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Page Number: 13

10 

UNITED STATES v. QUALITY STORES, INC. 

Opinion of the Court 

defined the concept of SUBs as the receipt of “both a state 
system unemployment benefit and a Weekly Supplemental
Benefit  . . .  without  reduction  of  the  state  system  unem-
ployment  benefit  because  of  the  payment  of  the  Weekly 
Supplemental  Benefit.”  Note,  Effect  of  Receiving  Supple-
mental  Unemployment  Benefits  on  Eligibility  for  State
Benefits,  69  Harv.  L. Rev.  362,  364,  n. 11  (1955);  see 
J.  Becker,  Guaranteed  Income  for  the  Unemployed:  The 
Story of SUB (1968).  Employer plans that provided SUBs 
sought  “to  provide  economic  security  for  regular  employ-
ees” and “to assure a stable work force through periods of 
short-term layoffs.”  Coffy, supra, at 200. 

But  an  obstacle  arose.   For  these  plans  to  work,  it  was 
necessary to avoid having the SUBs defined under federal 
law  as  “wages.”    That  was  because  some  States  only  pro-
vided  unemployment  benefits  if  terminated  employees
were not earning “wages” from their employers.  See Brief 
for  United  States  29;  CSX  Corp.,  supra,  at  1334–1335; 
Note,  69  Harv.  L. Rev.,  at  366  (“The  typical  state  unem-
ployment  compensation  statute  provides  that  ‘an  individ-
ual shall be deemed unemployed in any week with respect 
to which no wages are payable to him and during which he 
performs  no  services  .  .  .’ ”  (ellipsis  and  emphasis  in  origi-
nal));  id.,  at  367  (“[S]tates  tend  to  treat  as  ‘wages’  those 
items which the federal government treats as ‘wages’ ”).

The  inability  of  terminated  employees  to  receive  state
unemployment benefits, of course, would render SUBs far 
less useful to them and their employers.  Employers, as a 
consequence,  undertook  to  ensure  that  the  Federal  Gov-
ernment did not construe benefits paid out by SUB plans 
as “wages.”  CSX Corp., supra, at 1334–1335. 

In at least partial response to the prospect of differential
treatment of SUBs based on the vagaries of state law, the
IRS promulgated a series of Revenue Rulings in the 1950’s 
and 1960’s that took the position that SUB payments were 
not “wages” under FICA as well as for purposes of income-