BINGLER V. JOHNSON
394 U.S. 741 (1969)
NATURE OF THE CASE: Bingler (D), IRS Director, appealed a reversal of a ruling wherein
Johnson (Ps) were taxed on amounts received from their employer for attending college.
FACTS: Ps held engineering positions at the Bettis Atomic Power Laboratory, which
Westinghouse operates under a 'cost-plus' contract with the Atomic Energy Commission. Ps
participated in what is known as the Westinghouse Bettis Fellowship and Doctoral Program.
That program, designed both to attract new employees seeking further education and to give
advanced training to persons already employed at Bettis, offers a two-phase schedule of
subsidized postgraduate study in engineering, physics, or mathematics. Ps got 8 hours of
their 40-hour work week for work study. 'Tuition remuneration,' as well as reimbursement for
various incidental academic expenses, is provided by the company. When an employee has
completed all preliminary requirements for his doctorate, he may apply for an educational
leave of absence, which constitutes the second phase of the Fellowship Program. Westinghouse
and the AEC must approve his dissertation. If approved, the employee devotes his full
attention, for a period of at least several months, to fulfilling his dissertation
requirement. He receives a 'stipend' from Westinghouse, in an amount based on a specified
percentage (ranging from 70% to 90%) of his prior salary plus 'adders,' depending upon the
size of his family. He also retains his seniority status and receives all employee benefits,
such as insurance and stock option privileges. He is obligated to return to the employ of
Westinghouse for a period of at least two years following completion of his leave. Ps all
participated in the program. Westinghouse listed the amounts paid as 'indirect labor'
expenses and withheld federal income tax from those amounts. Ps filed claims for refund,
contending that the payments they had received were 'scholarships,' and hence were
excludable from income under 117 of the Code. D refused and Ps sued. The jury found for D.
Ps appealed and the court reversed. D appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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