In Private Letter Ruling 201024045, the IRS ruled that the amounts of salary waived by certain governmental employees are not includible in their gross incomes. Specifically, legislation (“Statute A”) was passed which allowed the employees to voluntarily waive a statutorily specified amount of salary on a monthly basis. The waivers are irrevocable and must be filed by an employee by a specified date prior to the day on which the employee is paid. The employees have no claim to the waived amounts in the future.
The Ruling cites Code Sections 61 and 451, Treas. Reg. Sec. 1.451-1(a) and Revenue Rulings 66-167 (holding that fees or commissions are not includible in the gross income of the executor of an estate, where he effectively waives his right to receive such fees or commissions within a reasonable time after commencing to serve as the executor, and all his other actions with respect to the estate are consistent with an intention to render gratuitous service). Then, without any analysis, the Ruling concludes that the amounts of salary waived by the employees pursuant to Statute A are not includible in their gross incomes.
Note: I always thought that, as a general matter, you cannot turn your back on income without being taxed. Since there is no analysis in the Ruling, it is unkown how the thinking behind this Ruling could be applied to analogous waivers of salary, fees and commissions.