Bingler v. Johnson

LOCATION: United States District Court for the Northern District of Illinois, Eastern Division

DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 394 US 741 (1969)
ARGUED: Mar 03, 1969 / Mar 04, 1969
DECIDED: Apr 23, 1969

Facts of the case


Media for Bingler v. Johnson

Audio Transcription for Oral Argument - March 03, 1969 in Bingler v. Johnson

Audio Transcription for Oral Argument - March 04, 1969 in Bingler v. Johnson

Earl Warren:

473, John H.Bingler, Director of Internal Revenue, petitioner versus Richard E.Johnson et al.

Mr. Larrimer, you may continue with your argument.

James C. Larrimer:

Mr. Chief Justice and may it please the Court.

The issue in this case is essentially whether or not an employer can make a scholarship grant to an employee with that scholarship grant being excludable from gross income under the Internal Revenue Code.

The Government's position is that it cannot because Congress expressly stated that any continuing salary arrangement was not to have attached to it tax exempt consequences.

This statement on behalf of the Government is repeated throughout its brief as though the constant repetition would add some validity to it.

The legislative history however does not support the statement that a scholarship which may in fact be labeled a continuing salary arrangement.

The legislative history does not support that statement.

The 1954 Code in which Section 117 was inserted with respect to scholarships and fellowships was new with the 1954 Code.

There was no specific provision of the Internal Revenue Code previous to that time.

There was acknowledged by --

Can I ask you a question.

The Fifth Circuit went the other way in this case, is it not?

James C. Larrimer:

Yes sir.

Are there are any circuits about that problem?

James C. Larrimer:

There's another circuit, I think it's the Fourth Circuit if I'm not mistaken.

There are at least two circuits which are in conflict with the decision of the Third Circuit in this case.

The Congress at the time of enacting the Section 117 recognized the state of confusion which existed as to the tax consequences of the scholarship and fellowship grant.

It said about to attempt to provide what it labeled a clear cut method of determining the tax consequences of these grants without the necessity of deciding each case, case-by-case.

It did so under the format of Section 117 in which it set forth specifically that a scholarship at an educational institution shall not be included in gross income.

It also provided that a fellowship shall not be included in gross income.

And then, considering the compensatory possibilities of these grants, it inserted limitations in the code in Section 117.

First, it provided with respect to scholarships and it's recognized by Congress at this point that scholarships must be at an educational institution as it is defined in the Internal Revenue Code.

Now, the Internal Revenue Code specifically defines an educational institution as an education -- as an institution which has a regular faculty and a regular student body and a regular curriculum.

So, Congress intended that a scholarship relate only to a student at an educational institution.

Hugo L. Black:

Would you mind telling me precisely, what's the relationship of the student after they give him the scholarship with reference to the company?

James C. Larrimer:

The student is on a leave of absence from a company.

Hugo L. Black:


James C. Larrimer:

Completely, he's got no duties whatsoever.

He does not report to the company.