Rev. Rul. 80-330

ISSUE

Are payments received by taxpayers pursuant to the National Historic Preservation Act of 1966, section 101, 16 U.S.C. sections 470 to 470t (1976), as amended, includible in their gross incomes?

FACTS

Under 16 U.S.C. section 470a, the Secretary of the Interior is authorized to establish a program of matching grants-in-aid to states for projects having as their purpose the preservation for public benefit of properties that are significant in American history, architecture, archeology, and culture. The term "project" means programs of state and local governments and other public bodies and private organizations and individuals for the acquisition of title or interests in, and for the development of, any district, site, building, structure, or object that is significant in American history, architecture, archeology, and culture, or property used in connection therewith, and for its development in order to assure the preservation for public benefit of any such historical properties. The term "historic preservation" includes the protection, rehabilitation, restoration, and reconstruction of districts, sites, buildings, structures, and objects significant in American history, architecture, archeology, or culture.

Upon approval of an application submitted to the Department of the Interior, grant funds, not exceeding 50 percent of the total cost of the project, are awarded by the Department to the state. The state distributes the federal funds to the persons responsible for the various programs for which the federal funds are awarded. Properties for which funds are provided must be included in or eligible for inclusion in the National Register of historic places.

A, a professional person, purchased a house that is included in the National Register and received grant funds from the state to restore the house, which A intended to use only as an office.

LAW AND ANALYSIS

Section 61 of the Internal Revenue Code and the Income Tax Regulations thereunder provide that, except as otherwise provided by law, gross income means all income from whatever source derived.

The Internal Revenue Service has consistently held that payments made under legislatively provided social benefit programs for the promotion of general welfare are not includible in the recipients' gross incomes. See, for example, Rev. Rul. 76-395, 1976-2 C.B. 16, concerning home rehabilitation grants received under the Housing and Community Development Act of 1974, Pub. L. 93-383, 1974-2 C.B. 418, and Rev. Rul. 76-144, 1976-1 C.B. 17, concerning grants received under the Disaster Relief Act Amendments of 1974, Pub. L. 93-288, 1974-2 C.B. 414.

The payments in this case are distinguished from welfare program payments such as those involved in Rev. Rul. 76-395 and Rev. Rul. 76-144. The ultimate recipients of the payments in this case can be governmental units and other organizations exempt from federal income taxation and they can be taxpayers, including individuals, corporations, and unincorporated entities. Payments made to individuals can be made with respect to the individual's personal residence, and they can be made with respect to property used in the individual's trade or business or for the production of income. Thus, the payments are not based on an individual recipient's personal financial status, health, educational background, or employment status, nor are they intended to improve the living conditions of low-income homeowners. Rather, the purpose of the payments is to preserve historically significant structures. Thus, the payments are not made under a social benefit program for the promotion of general welfare.

HOLDING

The payments received by A are includible in A's gross income under section 61 of the Code. Because the house is used in A's trade or business, A is entitled to a deduction under section 191, concerning amortization of certain rehabilitation expenditures for certified historic structures, or section 167(o) concerning depreciation with respect to such structures.