incorporation, the court reasoned, the claimants after incorporation performed no more services "than those necessary 'to maintain the space in condition for occupancy.'" 569 F.2d at 1041 (quoting Delno, 347 F.2d at 163).
While social security rulings do not have the effect of law and are not binding on this court, they establish precedent that must be followed by the Secretary. Lauer v. Bowen, 818 F.2d 636, 639-40 & n. 9 (7th Cir. 1987); Social Security Law and Practice § 1.18 (1987). Moreover, these rulings, which represent the Secretary's own interpretation of the regulations he promulgated pursuant to the Social Security Act and of this authorizing statute itself, "must be sustained [by this court] unless determined to be unreasonable." Hubbard v. Califano, 596 F.2d 623, 626 (4th Cir. 1979); cf. B.B. v. Schweiker, 643 F.2d 1069, 1071 (5th Cir. 1981) ("we accord [the agency's ruling] great respect and deference where the statute is not clear and the legislative history offers no guidance").
We find the reasoning and conclusion of Joyce -- and therefore of the social security ruling -- to be not only reasonable but also persuasive. It is well established that the Secretary has the prerogative and duty to examine the substance as well as the form of a relationship that affects a claim for benefits. This principle has been invoked in a variety of different contexts within the framework of old-age retirement benefits, such as wage shifting between spouses, see Rebak v. Matthews, 438 F. Supp. 668, 673 (S.D.N.Y. 1977) (rejecting plaintiff's claim that he had retired and his wife had assumed control of corporation where plaintiff continued to perform same tasks and exercise same control; wage payments to wife discounted as part of disingenuous scheme of shifting income); Bryan v. Mathews, 427 F. Supp. 1263, 1267 (D.C. Cir. 1977); Gordon v. Finch, 437 F.2d 253 (8th Cir. 1971), classification of income, see Weisenfeld v. Richardson, 463 F.2d 670 (3d Cir. 1972) (alleged salary found to be disguised dividends, which are not considered wages for old-age insurance purposes), and the formation of corporations. See Flemming v. Lindgren, 275 F.2d 596 (9th Cir. 1960); Moraites v. Celebrezze, 1964 Unempl. Ins. Rep. (CCH) P16,299 (N.D. Ill. 1964). It hardly seems unreasonable, therefore, that the Joyce court predicated its analysis on the "right and duty to scrutinize the actuality of the resulting relationships to determine if they are genuine and if the source of income is only a change of form rather than one of substance." 569 F.2d at 1041.
However consistently repeated this proposition may be, it appears that it has been applied -- at least in the context of incorporation cases -- with inconsistent rigor. One line of authority, cited but not developed by Vogel, suggests that the quest beyond the form to the substance of a corporation contemplates a simple inquiry into whether the corporation is bona fide in the sense that it has functioned as a legitimate business entity. See Stark v. Flemming, 283 F.2d 410 (9th Cir. 1960); Rebak, 438 F. Supp. at 674-75; Brannon v. Ribicoff, 200 F. Supp. 697 (D. Mont. 1961); Williamson v. Celebrezze, 1963 Unempl. Ins. Rep. (CCH) P15,014 (N.D. Ind. 1963) (incorporated in S.S.R. 66-31c (Cum. Ed. 1966)). According to these cases, the Secretary is not justified in denying the legitimacy of wages earned from a corporation where there has been proper adherence to corporate routines
and the salary is commensurate with the value of services rendered. Rebak, 438 F. Supp. at 675. This approach seems to be rooted in an objection to the lack of symmetry presented when a corporation must be respected in most contexts but may be disregarded for social security purposes. Cf. Brannon, 200 F. Supp. at 702 ("The corporate entity . . . may not be so summarily disregarded. . . . The corporate arrangements would have to be respected by others and must be respected by the Secretary as well").
A competing line of cases, however, including two decisions of courts in this circuit, provides authority for the proposition that the Secretary can properly disregard a corporation even where it follows normal corporate routines. See Dunn v. Ribicoff, 1962 Unempl. Ins. Rep. (CCH) P14,545 (D. Mo. 1962). Any legal regularity or legitimacy of which the corporation may be able to boast is considered irrelevant under this approach if the Secretary concludes that the corporation was formed to transform non-cognizable earnings into wages. See Moraites v. Celebrezze, 1964 Unempl. Ins. Rep. (CCH) P16,299 (N.D. Ill. 1964) ("formation and dissolution of the corporation was merely a device to convert rental income to wages and, thus, . . . the corporation was a sham and of no effect for social security purposes."); S.S.R. 63-36c (Cum. Ed. 1963) (incorporating Brunenkant v. Celebrezze, 310 F.2d 355 (7th Cir.), cert. denied, 373 U.S. 921, 83 S. Ct. 1522, 10 L. Ed. 2d 421 (1963)) (coverage denied where the "sole function of the corporation was its utilization by the plaintiff as a device to create a sham employment relationship for the sole purpose of attempting to convert his non-creditable earnings from futures trading into creditable wages"). The analysis in these cases reflects a willingness to sort through the various reasons offered by the claimants for incorporation in an attempt to determine whether the corporation in fact served primarily to create a specious employment relationship. Thus the court in Moraites discounted the claimant's assertion that the corporation was formed to facilitate the purchase of additional apartment buildings, finding that "serious consideration was never given to this purpose." Similarly, the Dunn court rejected the claimant's testimony that she formed the corporation in an attempt to ensure a more favorable probate of her estate upon her death.
Yet a third approach appears to have been espoused by the court in Joyce. While the court had little doubt that the corporation was formed to secure social security benefits, it also recognized that improper motive cannot disqualify an otherwise qualified claimant; the court rested its conclusion instead on a finding that the fundamental nature of the earnings had not changed. 569 F.2d at 1041. This approach strikes us as the most reasonable of the three.
The analysis used in the Moraites line of cases seems to rely too heavily on the Secretary's assessment of the true motive behind incorporation, in contravention of the widely recognized principle that motive alone will not defeat a claimant's bid for benefits. See Gordon, 437 F.2d at 257; Stark, 283 F.2d at 410; Brannon, 200 F. Supp. at 703; Joyce, 569 F.2d at 1041. And the Rebak technique of ascertaining merely that the corporation follows certain routines reflects a formalistic adherence to unnecessary symmetry that seems unduly to restrict the Secretary's ability to administer the Social Security Act in accordance with its purpose and goals. To allow a claimant to qualify for benefits on the basis of earnings that, but for a certificate from the Corporation Department of the Illinois Department of State and the filing of a few corporate tax returns would be excluded as rental income, would frustrate the goal of protecting "workers and their dependents from the risk of loss of income due to the insured's old age." Delno, 347 F.2d at 161.
That neither Joyce nor its encompassing social security ruling has been cited in subsequent federal court decision is not troubling. Vogel did not cite, nor were we able to find, any case decided after Joyce that dealt with analogous issues; indeed, it seems quite likely to this court that the very unambiguity of the Joyce ruling has deterred subsequent claimants from pursuing a similar dispute in federal court. It is likewise irrelevant that at least one of the older decisions that limited the Secretary's inquiry was incorporated in a social security ruling, see S.S.R. 66-31c (incorporating Williamson v. Celebrezze), for such a ruling is binding on the Secretary only until "expressly superseded, modified, or revoked by later legislation, regulations, court decisions or rulings." Lauer, 818 F.2d at 640 & n. 9.
S.S.R. 78-28c, the Joyce ruling, does precisely that. Vogel has failed to persuade us that the Joyce decision is not reasonable, and we therefore find no error in the Secretary's reliance on this case and its companion social security ruling in fashioning the legal standard in the instant dispute.
The legal standard used by the Secretary thus validated, we now must review its application to the facts of this case. The relevant inquiry under the Joyce approach asks whether the services performed were "more than those necessary 'to maintain the space in condition for occupancy.'" Discussing the services performed by Vogel in connection with the 1517 Bonnie Brae Building Corporation, the Secretary observed:
The record does not establish if or how the claimant's duties changed after he incorporated his building, nor does there appear to be any change in the business of 1517 Bonnie Brae Building itself. The claimant owned the building continuously since 1958. . . . He described his duties as setting, collecting and depositing rents, paying bills, bookkeeping, making minor repairs and contracting out large ones, and making management decisions. The claimant's duties appear to have remained the same both before and after incorporation, and are all duties real estate owners who manage their own rental properties customarily perform.
(A.R. 7). We recognize that the Social Security Act is intended to be interpreted liberally, Conklin v. Celebrezze, 319 F.2d 569, 571 (7th Cir. 1963), and that, in keeping with this intention, the 20 C.F.R. § 404.1082(d)(2) provision that a claimant must render services for the benefit of his tenants in order to avoid application of the rental income exclusion should not be interpreted as to impose an unduly onerous burden on a would-be service provider. But Vogel merely asserts without substantiation or development that the services he provided were "primarily for the convenience of the occupant of the premises" (Plaintiff's Memorandum at 16). Even giving Vogel every benefit that the liberal statute offers, we cannot agree that these services were provided for occupants as understood by § 404.1082(d)(2). Vogel does not point to a single example of a service rendered beyond those usually provided in connection with the rental of rooms or other space for occupancy only; activities such as collecting rent and making repairs do not even approach the level of service that the regulations seem to call for. See 20 C.F.R. § 404.1082(d)(2)(ii) (1989) ("We consider the supplying of maid service to be a service provided to the occupant. However, we do not consider the furnishing of heat and light, the cleaning of public entrances, exits, stairways, and lobbies, and the collection of trash, as services provided to the occupant."). Indeed, Vogel seems to have provided the bare minimum necessary to maintain the property in a suitable condition for occupancy, and therefore his earnings cannot escape the rental income exclusion under this theory either.
Vogel makes one last effort to legitimate his earnings from 1517 Bonnie Brae by asserting that the corporation served not only as lessor of the Bonnie Brae apartments but also as a dealer in real estate in general. To support this claim Vogel quotes a passage from his Articles of Incorporation that indicates that one purpose of the 1517 Bonnie Brae Building Corporation is to "deal in and with real property." But that language is no more proof that the corporation is a dealer than the subsequent language in the articles -- that the corporation purports "to engage in any lawful act or activities for which corporations may be organized" -- is proof that the corporation engages in all such activity; the articles of incorporation do not encompass the minimum that a corporation must do but rather the maximum that it can. Vogel has presented no additional proof that the corporation is "engaged in the business of selling real estate to customers for profit," 20 C.F.R. § 404.1082(b)(1), and therefore his dealer argument is not tenable.
B. 1956 Self-employment Income
Independent of the dispute over his post-1982 income, Vogel argues that he is entitled to four quarters of coverage based on his self-employment income in 1956 and that the Secretary was arbitrary in ignoring his "tender" of tax return evidence supporting this claim. We find no evidence of arbitrary behavior in this case. The Social Security Act requires the Secretary to "establish and maintain records of . . . the amounts of self-employment income" earned by individuals. 42 U.S.C. § 405(c)(2)(A) (1982). These records may be corrected by the Secretary upon application by the concerned individual filed within three years, three months, and fifteen days after the disputed year; after this period, "the absence of an entry in the Secretary's records as to the self-employment income alleged to have been derived . . . shall be conclusive." § 405(c)(4)(C); see also Weisbraut v. Secretary of Dep't of Health and Human Services, 757 F.2d 83, 85 (3d Cir.), cert. denied, 474 U.S. 852, 106 S. Ct. 152, 88 L. Ed. 2d 125 (1985). The Secretary may correct his records after the time limitation, however, to conform his records to tax returns timely filed with the Commissioner of Internal Revenue. § 405(c)(5)(F)(i).
It is in light of this latter provision, we presume, that Vogel claims the Secretary acted arbitrarily. But Vogel never actually presented the Secretary with a copy of his 1956 returns, and § 405(c)(5)(F)(i) does not appear to require the Secretary to consider an undocumented assertion that an income tax return exists; rather, it is incumbent upon the individual seeking correction to supply such evidence. See Burke v. Secretary of Health and Human Services, 680 F.2d 1128, 1130 (6th Cir. 1982) ("we refuse to deviate from the statute's clear rule that a claimant may document self-employment income only by submitting a timely filed income tax return."). Jabbar v. Secretary of Health and Human Services, 855 F.2d 295 (6th Cir. 1988), on which Vogel relies, is inapposite. In that case the Secretary refused to correct his records without verification of the accuracy of the information contained on the claimant's timely filed tax return. Finding the Secretary to have imposed unduly stringent requirements on the claimant, the court held that the Social Security Act required the Secretary to correct his records to conform to tax returns filed within the time limitation unless such returns were filed fraudulently.
Jabbar is distinguishable from the instant case in two very significant ways. First, that case discussed and interpreted the requirements of § 405(c)(4)(C), which provides a correction mechanism for errors discovered within the time limitation of three years, three months, and fifteen days; because this time limitation has clearly expired here, Vogel's claim is governed by § 405(c)(5)(F). And while the former provision states that the Secretary shall amend his records to include income erroneously excluded, the latter provides, less restrictively, that the Secretary may change his records to conform to new evidence of tax returns.
Secondly, the claimant in Jabbar actually supplied the Secretary with a copy of the tax return for the relevant year; it was in the Secretary's act of ignoring this submitted evidence that the court found error. The Jabbar analysis simply cannot be extended to a situation where a claimant merely asserts -- over thirty years after the fact -- that he filed a tax return for a disputed year.
For the foregoing reasons, we find the Secretary's decision to be supported by substantial evidence. Defendant's motion for summary judgment is accordingly granted and plaintiff's is denied.