COMMITTEE ON CODES OF CONDUCT
ADVISORY OPINION NO. 86

Honoraria, Teaching, and Outside Earned Income Limitation.

Three related inquiries have been placed before the Committee, arising from a common factual background. The judge has already received for the calendar year "outside earned income" equal to the 15% limit imposed by 5 U.S.C. app. § 501(a)(1). In addition, the judge plans to deliver in the same calendar year a lecture at a law school for which the school would ordinarily pay a stipend.

1. Is There An Option to Treat the Stipend for the Lecture Either as Honorarium or Compensation from Teaching? The judge noted that the lecture clearly fell within the definition of teaching in the Judicial Conference Ethics Reform Act Regulations on Outside Earned Income, Honoraria, and Outside Employment, Section 5(b) ("course of study at an accredited educational institution or participating in an educational program of any duration that is sponsored by such an institution and is part of its educational offering. Examples of the latter are a lecture. . . ."). The judge also noted that Regulation Section 4(b)(2) defines honorarium to mean a payment for, inter alia, a speech, but excludes from the definition of an honorarium "[c]ompensation received for teaching activity . . . approved pursuant to Section 5 hereof." The judge inquired whether the regulation could be read to give the judge an option to treat the lecture stipend either as an honorarium or as compensation from teaching, i.e., by reading Regulation Section 4(b)(2) as excluding teaching compensation from the definition of honoraria only if the teaching activity is actually approved in the prescribed manner. Thus, by declining to obtain such approval, the judge could in effect elect to treat the lecture stipend as an honorarium. The judge desired this result in order to take advantage of Section 501(c) of the statute which would permit the law school on behalf of the judge to pay the lecture stipend (up to $2000) to charity.

The Committee's interpretation of the statute and regulation is that the lecture stipend is compensation for teaching, and cannot be treated as an honorarium. The intent of the regulations was to define teaching to include the educational offerings (including a lecture or lecture series) of an accredited law school, and to exclude from the definition of honoraria compensation received for teaching as thus defined. The regulation was not intended to allow a judge an option to obtain prior approval and treat such an amount as teaching, or to fail to obtain prior approval and treat the amount as an honorarium. This interpretation is supported by the Commentary:

The Act does not define "teaching." These regulations define it to include meaningful participation in bona fide components of an educational curriculum or plan, regardless of the duration or format of the particular program in which the judicial officer participates. The statutory authority to "teach" for compensation thus includes permission to participate in the educational program of an accredited institution in the manner in which that institution plans and carries out its teaching function. When speeches and lectures are sponsored by and presented within the overall educational program of an accredited institution, the Conference believes that they do not provide the occasion for any of the evils Congress was seeking to avert [in the ban on honoraria] and accordingly, they should qualify as "teaching." Thus, a lecture, lecture series, symposia, moot courts, and jurist-in-residence programs may be compensated as "teaching," provided, of course, the strictures of the Codes of Conduct are met.

2. Can 5 U.S.C. App.§ 501(c) Be Expansively Read to Encompass Teaching Compensation as Well as Honoraria?

The judge also inquired whether the rationale of Section 501(c) of the statute (permitting an otherwise banned honorarium to be paid on behalf of a judge to charity) can be expanded to compensation for teaching which the law school is willing to pay but which the judge cannot receive because of the 15% cap. In other words, if a judge directs the law school to give to charity amounts (up to the Section 501(c) limit of $2000) that the law school otherwise would have paid the judge, will such amounts be "deemed not to be received," Section 501(c), thus avoiding the 15% limit on outside earned income under Section 501(a)(1). The judge suggested certain similarities between honoraria and teaching compensation which would make it rational for the Section 501(c) rule to apply to both. However, the Committee interprets the statute and regulations to permit Section 501(c) payments to charity only for honoraria, and not for teaching compensation. The fact that Congress limited Section 501(c) to honoraria evidences a congressional intent that Section 501(c) apply only to honoraria and not to teaching compensation. Moreover, one of the purposes of the 15% cap was to provide a bright line limit on outside activities in order to insure that primary effort was devoted to the governmental function. This interpretation furthers that purpose.

3. Is the Lecture Stipend Excluded from "Outside Earned Income" under Regulation Section 3(b)(6)?

The judge suggested that Regulation Section 3(b)(6) might exclude the stipend from the definition of "outside earned income" if the stipend is paid directly to a charity designated by the judge. That regulation excludes from the definition of "outside earned income":

Anything of value earned or received for services rendered which is not includible as gross income in the relevant calendar year under controlling provisions of the Internal Revenue Code.

The judge suggested that under the complex tax principle of assignment of income, it is uncertain whether such amounts would be included in gross income for tax purposes.

Regulation Section 3(b)(6) was included in the regulations because the regulations could not possibly provide adequate guidance on all of the questions likely to arise about the concept of earned income and the allocation of earned income to reporting years. The reference to the Internal Revenue Code in that section was intended to simplify the administration of the cap on earned income and provide judges with greater assurance that their conduct would not be called into question in those instances in which they received something of value that would clearly be excludable from that year's "gross income" for tax purposes. Where it is doubtful whether the amount in issue would properly be excludable from the judge's gross income for tax purposes, the Committee advises that the judge include the amount when planning compliance with the 15% cap particularly where to do otherwise would appear to undermine the purposes of the cap. Accordingly, unless a judge is confident that the amounts diverted to charity would not be includible in gross income for tax purposes in the reporting year as having been constructively received, the Committee's advice is that the judge include those amounts in planning compliance with the 15% cap on outside earned income.

July 15, 1991
Revised January 16, 1998
 

Note:
 

1. Section 502(b) was amended in 1991 to exclude from the 15% cap income received by senior justices and judges for approved teaching.