The Supreme Court recently granted the government an extension of time to file a petition for the Supreme Court to review the Sixth Circuit’s decision in United States v. Quality Stores. In this case, the Sixth Circuit held that severance payments that meet the statutory definition of supplemental unemployment compensation benefit payments (“SUB Payments”) are not wages for purposes of FICA taxation. SUB Payments are amounts paid to an employee pursuant to
the employer’s plan because of the employee’s involuntary separation resulting from a reduction in force or discontinuance of a plant or operation and included in the employee’s wages. The Sixth Circuit’s holding is contrary to a prior decision of the Federal Circuit Court of Appeals and published IRS guidance. The government now has until May 3, 2013 to file its petition. Should the government file a petition, the Supreme Court is unlikely to decide whether to review the
Quality Stores decision before Fall 2013.