Fax v. State Tax Commission

Prescott, J., delivered the opinion of the Court. From a ruling by the State Tax Commission which denied an exemption to the taxpayer for certain sums of money received by the taxpayer and declared in his income tax return, but for which he claimed an exemption, this appeal has been taken. The taxpayer was employed by the United States Government Atomic Energy Commission (Commission) under a contract of employment for consulting services in connection with Thermo-Dynamic problems under the Atomic Energy Act of 1946. Under this contract, the taxpayer received three hundred dollars ($300.00) in income during the year 1951.

He also had a contract for employment as a consultant to the Carbide & Carbon Chemicals Division, Union Carbide & Carbon Corporation, which company had a contract with the Oak Ridge National Laboratory at Oak Ridge, Tennessee. This contract was subject to and approved by the Commission. Under the daily rate of compensation set forth in the contract, the taxpayer received a total of $3,415.43 during the year 1951. The Comptroller and the State Tax Commission assessed taxes on all of this income, and the tax ²⁹⁸ payer has appealed, claiming it is exempt from the income tax law of the State of Maryland.

The statute involved, and under which appellant claims exemption, is a part of Sec. 9 (b) of the Atomic Energy Act, 1946, 42 U. S. C. A. Sec. 1809 (b), which, until amendment in 1954, provided as follows: “* * * The Commission, and the property, activities, and income of the Commission, are expressly exempted from taxation in any manner or form by any State, county, municipality, or any subdivision thereof.” The sole question presented is: Is income received by the appellant as compensation for work performed as a consultant to the Commission and its agent, under the Atomic Energy Act, includable in his gross income for purposes of computing the Maryland income tax for which appellant is liable? The income in question here was received by the appellant as compensation for personal services rendered. All of- this money is, under the terms of the Maryland income tax law (Sec. 276 of Art. 81 of the Code (1951)), includable as gross income, unless it is exempted by the above quoted portion of the Federal statute. Since this compensation is paid by the Commission and its agent to the appellant, it is not “income of the Commission”, therefore, he relies hpon a claimed exemption that his above income comes within the other terms of said statute, namely, “activities * * * of the Commission”.

The appellant relies upon two cases decided by the Supreme Court of the United States: Carson v. Roane-Anderson Co., 342 U. S. 232 ; and, General Elec. Co. v. Washington, 347 U. S. 909 , 98 L. Ed. 1066 . In both of these cases, the taxpayer was a corporation operating