Rev. Rul. 55-652

Advice has been requested whether unemployment compensation payments to Federal employees during unemployment periods, made pursuant to Title XV of the Social Security Act, as amended, 68 Stat. 1130, 42 U.S.C. 1361, constitute taxable income to the recipients.

Public Law 767, 83d Cong., C.B. 1954-2, 612, entitled `An Act to extend and improve the unemployment compensation program' amended the Social Security Act by adding Title XV which extended unemployment compensation benefits to Federal employees. Section 1502 of Title XV supra , authorizes the Secretary of Labor to enter into an agreement with any State, or with the agency administering the unemployment compensation law of the State, under which such agency will make payments to unemployed Federal employees after December 31, 1954, as agent of the United States. Such payments are to be in the same amount and subject to the same terms and conditions as if the Federal service were covered under the unemployment compensation law of the State. Section 1503 of Title XV, supra , provides in substance that in the absence of a State agreement, the Secretary of Labor is to make payments to unemployed Federal workers after December 31, 1954, in the same amounts and subject to the same terms and conditions as would be paid to such Federal workers if their Federal service had been covered by State law.

In I.T. 3230, C.B. 1938-2, 136, it was held that payments on account of unemployment paid by a State agency out of funds received from the Federal unemployment trust fund are not subject to Federal income tax in the hands of the recipients. The same principle is equally applicable to unemployment compensation payments made under Title XV of the Social Security Act, as amended. Accordingly, such payments are exempt from Federal income tax to the recipients