UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

NICHOLAS J. SCALLION; MARY E.

SCALLION,

Plaintiffs-Appellants,

No. 98-2580

v.

UNITED STATES OF AMERICA,

Defendant-Appellee.

CLYDE E. MILLER; JOANN M.

MILLER,

Plaintiffs-Appellants,

No. 98-2586

v.

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeals from the United States District Court

for the District of Maryland, at Baltimore.

William M. Nickerson, District Judge.

(CA-97-711-WMN, CA-97-709-WMN)

Argued: May 4, 1999

Decided: July 2, 1999

Before WILLIAMS, MICHAEL, and MOTZ, Circuit Judges.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Edward Lee Blanton, Jr., Baltimore, Maryland, for

Appellants. Kenneth W. Rosenberg, Tax Division, UNITED STATES

DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON

BRIEF: Loretta C. Argrett, Assistant Attorney General, Richard Farber, Lynne A. Battaglia, United States Attorney, UNITED STATES

DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Nicholas and Mary Scallion and Clyde and JoAnn Miller brought

actions against the United States to recover money they paid to the

Internal Revenue Service under I.R.C. § 4980A (1994), which

imposes an excise tax on certain distributions from qualified pension

plans. The district court granted summary judgment for the United

States, and the Scallions and Millers appeal. We affirm.

I.

Appellants Nicholas Scallion and Clyde Miller were teachers in

Maryland's public schools for a number of years. Scallion began

teaching in 1954, and Miller started in 1961. Both enrolled in the

Maryland Teacher's Retirement System and contributed five percent

of their annual salaries to the plan.

In 1979 Maryland created a new retirement program called the

Maryland Employees Pension System and required all new hires to

enroll in that program instead of the Teacher's Retirement System.

The State, over a period of years, also encouraged members of the

Teacher's Retirement System to transfer to the new program. In 1990

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Scallion and Miller took the State's suggestion and transferred from

the Teacher's Retirement System to the Maryland Employees Pension

System. As a result, they received disbursements, or"transfer

refunds," from the old Teacher's Retirement System. Scallion

received $400,925.50 and Miller received $250,530.19. That money

was the sum of their contributions and accrued earnings in the old

system.

Scallion and Miller, along with their wives, listed their pension disbursements as income on their 1990 tax returns and paid an excise tax

on the disbursements under I.R.C. § 4980A. Section 4980A imposes

a 15 percent levy on the portion of any retirement distribution that

exceeds $150,000 in one calendar year. Thus, Scallion paid $33,158

and Miller paid $9,955, sums equal to 15 percent of the portions of

their disbursements that exceeded $150,000.

Shortly thereafter, the Scallions and the Millers filed amended tax

returns claiming refunds on the ground that § 4980A's excise tax did

not apply to their transfer refunds from the old retirement system. The

Internal Revenue Service denied those claims. The Scallions and

Millers then filed suits in federal district court, seeking refunds of

their excise tax payments. They claimed that their transfer refunds

were not taxable "distributions" as defined by I.R.C. § 4980A(e).

Instead, they argued, the transfer refunds were permissible withdrawals and were not taxable under § 4980A.

II.

Section 4980A(a) imposes "a tax equal to 15 percent of the excess

distributions with respect to any individual during any calendar year."

Subpart (e) of the same section defines a "retirement distribution" in

part as "the amount distributed during the taxable year under . . . any

qualified employer plan with respect to which such individual is or

was the employee . . . ." The section further defines a "qualified

employer plan" in part as "any plan described in section 401(a) . . . ."

I.R.C. § 4980A(e).

In district court, the appellants presented a rather complicated argument to show that their transfer refunds should not be considered "distributions" under Section 4980A. They noted that plans are not

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permitted, under § 401(a), to issue early distributions.1 They then

pointed out that they had indeed received money from their plan

early, that is, prior to their retirement, death, or disability. Finally,

they argued that because the Internal Revenue Service had not disqualified the Maryland Teacher's Retirement System for having

issued early "distributions," the money they received could not possibly be characterized as "distributions" for purposes of § 4980A.

Instead, they argued, the funds were mere "withdrawals" outside the

scope of § 4980A.

The district court did not agree with the Scallions and the Millers

on this point, however. Instead, it relied on this court's decision in

Powell v. Commissioner, 129 F.3d 321 (4th Cir. 1997), which

addressed a similar factual situation. In Powell the taxpayer argued

that the Maryland Teacher's Retirement Plan's early disbursement

automatically rendered it "unqualified" and that his transfer refund

therefore could not have been a distribution under§ 4980A. We

rejected Powell's argument, noting that "a retirement plan [under section 4980A] is deemed to be a `qualified plan' even if it is not qualified on the date of the distribution, so long as the Commissioner at

any time had determined that the plan was qualified." Id. at 325. We

then held that the "Transfer Refunds were distributions from a `qualified employer plan'" and therefore taxable under§ 4980A. Id. In the

case now before us, the district court concluded that the Scallions and

Millers' argument was simply a refinement of the argument made in

Powell and that Powell in any event governed the treatment of these

transfer refunds. Accordingly, the district court considered itself

bound by Powell and granted summary judgment in favor of the

United States.

III.

After considering the briefs, the joint appendix, and the oral arguments by counsel, we affirm on the reasoning expressed in the opin-

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1 Cf. Rev. Rul. 56-693, 1956-2 C.B. 282 ("[A]n employees' pension

plan which permits the participants, prior to any severance of their

employment or the termination of the plan, to withdraw all or part of the

funds accumulated on their behalf . . . will fail to meet the requirements

of § 401(a) of the Code.").

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ions of the district court. See Scallion v. United States, No. WMN-97-

711 (D. Md. Mar. 5, 1998); Miller v. United States, No. WMN-97-

709 (D. Md. Mar 5, 1998); Scallion v. United States, No. WMN-97-

711 (D. Md. Aug. 19, 1998) (denying plaintiffs' motion to alter or

amend the March 5 order); Miller v. United States, No. WMN 97-709

(D. Md. Aug. 19, 1998) (same).2

AFFIRMED

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2 The appellants also argue that§ 4980A should not apply to governmental plans. We believe that this argument is also foreclosed by Powell.

See 129 F.3d at 325.

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