Reply Brief Filed in Quality Stores

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September 3, 2013

Linked below is the government’s reply brief in support of its petition for certiorari.  The reply attempts to counter the taxpayer’s argument that the conflict between the Sixth Circuit and the Federal Circuit is unimportant because all taxpayers will choose to avoid the Federal Circuit in the future.  See our previous report here.  The government criticizes this argument for seeking to preserve a “forum shopping” opportunity and also remarks that “there is no reason to assume that other courts of appeals” faced with this issue will follow the Sixth Circuit’s reasoning rather than that of the Federal Circuit.  The government also dismisses the taxpayer’s suggestion that the issue can be resolved by promulgating new regulations, thus obviating the need for Supreme Court review.  The government asserts that the Sixth Circuit’s opinion suggests that the IRS has no authority to treat the severance payments as subject to FICA taxation and therefore the Sixth Circuit likely would not be swayed by new regulations.

As previously noted, the Court is scheduled to consider this petition at its September 30 conference and could announce whether it will grant certiorari as early as that afternoon.

Quality Stores – Government Reply Brief at Petition Stage



2 Responses to “Reply Brief Filed in Quality Stores”
  1. Jennifer Mendez says:

    I would like to find out whether or not this would have any effect on other circuit courts decisions, if Quality Stores wins? In California they have already determined, for purposes of Unemployment benefits, that severance packages, whether paid over time or in one lump sum, are not subject to benefit calculations. If this wins I am thinking and hoping that it will also effect the 9th circuit. They seem to be the most liberal of the circuits and I am wondering, would someone have to then bring a case to them? My husband was just laid off and the company is paying the severance in one lump sum. With already being hit with additional taxes for Federal and State, it would be nice to be able to recoup some of the FICA taxes also. If this doesn’t effect other courts and the case wins, would you then be bringing cases to other Circuits?

    • alanhorowitz says:

      If the Supreme Court agrees to hear the case and Quality Stores then wins in the Supreme Court, that decision would be the law of the land, including in the Ninth Circuit. It ought not to be necessary to bring a new case to the Ninth Circuit. If the Supreme Court declines to hear the case, then the Ninth Circuit would likely continue to follow its current rule, even though Quality Stores would have won its case in the Sixth Circuit.

      An employee who has paid FICA taxes can request a refund from the IRS, as long as the request is timely. If the Supreme Court rules in favor of Quality Stores, then the IRS could be expected to issue refunds for claims that are analogous to those ruled upon in the Quality Stores case, without requiring the claimant to go to court. So individuals who are following the Quality Stores litigation hoping for a Supreme Court decision in favor of Quality Stores just need to be careful not to let the statute of limitations period expire before they seek a refund from the IRS.