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
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
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
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
The government has finally filed its long-awaited cert petition in Quality Stores, asking the Supreme Court to review the Sixth Circuit’s ruling that severance payments paid to employees pursuant to an involuntary reduction in force are not “wages” for FICA tax purposes. In our previous coverage, we have noted why this case is a strong candidate for Supreme Court review, and the cert petition sets those forth succinctly: (1) “the Sixth Circuit’s decision in this case squarely conflicts with the Federal Circuit’s decision in CSX Corp.”; and (2) “the question presented here is both recurring and important.” … Read More
The Supreme Court has granted the government’s request for a one-month extension to file its petition for certiorari in Quality Stores, extending the due date from April 4 to May 3. As we have previously observed, we believe there is a strong likelihood that the government will petition in this case and that the Court will grant certiorari to resolve the circuit conflict on the treatment for FICA purposes of supplemental unemployment compensation benefits. See our previous coverage here.
With this extension, however, the Court likely will not decide whether to grant certiorari until early October, after the … Read More
Acting promptly after receiving the taxpayer’s response, the Sixth Circuit has denied the government’s petition for rehearing en banc in Quality Stores. Even though the government’s petition pointed to a direct circuit conflict and alleged tension with the Sixth Circuit’s own precedent (see our report here), the court’s order recites that no judge on the Sixth Circuit requested a vote on the petition.
The court’s order puts the ball back in the government’s court to decide whether to seek Supreme Court review. Given the conflict and the apparent importance of having a uniform nationwide rule, there is … Read More
Following up on the Sixth Circuit’s order, the taxpayer has now filed a response to the government’s petition for rehearing en banc in Quality Stores. See our prior reports here. The brief offers a point-by-point response to the government’s petition, arguing in particular that the Sixth Circuit was correct in relying on Coffy v. Republic Steel Corp., 447 U.S. 191 (1980), and disputing the government’s contention that the panel’s decision was inconsistent with earlier Sixth Circuit decisions.
The petition is now back in the lap of the Sixth Circuit, which could rule in the next few weeks … Read More
The Sixth Circuit yesterday directed the taxpayer to file a response to the government’s petition for rehearing en banc in Quality Stores. As we previously noted, the Federal Rules of Appellate Procedure prohibit responding to rehearing petitions unless ordered by the court, but such an order in this case was a strong possibility. Courts of appeals frequently direct responses to rehearing petitions filed by the government, and the government’s petition highlights why this case is a strong candidate for the relatively rare action of rehearing en banc. If the court’s order is surprising at all, it is that … Read More
The government yesterday filed a petition for rehearing en banc in the Sixth Circuit in the Quality Stores case, asking the full court to reverse the panel and eliminate the circuit conflict on the treatment for FICA purposes of supplemental unemployment compensation benefits. As noted in our previous post, regardless of whether the petition is granted, the mere filing of the petition has the effect of postponing the deadline for seeking Supreme Court review. The 90-day period for filing a petition for certiorari begins to run anew from the date of the resolution of the rehearing petition. Thus, if … Read More