Rev. Rul. 56-188

An organization, which is exempt from the payment of Federal income tax under section 501(a) of the Internal Revenue Code of 1954 as an organization described in section 501(c)(3) of the Code, derives a portion of its income from certain unrelated activities. Advice has been requested whether services performed by its employees in connection with such unrelated activities are excepted from `employment' under section 3121(b)(8)(B) of the Federal Insurance Contributions Act.

Section 3121(b)(8)(B) of the Federal Insurance Contributions Act excepts from the term `employment' services performed in the employ of an organization described in section 501(c)(3) of the 1954 Code which is exempt from income tax under section 501(a) of the 1954 Code. The exception is applicable to the exempt organization as a whole rather than separately to its component parts or activities.

Accordingly, it is held that all of the services performed for the exempt organization by its employees, including the services performed in the conduct of its unrelated activities, are excepted from `employment' under section 3121(b)(8)(B) of the Federal Insurance Contributions Act, and the remuneration for such services is not subject to the taxes imposed under the Act.