair rental value of the residence furnished to the organization’s presidents was taxable income and wages subject to withholding and FICA under I.R.C. § 61, or excludable under I.R.C. § 119.
2. Whether, for § 119, the lodging was furnished on the employer’s “business premises.”
3. Whether the presidents were required to accept the lodging as a “condition of employment” and for the employer’s convenience within the meaning of § 119.

## Decision

- The Court of Claims entered judgment for the taxpayer and awarded a refund of the assessed withholding and FICA taxes (with interest).
- The court held the lodging’s value was excludable from the presidents’ gross income under I.R.C. § 119.
- The court found the presidents were required by the organization’s bylaws to live in the residence, satisfying the “condition of employment” requirement.
- The court concluded the residence qualified as the employer’s “business premises” because it was owned by the organization and was a regular site of significant business activity tied to the president’s duties.

## Legal Principles

- Under I.R.C. § 119, the value of employer-furnished lodging is excluded from gross income if it is provided for the employer’s convenience, on the employer’s business premises, and the employee must accept it as a condition of employment.
- “Condition of employment” is satisfied when the employee is not free to choose alternative lodging while holding the position and the requirement serves the employer’s business needs.
- “Business premises of the employer” may include employer-owned residential property when it functions as an integral place where the employer’s business is regularly carried on, even if it also serves as living quarters.
- If lodging is excluded under § 119, its value is not “wages” for purposes of withholding and FICA tax assessments.

## Conclusion

The Court of Claims held that the organization’s required, employer-provided presidential residence was lodging on the employer’s business premises furnished for the employer’s convenience, making its rental value excludable under I.R.C. § 119 and not subject to withholding or FICA taxes.


United States Junior Chamber of Commerce v. United States, 334 F.2d 660 (Ct. Cl. 1964)