A recent decision provides new support for excluding a broad range of severance pay from FICA taxes—a position undercut by the taxpayer’s loss in CSX Corp. v. United States, 518 F.3d 1328 (Fed. Cir. 2008). United States v. Quality Stores Inc., (W.D. Mich., Feb. 23, 2010), affirms a bankruptcy court’s conclusion that, contrary to Revenue Ruling 90-72, 1990-2 C.B. 211, severance payments made because of involuntary separation from employment resulting from a reduction in force or the discontinuance of a plant or operation were not properly classified as “wages” and therefore were not subject to FICA taxation even though they were not linked to the receipt of state unemployment compensation and, in some cases, were paid in a lump sum. The bankruptcy court had relied in part on the Court of Claims’ decision in CSX Corp., Inc. v. United States, 52 Fed. Cl. 208 (2002). After the Federal Circuit reversed the Court of Claims’ decision in 2008, the government moved for reconsideration. The bankruptcy court ratified its prior opinion, and the district court affirmed that decision. The district court reasoned that Code Section 3402(o), by expressly providing that supplemental unemployment compensation (generally defined there as severance payments made because of involuntary separation from employment resulting from a reduction in force or the discontinuance of a plant or operation) “shall be treated as if it were a payment of wages” for income tax withholding purposes, implies that it would not otherwise be treated as wages for that purpose, and that, in the absence of a similar provision in the statute or regulations under Code Section 3121 (and not merely a revenue ruling), supplemental unemployment compensation should not be treated as wages for FICA purposes. It remains to be seen whether this decision will have any effect on the IRS’s processing of the many claims for FICA tax refunds that were filed after the Court of Claims’ decision in CSX Corp. and suspended pending the appeal to the Federal Circuit.