Commissioner v. Kowalski
434 U.S. 77 (1977)

  • Kowalski was a policeman in New Jersey. He received cash to pay for the cost of lunches that he ate while on duty.
    • The rationale suggested that when the public sees a police car, it tends to deter crime, so New Jersey wanted the police out in the community and not at home eating lunch.
  • The IRS claimed that the lunch money was taxable as gross income. Kowalski objected.
    • Kowalski argued that the lunch money counted as meals furnished for the convenience of the employer and was exempted from gross income by 26 U.S.C. 119.
    • The IRS argued that in order to qualify under 119, the meals have to be furnished on the business premises of the employer. Since Kowalski wasn't eating at the police station, it doesn't count.
    • The IRS also argued that Kowalski didn't receive a meal, he received cash. That's not the same thing and it isn't covered by the 119 exclusion.
  • The US Supreme Court found for the IRS.
    • The US Supreme Court found that the meals were not covered under 119.
      • The Court found that money is not food, and a plain language reading of 119 does not include cash paid for meals, only for the meals themselves.
      • In general, the Tax Code has been read to state that everything is includable as gross income under 26 U.S.C. 61(a) unless it is explicitly excluded.
    • Kowalski argued that some government employees got actual meals back at the police station, so it would inequitable for him to have to pay taxes. However, the Court found that this was a situation of horizontal inequity, and nothing in the Constitution or in the Tax Code mandated horizontal equity.
      • Horizontal equity says that taxpayers who have the same income should pay the same amount in taxes.