have no connection with it as in the case of services performed by an employee while on the vessel or aircraft merely as a passenger in the general sense. For example, the services of a buyer in the employ of a department store while he is a passenger on a vessel are not in connection with the vessel.

(c) The expression "on or in connection with" refers not only to services performed on the vessel or aircraft but also to services connected with the vessel or aircraft which are not actually performed on it (for example, shore services performed as officers or members of the crew, or as employees of concessionaires. of the vessel).

(d) Services performed within the United States on or in connection with a non-American vessel or aircraft for an employer by an employee who is not a citizen of the United States are excepted from employment, irrespective of whether the employer is or is not an American employer, provided the employee also is employed by such employer on and in connection with the vessel or aircraft when outside the United States. Services performed within the United States on or in connection with a nonAmerican vessel or aircraft by an employee for an employer who is not an American employer also are excepted from employment, irrespective of whether the employee is or is not a citizen of the United States, provided the employee also is employed by such employer on and in connection with the vessel or aircraft when outside the United States. Services performed within the United States after 1954 on or in connection with a non-American vessel or aircraft for an American employer by an employee who is a citizen of the United States are not excepted from employment under section 210(a) (4) of the Act, irrespective of whether the employee is employed by such employer on and in connection with the vessel or aircraft when outside the United States. Further, section 210(a) (4) of the Act does not except from employment services performed within the United States for an employer, whether or not an American employer, on or in connection with a non-American vessel or aircraft by an employee, whether or not a citizen of the United States, who is not also employed by such employer on and in connection with the vessel or aircraft when outside the United States

(e) Services performed prior to 1955 outside the United States on or in connection with a vessel not an American vessel, or on or in connection with an aircraft not an American aircraft, by a citizen of the United States as an employee for an American employer were excepted from employment, if the employee was employed on and in connec tion with such vessel or aircraft when outside the United States. Services performed after 1954 outside the United States on or in connection with a vessel not an American vessel, or on or in connection with an aircraft not an American aircraft, by a citizen of the United States as an employee for an American employer are not excepted from employment under section 210(a) (4) of the Act. irrespective of whether the employee is employed on and in connection with such vessel or aircraft when outside the United States. Services performed outside the United States on or in connection with a vessel not an American vessel, or on or in connection with an aircraft not an American aircraft, either by an employee who is not a citizen of the United States or for an employer who is not an American employer, do not constitute employ. ment in any event. (For provisions relating to services performed outside the United States which constitute employment, see § 404.1003 (c).)

(f) Prior to 1955 the citizenship or residence of the employee and the place where the contract of employment is entered into were immaterial for purposes of this exception. After 1954, the citizenship of the employee is material for purposes of this exception. The citizenship or residence of the employer is material only for the purpose of determining whether the vessel is an American vessel. For definitions of "vessel," "American vessel." "aircraft," "American aircraft," "citizen of the United States," and "American employer," see 404.1003 (c).

[32 F.R. 7760, May 27, 1967]

§ 404.1013 Services in employ of United States or instrumentalities thereof.

(a) In general. This section relates to services performed in the employ of the U.S. Government or in the employ of an instrumentality of the United States. Particular services which are not excepted from employment under one rule set forth in this section may nevertheless be excepted under another rule set forth in this section or under para

graph (d) of this section, relating to services in the employ of an instrumentality of the United States specifically exempted from the taxes imposed by section 1410 of the Internal Revenue Code of 1939 or section 3111 of the Internal Revenue Code of 1954. Moreover, services performed in the employ of the United States or of any instrumentality thereof which are not excepted from employment under paragraph (5) or (6) of section 210(a) of the Act (par. (6) or (7) of sec. 210(a) of the Act in effect prior to 1955) may nevertheless be excepted under some other paragraph of such section For provisions relating to the computation of remuneration for service performed by an individual as a member of a uniformed service or for service performed by an individual as a volunteer or volunteer leader within the meaning of the Peace Corps Act, see $ 404.1027(r).

(b) Services covered under a retirement system. Services performed in the employ of the United States or in the employ of any instrumentality thereof are excepted from employment if such services are covered under a law enacted by the Congress of the United States which specifically provides for the establishment of a retirement system for employees of the United States or of such Instrumentality. Determinations as to whether services are covered by a retirement system of the requisite character are to be made as of the time such services are performed. Services of an employee who has an option to have his services covered under a retirement system are not covered under such retirement system unless and until he exercises such option. The test is whether particular services performed by an employee are covered by a retirement system of the requisite character rather than whether the position in which such services are performed is covered by such retirement system.

(c) Special classes of services. The following classes of services performed either in the employ of the United States or in the employ of any instrumentality thereof are excepted from employment:

(1) Prior to 1955 only:

(1) Services performed in the field service of the Post Office Department unless performed by an individual as an employee who is excluded by Executive order from the operation of the Civil Service Retirement Act (Act of May

29, 1930, as amended, 5 U.S.C. 691 et seq.) because he is serving under a temporary appointment pending final determination of eligibility for permanent or indefinite appointment;

(11) Services performed in or under the Bureau of the Census of the Department of Commerce by temporary employees employed for the actual taking of any census (exclusive of clerical or other employees employed for work other than in the actual taking of the census);

(iii) Services performed by an individual as an employee who is excluded by Executive order from the operation of the Civil Service Retirement Act because of payment on a contract or fee basis;

(iv) Services performed by an individual as an employee receiving nominal compensation of $12 or less per annum;

(v) Services performed in a hospital, home, or other institution of the United States by a patient or inmate thereof;

(vi) Services performed by an individual as a consular agent appointed under the authority of section 551 of the Foreign Service Act of 1946 (22 U.S.C. 951);

(vii) Services performed by an individual as an employee who is employed under a Federal relief program to relieve him from unemployment; and

(vill) Services performed as a member of a State, county, or community committee under the Commodity Stabilization Service (formerly Production and Marketing Administration) or of any other board, council, committee, or other similar body, unless such board, council, committee, or other similar body is composed exclusively of individuals otherwise in the full-time employ of the United States.

(2) Both prior to 1955 and subsequent to 1954:

(1) Services performed as the President or Vice President of the United States or as a Member, Delegate, or Resident Commissioner, of or to the Congress of the United States;

(ii) Services performed in the legislative branch of the U.S. Government;

(iii) Services performed by student nurses, student dietitians, student physical therapists, or student occupational therapists. and services performed prior to 1966 by medical or dental interns and medical or dental residents-in-training, assigned or attached to a hospital, clinic, or medical or dental laboratory operated by any department, agency, or instru

mentality of the U.S. Government, or by certain other student employees described in section 2 of the Act of August 4, 1947 (5 U.S.C. 1052);

(iv) Services performed by an individual as an employee serving on a temporary basis in case of fire, storm, earthquake, flood, or other similar emergency:

(v) Services performed by an individual to whom the Civil Service Retirement Act does not apply because he is, with respect to such services, subject to another retirement system, established either by a law of the United States or by the agency or instrumentality of the United States for which such services are performed. This exception is not applicable, however, to services performed after 1955 by an individual to whom the Civil Service Retirement Act does not apply because he is subject to the retirement system established by the Tennessee Valley Authority under the plan approved by the Secretary of Health, Education, and Welfare on December 28, 1956.

(vi) Services performed in a penal institution of the United States by an inmate thereof.

(d) Services performed for instrumentality specifically exempted from employer tax. Services performed in the employ of an instrumentality of the United States are excepted from employment if such instrumentality is exempt from the employer tax imposed by section 3111 of the Internal Revenue Code of 1954, or by the corresponding section of prior law (sec. 1410 of the Internal Revenue Code of 1939) by virtue of any other provision of law which specifically refers to such section 3111 or such section 1410 in granting exemption from the tax Imposed by such section. This exception does not operate to exclude from employment services performed in the employ of an instrumentality of the United States unless and until the Congress grants to such instrumentality a specific exemption from the tax imposed by such section 3111 or such section 1410 Section 3112 of the Internal Revenue Code of 1954 and the corresponding provision of prior laws (sec. 1412 of the Internal Revenue Code of 1939) make ineffectual as to the employer tax imposed by such section 3111 and such section 1410, respectively, those provisions of law which grant to an instrumentality of the United States an exemption from taxation, unless such provisions grant a specific exemption from the tax imposed by such

section 3111 or such section 1410 by an appropriate reference to one or both of such sections. Thus, the general exemptions from Federal taxation granted by various statutes to certain instrumentalities of the United States without specific reference to tax imposed by such section 3111 or such section 1410 are rendered inoperative insofar as such exemptions relate to the tax imposed by such section 3111 or such section 1410. For provisions relating to services performed for an instrumentality exempt on December 31, 1950, from the employer tax, see paragraph (e) of this section.

(e) Services performed for an instrumentality not subject to employer tax on December 31, 1950. Services performed in the employ of an instrumentality of the United States may be excepted from employment if the particular instrumentality was not subject on December 31, 1950, to the employer tax imposed by section 1410 of the Internal Revenue Code of 1939. If the particular instrumentality was not in existence on December 31, 1950, but is created thereafter under a law which was in effect on December 31, 1950, services performed in the employ of such instrumentality may be excepted from employment if the instrumentality. had it been in existence on December 31. 1950, would not have been subject on that date to the employer tax imposed by section 1410 of the Internal Revenue Code of 1939. It is immaterial, for the purposes of this exception, whether the exemption from the employer tax on December 31, 1950, resulted, or would have resulted. from a tax exemption as such in effect on December 31, 1950, or from the provisions of section 1426(b) (6) of the Internal Revenue Code of 1939 in effect on that date, relating to the exception from employment of services performed in the employ of certain instrumentalities of the United States. The conditions under which such services are excepted are set out in subparagraphs (1) and (2) of this paragraph:

(1) If performed prior to 1955, such services were excepted unless they were performed:

(1) In the employ of a corporation which is wholly owned by the United States:

(1) In the employ of a Federal land bank association (formerly national farm loan association), a production credit association, a Federal reserve bank, or Federal credit union;

(iii) In the employ of a State, county, or community committee under the Commodity Stabilization Service (formerly Production and Marketing Administration); or

(iv) By a civilian employee, not compensated from funds appropriated by the Congress, in the Army and Air Force Exchange Service, Army and Air Force Motion Picture Service, Navy Exchanges, Marine Corps Exchanges, or other activities, conducted by an instrumentality of the United States subject to the jurisdiction of the Secretary of Defense, at Installations of the Department of Defense for the comfort, pleasure, contentment, and mental and physical improvement of personnel of such Department.

(2) If performed after 1954, such services are excepted if they are covered by a retirement system established by such instrumentality, and unless they are performed:

(1) In the employ of a corporation which is wholly owned by the United States;

(ii) In the employ of a Federal land bank association (formerly national farm loan association), a production credit association, a Federal Reserve bank, or a Federal credit union; and after 1959, in the employ of a Federal land bank, a Federal intermediate credit bank and a bank for cooperatives; and, after 1972, in the employ of a Federal Home Loan bank. Services performed as an employee of a Federal Home Loan Bank during the period January 1, 1967, through December 31, 1972, are not excepted from employment if the employee is employed by the Federal Home Loan bank on January 1, 1973, and the taxes imposed by sections 3101 and 3111 of the Internal Revenue Code of 1954 with respect to such services are paid by July 1, 1973, or at a later date provided in an agreement entered into prior to July 1, 1973, with the Secretary of the Treasury or his delegate;

(iii) In the employ of a State, county, or community committee under the Commodity Stabilization Service (formerly Production and Marketing Administration);

(iv) By a civilian employee, not compensated from funds appropriated by the Congress, in the Army and Air Force Exchange Service, Army and Air Force Motion Picture Service, Navy Exchange, Marine Corps Exchanges, or other activities, conducted by an instrumentality of the United States subject to the

jurisdiction of the Secretary of Defense, at installations of the Department of Defense for the comfort, pleasure, contentment, and mental and physical improvement of personnel of such Department; or

(v) By a civilian employee, not compensated from funds appropriated by the Congress, in the Coast Guard Exchanges or other activities, conducted by an instrumentality of the United States subject to the jurisdiction of the Secretary of the Treasury, at installations of the Coast Guard for the comfort, pleasure, contentment, and mental and physical improvement of personnel of the Coast Guard.

(3) Determinations as to whether services performed in the employ of an instrumentality referred to in subparagraph (1) or (2) of this paragraph are covered by a retirement system established by such instrumentality are to be made as of the time such services are performed. Services of an employee who has an option to have his services covered under a retirement system established by the instrumentality are not covered under such retirement system unless and until he exercises such option. The test is whether particular services performed by an employee are covered by a retirement system established by the instrumentality rather than whether the position in which such services are performed is covered by such retirement system.

(f) Services performed by members of the uniformed services of the United States. (1) Services performed before 1957 by a member of a uniformed service of the United States are excepted from employment. Services performed by an individual after 1956 as a member of a uniformed service of the United States on active duty are not excepted from employment unless:

(i) Such services are performed while the individual is on leave without pay; or

(ii) Such services are creditable under section 4 of the Railroad Retirement Act of 1937 (45 U.S.C. 228c-1).

(2) The term "active duty" means "active duty" and "active duty for training" as defined in section 102 of the Servicemen's and Veterans' Survivor Benefits Act (38 U.S.C. 101).

(3) The term "member of a uniformed service" means any person appointed, inducted, or enlisted in the Army, Navy, Air Force, Marine Corps, or Coast Guard, or in any regular or reserve component