[Code of Federal Regulations]
[Title 26, Volume 15]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR31.3306(c)(10)-1]

[Page 174-176]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 31_EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE--Table of Contents
 
  Subpart D_Federal Unemployment Tax Act (Chapter 23, Internal Revenue 
                              Code of 1954)
 
Sec. 31.3306(c)(10)-1  Services in the employ of certain organizations 
exempt from income tax.

    (a) In general. (1) This section deals with the exception from 
employment of certain services performed in the employ of any 
organization exempt from income tax under section 501(a) (other than an 
organization described in section 401(a)) or under section 521. (See the 
provisions of Sec. Sec. 1.401-1, 1.501(a)-1, and 1.521-1 of this 
chapter (Income Tax Regulations).) If the services meet the tests set 
forth in paragraphs (b), (c), (d), or (e) of this section, the services 
are excepted.
    (2) See also Sec. 31.3306(c)(8)-1 for provisions relating to the 
exception of services performed in the employ of religious, charitable, 
educational, or certain other organizations exempt from income tax; 
Sec. 31.3306(c)(10)-2 for provisions relating to the exception of 
services performed by certain students in the employ of a school, 
college, or university; and Sec. 31.3306(c)(10)-3 for provisions 
relating to the exception of services performed before 1962 in the 
employ of certain employees' beneficiary associations.
    (b) Remuneration less than $50 for calendar quarter. Services 
performed by an employee in a calendar quarter in the employ of an 
organization exempt from income tax under section 501(a) (other than an 
organization described in section 401(a)) or under section 521 are 
excepted from employment, if the remuneration for the service is less 
than $50. The test relating to remuneration of $50 is based on the 
remuneration earned during a calendar quarter rather than on the 
remuneration paid in a calendar quarter. The exception applies 
separately with respect to each organization for which the employee 
renders services in a calendar quarter. The type of services performed 
by the employee and the place where the services are performed are 
immaterial; the statutory tests are the character of the organization in 
the employ of which the services are performed and the amount of the 
remuneration for services performed by the employee in the calendar 
quarter.

    Example 1. X is a local lodge of a fraternal organization and is 
exempt from income tax under section 501(a) as an organization of the 
character described in section 501 (c)(8). X has a number of paid 
employees, among them being A who serves exclusively as recording 
secretary for the lodge, and B who performs services for the lodge as 
janitor of its clubhouse. For services performed during the first 
calendar quarter of 1955 (that is, January 1, 1955, through March 31, 
1955, both dates inclusive) A earns a total of $30. For services 
performed during the same calendar quarter B earns $180. Since the 
remuneration for the services performed by A during such quarter is less 
than $50, all of such services are excepted. Thus, A is not counted as 
an employee in employment on any of the days during such quarter for 
purposes of determining whether the X organization is an employer (see 
Sec. 31.3306(a)-1). Even though it is subsequently determined that X is 
an employer, A's remuneration of $30 for services performed during the 
first calendar quarter

[[Page 175]]

of such year is not subject to tax. B's services, however, are not 
excepted during such quarter since the remuneration therefor is not less 
than $50. Thus, B is counted as an employee in employment during all of 
such quarter for purposes of determining whether the X organization is 
an employer. If it is determined that the X organization is an employer, 
B's remuneration of $180 for services performed during the first 
calendar quarter is included in computing the tax.
    Example 2. The facts are the same as in example 1, above, except 
that on April 1, 1955, A's salary is increased and, for services 
performed during the calendar quarter beginning on that date (that is, 
April 1, 1955, through June 30, 1955, both dates inclusive), A earns 
$60. Although all of the services performed by A during the first 
quarter were excepted, none of A's services performed during the second 
quarter are excepted since the remuneration for such services is not 
less than $50. A, therefore, is counted as an employee in employment 
during all of the second quarter for the purpose of determining whether 
the X organization is an employer. If it is determined that the X 
organization is an employer, A's remuneration of $60 for services 
performed during the second calendar quarter is included in computing 
the tax.
    Example 3. The facts are the same as in example 1, above, except 
that A earns $120 for services performed during the year 1955, and such 
amount is paid to him in a lump sum at the end of the year. The services 
performed by A in any calendar quarter during the year are excepted if 
the portion of the $120 attributable to services performed in that 
quarter is less than $50. In such case, A is not counted as an employee 
in employment on any of the days during such quarter for purposes of 
determining whether the X organization is an employer. If, however, the 
portion of the $120 attributable to services performed in any calendar 
quarter during the year is not less than $50, the services during that 
quarter are not excepted. In the latter case, A is counted as an 
employee in employment during all of such quarter and, if it is 
determined that the X organization is an employer, that portion of the 
$120 attributable to services performed in such quarter is included in 
computing the tax.

    (c) Collection of dues or premiums for fraternal beneficiary 
societies, and ritualistic services in connection with such societies, 
before 1962. The following services performed by an employee in the 
employ of a fraternal beneficiary society, order, or association exempt 
from income tax under section 501(a) are excepted from employment if the 
services are performed before 1962 or if remuneration for the services 
is paid before 1962:
    (1) Services performed away from the home office of such a society, 
order, or association in connection with the collection of dues or 
premiums for such society, order, or association; and
    (2) Ritualistic services (wherever performed) in connection with 
such a society, order, or association.

For purposes of the paragraph the amount of the remuneration for 
services performed by the employee in the calendar quarter is 
immaterial; the tests are the character of the organization in whose 
employ the services are performed, the type of services, and, in the 
case of collection of dues or premiums, the place where the services are 
performed.
    (d) Students employed before 1962. (1) Services performed in the 
employ of an organization exempt from income tax under section 501(a) 
(other than an organization described in section 401(a)) or under 
section 521 by a student who is enrolled and is regularly attending 
classes at a school, college, or university, are excepted from 
employment if the services are performed before 1962 or if remuneration 
for the services is paid before 1962. For purposes of this paragraph, 
the amount of remuneration for services performed by the employee in the 
calendar quarter, the type of services, and the place where the services 
are performed are immaterial; the tests are the character of the 
organization in whose employ the services are performed and the status 
of the employee as a student enrolled and regularly attending classes at 
a school, college, or university.
    (2) The term ``school, college, or university'' as used in this 
paragraph is to be taken in its commonly or generally accepted sense. 
For provisions relating to services performed before 1962 by a student 
enrolled and regularly attending classes at a school, college, or 
university not exempt from income tax in the employ of such school, 
college, or university, see paragraph (b) of Sec. 31.3306(c)(10)-2. For 
provisions relating to services performed after 1961 by a student 
enrolled and regularly attending classes at a school, college, or 
university in the employ of such school, college, or university, see 
paragraph (a) or Sec. 31.3306(c)(10)-2.

[[Page 176]]

    (e) Services performed before 1962 in employ of agricultural or 
horticultural organization exempt from income tax. (1) Services 
performed by an employee in the employ of an agricultural or 
horticultural organization which is described in section 501(c)(5) and 
the regulations thereunder and which is exempt from income tax under 
section 501(a) are excepted from employment if the services are 
performed before 1962 or if remuneration for the services is paid before 
1962.
    (2) For purposes of this paragraph, the type of services performed 
by the employee, the amount of remuneration for the services, and the 
place where the services are performed are immaterial; the test is the 
character of the organization in whose employ the services are 
performed.

[T.D. 6658, 28 FR 6639, June 27, 1963]