Last Friday, the government asked the Supreme Court to review the Sixth Circuit’s decision in United States v. Quality Stores.  In that decision, the Sixth Circuit sided with taxpayers and concluded that certain severance payments that qualify as supplemental unemployment compensation benefit payments (or “SUB” payments) for federal income tax purposes are not subject to tax under the Federal Insurance Contribution Act (FICA).

The government’s certiorari petition argues that the Sixth Circuit’s decision is wrong, conflicts with decisions of the Supreme Court and other Courts of Appeals, and concerns a matter of exceptional importance.  According to the petition, the supplemental unemployment benefits issue is currently pending in 11 cases and more than 2,400 administrative refund claims, with a total amount at stake of more than $1 billion, which is expected to grow.

Quality Stores has 30 days to respond to the government’s petition, although that time may be extended.  Based on the calendar for the rest of the session, the Court will likely decide whether to review the case when it returns from summer recess in September.

In view of the existing circuit split, the fact that the government is asking for review, and the large amount at stake, there is a substantial likelihood that the Court will agree to hear this case.

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Photo of Robert Newman Robert Newman

Robert Newman represents clients ranging from small employers to some of the nation’s largest employers, including for-profit and tax-exempt entities.  His practice includes designing, drafting, and amending a wide range of retirement plans (including 401(k) plans, ESOPs, and traditional and hybrid defined benefit…

Robert Newman represents clients ranging from small employers to some of the nation’s largest employers, including for-profit and tax-exempt entities.  His practice includes designing, drafting, and amending a wide range of retirement plans (including 401(k) plans, ESOPs, and traditional and hybrid defined benefit plans) and welfare plans (including health, severance, and cafeteria plans); creating executive compensation arrangements including nonqualified deferred compensation plans, stock option plans, and other incentive plans; representing clients before the IRS and the Department of Labor; assisting clients with legislative initiatives; providing benefits expertise in corporate transactions and ERISA litigation; counseling clients with respect to pension fund investments in private equity funds and hedge funds; and negotiating and writing employment agreements.