Rev. Rul. 54-593

Advice has been requested whether withholding of income tax by employers is required in 1954 with respect to the value of meals or lodging furnished an employee by his employer if the value of such meals or lodging is excludable from the gross income of the employee under section 119 of the Internal Revenue Code of 1954. Section 119 provides as follows:

There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him by his employer for the convenience of the employer, but only if-

(1) in the case of meals, the meals are furnished on the business premises of the employer, or

(2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment. In determining whether meals or lodging are furnished for the convenience of the employer, the provisions of an employment contract or of a State statute fixing terms of employment shall not be determinative of whether the meals or lodging are intended as compensation.

Under section 406.207(a)(5) of Regulations 120 an employer is not required to withhold income tax with respect to the value of meals or lodging furnished by him to his employee if such value is excludable from the gross income of the employee under the convenience of the employer rule.

Section 119 of the 1954 Code, which is effective as of January 1, 1954, contains provisions with respect to the exclusion from the gross income of an employee of the value of meals or lodging furnished to the employee by, and for the convenience of, his employer. For the purposes of section 406.207(a)(5) of Regulations 120, the provisions of section 119 may be followed in determining whether the value of meals or lodging furnished an employee in 1954 by his employer is excludable from the gross income of the employee. Accordingly, an employer is not required in 1954 to withhold income tax upon the value of meals and lodging if such value is clearly excludable from the gross income of the employee by reason of section 119.

No adjustment between the employer and his employee is required with respect to income tax withheld during the calendar year 1954 on the value of meals or lodging furnished by the employer to his employee which is excludable from the gross income of the employee under the provisions of section 119. However, if the employer desires to make such adjustments, he may do so.

The Commissioner, with the approval of the Secretary, will prescribe income tax withholding regulations under Chapter 24 of the Internal Revenue Code of 1954, containing provisions which will correlate with section 119. This Revenue Ruling will be applicable only for the period prior to the issuance of such forthcoming regulations.

This Revenue Ruling is not applicable for purposes of the taxes imposed by the Federal Insurance Contributions Act and the Federal Unemployment Tax Act.