March 25, 2014
The Supreme Court today ruled 8-0 in favor of the government in the long-running Quality Stores litigation, holding that severance payments are taxable FICA wages, even if they fall within the category of “supplemental unemployment compensation benefits” that are subject to income tax withholding under Code section 3402(o). See our prior coverage here. The Court’s opinion closely tracks the arguments made by the government in its brief.
The Court began by analyzing the definition of “wages” in the FICA statute, which it repeatedly characterizes as “broad.” That defintion — “remuneration for employment” — appears to encompass the payments at … Read More
January 15, 2014
The Supreme Court heard oral argument on January 14 in Quality Stores. Whether it was because of a lack of interest in the subject matter or because it was the third argument of the day at the unusually late hour of 1:00 (the Court’s usual schedule in recent years calls for two (sometimes only one) arguments in the morning that finish before lunch), the Court was less active than usual in its questioning. Indeed, the government’s counsel began to sit down after using only five of his alloted 30 minutes for his opening argument (though he was then persuaded … Read More
January 2, 2014
The government’s reply brief has now been filed in Quality Stores, completing the briefing. The Court will hear oral argument on January 14.
Also linked below are three amicus briefs that have been filed in support of the taxpayer. The brief filed by the ERISA Industry Committee comprehensively addresses the question presented, examining the relevant statutes, legislative history, administrative pronouncements, and judicial precedents. The brief filed by the American Payroll Association engages in a statutory analysis and examines the administrative pronouncements, concluding that the government’s position “would replace the straightforward definition provided by Congress with a cumbersome and essentially … Read More
December 16, 2013
The taxpayer has filed its responsive brief in Quality Stores, setting forth both its basic position that SUB payments are not FICA “wages” and responding in detail to the government’s contrary arguments. The taxpayer’s affirmative case begins with the income tax withholding provisions that the government has argued are irrelevant. The taxpayer argues that the payments are not “remuneration . . . for services” within the meaning of Code section 3401(a) and, in particular, cannot be “wages” because they fall within the category of payments that section 3402(o) describes in its title as “certain payments other than wages” and … Read More
November 20, 2013
The government has filed its opening brief in the Quality Stores case, which involves the question whether severance payments made pursuant to an involuntary reduction in force are subject to FICA taxation. See our prior coverage here. The brief is considerably shorter than the page limit, as the government has sought to take a relatively simple approach to an issue that in the past has generated complex and detailed briefs and opinions.
The government’s primary submission is that the Court needs to focus its attention on the FICA statute and not be distracted by the income tax withholding statute … Read More
November 5, 2013
The Supreme Court has scheduled oral argument in the Quality Stores case for the afternoon of Tuesday, January 14. Two other cases will be argued in the morning session, and the Court will then break for lunch and reconvene at 1:00 for the Quality Stores argument, in which each side is given 30 minutes for argument. A decision is expected no later than the end of June.… Read More
October 1, 2013
The Supreme Court, not surprisingly, granted cert this morning in the Quality Stores case. As we have previously reported (see our prior coverage here), the Court is now poised to resolve a conflict between the Sixth Circuit and the Federal Circuit regarding whether severance payments paid to employees pursuant to an involuntary reduction in force are “wages” subject to FICA taxation. Notably, Justice Kagan did not participate in the order granting the petition, perhaps because she had some involvement in the case during her tenure as Solicitor General. Her recusal creates the theoretical possibility that the Court could … Read More
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 … Read More
August 15, 2013
The taxpayer has filed its brief in opposition in the Supreme Court in Quality Stores. (See our earlier report on the certiorari petition here.) The government has the option of filing a reply brief, which has no specific due date, but likely would be filed no later than early September.
The brief in opposition argues at length that the Sixth Circuit’s decision is correct on the merits. With respect to the government’s reliance on a circuit conflict, the taxpayer describes this as a “shallow conflict” that does not justify a grant of certiorari. Specifically, the taxpayer … Read More
July 3, 2013
The taxpayer has obtained an extension until July 31 to respond to the government’s petition for certiorari in Quality Stores.… Read More