Rev. Rul. 71-290

The purpose of this ruling is to update and restate, under the current statute and regulations, the position set forth in S.S.T. 386, C.B. 1940-1, 211.

The question presented is whether the value of board and lodging furnished without charge to the officers and members of the crews of vessels operated by a steamship company is "wages" for purposes of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act (Chapters 21 and 23, respectively, subtitle C, Internal Revenue Code of 1954).

The steamship company, a United States corporation, makes no charge or assessment against the officers and members of the crews of its vessels for meals or lodging furnished them during voyages.

Section 3121(a) of the Federal Insurance Contributions Act provides, in part, that the term "wages" means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash. Section 31.3121(a)-1(f) of the Employment Tax Regulations provides that ordinarily, facilities or privileges (such as entertainment, medical services, or so-called "courtesy" discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as remuneration for employment if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment, or efficiency of his employees. The term "facilities or privileges," however, does not ordinarily include the value of meals or lodging furnished, for example, to restaurant or hotel employees, or to seamen or other employees aboard vessels, since generally these items constitute an appreciable part of the total remuneration of such employees. Section 3306(b) of Federal Unemployment Tax Act and the regulations thereunder contain similar provisions.

In the instant case the value of the board and lodging is not of relatively small value but represents an appreciable part of the total remuneration of the officers and crews so that it cannot be said to represent "facilities or privileges" which may be excluded from the term "wages."

Accordingly, it is held that the fair value of the board and lodging furnished the officers and members of the crews of vessels operated by the steamship company is "wages" for purposes of the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act. See Revenue Ruling 68-321, C.B. 1968-1, 415, for factors in determining the value to be placed on meals furnished to employees as part of their compensation in computing Federal employment taxes.

S.S.T. 386 is superseded since the position set forth therein is restated under current law in this Revenue Ruling.

¹ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.