Sixth Circuit Creates Circuit Conflict on FICA Exclusion for Severance Payments

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September 10, 2012

More than two years after the appellate briefing was completed, the Sixth Circuit has finally issued its decision in Quality Stores.  (See our previous coverage here.)  The court ruled that severance payments paid to employees pursuant to an involuntary reduction in force are not “wages” for FICA tax purposes.  In so holding, the Sixth Circuit expressly declined to follow the Federal Circuit’s contrary decision in CSX Corp. v. United States, 518 F.3d 1328 (2008).

The court agreed with the taxpayer’s argument that the severance payments are not literally “wages” under the Code.  Although Code section 3402(o) … Read More

Second Circuit Upholds Denial of R&E Credit Claims in Union Carbide

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September 7, 2012

The Second Circuit today affirmed the Tax Court’s decision in Union Carbide denying the research and experimentation credit for the costs of certain supplies used in production process experiments that sought to improve a process that was already in use for producing products. The court concluded that the credit is available only for the costs of supplies that would not have been incurred but for the experiment; hence, it disallowed the credit claim for the costs of other supplies that concededly were necessary for the experiment because they are otherwise necessary for the production process, but would have been incurred … Read More

Government Urges Supreme Court to Consider Foreign Tax Credit Issue

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September 5, 2012

As previously reported here a few weeks ago, PPL filed a petition for certiorari asking the Supreme Court to review the Third Circuit’s decision denying a foreign tax credit for U.K. Windfall Tax payments.  Given that the Fifth Circuit had decided the same issue in the opposite way in the Entergy case, there was a significant possibility that the government would not oppose certiorari, but instead would urge the Court to resolve the circuit conflict.

The government has now decided that its interests in resolving the conflict and potentially securing a reversal in Entergy outweigh its interest in preserving … Read More