To initiate a policy as a result of a provision in the Tax Reform Act of 1976 (as amended by a provision in the Revenue Act of 1978) extending the definition of a trade or business for social security purposes to include services of certain fishermen whose compensation is based on a share of the catch.
Sections 1207(e) and (f) of Public Law (P.L.) 94-455; Section 701(z) of P.L. 95-600; Sections 210(a)(20) and 211(c)(2)(F) of the Social Security Act; Regulations No. 4, sections 404.1031.
Prior to this legislation crew members of commercial fishing boats were usually treated, for tax purposes, as employees, not as self-employed. The problem of determining the status of crew members has been an active issue facing the Internal Revenue Service over the years. In 1970, on remand from the U.S. Supreme Court, the U.S. Court of Appeals (5th Cir) in United States v. W.M. Webb, Inc., held that, under the facts of that case, certain captains and crewmen were employees of the boat owners. In passing Section 1207 of P.L. 94-455, (enacted October 4, 1976,) Congress deemed that the services performed by certain fishermen after December 31, 1971, constitute a trade or business for social security purposes. Section 701(z) of P.L. 95-600 (enacted November 6, 1978), however, amended Section 1207 of P.L. 94-455 to provide that if these services were performed after December 31, 1954, they constitute a trade or business for social security purposes.
Services performed after December 31, 1954, by an individual on a boat engaged in catching fish or other forms of aquatic animal life constitute a trade or business for social security purposes if the services are performed under the following conditions:
An arrangement exists between the individual and the owner or operator of the boat whereby the individual does not receive any remuneration other than a share of the catch or a share of the proceeds from the sale of the catch of that boat (or a group of boats engaged in the same operation); and
The amount of the share depends on the amount of the catch; and
The operating crew of the boat (or of each boat engaged in the same operation) is normally made up of fewer than 10 individuals.
If all of these conditions are met the individual is considered to be self-employed. If one or more of the conditions are not met the individual's status must be determined under the usual common-law rules. (Section 404.1007 of Social Security Regulations No. 4).
Where remuneration was received by an individual after December 31, 1954, and before October 4, 1976, for services performed after December 31, 1954, and the boat owner or operator has treated it as wages under the Federal Insurance Contributions Act, the coverage status of such remuneration shall be determined under the usual common-law rules applicable prior to the enactment of P.L. 94-455, as amended by P.L. 95-600.
This policy is effective for services performed by certain fishermen after December 31, 1954. Final regulations covering this policy were published in the Federal Register in March 27, 1980 at 45 FR 20074.
The time limitations for crediting self-employment income (SEI) for 1955-1976 have expired. SEI may be credited for these years under one or more of the provisions governing administrative finality in section 404.822 of Regulations No. 4.
Claims Manual sections 1390 and 1518.1.
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