10 Updates

Employers' Huge Tax Refund Hopes Dashed by Supreme Court Severance Pay Ruling

Apr 4 2014, 4:59pm CDT | by

The Supreme Court’s unanimous reversal of the pro-employer, 2013 Sixth Court decision in U.S. v. Quality Stores Inc., has quashed any prospect of big tax refunds to employers for their past...

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15 weeks ago

Employers' Huge Tax Refund Hopes Dashed by Supreme Court Severance Pay Ruling

Apr 4 2014, 4:59pm CDT | by

The Supreme Court’s unanimous reversal of the pro-employer, 2013 Sixth Court decision in U.S. v. Quality Stores Inc., has quashed any prospect of big tax refunds to employers for their past severance payouts to laid-off workers.

As we reported here in October, the Sixth Circuit ruled that severance payments to involuntarily severed employees were not taxable under FICA. Had the Supreme Court agreed, teams of employers would be due refunds for their FICA contributions in connection with severance payouts made during layoffs in the Great Recession. Unfortunately, the High Court reversed.

The Court ruled that severance payments employers made to involuntarily laid-off employees are “wages” and are taxable under FICA. The Court based its decision on an analysis of (1) the definition of “wages” in FICA—a statute that taxes “wages” paid by an employer or received by an employee “with respect to employment,” to fund Social Security and Medicare benefits—and (2) Internal Revenue Code (IRC) § 3402(o)—which governs income-tax withholding.

  1. As to the FICA definition—that “wages” means “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash,” FICA § 3121(b)—the Court held that severance payments are, “of course, ‘remuneration,’” and that “common sense dictates that employees receive the payments ‘for employment.’”
  2. As to IRC § 3402(o)—which provides that “any supplemental unemployment compensation benefit paid to an individual shall be treated as if it were a payment of wages by an employer to an employee” (emphasis added)—the Court rejected the Sixth Circuit’s ruling that the “as if” language meant severance payments were not covered by FICA’s “wages” definition.

But there is a silver lining. Employers will no longer face different tax requirements depending on where their severed employees worked. The High Court’s ruling resolves the inconsistency between lower courts that the Sixth Circuit’s Quality Stores decision created—as it was in direct odds with a Federal Circuit’s 2008 decision that severance payments are taxable under FICA (in a case titled CSX Corp. v. U.S.). In addition, the Supreme Court’s Quality Stores decision is consistent with the IRS’ long-held position on the taxability of severance payments, as well as with most employers’ current and long-term practices in compliance with that IRS position.

The Takeaway: No tax refunds on the horizon, but clear guidance and certainty for the future.

Copies of U.S. v. Quality Stores Inc., et al., No. 12-1408, 2014 WL 1168968 (March 25, 2014), and the two Circuit Court decisions the Supreme Court has reconciled—CSX Corp., et al. v. U.S., 518 F.3d 1328 (Fed. Cir. 2008), and U.S. v. Quality Stores Inc., et al., 693 F.3d 605 (6th Cir. 2013)—are available here , here and here , respectively.

 
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10

6 weeks ago

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Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

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KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Ra ...
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6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

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KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Huss ...
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Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

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PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ i ...
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Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

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KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 milli ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moh ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

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JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an alloca ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan B ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skywa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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